oversight

Audit of CareFirst BlueCross BlueShield Owings Mills, Maryland

Published by the Office of Personnel Management, Office of Inspector General on 2015-10-28.

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
                                CAREFIRST BLUECROSS BLUESHIELD
                                   OWINGS MILLS, MARYLAND

                                           Report Number 1A-10-85-14-053
                                                  October 28, 2015



                                                             -- 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 CareFirst BlueCross BlueShield

Report No. 1A-10-85-14-053                                                                      October 28, 2015



Why did we conduct the audit?             What did we find?
We conducted this limited scope audit     We questioned $657,472 in health benefit charges, administrative
to obtain reasonable assurance that       expenses, and lost investment income (LII). The BlueCross
CareFirst BlueCross BlueShield            BlueShield Association (Association) and Plan agreed with the
(Plan) is complying with the              questioned amounts.
provisions of the Federal Employees
Health Benefits Act and regulations       Our audit results are summarized as follows:
that are included, by reference, in the
Federal Employees Health Benefits         	 Miscellaneous Health Benefit Payments and Credits – We
Program (FEHBP) contract.                    questioned $595,303 for health benefit refunds and recoveries
Specifically, the objectives of our          and medical drug rebates that had not been returned to the
audit were to determine if the Plan          FEHBP as of March 31, 2014, and $127,642 for LII on health
charged costs to the FEHBP and               benefit refunds and recoveries, medical drug rebates, special
provided services to FEHBP members           plan invoices, and fraud and abuse recoveries that were
in accordance with the terms of the          returned untimely to the FEHBP. We noted that the Plan has
contract.                                    returned all of these questioned amounts to the FEHBP.

What did we audit?                        	 Administrative Expenses – We questioned $65,473 in net
                                             undercharges and applicable LII, consisting of $17,304 in
Our audit covered miscellaneous
                                             overcharges for Association dues, $86,402 in net undercharges
health benefit payments and credits
                                             for post-retirement benefit costs, and $3,625 for LII on the
and administrative expenses from
                                             overcharges. We noted that the Plan has returned all of the
2009 through 2013 as reported in the
                                             questioned overcharges and LII to the FEHBP. We also noted
Annual Accounting Statements for
                                             that the Plan has submitted prior period adjustments to the
the Plan’s Washington, D.C. and
                                             Association for the questioned undercharges.
Maryland Service Areas. In addition,
we reviewed the Plan’s cash
                                          	 Cash Management – We determined that the Plan handled
management activities and practices
                                             FEHBP funds in accordance with Contract CS 1039 and
related to FEHBP funds from 2009
                                             applicable laws and regulations.
through 2013 and the Plan’s Fraud
and Abuse Program from 2013
                                          	 Fraud and Abuse Program – The Plan is in compliance with the
through June 30, 2014.
                                             communication and reporting 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
CFR           Code of Federal Regulations
DC            Washington, D.C.
FAR           Federal Acquisition Regulations
FAS           Financial Accounting Standards
FEHB          Federal Employees Health Benefits
FEHBAR        Federal Employees Health Benefits Acquisition Regulations
FEHBP         Federal Employees Health Benefits Program
FEP           Federal Employee Program
F&A           Fraud and Abuse
FIMS          Fraud Information Management System
FTE           Full Time Equivalent
LII           Lost Investment Income
MD            Maryland
Memorandum    FEP Memorandum #13-105PI
OIG           Office of the Inspector General
OPM           U.S. Office of Personnel Management
Plan          CareFirst BlueCross BlueShield
PRB           Post-Retirement Benefit
SIU           Special Investigations Unit
SPI           Special Plan Invoice




                                    ii
IV. MAJOR CONTRIBUTORS  TO THIS REPORT
          TABLE OF CONTENTS

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


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


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


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


III.	   AUDIT FINDINGS AND RECOMMENDATIONS ....................................................7 


        A. MISCELLANEOUS HEALTH BENEFIT PAYMENTS AND CREDITS ...........7 


             1.   Unidentified Health Benefit Refunds and Other Recoveries .............................7 

             2.   Medical Drug Rebates........................................................................................9 

             3.   Health Benefit Refunds....................................................................................12 

             4.   Special Plan Invoices .......................................................................................14 

             5.   Fraud and Abuse Recoveries ...........................................................................15 


        B. ADMINISTRATIVE EXPENSES ........................................................................16                         


             1. BlueCross BlueShield Association Dues .........................................................16 

             2. Post-Retirement Benefit Costs .........................................................................18 


        C. CASH MANAGEMENT ......................................................................................21 


        D. FRAUD AND ABUSE PROGRAM ....................................................................21 


IV.	    MAJOR CONTRIBUTORS TO THIS REPORT........................................................22 


V.	     SCHEDULE A - QUESTIONED CHARGES

        APPENDIX (BlueCross BlueShield Association’s Draft Report Response, dated
        August 7, 2015)

        REPORT FRAUD, WASTE, AND MISMANAGEMENT
    IV. MAJOR CONTRIBUTORS
               I. BACKGROUND
                           TO THIS REPORT

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
CareFirst BlueCross BlueShield (Plan) pertaining to the Plan’s Washington, D.C. (DC) and
Maryland (MD) Service Areas. The Plan’s headquarters are located in Owings Mills, Maryland.

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-10-85-14-053
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, pertaining to the DC and MD Service Areas
(Report No. 1A-10-85-09-023, dated May 21, 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 April 1, 2015;
and were presented in detail in a draft report, dated May 28, 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-10-85-14-053
 IV.
 II. OBJECTIVES,
     MAJOR CONTRIBUTORS
                 SCOPE, AND TO
                            METHODOLOGY
                               THIS REPORT
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-10-85-14-053
We reviewed the BlueCross and BlueShield FEHBP Annual Accounting Statements as they
pertain to the Plan’s DC and MD Service Areas (Plan codes 080, 081, 082, 190, 580, 582, and
690) for contract years 2009 through 2013. During this period, the Plan processed approximately
$9 billion in FEHBP health benefit payments and charged the FEHBP $531 million in
administrative expenses for the DC and MD Service Areas.



