oversight

Audit of BlueCross BlueShield of Minnesota Eagan, Minnesota

Published by the Office of Personnel Management, Office of Inspector General on 2016-02-16.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

        U.S. OFFICE OF PERSONNEL MANAGEMENT
           OFFICE OF THE INSPECTOR GENERAL
                    OFFICE OF AUDITS




                       Final Audit Report

                                   AUDIT OF
                      BLUECROSS BLUESHIELD OF MINNESOTA
                              EAGAN, MINNESOTA

                                            Report Number 1A-10-78-15-040
                                                   February 16, 2016


                                                             -- CAUTION --
This audit report has been distributed to Federal officials who are responsible for the administration of the audited program. This audit report may
contain proprietary data that is protected by Federal law (18 U.S.C. 1905). Therefore, while this audit report is available under the Freedom of
Information Act and made available to the public on the OIG webpage (http://www.opm.gov/our-inspector-general), caution needs to be exercised
before releasing the report to the general public as it may contain proprietary information that was redacted from the publicly distributed copy.
               EXECUTIVE SUMMARY 

                                Audit of BlueCross BlueShield of Minnesota

Report No. 1A-10-78-15-040                                                                      February 16, 2016



 Why did we conduct the audit?             What did we find?

 We conducted this limited scope audit     We questioned $227,123 in health benefit refunds and recoveries,
 to obtain reasonable assurance that       medical drug rebates, and lost investment income (LII). We also
 BlueCross BlueShield of Minnesota         identified a procedural finding regarding the Plan’s F&A Program.
 (Plan) is complying with the              The BlueCross BlueShield Association (Association) and Plan
 provisions of the Federal Employees       agreed with all of the questioned amounts as well as the procedural
 Health Benefits Act and regulations       finding regarding the Plan’s F&A Program.
 that are included, by reference, in the
 Federal Employees Health Benefits         Our audit results are summarized as follows:
 Program (FEHBP) contract.
 Specifically, the objectives of our       	 Miscellaneous Health Benefit Payments and Credits – We
 audit were to determine if the Plan          questioned $208,342 for health benefit refunds and recoveries
 charged costs to the FEHBP and               and medical drug rebates that had not been returned to the
 provided services to FEHBP members           FEHBP and $18,781 for applicable LII. We verified that the
 in accordance with the terms of the          Plan has returned these questioned amounts to the FEHBP.
 contract.
                                           	 Administrative Expenses – The audit disclosed no findings for
 What did we audit?                           administrative expenses. Overall, we determined that the
                                              Plan’s administrative expenses charged to the FEHBP were
 Our audit covered miscellaneous              actual, allowable, necessary, and reasonable expenses incurred
 health benefit payments and credits          in accordance with Contract CS 1039 and applicable laws and
 from 2010 through September 30,              regulations.
 2014, as well as administrative
 expenses from 2009 through 2013, as       	 Cash Management – The audit disclosed no findings pertaining
 reported in the Annual Accounting            to the Plan’s cash management activities and practices.
 Statements. We also reviewed the             Overall, we determined that the Plan handled FEHBP funds in
 Plan’s cash management activities            accordance with Contract CS 1039 and applicable laws and
 and practices related to FEHBP funds         regulations.
 from 2010 through September 30,
 2014, and the Plan’s Fraud and Abuse      	 Fraud and Abuse Program –The Association and Plan are not
 (F&A) Program from January 1, 2014           in compliance with the communication and reporting
 through September 30, 2014.                  requirements for fraud and abuse cases that are set forth in
                                              FEHBP Carrier Letter 2011-13.
  _______________________
  Michael R. Esser
  Assistant Inspector General
  for Audits                                         i
                    ABBREVIATIONS

Association   BlueCross BlueShield Association
BCBS          BlueCross BlueShield or BlueCross and/or BlueShield
CL            Carrier Letter
CFR           Code of Federal Regulations
Contract      Contract CS 1039
DDE           Direct Data Entry
FAR           Federal Acquisition Regulations
FEHB          Federal Employees Health Benefits
FEHBAR        Federal Employees Health Benefits Acquisition Regulations
FEHBP         Federal Employees Health Benefits Program
FEP           Federal Employees Program
FEPDO         Federal Employees Program Director’s Office
F&A           Fraud and Abuse
FIMS          Fraud Information Management System
LOCA          Letter of Credit Account
LII           Lost Investment Income
OIG           Office of the Inspector General
OPM           Office of Personnel Management
Plan          BlueCross BlueShield of Minnesota
SIU           Special Investigations Unit
SPI           Special Plan Invoice




