U.S. OFFICE OF PERSONNEL MANAGEMENT OFFICE OF THE INSPECTOR GENERAL OFFICE OF AUDITS Final Audit Report Audit of Premera Blue Cross Report Number 1A-10-70-17-019 October 2, 2017 -- CAUTION -- This report has been distributed to Federal officials who are responsible for the administration of the subject program. This non-public version may contain confidential and/or proprietary information, including information protected by the Trade Secrets Act, 18 U.S.C. § 1905, and the Privacy Act, 5 U.S.C. § 552a. Therefore, while a redacted version of this report is available under the Freedom of Information Act and made publicly available on the OIG webpage (http://www.opm.gov/our-inspector-general), this non-public version should not be further released unless authorized by the OIG. EXECUTIVE SUMMARY Audit of Premera Blue Cross Report No. 1A-10-70-17-019 October 2, 2017 Why Did We Conduct the Audit? What Did We Find? The objectives of our audit were to Our limited scope performance audit identified minimal exceptions and determine whether Premera Blue determined that Premera Blue Cross is generally pricing claim Cross (Plan) charged costs to the payments properly on behalf of the FEHBP. Therefore, we conclude Federal Employees Health Benefits that Premera Blue Cross appears to be in compliance with the terms of Program (FEHBP) and provided its contract with the U.S. Office of Personnel Management and industry services to FEHBP members in standards. accordance with the terms of its contract with the U.S. Office of Personnel Management. Specifically, our objective was to determine whether the Plan complied with contract provisions relative to claim payments. What Did We Audit? The Office of the Inspector General (OIG) has completed a limited scope performance audit of the FEHBP operations of Premera Blue Cross. The audit covered claim payments from January 1, 2014, through December 31, 2016, as reported in the Blue Cross and Blue Shield Association’s (Association) Federal Employee Program Government- wide Service Benefit Annual Accounting Statements. _______________________ Michael R. Esser Assistant Inspector General for Audits This report is non-public and should not be further released unless authorized by the OIG, because it may contain confidential and/or proprietary information that may be protected by the Trade Secrets Act, 18 U.S.C. § 1905, or the Privacy Act, 5 U.S.C. § 552a. ABBREVIATIONS Association Blue Cross Blue Shield Association BCBS Blue Cross and Blue Shield FEHB Federal Employee Health Benefits FEHBP Federal Employee Health Benefit Program FEP Federal Employee Program OBRA 93 Omnibus Budget Reconciliation Act of 1993 OIG Office of the Inspector General OPM U.S. Office of Personnel Management Plan Premera Blue Cross ii This report is non-public and should not be further released unless authorized by the OIG, because it may contain confidential and/or proprietary information that may be protected by the Trade Secrets Act, 18 U.S.C. § 1905, or the Privacy Act, 5 U.S.C. § 552a. TABLE OF CONTENTS Page EXECUTIVE SUMMARY .......................................................................i ABBREVIATIONS.................................................................................. ii I. BACKGROUND.......................................................................................1 II. OBJECTIVES, SCOPE, AND METHODOLOGY ..............................3 III. AUDIT REVIEWS AND CONCLUSION .............................................5 A. System Pricing Review .........................................................................5 B. Omnibus Budget Reconciliation Act of 1993 .......................................5 APPENDIX A: Blue Cross Blue Shield Association’s August 3, 2017, response to the Draft Audit Report, issued July 31, 2017. REPORT FRAUD, WASTE AND MISMANAGEMENT This report is non-public and should not be further released unless authorized by the OIG, because it may contain confidential and/or proprietary information that may be protected by the Trade Secrets Act, 18 U.S.C. § 1905, or the Privacy Act, 5 U.S.C. § 552a. IV. MAJOR CONTRIBUTORS I. BACKGROUND TO THIS REPORT This final report details the audit reviews and conclusion resulting from our limited scope audit of the Federal Employees Health Benefits Program (FEHBP) operations at Premera Blue Cross (Plan). The Plan is located in Mountlake Terrace, Washington. The audit was performed by the U.S. Office of Personnel Management’s (OPM) Office of the Inspector General (OIG), as authorized by the Inspector General Act of 1978, as amended. The FEHBP was established by the Federal Employees Health Benefits (FEHB) Act (Public Law 86-382), enacted on September 28, 1959. The