                                    CareFirst BlueCross BlueShield
                                      Contract Charges by Year

                              2.5

                              2.0
                 $ Billions




                              1.5

                              1.0

                              0.5

                              0.0
                                      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, and medical drug rebates), administrative expenses, and cash
management activities from 2009 through 2013 for the Plan’s DC and MD Service Areas. We
also reviewed the Plan’s Fraud and Abuse (F&A) Program activities and practices from 2013
through June 30, 2014 for these Service Areas.

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


                                                           4                               Report No. 1A-10-85-14-053
items tested, the Plan did not comply with all provisions of the contract and federal procurement
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 Owings Mills, Maryland on various dates from
September 9, 2014 through November 14, 2014. Audit fieldwork was also performed at our
office in Cranberry Township, Pennsylvania through March 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
2009 through 2013, we also judgmentally selected and reviewed the following items:

   	 200 high dollar health benefit refunds, totaling $16,998,431, from a universe of 62,469
      refunds, totaling $61,694,591. We selected the 20 highest refund amounts from each
      year in the audit scope for each Service Area.

   	 67 high dollar special plan invoices (SPI), totaling $15,480,940 in net FEP credits, from a
      universe of 1,925 SPI’s, totaling $74,164,662 in net FEP payments. We selected these
      SPI’s based on a nomenclature review of the invoices for each Service Area.

   	 50 high dollar subrogation recoveries, totaling $5,464,073, from a universe of 11,299
      recoveries, totaling $23,249,155. We selected the 25 highest subrogation amounts for
      each Service Area.

   	 42 high dollar provider audit recoveries, totaling $3,426,922, from a universe of 4,537
      recoveries, totaling $14,552,035. We selected all recoveries of $4,000 or more for the
      MD Service Area and $80,000 or more for the DC Service Area.



                                                5	                          Report No. 1A-10-85-14-053
    	 44 high dollar FEP medical drug rebate amounts, totaling $2,176,079, from a universe of
       152 FEP rebate amounts, totaling $2,468,324. We selected all FEP rebate amounts of
       $10,000 or more for each Service Area.

    	 18 high dollar fraud and abuse recoveries, totaling $1,214,979, from a universe of 213
       recoveries totaling $1,635,784. We selected all recoveries of $26,000 or more for each
       Service Area.

    	 15 high dollar unidentified health benefit refunds, totaling $700,533, from a universe of
       60 unidentified refunds, totaling $1,182,699. We selected the three highest refund
       amounts from each year in the audit scope for the DC Service Area only.

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,
Association dues, non-recurring projects, return on investment, and subcontracts.2 We used 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 drawdowns, provider advances, working
capital calculations, adjustments and/or balances, and interest income transactions for the period
2009 through 2013, as well as the Plan’s dedicated FEP investment account balances as of
December 31, 2013 for the DC and MD Service Areas.

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.
2
  For the DC and MD Service Areas, the Plan allocated administrative expenses of $510,263,624 to the FEHBP from
2,094 cost centers and 162 natural accounts. From this universe, we selected a judgmental sample of 53 cost centers
to review, which totaled $203,869,350 in expenses allocated to the FEHBP. We also selected a judgmental sample
of 49 natural accounts to review, which totaled $236,420,629 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-10-85-14-053
 IV. AUDIT
III.  MAJOR  CONTRIBUTORS
           FINDINGS       TO THIS REPORT
                    AND RECOMMENDATIONS
A. MISCELLANEOUS HEALTH BENEFIT PAYMENTS AND CREDITS

  1. Unidentified Health Benefit Refunds and Other Recoveries                            $347,287

     Our audit determined that the Plan had not returned 4 unidentified health benefit refund
     amounts and 17 other recoveries, totaling $315,559, to the FEHBP as of
     March 31, 2014. The Plan subsequently returned these refunds and recoveries to the
     FEHBP from 86 to 1,279 days late and after receiving our audit notification letter.
     Additionally, the Plan untimely returned unidentified refund amounts of $558,624 to the
     FEHBP during the audit scope and prior to receiving our audit notification letter. As a
     result of our audit, the Plan returned $347,287 to the FEHBP, consisting of $315,559 for
     the questioned unidentified refunds and other recoveries and $31,728 for lost investment
     income (LII) on the funds 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.”

     Contract CS 1039, Part II, Section 2.3 (i) states, “All health benefit refunds and
     recoveries, including erroneous payment 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, BlueCross
     and BlueShield plans have 30 days to return health benefit refunds and recoveries to the
     FEHBP before LII will commence to be assessed.

     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
     already identified and corrected (i.e., . . . untimely health benefit refunds were already
     processed and returned to the FEHBP) prior to audit notification.”

     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 Section 611 of the Contract
     Disputes Act of 1978 (Public Law 95-563), 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.”



                                           7                                Report No. 1A-10-85-14-053
For the period 2009 through 2013, the Plan allocated 60 unidentified health benefit
refund amounts to the FEP, totaling $1,182,699, for the DC Service Area. From this
universe, we selected and reviewed a judgmental sample of 15 unidentified refund
amounts allocated to the FEP, totaling $700,533, for the purpose of determining if the
Plan properly allocated and timely returned these funds to the FEHBP. Our sample
included the three highest unidentified refund amounts for each year. While reviewing
these unidentified refund amounts, we also reviewed 17 other health benefit recoveries
that we identified for the DC Service Area, where the Plan had returned these recoveries
untimely to the FEHBP after our audit notification date.