                                   ii
                         TABLE OF CONTENTS

                                                                                                                        Page
        EXECUTIVE SUMMARY ........................................................................................... i 


        ABBREVIATIONS ...................................................................................................... ii 


I.      BACKGROUND ...........................................................................................................1 


II.     OBJECTIVES, SCOPE, AND METHODOLOGY .......................................................3 


III.	   AUDIT FINDINGS AND RECOMMENDATIONS ....................................................8 


        A. MISCELLANEOUS HEALTH BENEFIT PAYMENTS AND CREDITS ...........8


             1. Health Benefit Refunds and Recoveries ............................................................8 

             2. Medical Drug Rebates......................................................................................10 


        B. ADMINISTRATIVE EXPENSES.........................................................................12 


        C. CASH MANAGEMENT .......................................................................................12 


        D. FRAUD AND ABUSE PROGRAM .....................................................................12 


             1. Special Investigations Unit ..............................................................................12 


IV.	    MAJOR CONTRIBUTORS TO THIS REPORT........................................................15 


V.	     SCHEDULE A – QUESTIONED CHARGES

        APPENDIX (BlueCross BlueShield Association’s Draft Report Response, dated
        November 30, 2015)

        REPORT FRAUD, WASTE, AND MISMANAGEMENT
                                   I. BACKGROUND

This final audit report details the findings, conclusions, and recommendations resulting from our
limited scope audit of the Federal Employees Health Benefits Program (FEHBP) operations at
BlueCross BlueShield of Minnesota (Plan). The Plan is located in Eagan, Minnesota.

The audit was performed by the U.S. Office of Personnel Management’s (OPM) Office of the
Inspector General (OIG), as established 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, Chapter 1, Part
890 of the Code of Federal Regulations (CFR). Health insurance coverage is made available
through contracts with various health insurance carriers.

The BlueCross BlueShield Association (Association), on behalf of participating local BlueCross
and/or BlueShield (BCBS) plans, has entered into a Government-wide Service Benefit Plan
contract (contract or 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. The Plan is one
of 36 BCBS companies participating in the FEHBP. These 36 companies include 64 local BCBS
plans.

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 BCBS, located in Owings Mills, Maryland and
Washington, D.C. These activities include acting as intermediary for claims processing between
the Association and local BCBS plans, processing and maintaining subscriber eligibility,
adjudicating member claims on behalf of BCBS plans, approving or disapproving the
reimbursement of local plan payments of FEHBP claims (using computerized system edits),

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-10-78-15-040
maintaining a history file of all FEHBP claims, and maintaining claims payment data and related
financial data in support of the Association’s accounting of all program funds.

Compliance with laws and regulations applicable to the FEHBP is the responsibility of the
Association and Plan management. Also, working in partnership with the Association,
management of the Plan is responsible for establishing and maintaining a system of internal
controls.

All findings from our previous audit of the Plan (Report No. 1A-10-78-10-002, dated March 30,
2010), for contract years 2004 through 2008, have been satisfactorily resolved.

The results of this audit were provided to the Plan in written audit inquiries; were discussed with
Plan and/or Association officials throughout the audit and at an exit conference on September 9,
2015; and were presented in detail in a draft report, dated September 30, 2015. 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-10-78-15-040
II. OBJECTIVES, SCOPE, AND 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 objectives were as follows:

        Miscellaneous Health Benefit Payments and Credits

        	 To determine whether miscellaneous payments charged to the FEHBP were in
           compliance with the terms of the contract.

        	 To determine whether credits and miscellaneous income relating to FEHBP benefit
           payments were returned timely to the FEHBP.

        Administrative Expenses

        	 To determine whether administrative expenses charged to the contract were actual,
           allowable, necessary, and reasonable expenses incurred in accordance with the terms
           of the contract and applicable regulations.

        Cash Management

        	 To determine whether the Plan handled FEHBP funds in accordance with applicable
           laws and regulations concerning cash management in the FEHBP.

        Fraud and Abuse Program

        	 To determine whether the Plan's communication and reporting of fraud and abuse
           cases were in compliance with the terms of Contract CS 1039 and the applicable
           FEHBP Carrier Letters.

 SCOPE

 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.

