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
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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
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)