FEHBP was created to provide health insurance benefits for federal employees, annuitants, and dependents. OPM’s Healthcare and Insurance Office has overall responsibility for administration of the FEHBP. The provisions of the FEHB Act are implemented by OPM through regulations, which are codified in Title 5, Part 890 of the Code of Federal Regulations (CFR). Health insurance coverage is made available through contracts with various health insurance carriers. The Blue Cross Blue Shield Association (Association), on behalf of participating Blue Cross and Blue Shield (BCBS) plans, has entered into a Government-wide Service Benefit Plan contract (CS-1039) with OPM to provide a health benefit plan authorized by the FEHB Act. The Association delegates authority to participating local BCBS plans throughout the United States to process the health benefit claims of its federal subscribers. There are 64 BCBS plans participating in the FEHBP. The Association has established a Federal Employee Program (FEP1) Director’s Office in Washington, D.C. to provide centralized management for the Service Benefit Plan. The FEP Director’s Office coordinates the administration of the contract with the Association, member BCBS plans, and OPM. The Association has also established an FEP Operations Center. The activities of the FEP Operations Center are performed by CareFirst Blue Cross Blue Shield, located in Washington, D.C. These activities include acting as fiscal intermediary between the Association and member plans, verifying subscriber eligibility, approving or disapproving the reimbursement of local Plan payments of FEHBP claims (using computerized system edits), maintaining a history file of all FEHBP claims, and maintaining an accounting of all program funds. 1 Throughout this report, when we refer to “FEP”, we are referring to the Service Benefit Plan lines of business at the Plan. When we refer to the “FEHBP”, we are referring to the program that provides health benefits to federal employees. 1 Report No. 1A-10-70-17-019 This report is non-public and should not be further released unless authorized by the OIG, because it may contain confidential and/or proprietary information that may be protected by the Trade Secrets Act, 18 U.S.C. § 1905, or the Privacy Act, 5 U.S.C. § 552a. Compliance with laws and regulations applicable to the FEHBP is the responsibility of the Association and Plan management. Also, management of the Plan is responsible for establishing and maintaining a system of internal controls. The most recent audit report issued that covered claim payments for Premera Blue Cross was Report No. 1A-10-70-04-021, dated October 19, 2004. All findings from the previous audit have been resolved. The results of this current audit were discussed with Plan and Association officials throughout the audit and at an exit conference dated July 31, 2017. The Association’s comments offered in response to the draft report were considered in preparing our final report and are included as an Appendix to this report. 2 Report No. 1A-10-70-17-019 This report is non-public and should not be further released unless authorized by the OIG, because it may contain confidential and/or proprietary information that may be protected by the Trade Secrets Act, 18 U.S.C. § 1905, or the Privacy Act, 5 U.S.C. § 552a. IV. OBJECTIVES, II. MAJOR CONTRIBUTORS SCOPE, ANDTO THIS REPORT METHODOLOGY OBJECTIVES The objectives of our audit were to determine whether the Plan charged costs to the FEHBP and provided services to FEHBP members in accordance with the terms of the contract. Specifically, our objective was to determine whether the Plan complied with contract provisions relative to health benefit payments. SCOPE AND METHODOLOGY We conducted our limited scope performance audit in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient and appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. We reviewed the Blue Cross and Blue Shield Association’s Government-wide Service Benefit Plan Annual Accounting Statements as they pertain to Plan codes 430, 439, 934 and 936 (Premera Blue Cross) for contract years 2014 through 2016 (see Exhibit I) and determined the Plan paid approximately $1.6 billion in health benefit charges. From this universe, we judgmentally selected various samples for review. We reviewed approximately 127 claims, totaling $7.7 million in payments, for the period of January 1, 2014, through December 30, 2016, for proper adjudication. The determination of our audit findings is based on the FEHBP contract, the 2014 through 2016 Service Benefit Plan brochures, the Plan’s provider agreements, and the Association’s FEP Administrative Procedures Manual. The results