                                                 3	                 Report No. 1A-10-78-15-040
We reviewed the BlueCross and BlueShield FEHBP Annual Accounting Statements as they
pertain to Plan codes 220 and 720 for contract years 2009 through 2013. During this period, the
Plan paid approximately $1.7 billion in FEHBP health benefit payments and charged the FEHBP
$87.5 million in administrative expenses.


                                       BlueCross BlueShield of Minnesota
                                              Contract Charges

                                 500

                                 400
                    $ Millions




                                 300

                                 200

                                 100

                                   0
                                        2009      2010      2011       2012     2013
                                                         Contract Years
                                       Health Benefit Payments     Administrative Expenses


Specifically, we reviewed miscellaneous health benefit payments and credits (e.g., refunds,
provider audit recoveries, medical drug rebates, and special plan invoices) and cash management
activities from 2010 through September 30, 2014, as well as administrative expenses from 2009
through 2013. We also reviewed the Plan’s Fraud and Abuse (F&A) Program activities and
practices from January 1, 2014 through September 30, 2014.

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. This was
determined to be the most effective approach to select areas of audit. For those areas selected,
we primarily relied on 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, the
applicable procurement regulations (i.e., Federal Acquisition Regulations (FAR) and Federal
Employees Health Benefits Acquisition Regulations (FEHBAR), as appropriate), and the laws
and regulations governing the FEHBP. The results of our tests indicate that, with respect to the
items tested, the Plan did not comply with all provisions of the contract and federal procurement

                                                            4                    Report No. 1A-10-78-15-040
regulations. Exceptions noted in the areas reviewed are set forth in detail in the "Audit Findings
and Recommendations" 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 and the Plan. Due to time constraints, we did not verify the reliability
of the data generated by the various information systems involved. However, 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.

The audit was performed at the Plan’s office in Eagan, Minnesota from June 2, 2015 through
June 26, 2015. Audit fieldwork was also performed at our office in Cranberry Township,
Pennsylvania through September 9, 2015.

METHODOLOGY

We obtained an understanding of the internal controls over the Plan’s financial, cost accounting,
and cash management systems by inquiry of Plan officials.

We interviewed Plan personnel and reviewed the Plan’s policies, procedures, and accounting
records during our audit of miscellaneous health benefit payments and credits. For the period
2010 through September 30, 2014, we also judgmentally or statistically selected and reviewed
the following items:

   Health Benefit Refunds

   	 A high dollar sample of 40 FEP health benefit refunds returned via auto recoupments,
      totaling $7,652,515, and a statistical sample of 72 FEP refunds returned via auto
      recoupments, totaling $1,994,640 (from a universe of 73,800 FEP refunds returned via
      auto recoupments, totaling $71,171,704). Our high dollar sample included all auto
      recoupments of $125,000 or more and our statistical sample included auto recoupments
      selected from a stratification of amounts greater than $500 but less than $125,000.

   	 A high dollar sample of 39 FEP health benefit refund cash receipts, totaling $4,778,302,
      and a statistical sample of 72 FEP refund receipts, totaling $1,002,775 (from a universe
      of 15,450 FEP refund receipt amounts, totaling $15,044,133). Our high dollar sample
      included all refund receipt amounts of $50,000 or more and our statistical sample
      included refunds selected from a stratification of receipt amounts greater than $250 but
      less than $50,000.


                                                 5	                  Report No. 1A-10-78-15-040
    	 20 high dollar direct data entry (DDE) health benefit refunds, totaling $314,737, from a
       universe of 2,207 DDE refunds, totaling $840,772. For this sample, we selected all DDE
       refunds of $8,000 or more.

    Other Health Benefit Payments, Credits, and Recoveries

    	 23 high dollar provider audit recoveries, totaling $1,363,738, from a universe of 3,103
       recoveries, totaling $5,340,619. For this sample, we selected all provider audit recoveries
       of $30,000 or more.

    	 All       FEP medical drug rebate amounts, totaling $                    .

    	 16 high dollar special plan invoices (SPI), totaling $9,062,466 in net FEP payments, from
       a universe of 153 SPI’s, totaling $9,634,167 in net FEP payments. We selected these
       SPI’s based on our nomenclature review of high dollar invoice amounts.

    	 10 provider settlements, totaling $3,172,553 in net payments, from the Plan’s yearly
       settlement calculations, totaling $15,442,720 in net payments. We selected these
       provider settlements based on our nomenclature review of the various settlement types.

    	 9 fraud recoveries, totaling $3,866, from a universe of 88 recoveries, totaling $6,125. For
       this sample, we selected the five highest fraud recoveries where the funds were recovered
       via auto recoupments as well as all fraud recoveries that were returned via SPI’s.