Based on our review, we noted the following exceptions:

	 The Plan had not deposited four unidentified refund amounts, totaling $112,017, into
   the FEP investment account as of March 31, 2014. The Plan subsequently returned
   these refunds to the FEHBP from 86 to 1,262 days late and after receiving our audit
   notification letter (dated April 1, 2014). Therefore, we are questioning this amount as
   a monetary finding. In addition, the Plan untimely returned 10 unidentified refund
   amounts, totaling $558,624, to the FEHBP during the audit scope and prior to
   receiving our audit notification letter. Specifically, we noted that the Plan deposited
   these funds into the FEP investment account from 39 to 1,705 days late. Since the
   Plan returned these unidentified refunds to the FEHBP during the audit scope, we did
   not question this amount as a monetary finding. However, the FEHBP is due LII on
   these unidentified refunds that were returned untimely to the FEHBP. As a result of
   this finding, the Plan also returned LII of $19,314 to the FEHBP.

	 The Plan had not deposited 17 other health benefit recoveries, totaling $203,542, into
   the FEP investment account as of March 31, 2014. The Plan subsequently returned
   these recoveries to the FEHBP from 974 to 1,279 days late and after receiving our
   audit notification letter. Therefore, we are questioning this amount as a monetary
   finding as well as LII for returning these recoveries untimely to the FEHBP. As a
   result of this finding, the Plan also returned LII of $12,414 to the FEHBP.


    The Plan returned          In total, we are questioning $315,559 ($112,017 plus
  refunds and recoveries       $203,542) for unidentified health benefit refunds and
     of $315,559 to the        other recoveries that were returned to the FEHBP late and
 FEHBP from 86 to 1,279        after receiving our audit notification letter. We are also
  days late and after the      questioning $31,728 ($19,314 plus $12,414) for LII on
  audit notification date.     the refunds and recoveries that were returned untimely to
                               the FEHBP.




                                        8	                          Report No. 1A-10-85-14-053
   Association’s Response:

   The Association agrees with this finding. The Association states that the Plan submitted
   SPI’s to return LII of $31,728 to the FEHBP.

   OIG Comment:

   We verified that the Plan returned $347,287 to the FEHBP, consisting of $315,559 for the
   questioned unidentified health benefit refunds and other recoveries and $31,728 for LII
   on the funds returned untimely to the FEHBP.

   Recommendation 1

   We recommend that the contracting officer require the Plan to return $315,559 to the
   FEHBP for the questioned unidentified refunds and other health benefit recoveries.
   However, since we verified that the Plan returned $315,559 to the FEHBP for these
   questioned refunds and recoveries, no further action is required for this amount.

   Recommendation 2

   We recommend that the contracting officer require the Plan to return $31,728 to the
   FEHBP for LII on the unidentified refunds and other health benefit recoveries that were
   returned untimely to the FEHBP. However, since we verified that the Plan returned
   $31,728 to the FEHBP for the questioned LII, no further action is required for this LII
   amount.

2. Medical Drug Rebates                                                             $169,645

   Our audit determined that the Plan had not returned two medical drug rebate amounts,
   totaling $122,632, to the FEHBP as of March 31, 2014. The Plan subsequently returned
   these rebates to the FEHBP more than three years late and after receiving our audit
   notification letter. Additionally, the Plan untimely returned 11 medical drug rebate
   amounts, totaling $473,008, to the FEHBP during the audit scope and prior to receiving
   our audit notification letter. As a result of our audit, the Plan returned $169,645 to the
   FEHBP, consisting of $122,632 for the questioned medical drug rebates and $47,013 for
   LII on medical drug rebates returned untimely to the FEHBP.

   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.



                                            9                           Report No. 1A-10-85-14-053
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
already identified and corrected (i.e., . . . untimely health benefit refunds were already
processed and returned to the FEHBP) prior to audit notification.”

The Plan participates in medical drug rebate programs with the manufacturers
                                          . The drug rebates are determined based on
medical claims for these drugs, which are administered in a physician’s office. These
drug rebates are received multiple times a year (usually on a quarterly basis) by the Plan
and credited to the participating groups, including the FEP. For the period 2009 through
2013, we identified 152 FEP medical drug rebate amounts, totaling $2,468,324, for the
Plan’s DC and MD Service Areas. From this universe, we judgmentally selected and
reviewed 44 FEP medical drug rebate amounts, totaling $2,176,079, for the purpose of
determining if the Plan timely returned these funds to the FEHBP. Our sample included
all FEP drug rebate amounts of $10,000 or more from each Service Area.

Based on our review, we noted the following exceptions for the DC Service Area only:

	 The Plan had not deposited two medical drug rebate amounts, totaling $122,632, into
   the FEP investment account as of March 31, 2014. The Plan subsequently returned
   these rebates to the FEHBP more than three years late and after receiving our audit
   notification letter (dated April 1, 2014). Therefore, we are questioning this amount as
   a monetary finding as well as LII for returning these rebates untimely to the FEHBP.
   As a result of this finding, the Plan also returned LII of $7,198 to the FEHBP.

	 The Plan also returned 11 medical drug rebate amounts, totaling $473,008, untimely
   to the FEHBP. Specifically, we noted that the Plan deposited these funds into the
   FEP investment account from 1,012 to 1,783 days late. Since the Plan returned these
   medical drug rebates to the FEHBP during the audit scope and prior to receiving our
   audit notification letter, we did not question this amount as a monetary finding.
   However, the FEHBP is due LII on these rebates since the funds were deposited
   untimely into the FEP investment account. As a result of this finding, the Plan
   returned LII of $39,815 to the FEHBP.




                                         10 	                          Report No. 1A-10-85-14-053
   The Plan returned         In total, we are questioning $122,632 for medical drug
 medical drug rebates of     rebates returned to the FEHBP more than three years late
 $122,632 to the FEHBP       and after receiving our audit notification letter. We are also
  over three years late      questioning $47,013 ($7,198 plus $39,815) for applicable
   and after the audit       LII on medical drug rebates that were returned untimely to
    notification date.       the FEHBP.