of these samples were not projected to the universe of claims. Exhibit I – Health Benefit Charges Premera Blue Cross Health Benefit Charges $600 $500 $ Millions $400 Health Benefit $300 Payments $200 $100 $‐ 2014 2015 2016 3 Report No. 1A-10-70-17-019 This report is non-public and should not be further released unless authorized by the OIG, because it may contain confidential and/or proprietary information that may be protected by the Trade Secrets Act, 18 U.S.C. § 1905, or the Privacy Act, 5 U.S.C. § 552a. In planning and conducting our audit, we obtained an understanding of the Plan’s internal control structure to help determine the nature, timing, and extent of our auditing procedures. Our audit approach consisted mainly of substantive tests of transactions and not tests of controls. Based on our testing, we did not identify any significant matters involving the Plan’s internal control structure and its operations. However, since our audit would not necessarily disclose all significant matters in the internal control structure, we do not express an opinion on the Plan’s system of internal controls taken as a whole. We also conducted tests to determine whether the Plan had complied with the contract and the laws and regulations governing the FEHBP as they relate to claim payments. The results of our tests indicate that, with respect to the items tested, the Plan is in compliance with the provisions of the contract relative to claim payments. A summary of our reviews was noted and explained in detail in the “Audit Reviews and Conclusion” section of this audit report. With respect to the items not tested, nothing came to our attention that caused us to believe that the Plan had not complied, in all material respects, with those provisions. In conducting our audit, we relied to varying degrees on computer-generated data provided by the FEP Director’s Office, the FEP Operations Center, and the Plan. Through audits and a reconciliation process, we have verified the reliability of the BCBS claims data in our data warehouse, which was used to identify the universe of claims for each type of review. The BCBS claims data is provided to us on a monthly basis by the FEP Operations Center, and after a series of internal steps, uploaded into our data warehouse. However, due to time constraints, we did not verify the reliability of the data generated by the Plan’s local claims system. While utilizing the computer-generated data during our audit, nothing came to our attention to cause us to doubt its reliability. We believe that the data was sufficient to achieve our audit objectives. Audit fieldwork was performed at our offices in Washington, D.C.; Cranberry Township, Pennsylvania; and Jacksonville, Florida from May through July 2017. 4 Report No. 1A-10-70-17-019 This report is non-public and should not be further released unless authorized by the OIG, because it may contain confidential and/or proprietary information that may be protected by the Trade Secrets Act, 18 U.S.C. § 1905, or the Privacy Act, 5 U.S.C. § 552a. IV. III. MAJOR CONTRIBUTORS AUDIT REVIEWS ANDTO THIS REPORT CONCLUSION The sections below summarize the results of the reviews we performed on claim payments made by Premera Blue Cross. As mentioned in the “scope” section above, all of our samples were selected from claim payments for services reimbursed between January 1, 2014, and December 31, 2016. A. SYSTEM PRICING REVIEW We reviewed a sample of claims where the FEHBP paid as the primary insurer to determine whether the Plan’s local claims adjudication system properly processed and priced these claims in accordance with contract CS 1039. See Exhibit II for a summary of our System Pricing Review. Exhibit II – Summary of System Pricing Review Universe of Universe Dollar Sampled Sampled Dollar Claim Lines Total Claims Total 107 $ 7,729,248 Sample Selection Criteria We selected 107 claims that were stratified by place of service (such as provider’s office or inpatient hospital) and payment category (such as $50 to $99). Our sample size was judgmentally determined by the number of sample items from each place of service stratum based on the stratum’s total claim dollars paid. Review Summary Our review did not identify any claim payment errors. B. OMNIBUS BUDGET RECONCILIATION ACT OF 1993 (OBRA 93) OBRA 93 limits the benefit payment to physicians for services provided to annuitants age 65 or older who are not covered under Medicare Part B. The FEHBP fee-for-service plans are required to limit the claim payment to the lesser of the billed charges or the amount equivalent to the Medicare Part B payment. The FEP Operations Center contracts with Palmetto (an OBRA 93 pricing vendor) to