We reviewed these samples to determine if health benefit refunds and recoveries were timely
returned to the FEHBP and if miscellaneous payments were properly charged to the FEHBP.
The results of these samples were not projected to the universe of miscellaneous health benefit
payments and credits.

We judgmentally reviewed administrative expenses charged to the FEHBP for contract years
2009 through 2013. Specifically, we reviewed administrative expenses relating to cost centers,
natural accounts, pension, post-retirement, employee health benefits, executive compensation,
non-recurring projects, out-of-system adjustments, and sale-leaseback transactions.2 We used


2
  The Plan allocated administrative expenses of $95,774,540 to the FEHBP from 557 cost centers and 33 natural
accounts. From this universe, we selected a judgmental sample of 37 cost centers to review, which totaled
$71,860,761 in expenses allocated to the FEHBP. We also selected a judgmental sample of 10 natural accounts to
review, which totaled $44,495,393 in expenses allocated to the FEHBP. We selected these cost centers and natural
accounts based on high dollar amounts, high dollar allocation methods, and our nomenclature review and trend
analysis. We reviewed the expenses from these cost centers and natural accounts for allowability, allocability, and
reasonableness. The results of these samples were not projected to the universe of administrative expenses.

                                                          6	                        Report No. 1A-10-78-15-040
the FEHBP contract, the FAR, and the FEHBAR to determine the allowability, allocability, and
reasonableness of charges.

We reviewed the Plan’s cash management activities and practices to determine whether the Plan
handled FEHBP funds in accordance with Contract CS 1039 and applicable laws and regulations.
Specifically, we reviewed letter of credit account (LOCA) drawdowns, working capital
calculations, adjustments and/or balances, and interest income transactions from 2010 through
September 30, 2014, as well as the Plan’s dedicated FEP investment account activity.

We also interviewed the Plan’s Special Investigations Unit regarding the effectiveness of the
F&A Program, as well as reviewed the Plan’s communication and reporting of fraud and abuse
cases to test compliance with Contract CS 1039 and the applicable FEHBP Carrier Letters.




                                               7                  Report No. 1A-10-78-15-040
III.
  IV. AUDIT
       MAJORFINDINGS AND RECOMMENDATIONS
             CONTRIBUTORS  TO THIS REPORT
 A. MISCELLANEOUS HEALTH BENEFIT PAYMENTS AND CREDITS

   1. Health Benefit Refunds and Recoveries                                             $203,760

      Our audit determined that the Plan had not returned two health benefit refunds, totaling
      $186,314, to the FEHBP as of September 30, 2014. As a result of this audit finding, the
      Plan returned $203,760 to the FEHBP in August 2015, consisting of $186,314 for the
      questioned refunds and $17,446 for applicable lost investment income (LII).

      Contract CS 1039, Part II, Section 2.3 (i) states, “All health benefit refunds and
      recoveries . . . must be deposited into the working capital or investment account within 30
      days and returned to or accounted for in the FEHBP letter of credit account within 60
      days after receipt by the Carrier.” Also, based on an agreement between OPM and the
      Association, dated March 26, 1999, BCBS plans have 30 days to return health benefit
      refunds and recoveries to the FEHBP before LII will commence to be assessed.

      FAR 52.232-17(a) states, “all amounts that become payable by the Contractor . . . shall
      bear simple interest from the date due . . . The interest rate shall be the interest rate
      established by the Secretary of the Treasury as provided in 41 U.S.C. 7109, which is
      applicable to the period in which the amount becomes due, as provided in paragraph (e)
      of this clause, and then at the rate applicable for each six-month period as fixed by the
      Secretary until the amount is paid.”

      Health Benefit Refunds – Cash Receipts
      For the period 2010 through September 30, 2014, we identified 15,450 health benefit
      refund cash receipt amounts, totaling $15,044,133, for FEP. From this universe, we
      selected and reviewed a judgmental sample of 39 high dollar health benefit refunds,
      totaling $4,778,302, and a statistical sample of 72 health benefit refunds, totaling
      $1,002,775, for the purpose of determining if the Plan timely returned these refunds to
      the FEHBP. Our high dollar sample included all refund receipt amounts of $50,000 or
      more and our statistical sample included refunds selected from a stratification of receipt
      amounts greater than $250 but less than $50,000.