Association’s Response:

The Association agrees with this finding. The Association states that the Plan submitted
SPI’s to return LII of $47,013 to the FEHBP.

OIG Comment:

We verified that the Plan returned $169,645 to the FEHBP, consisting of $122,632 for the
questioned medical drug rebates and $47,013 for LII on medical drug rebates that were
returned untimely to the FEHBP.

Recommendation 3

We recommend that the contracting officer require the Plan to return $122,632 to the
FEHBP for the questioned medical drug rebates. However, since we verified that the
Plan returned $122,632 to the FEHBP for the questioned drug rebates, no further action is
required for this amount.

Recommendation 4

We recommend that the contracting officer require the Plan to return $47,013 to the
FEHBP for LII on the medical drug rebates returned untimely to the FEHBP. However,
since we verified that the Plan returned $47,013 to the FEHBP for the questioned LII, no
further action is required for this LII amount.




                                       11                           Report No. 1A-10-85-14-053
3. 	 Health Benefit Refunds                                                            $165,962

   Our audit determined that the Plan had not returned six health benefit refunds, totaling
   $157,112, to the FEHBP as of March 31, 2014. The Plan returned these refunds to the
   FEHBP on July 30, 2014, more than 2 ½ years late and after receiving our audit
   notification letter. Additionally, the Plan untimely returned health benefit refunds of
   $495,184 to the FEHBP during the audit scope and prior to receiving our audit
   notification letter. As a result of our audit, the Plan returned $165,962 to the FEHBP,
   consisting of $157,112 for the questioned health benefit refunds and $8,850 for LII on the
   refunds returned untimely to the FEHBP.

   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
   already identified and corrected (i.e., . . . untimely health benefit refunds were already
   processed and returned to the FEHBP) prior to audit notification.”

   For the period 2009 through 2013, we identified 62,469 FEP health benefit refunds,
   totaling $61,694,591, for the Plan’s DC and MD Service Areas. From this universe, we
   selected and reviewed a judgmental sample of 200 health benefit refunds, totaling
   $16,998,431, for the purpose of determining if the Plan timely returned these refunds to
   the FEHBP. Our sample included the 20 highest refund amounts from each Service Area
   and each year in the audit scope. For the MD Service Area, we also reviewed five
   additional health benefit refunds that we identified where the Plan had returned these
   refunds untimely to the FEHBP after our audit notification letter date.

   Based on our review, we noted the following exceptions:

   	 For the MD Service Area, the Plan returned six health benefit refunds, totaling
      $157,112, to the FEHBP on July 30, 2014. This was more than 2 ½ years late and
      after receiving our audit notification letter (dated April 1, 2014). Therefore, we are
      questioning this amount as a monetary finding as well as LII for returning these




                                            12 	                          Report No. 1A-10-85-14-053
   refunds untimely to the FEHBP. As a result of this finding, the Plan also returned
   LII of $7,797 to the FEHBP.

	 For the DC Service Area, we determined that the Plan returned five health benefit
   refunds, totaling $495,184, untimely to the FEHBP during the audit scope.
   Specifically, these refunds were deposited into the FEP investment account from 5 to
   183 days late. Since the Plan returned these refunds to the FEHBP during the audit
   scope and prior to receiving our audit notification letter, we did not question this
   amount as a monetary finding. However, the FEHBP is due LII on these refunds
   since the funds were deposited untimely into the FEP investment account. As a result
   of this finding, the Plan returned LII of $1,053 to the FEHBP.

    The Plan returned        In total, we are questioning $157,112 for health benefit
  health benefit refunds     refunds returned to the FEHBP on July 30, 2014, more than
    of $157,112 to the       2 ½ years late and after receiving our audit notification
 FEHBP over 2 ½ years        letter. We are also questioning $8,850 ($7,797 plus $1,053)
 late and after the audit    for applicable LII on health benefit refunds that were
     notification date.      returned untimely to the FEHBP.


Association’s Response:

The Association agrees with this finding. The Association states that the Plan submitted
SPI’s to return LII of $8,850 to the FEHBP.

OIG Comment:

We verified that the Plan returned $165,962 to the FEHBP, consisting of $157,112 for the
questioned health benefit refunds and $8,850 for LII on health benefit refunds that were
returned untimely to the FEHBP.

Recommendation 5

We recommend that the contracting officer require the Plan to return $157,112 to the
FEHBP for the questioned health benefit refunds. However, since we verified that the
Plan returned $157,112 to the FEHBP for the questioned health benefit refunds, no
further action is required for this amount.




                                       13 	                        Report No. 1A-10-85-14-053
   Recommendation 6

   We recommend that the contracting officer require the Plan to return $8,850 to the
   FEHBP for LII on the health benefit refunds returned untimely to the FEHBP. However,
   since we verified that the Plan returned $8,850 to the FEHBP for the questioned LII, no
   further action is required for this LII amount.

4. 	 Special Plan Invoices                                                         $23,047

   The Plan untimely returned two SPI amounts, totaling $3,020,639, to the FEHBP during
   the audit scope. As a result of our finding, the Plan returned $23,047 to the FEHBP for
   LII calculated on these SPI amounts.

   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.

   For the period 2009 through 2013, we identified 1,925 SPI’s, totaling $74,164,622 in net
   FEP payments, for the Plan’s DC and MD Service Areas. From this universe, we
   selected and reviewed a judgmental sample of 67 SPI’s, totaling $15,480,940 in net FEP
   credits, for the purpose of determining if the Plan properly calculated, charged and/or
   credited these SPI amounts to the FEHBP. Our sample included 51 SPI’s with FEP credit
   amounts, totaling $15,911,402, and 16 SPI’s with FEP payment amounts, totaling
   $430,462, that were selected through our nomenclature review of the SPI’s.