calculate the pricing amounts for FEHBP claims subject to OBRA 93 pricing regulations. We reviewed a sample of OBRA 93 claim lines that contained procedure code modifiers 62, 66, AS, 50 and 51. Based on our audit experience, we consider these claim lines to be at high risk 5 Report No. 1A-10-70-17-019 This report is non-public and should not be further released unless authorized by the OIG, because it may contain confidential and/or proprietary information that may be protected by the Trade Secrets Act, 18 U.S.C. § 1905, or the Privacy Act, 5 U.S.C. § 552a. for claim payment error since the FEP Express – FEHBP national claims system – was not configured to apply the Medicare modifier discount percentages. See Exhibit III for a summary of our OBRA 93 review. Exhibit III – Summary of OBRA 93 Review Universe of Universe Dollar Sampled Sampled Dollar Claim Lines Total Claims Total 20 $21,317 Sample selection Criteria All claim lines with amounts paid of $400 or more. Review Summary Our review determined the Plan incorrectly paid four claims due to the fact that the FEP Express system was not configured to apply the correct modifier reimbursement percentage discounts for these claims. The Plan has already taken the necessary action and these overcharges of $2,314 have been returned to the FEHBP. Therefore, no further action is required. Overall Audit Conclusion Our audit review did not detect any significant concerns with the Plan’s process for pricing and paying FEHBP claims, and the Plan appears to be in compliance with the terms of its contract with the U.S. Office of Personnel Management and industry standards. 6 Report No. 1A-10-70-17-019 This report is non-public and should not be further released unless authorized by the OIG, because it may contain confidential and/or proprietary information that may be protected by the Trade Secrets Act, 18 U.S.C. § 1905, or the Privacy Act, 5 U.S.C. § 552a. APPENDIX A August 3, 2017 Senior team Leader Information System Audit group OPM Office of the Inspector General Re: Draft Audit Report No. 1A-10-70-17-019 Dear : Thank you for the time your team has spent working with our plan. It has been a pleasure working with all of you. I am writing you concerning the Office of the Inspector General Draft Audit Report, which included claim payments from January 1, 2014 through December 31, 2016. We have reviewed the Draft Audit Report that identified minimal exceptions. We are very pleased with the conclusion that Premera Blue Cross appears to be in compliance with the terms of our contract and is generally properly pricing claim payments on behalf of the Federal Employees Health Benefits Program. Premera takes any potential findings seriously and we appreciate every opportunity to provide peace of mind to all of our customers. Sincerely, , Manager Quality Review & Reporting Premera Blue Cross cc: , BCBSA , Premera Blue Cross , Premera Blue Cross , Premera Blue Cross 7 Report No. 1A-10-70-17-019 This report is non-public and should not be further released unless authorized by the OIG, because it may contain confidential and/or proprietary information that may be protected by the Trade Secrets Act, 18 U.S.C. § 1905, or the Privacy Act, 5 U.S.C. § 552a. Report Fraud, Waste, and Mismanagement Fraud, waste, and mismanagement in Government concerns everyone: Office of the Inspector General staff, agency employees, and the general public. We actively solicit allegations of any inefficient and wasteful practices, fraud, and mismanagement related to OPM programs and operations. You can report allegations to us in several ways: By Internet: http://www.opm.gov/our-inspector-general/hotline-to-report- fraud-waste-or-abuse By Phone: Toll Free Number: (877) 499-7295 Washington Metro Area: (202) 606-2423 By Mail: Office of the Inspector General U.S. Office of Personnel Management 1900 E Street, NW Room 6400 Washington, DC 20415-1100 -- CAUTION -- This report has been distributed to Federal officials who are responsible for the administration of the subject program. This non-public version may contain confidential and/or proprietary information, including information protected by the Trade Secrets Act, 18 U.S.C. § 1905, and the Privacy Act, 5 U.S.C. § 552a. Therefore, while a redacted version of this report is available under the Freedom of Information Act and made publicly available on the OIG webpage (http://www.opm.gov/our-inspector-general), this non-public version should not be further released unless authorized by the OIG. .
Audit of Premera Blue Cross
Published by the Office of Personnel Management, Office of Inspector General on 2017-10-02.
Below is a raw (and likely hideous) rendition of the original report. (PDF)