                                                8                   Report No. 1A-10-78-15-040
  Our audit identified      Based on our review, we determined that the Plan had not
 two unreturned health      returned two health benefit refunds, totaling $186,314, to
 benefit refunds totaling   the FEHBP as of September 30, 2014. These questioned
   $186,314, which the      health benefit refunds were identified in our high dollar
   Plan then returned,      sample. As a result of this finding, the Plan returned
    along with LII of       $203,760 to the FEHBP in August 2015, consisting of
 $17,446, to the FEHBP.     $186,314 for the two questioned health benefit refunds and
                            $17,446 for applicable LII on these refunds.

Health Benefit Refunds – Auto Recoupments
For the period 2010 through September 30, 2014, we identified 73,800 FEP health benefit
refunds, totaling $71,171,704, that were returned to the FEHBP via auto recoupments.
From this universe, we selected and reviewed a judgmental sample of 40 high dollar auto
recoupments, totaling $7,652,515, and a statistical sample of 72 auto recoupments,
totaling $1,994,640, for the purpose of determining if the Plan timely returned these
refunds to the FEHBP. Our high dollar sample included all auto recoupments of
$125,000 or more and our statistical sample included auto recoupments selected from a
stratification of amounts greater than $500 but less than $125,000. Based on our review,
we determined that the Plan properly returned these refunds to the FEHBP via auto
recoupments.

Health Benefit Refunds – Direct Data Entry (DDE)
For the period 2010 through September 30, 2014, we identified 2,207 DDE health benefit
refunds (i.e., refunds related to claims that were directly entered into the FEP claims
system), totaling $840,772, for FEP. From this universe, we selected and reviewed a
judgmental sample of 20 high dollar DDE refunds, totaling $314,737, for the purpose of
determining if the Plan timely returned these refunds to the FEHBP. Our sample
included all DDE refunds of $8,000 or more. Based on our review, we determined that
the Plan timely returned these DDE refunds to the FEHBP.

Association Response:

The Association and Plan agree with this finding.

OIG Comment:

We verified that the Plan returned $203,760 to the FEHBP in August 2015, consisting of
$186,314 for the questioned health benefit refunds and $17,446 for applicable LII.




                                        9                  Report No. 1A-10-78-15-040
   Recommendation 1

   We recommend that the contracting officer require the Plan to return $186,314 to the
   FEHBP for the questioned health benefit refunds. However, since we verified that the
   Plan returned $186,314 to the FEHBP for these questioned health benefit refunds, no
   further action is required for this amount.

   Recommendation 2

   We recommend that the contracting officer require the Plan to return $17,446 to the
   FEHBP for LII on the questioned health benefit refunds. However, since we verified that
   the Plan returned $17,446 to the FEHBP for the questioned LII, no further action is
   required for this LII amount.

2. Medical Drug Rebates                                                                 $23,363

   Our audit determined that the Plan had not returned two medical drug rebate amounts,
   totaling $22,028, to the FEHBP as of September 30, 2014. The Plan subsequently
   returned these questioned medical drug rebates to the FEHBP on March 17, 2015, more
   than 60 days after receipt and after receiving our audit notification letter. As a result of
   our audit, the Plan returned $23,363 to the FEHBP, consisting of $22,028 for the
   questioned medical drug rebates and $1,335 for applicable LII on these rebates returned
   untimely to the FEHBP.

   48 CFR 31.201-5 states, “The applicable portion of any income, rebate, allowance, or
   other credit relating to any allowable cost and received by or accruing to the contractor
   shall be credited to the Government either as a cost reduction or by cash refund.”

   As previously cited from Contract CS 1039, all health benefit refunds and recoveries
   must be deposited into the FEP investment account within 30 days and returned to the
   FEHBP within 60 days after receipt by the Carrier.

   As previously cited from FAR 52.232-17(a), all amounts that become payable by the
   Carrier should include simple interest from the date due.

   Regarding reportable monetary findings, Contract CS 1039, Part III, section 3.16 (a),
   states, “Audit findings . . . in the scope of an OIG audit are reportable as questioned
   charges unless the Carrier provides documentation supporting that the findings were
   identified and corrected (i.e., . . . untimely health benefit refunds were already processed
   and returned to the FEHBP) prior to audit notification.”


                                              10                  Report No. 1A-10-78-15-040
The Plan participates in medical drug rebate programs with various drug manufacturers.
The drug rebates are determined based on medical claims for the applicable drugs, which
are primarily administered in a physician’s office. Theses drug rebates are received
multiple times a year (usually on a quarterly basis) and credited to the participating groups,
including the FEP. From January 1, 2010 through September 30, 2014, the Plan received
   FEP medical drug rebate amounts, totaling $           . We reviewed all of these medical
drug rebate amounts to determine if the Plan timely returned these rebates to the FEHBP.