   Based on our review, we noted the following exceptions:

   	 For the MD Service Area, we determined that the Plan returned one SPI amount,
      totaling $2,970,000, untimely to the FEHBP. Specifically, these funds were
      deposited into the FEP investment account 36 days late. Since the Plan returned these
      funds to the FEHBP during the audit scope and prior to receiving our audit
      notification letter, we did not question this amount as a monetary finding. However,
      the FEHBP is due LII on this amount since the funds were deposited untimely into
      the FEP investment account. As a result of this finding, the Plan returned LII of
      $16,477 to the FEHBP.




                                          14 	                        Report No. 1A-10-85-14-053
   	 For the DC Service Area, we determined the Plan returned one SPI amount, totaling
      $50,639, untimely to the FEHBP. Specifically, these funds were deposited into the
      FEP investment account 1,731 days late. Since the Plan returned these funds to the
      FEHBP during the audit scope and prior to receiving our audit notification letter, we
      did not question this amount as a monetary finding. However, the FEHBP is due LII
      on this amount since the funds were deposited untimely into the FEP investment
      account. As a result of this finding, the Plan returned LII of $6,570 to the FEHBP.

   In total, we are questioning $23,047 ($16,477 plus $6,570) for LII on SPI amounts
   returned untimely to the FEHBP.

   Association’s Response:

   The Association agrees with this finding. The Association states that the Plan submitted
   SPI’s to return LII of $23,047 to the FEHBP.

   OIG Comment:

   We verified that the Plan returned $23,047 to the FEHBP for LII on the untimely returned
   SPI amounts.

   Recommendation 7

   We recommend that the contracting officer require the Plan to return $23,047 to the
   FEHBP for LII on the SPI amounts that were returned untimely to the FEHBP. However,
   since we verified that the Plan returned $23,047 to the FEHBP for the questioned LII, no
   further action is required for this LII amount.

5. 	 Fraud and Abuse Recoveries                                                     $17,004

   The Plan untimely returned four fraud and abuse recoveries, totaling $279,341, to the
   FEHBP during the audit scope. As a result of this finding, the Plan returned $17,004 to
   the FEHBP for LII calculated on these fraud and abuse recoveries.

   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.



                                          15 	                        Report No. 1A-10-85-14-053
     For the period 2009 through 2013, we identified 213 FEP fraud and abuse recoveries,
     totaling $1,635,784, for the Plan’s DC and MD Service Areas. From this universe, we
     selected and reviewed a judgmental sample of 18 fraud and abuse recoveries, totaling
     $1,214,979, for the purpose of determining if the Plan timely returned these recoveries to
     the FEHBP. Our sample included all fraud and abuse recoveries of $26,000 or more.

     For the DC Service Area, we determined that the Plan returned four fraud and abuse
     recoveries, totaling $279,341, untimely to the FEHBP. Specifically, we noted that the
     Plan deposited these funds into the FEP investment account from 885 to 1,606 days late.
     Since the Plan returned these recoveries to the FEHBP during the audit scope and prior to
     receiving our audit notification letter, we did not question this amount as a monetary
     finding. However, the FEHBP is due LII on these recoveries since the funds were
     deposited untimely into the FEP investment account. As a result of this finding, the Plan
     returned LII of $17,004 to the FEHBP.

     Association’s Response:

     The Association agrees with this finding. The Association states that the Plan submitted
     SPI’s to return LII of $17,004 to the FEHBP.

     OIG Comment:

     We verified that the Plan returned $17,004 to the FEHBP for LII on the untimely returned
     fraud and abuse recoveries.

     Recommendation 8

     We recommend that the contracting officer require the Plan to return $17,004 to the
     FEHBP for LII on the fraud and abuse recoveries that were returned untimely to the
     FEHBP. However, since we verified that the Plan returned $17,004 to the FEHBP for the
     questioned LII, no further action is required for this LII amount.

B. ADMINISTRATIVE EXPENSES

  1. BlueCross BlueShield Association Dues                                             $18,180

     For 2010, the Plan did not allocate Association dues to the FEHBP in accordance with the
     agreement between the Association and OPM regarding dues chargeability. As a result
     of our finding, the Plan returned $18,180 to the FEHBP, consisting of $17,304 for
     Association dues overcharged to the FEHBP and $876 for applicable LII.



                                             16                          Report No. 1A-10-85-14-053
FEP Memorandum #13-105PI (Memorandum), titled BCBSA Regular Member Plan Dues
and Other Assessments: 2009-2014, dated December 6, 2013, provides guidance to the
BCBS plans with respect to charging the FEHBP for Association dues. The
Memorandum also includes specific guidance related to the chargeability of the 2010
special dues assessment to the FEHBP. Specifically, the Memorandum states that this
assessment is chargeable to the FEHBP after applying the allowability factor to the
invoiced amount.

Contract CS 1039, Part III, section 3.2 (b)(1) states, “The Carrier may charge a cost to the
contract for a contract term if the cost is actual, allowable, allocable, and reasonable.”

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.

To determine the reasonableness of the amounts charged to the FEHBP, we reviewed
each year within the audit scope and recalculated FEP’s share of the Association dues in
accordance with the methods in the Memorandum. We found that the Plan overcharged
                             the FEHBP $17,304 for Association dues in 2010.
                             Specifically, we identified $11,182 in overcharges for the
 The Plan overcharged
                             Plan’s DC Service Area and $6,122 in overcharges for the
  the FEHBP $17,304
                             Plan’s MD Service Area. This error occurred because the
  for Association dues
                             Plan did not apply the allowability factor to the Association’s
        in 2010.
                             special dues assessment when determining the chargeable
                             dues base for 2010.

As a result of our finding, the Plan returned $18,180 to the FEHBP, consisting of $17,304
for Association dues overcharged to the FEHBP and $876 for applicable LII. We
reviewed and accepted the Plan’s LII calculation.

Association’s Response:

The Association agrees with this finding. The Association states that the Plan submitted
prior period adjustments to return the overcharges of $17,304 to the FEHBP.