   The Plan returned            Based on our review, we determined that the Plan returned
 medical drug rebates of        two medical drug rebate amounts, totaling $22,028, and
 $22,028 to the FEHBP           applicable LII, totaling $1,335, to the FEHBP on
  approximately three           March 17, 2015. The Plan returned these two rebate
 years late and after the       amounts to the FEHBP approximately three years after
 audit notification date.       receipt (i.e., 1,081 and 1,173 days late) and after receiving
                                our audit notification letter (dated October 1, 2014). The
Plan self-disclosed that these two medical drug rebate amounts were identified while
preparing for the audit. Therefore, we are questioning $23,363 as a monetary finding,
consisting of $22,028 for medical drug rebates and $1,335 for LII on these rebates.

Association Response:

The Association and Plan agree with this finding.

OIG Comment:

We verified that the Plan returned $23,363 to the FEHBP on March 17, 2015, consisting
of $22,028 for the questioned medical drug rebates and $1,335 for LII on these rebates.

Recommendation 3

We recommend that the contracting officer require the Plan to return $22,028 to the
FEHBP for the questioned medical drug rebates. However, since we verified that the
Plan returned $22,028 to the FEHBP for these questioned rebates, no further action is
required for this amount.

Recommendation 4

We recommend that the contracting officer require the Plan to return $1,335 to the FEHBP
for LII on the questioned medical drug rebates. However, since we verified that the Plan
returned the questioned LII to the FEHBP, no further action is required for this LII amount.


                                           11                  Report No. 1A-10-78-15-040
B. ADMINISTRATIVE EXPENSES

  The audit disclosed no findings pertaining to administrative expenses. Overall, we concluded
  that the Plan charged administrative expenses to the FEHBP that were actual, allowable,
  necessary, and reasonable expenses incurred in accordance with Contract CS 1039 and
  applicable laws and regulations.

C. CASH MANAGEMENT

  The audit disclosed no findings pertaining to the Plan’s cash management activities and
  practices. Overall, we concluded that the Plan handled FEHBP funds in accordance with
  Contract CS 1039 and applicable laws and regulations.

D. FRAUD AND ABUSE PROGRAM

  1. Special Investigations Unit                                                   Procedural

                                       The Plan and Association’s FEP Director’s Office
        The Plan and FEPDO did         (FEPDO) are not in compliance with the
          not report, or did not       communication and reporting requirements for fraud
       timely report, all fraud and    and abuse cases set forth in FEHBP Carrier Letter (CL)
         abuse cases to the OIG.       2011-13. Specifically, the Plan and FEPDO did not
                                       report, or did not timely report, all fraud and abuse
     cases to the OIG. This non-compliance may be due in part to incomplete and/or untimely
     reporting of fraud and abuse cases to the FEPDO by the Plan, as well as inadequate
     controls at the FEPDO to monitor and communicate the Plan’s cases to the OIG. Without
     awareness of these existing potential fraud and abuse issues, the OIG cannot investigate
     the broader impact of these potential issues on the FEHBP as a whole.

     CL 2011-13 (Mandatory Information Sharing via Written Case Notifications to OPM’s
     Office of the Inspector General), dated June 17, 2011, states that all Carriers “are
     required to submit a written notification to the OPM OIG . . . within 30 working days of
     becoming aware of a fraud, waste or abuse issue where there is a reasonable suspicion
     that a fraud has occurred or is occurring against the Federal Employees Health Benefits
     (FEHB) Program.” There is no dollar threshold for this requirement.

     The FEPDO is primarily responsible for timely reporting fraud and abuse cases to the
     OIG (i.e., within 30 working days of becoming aware of a fraud, waste or abuse issue).
     In order to comply with the timeliness requirement, the FEPDO requires the BCBS plans
     to enter fraud and abuse cases into the Fraud Information Management System (FIMS).


                                              12                 Report No. 1A-10-78-15-040
        FIMS is a multi-user, web-based FEP case-tracking database that the FEPDO’s Special
        Investigations Unit (SIU) developed in-house. FIMS is used by the local BCBS plans’
        SIUs and the FEPDO’s SIU to track and report potential fraud and abuse activities. The
        FEPDO is responsible for the maintenance and oversight of this system as well as
        reporting to the OIG all fraud and abuse cases that are entered into FIMS by the local
        BCBS plans.