OIG Comment:

We verified that the Plan returned $18,180 to the FEHBP, consisting of $17,304 for the
questioned Association dues and $876 for applicable LII.




                                        17                           Report No. 1A-10-85-14-053
   Recommendation 9

   We recommend that the contracting officer disallow $17,304 for Association dues that
   were overcharged to the FEHBP in 2010. However, since we verified that the Plan
   returned $17,304 to the FEHBP for the questioned Association dues, no further action is
   required for this amount.

   Recommendation 10

   We recommend that the contracting officer require the Plan to return $876 to the FEHBP
   for LII on the questioned Association dues. However, since we verified that the Plan
   returned $876 to the FEHBP for the questioned LII, no further action is required for this
   LII amount.

2. Post-Retirement Benefit Costs                                                     ($83,653)

   During our audit fieldwork phase, the Plan self-disclosed undercharges of $86,402 (net)
   to the FEHBP for post-retirement benefit (PRB) costs that were incurred from 2009
   through 2013. Specifically, the Plan overcharged the FEHBP $120,811 for PRB costs
   (DC Service Area) in 2010 and 2013 and undercharged the FEHBP $207,213 for PRB
   costs (DC and MD Service Areas) from 2009 through 2013. As a result, the Plan
   returned $123,560 to the FEHBP, consisting of $120,811 for the PRB costs overcharged
   to the FEHBP and $2,749 for applicable LII on the overcharges.

   As previously cited from Contract CS 1039, costs charged to the FEHBP must be actual,
   allowable, allocable, and reasonable.

   48 CFR 31.205-6(o) states, “(1) PRB covers all benefits, other than cash benefits and life
   insurance benefits paid by pension plans, provided to employees, their beneficiaries, and
   covered dependents during the period following the employees' retirement. Benefits
   encompassed include, but are not limited to, postretirement health care; life insurance
   provided outside a pension plan; and other welfare benefits such as tuition assistance, day
   care, legal services, and housing subsidies provided after retirement. (2) To be allowable,
   PRB costs must be reasonable and incurred pursuant to law, employer-employee
   agreement, or an established policy of the contractor. In addition, to be allowable, PRB
   costs must also be calculated in accordance with paragraphs (o)(2)(i), (ii), or (iii) of this
   section.”

   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.



                                            18                           Report No. 1A-10-85-14-053
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
already identified and corrected (i.e., administrative expense overcharges . . . were
already . . . returned to the FEHBP) prior to audit notification.”

In general, the Plan charges PRB costs to the FEHBP through a manual calculation
performed outside of the cost allocation system. These charges include Financial
Accounting Standards (FAS) 106 and FAS 112 costs determined on a cash basis, or when
the PRB costs are actually paid, which are allowable charges to the contract. The Plan
uses a “Full Time Equivalent” (FTE) headcount statistic to allocate PRB costs to the FEP.

                             While conducting our review of PRB costs, the Plan
          The Plan           disclosed to us on November 3, 2014 that there was an
     undercharged the        issue with the allocation of FAS 106 and FAS 112
   FEHBP $86,402 (net)       expenses during the audit scope. According to the Plan,
    for PRB costs from       this allocation issue was identified during a discussion
    2009 through 2013.       between the Plan’s cost accounting and FEP reporting staff
                             on September 2, 2014 and included multiple errors with the
Plan’s FTE allocation methodology. For the Plan’s DC and MD Service Areas, the Plan
identified that the FEHBP was undercharged $86,402 (net) for PRB costs from 2009
through 2013.

The following summarizes the exceptions noted by Service Area:

	 For the DC Service Area, the Plan originally charged $3,928,233 to the FEHBP for
   PRB costs from 2009 through 2013. Based on the Plan’s revised calculations, the
   Plan should have allocated $3,915,957 in PRB costs to the FEP, resulting in net
   overcharges of $12,276 ($120,811 in overcharges and $108,535 in undercharges) to
   the FEHBP. Specifically, the Plan overcharged the FEHBP $5,291 in 2010 and
   $115,520 in 2013 and undercharged the FEHBP $43,005 in 2009, $24,942 in 2011,
   and $40,588 in 2012. We reviewed the Plan’s self-disclosed over- and undercharges
   during the audit scope and agreed with the Plan’s revised calculations of PRB costs
   for the DC Service Area.




                                        19 	                         Report No. 1A-10-85-14-053
	 For the MD Service Area, the Plan originally charged $2,182,579 to the FEHBP for
   PRB costs from 2009 through 2013. Based on the Plan’s revised calculations, the
   Plan should have allocated $2,281,257 in PRB costs to the FEP, resulting in
   undercharges of $98,678 to the FEHBP. Specifically the Plan undercharged the
   FEHBP $23,674 in 2009, $1,836 in 2010, $2,711 in 2011, $52,317 in 2012, and
   $18,140 in 2013. We reviewed the Plan’s self-disclosed undercharges and agreed
   with the Plan’s revised calculations of PRB costs for the MD Service Area.

As a result of this finding, the Plan returned $123,560 to the FEHBP, consisting of
$120,811 for the PRB cost overcharges and $2,749 for applicable LII on these
overcharges. We reviewed and accepted the Plan’s LII calculation. The Plan also
submitted prior period adjustments to the Association for the PRB cost undercharges of
$207,213 ($108,535 plus $98,678). In total, we are questioning a net undercharge
amount of $83,653 to the FEHBP, consisting of $207,213 for PRB cost undercharges,
$120,811 for PRB cost overcharges, and $2,749 for applicable LII of the overcharges.

Association’s Response:

The Association agrees with this finding. The Association states that the Plan submitted
prior period adjustments for the undercharges.

OIG Comment:

We verified that the Plan returned $123,560 to the FEHBP, consisting of $120,811 for the
PRB cost overcharges and $2,749 for applicable LII. We also verified the Plan submitted
prior period adjustments to the Association for the PRB cost undercharges.

Recommendation 11

We recommend that the contracting officer disallow $120,811 for PRB costs that were
overcharged to the FEHBP in 2010 and 2013. However, since we verified that the Plan
returned $120,811 to the FEHBP for the questioned PRB cost overcharges, no further
action is required for this amount.

Recommendation 12

We recommend that the contracting officer require the Plan to return $2,749 to the
FEHBP for LII on the questioned PRB cost overcharges. However, since we verified that
the Plan returned $2,749 to the FEHBP for the questioned LII, no further action is
required for this LII amount.



                                       20 	                        Report No. 1A-10-85-14-053
        Recommendation 13

        We recommend that the contracting officer allow the Plan to charge the FEHBP $207,213
        for PRB costs that were undercharged to the FEHBP from 2009 through 2013.

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

                                      The audit disclosed no findings pertaining to the Plan’s
      The Plan timely entered all     F&A Program. For the period 2013 through June 2014,
      fraud and abuse cases into      the Plan timely entered all fraud and abuse cases into the
       the Association’s FIMS.        Association’s Fraud Information Management System
                                      (FIMS) for the Plan’s DC and MD Service Areas.3
    Overall, we determined the Plan is in compliance with the communication and reporting
    requirements for fraud and abuse cases set forth in the FEHBP Carrier Letter 2011-13.
    However, we did find that the Association did not report, or did not timely report, all of the
    Plan’s fraud and abuse cases to the OIG. We addressed this issue during a recent audit of the
    Association (Report No. 1A-99-00-14-069, dated July 14, 2015), covering FIMS and fraud
    and abuse cases entered into FIMS by the local BCBS plans from 2013 through June 2014.




3
  FIMS is a multi-user, web-based FEP case-tracking database that the Association’s FEP Special Investigations
Unit (SIU) developed in-house. FIMS is used by the local BCBS plans’ SIUs and the Association’s FEP SIU to
track and report potential fraud and abuse activities.


                                                       21                                Report No. 1A-10-85-14-053
    IV. MAJOR CONTRIBUTORS TO THIS REPORT

Experience-Rated Audits Group

               , Lead Auditor

               , Auditor

                 , Auditor

              , Auditor

              , Auditor




                 , Chief

            , Senior Team Leader
 

                              




                                   22 

                                                                                                                    V. SCHEDULE A


                                                                                                    CAREFIRST BLUECROSS BLUESHIELD
                                                                                                       OWINGS MILLS, MARYLAND

                                                                                                              QUESTIONED CHARGES

AUDIT FINDINGS                                                                                  2009                 2010                 2011                 2012                 2013                2014                 2015             TOTAL

A.	 MISCELLANEOUS HEALTH BENEFIT PAYMENTS
    AND CREDITS

       1.   Unidentified Health Benefit Refunds and Other Recoveries*                               $1,235               $2,529            $299,109                $8,614               $7,700             $28,100                       $0     $347,287
       2.   Medical Drug Rebates*	                                                                   4,299                7,965             134,664                11,195                9,316               2,206                        0      169,645
       3.   Health Benefit Refunds*	                                                                   296                    0             157,825                 2,953                2,974               1,914                        0      165,962
       4.   Special Plan Invoices*	                                                                 18,392                1,614               1,297                   952                  792                   0                        0       23,047
       5.   Fraud and Abuse Recoveries*	                                                               810                1,333               5,242                 5,250                4,369                   0                        0       17,004

   TOTAL MISCELLANEOUS HEALTH BENEFIT

   PAYMENTS AND CREDITS
                                                                           $25,032             $13,441             $598,137              $28,964              $25,151              $32,220                       $0     $722,945

B. ADMINISTRATIVE EXPENSES

       1. BlueCross BlueShield Association Dues*	                                                       $0             $17,304                    $0                $161                 $271                 $357                   $87         $18,180
       2. Post-Retirement Benefit Costs*                                                           (66,679)              3,455               (27,517)             (92,806)              97,463                2,431                    0         (83,653)

   TOTAL ADMINISTRATIVE EXPENSES                                                                  ($66,679)            $20,759             ($27,517)            ($92,645)             $97,734               $2,788                   $87        ($65,473)

C. CASH MANAGEMENT                                                                                       $0                   $0                   $0                   $0                  $0                   $0                      $0           $0

D. FRAUD AND ABUSE PROGRAM                                                                               $0                   $0                   $0                   $0                  $0                   $0                      $0           $0

TOTAL QUESTIONED CHARGES                                                                          ($41,647)            $34,200             $570,620             ($63,681)            $122,885              $35,008                   $87        $657,472

* We included lost investment income (LII) within audit findings A1 ($31,728), A2 ($47,013), A3 ($8,850), A4 ($23,047), A5 ($17,004), B1 ($876), and B2 ($2,749). Therefore, no additional LII is applicable for these audit findings.
 

                                      APPENDIX



August 7, 2015
                                                                             Federal Employee Program
                     , Group Chief                                           1310 G Street, N.W.
                                                                             Washington, D.C. 20005
Experience-Rated Audits Group
Office of the Inspector General
U.S. Office of Personnel Management
1900 E Street, Room 6400
Washington, DC 20415-11000

Reference:          OPM DRAFT AUDIT REPORT
                    CAREFIRST BLUECROSS BLUESHIELD
                    Report Number 1A-10-85-14-053
                    (Dated May 28, 2015)

Dear                 :

This is CareFirst BlueCross BlueShield’s response to the above referenced U.S. Office
of Personnel Management (OPM) Draft Audit Report covering the Federal Employees’
Health Benefits Program (FEHBP). The Blue Cross and Blue Shield Association
(BCBSA) and the Plan are committed to enhancing existing procedures on issues
identified by OPM. Please consider this feedback when updating the OPM Final Audit
Report.