        For the period January 2014 through September 2014, the Plan opened 29 fraud and
        abuse cases with potential FEP exposure. Based on our review of these cases, we
        determined that the FEPDO did not report 11 of these cases to the OIG and untimely
        reported 6 of these cases (i.e., 53 to 379 days after identifying FEP exposure). The
        remaining 12 cases were either timely reported to the OIG or did not require notification
        after the Plan determined that there was no FEP exposure. In addition, we found that the
        Plan did not report one of the opened cases into FIMS and untimely reported two of the
        open cases, which may have contributed to the FEPDO not reporting or timely reporting
        cases to the OIG.

        Ultimately, both the Plan’s not reporting or untimely reporting of potential FEP cases to
        the FEPDO’s SIU and the FEPDO SIU’s inadequate controls to monitor the Plan’s FIMS
        entries, and notify the OIG, have resulted in a failure to meet the communication and
        reporting requirements that are set forth in CL 2011-13. Timely case notifications allow
        the OIG to investigate whether other FEHBP Carriers are exposed to the identified
        fraudulent activity. Consequently, untimely notifications or the lack of OIG notification
        may result in additional improper payments being made by other FEHBP Carriers.

        Recommendation 5

        We recommend that the contracting officer require the Association to provide evidence or
        supporting documentation ensuring that the Plan has implemented the necessary
        procedural changes to meet the communication and reporting requirements of fraud and
        abuse cases that are contained in CL 2011-13 and CL 2014-29 (Federal Employees
        Health Benefits Fraud, Waste, and Abuse). 3 We also recommend that the contracting
        officer instruct the Association to provide the Plan with more oversight to ensure the
        timely and complete entry of all FEP fraud and abuse cases into FIMS, and concurrently,
        timely and complete communication of those cases to the OIG.




3
 CL 2014-29 (dated December 19, 2014) consolidates and updates the information from CL’s 2003-23, 2003-25,
2007-12, and 2011-13, which are superseded by this guidance. CL 2014-29 also supplements guidance from the
FEHBP contract (Section 1.9 – Plan Performance).

                                                      13                    Report No. 1A-10-78-15-040
Association Response:

The Association states, “BCBSA agrees with this recommendation. BCBSA will review
the Plan’s current Fraud Waste and Abuse Manual to ensure that the manual
addresses all of the Program requirements. BCBSA will also work with the Plan to
modify their Procedures, as necessary based upon the results of the review. BCBSA
expects to complete this review by January 31, 2016. In addition, BCBSA conducted
training for all Plans on June 3rd, June 11th, August 27th and September 22, 2015 . . .
on the revised 2015 FEP Fraud Waste and Abuse Program Standards Manual and
OPM requirements to ensure compliance with OPM and Carrier Letter requirements
as well as to ensure that entries into FIMS are timely and complete. BCBSA also
conducted Plan specific training onsite at the Plan on September 15, 2015. BCBSA
will continue to provide Plan training as necessary.”

Recommendation 6

We recommend that the contracting officer require the Association to provide evidence or
supporting documentation ensuring that the FEPDO’s SIU has implemented the
necessary procedural changes to meet the communication and reporting requirements of
fraud and abuse cases that are contained in CL 2011-13 and CL 2014-29 (Federal
Employees Health Benefits Fraud, Waste, and Abuse).

Association Response:

The Association states, “BCBSA modified its processes and manual on May 15, 2015 to
meet the communication and reporting requirements of fraud and abuse cases
contained in CL 2011-13 and CL 2014-29.”




                                        14                 Report No. 1A-10-78-15-040
IV. MAJOR CONTRIBUTORS TO THIS REPORT
Experience-Rated Audits Group

                 , Auditor-In-Charge

               , Auditor

               , Auditor

              , Auditor

              , Auditor




                 , Chief

            , Senior Team Leader




                                       15   Report No. 1A-10-78-15-040
16   Report No. 1A-10-78-15-040
APPENDIX 





             Report No. 1A-10-78-15-040
                     Group Chief
November 30, 2015
Page 2 of 4

      Recommendation 2

      We recommend that the contracting officer require the Plan to return $17,446 to
      the FEHBP for Lii on the questioned health benefit refunds. However, since we
      verified that the Plan returned $17,446 to the FEH BP for the questioned Lii, no
      further action is required for this Lii amount.

      Plan Response:

      The Plan agrees with this recommendation.

   2. Medical Drug Rebates                                             $23,363

      Recommendation 3

      We recommend that the contracting officer require the Plan to return $22,028 to
      the FEHBP for the questioned medical d rug rebates. However, since we verified
      that the Plan returned $22,028 to the FEHBP for these questioned rebates, no
      further action is required for this amount.

      Plan Response:

      The Plan agrees with this recommendation.

      Recommendation 4

      We recommend that the contracting officer require the Plan to return $1 ,335 to
      the FEHBP for Lii on the questioned medical drug rebates. However, since we
      verified that the Plan returned $1,335 to the FEHBP for the questioned Lii , no
      further action is required for this Lil amount.

      Plan Response:

      The Plan agrees with this recommendation.

B . ADMINISTRATIVE EXPENSES- No Plan Response required

   The audit disclosed no findings pertaining to administrative expenses. Overall, we
   concluded that the Plan charged costs lo the FEHBP that were actual, allowable,
   necessary, and reasonable expenses.

C. CASH MANAGEMENT - No Plan Response required




                                                                  Report No. 1A-10-78-15-040
                    , Group Chief
November 30, 2015
Page 3 of 4

   The audit disclosed no findings pertaining to the Plan's cash management activities
   and practices. Overall, we concluded that the Plan handl,ed FEHBP funds in
   accordance with Contract CS 1039 and app licable laws and regulations.
D. Fraud and Abuse

   Recommendation 5

   We recommend that the contracting officer require the Association to provide
   evidence or supporting documentation ensuring that the Plan has implemented the
   necessary procedural changes to meet the communication and reporting
   requirements of fraud and abuse cases that are contained in CL 2011-13 and CL
   2014-29 (Federal Employees Health Benefits Fraud, Waste, and Abuse). 1 We also
   recommend that the contracting officer instruct the Association to provide the Plan
   with more oversight to ensure the timely and complete entry of all FEP fraud and
   abuse cases into FIMS, and ooncurrently, timely and complete communication of
   those cases to the OIG.

   BCBSA Response

   BCBSA agrees with this recommendation. BCBSA will review the Plan's current
   Fraud Waste and Abuse Manual to ensure that the manual addresses all of the
   Program requirements. BC BSA will also work with the Pl:an to modify their
   Procedures, as necessary based upon the results of the review. BCBSA expects to
   complete this review by January 31, 2016. In addition, BC BSA conducted training
   for all Plans on June 3rd. June 11th, August 2ih and September 22, 2015
   (Attachment 1) on the revised 2015 FEP Fraud Waste and Abuse Program
   Standards Manual and OPM requirements to ensure compliance with OPM and
   Carrier Letter requirements as well as to ensure that entries into FIMS are timely and
   complet e. BCBSA also conducted Plan specific training onsite at the Plan on
   September 15, 2015. BC BSA will continue to provide Plan training as necessary.

   Recommendation 6

   We recommend that the contracting officer require the Association to provide
   evidence or supporting documentation ensuring that the FEPDO's SIU has
   implemented the necessary procedural changes to meet the communication and
   reporting requirements of fraud and abuse cases that are contained in CL 2011-13
   and CL 2014-29 (Federal Employees Health Benefits Fraud, Waste, and Abuse).




                                                                   Report No. 1A-10-78-15-040
                      Group Chief
November 30, 2015
Page 4 of 4

      BCBSA Response

      BCBSA modified its processes and manual on May 15, 2015 to meet the
      communication and reporting requirements of fraud and abuse cases contained in
      CL 2011-13 and CL 2014-29. See Attachment 2 for a copy of the revised 2015 FEP
      Fraud Waste and Abuse Program Standards Manual.

Thank you for this opportunity to respond to the recommendations included in this draft
report. If you have any questions, please contact me at 202.942.1285.

Sincerely,




Managing Director, Program Assurance

Attachments

cc:                   Blue Cross Blue Shield of Minnesota
                    FEP
                     FEP




                                                                   Report No. 1A-10-78-15-040
                                                                                                                         



                                       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 audit report has been distributed to Federal officials who are responsible for the administration of the audited program. This audit report may
contain proprietary data that is protected by Federal law (18 U.S.C. 1905). Therefore, while this audit report is available under the Freedom of
Information Act and made available to the public on the OIG webpage (http://www.opm.gov/our-inspector-general), caution needs to be exercised
before releasing the report to the general public as it may contain proprietary information that was redacted from the publicly distributed copy.

                                                                                                       Report No. 1A-10-78-15-040