Our comments concerning the findings in the report are as follows:


A. MISCELLANEOUS HEALTH BENEFIT PAYMENTS AND CREDITS

    1. Unidentified Health Benefit Refunds                                     $347,287

       Recommendation 1

       We recommend that the contracting officer require the Plan to return $315,559 to
       the FEHBP for the questioned unidentified refunds and other health benefit
       recoveries. Since we verified that the Plan returned $315,559 to the FEHBP for
       the questioned unidentified refunds and other health benefit recoveries, no
       further action is required for this amount.

       Plan’s Response:

       The Plan agrees with this recommendation.




                                                                     Report No. 1A-10-85-14-053
                   , Group Chief
August 7, 2015


      Recommendation 2

      We recommend that the contracting officer require the Plan to return $31,728 to
      the FEHBP for LII on the questioned unidentified refunds and other health benefit
      recoveries returned untimely to the FEHBP.

      Plan’s Response:

      The Plan agrees with this recommendation and submitted Special Plan Invoices
      (SPIs) for the lost investment income included in the recommendation and
      returned the funds to the Program through an offset to the Letter of credit
      account. The documentation is included as Attachment 1.

   2. Medical Drug Rebates                                                   $169,645

      Recommendation 3

      We recommend that the contracting officer require the Plan to return $122,632 to
      the FEHBP for the questioned drug rebates. Since we verified that the Plan
      returned $122,632 to the FEHBP for the questioned drug rebates, no further
      action is required for this amount.

      Plan’s Response:

      The Plan agrees with this recommendation.

      Recommendation 4

      We recommend that the contracting officer require the Plan to return $47,013 to
      the FEHBP for LII on the questioned drug rebates returned untimely to the
      FEHBP.

      Plan’s Response:

      The Plan agrees with this recommendation and submitted SPIs in the amount of
      $47,013 for the lost investment income included in the recommendation. The
      Plan has returned the funds to the Program. The documentation is included as
      Attachment 2.

   3. Health Benefit Refunds                                                 $165,962

      Recommendation 5

      We recommend that the contracting officer require the Plan to return $157,112 to
      the FEHBP for the questioned health benefit refunds. Since we verified that the
      Plan returned $157,112 to the FEHBP for the questioned health benefit refunds,
      no further action is required for this amount.

                                                                   Report No. 1A-10-85-14-053
                   , Group Chief
August 7, 2015


      Plan’s Response:

      The Plan agrees with this recommendation.

      Recommendation 6

      We recommend that the contracting officer require the Plan to return $8,850 to
      the FEHBP for LII on the questioned health benefit refunds returned untimely to
      the FEHBP.

      Plan’s Response:

      The Plan agrees with this recommendation and submitted SPIs of $8,850 for the
      lost investment income included in the recommendation. The Plan has returned
      the funds to the Program. The documentation is included as Attachment 3.

   4. Special Plan Invoices 	                                                 $23,047

      Recommendation 7

      We recommend that the contracting officer require the Plan to return $23,047 to
      the FEHBP for LII on the questioned SPI’s returned untimely to the FEHBP.

      Plan’s Response:

      The Plan agrees with this recommendation and submitted SPIs for $23,047 for
      the lost investment income included in the recommendation. The Plan has
      returned the funds to the Program. The documentation is included as Attachment
      4.

   5. Fraud and Abuse Recoveries 	                                             17,004

      Recommendation 8

      We recommend that the contracting officer require the Plan to return $17,004 to
      the FEHBP for LII on fraud recoveries returned untimely to the FEHBP.

      Plan’s Response:

      The Plan agrees with this recommendation and submitted SPIs (SPIs) for the
      lost investment income included in the recommendation. The Plan has returned
      the funds to the Program. The documentation is included as Attachment 5.




                                                                   Report No. 1A-10-85-14-053
                   , Group Chief
August 7, 2015


B. ADMINISTRATIVE EXPENSES

   1. BlueCross BlueShield Association Dues	                                    $17,304

      Recommendation 9

      We recommend that the contracting officer disallow $17,304 for Association dues
      that were overcharged to the FEHBP in 2010.

      Plan’s Response:

      The Plan agrees with this recommendation and submitted Prior Period
      Adjustments of $17,304 for the overcharge. The Plan has returned the funds to
      the program. The documentation is included as attachment 6.

   2. Post-Retirement Benefit Costs 	                                         ($83,653)

      Recommendation 10

      We recommend that the contracting officer disallow $120,811 for PRB costs that
      were overcharged to the FEHBP in 2010 and 2013. Since we verified that the
      Plan returned $120,811 to the FEHBP for the questioned PRB cost overcharges,
      no further action is required for this amount.

      Plan’s Response:

      The Plan agrees with this recommendation.

      Recommendation 11

      We recommend that the contracting officer require the Plan to return $2,749 to
      the FEHBP for LII on the questioned PRB cost overcharges. Since we verified
      that the Plan returned $2,749 to the FEHBP for LII, no further action is required
      for this LII amount.

      Plan’s Response:

      The Plan agrees with this recommendation.

      Recommendation 12

      We recommend that the contracting officer allow the Plan to charge the FEHBP
      $207,213 for PRB costs that were undercharged to the FEHBP from 2009
      through 2013.




                                                                     Report No. 1A-10-85-14-053
                     , Group Chief 

August 7, 2015 



        Plan’s Response:

        The Plan agrees with this recommendation and the Plan submitted prior period
        adjustments for the undercharges.

C. CASH MANAGEMENT – No Plan Response Required


D. Fraud and Abuse - No Plan Response Required


We appreciate the opportunity to provide our response to this Draft Audit Report and
request that our comments be included in their entirety as an amendment to the Final
Audit Report.

Sincerely,




Managing Director, Program Assurance


cc: 	                      , Contracting Officer, OPM
                              , FEP
                           , CareFirst Blue Cross Blue Shield




                                                                   Report No. 1A-10-85-14-053
                                                                                                                         



                                       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 which 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-10-85-14-053