U.S. OFFICE OF PERSONNEL MANAGEMENT
OFFICE OF THE INSPECTOR GENERAL
OFFICE OF AUDITS
Final Audit Report
Subject:
AUDIT OF
AGING HEALTH BENEFIT REFUNDS
SAMPLE OF BLUECROSS AND BLUESHIELD PLANS
Report No. 1A-99-00-12-021
Date: November 6, 2012
--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, caution needs to be exercised before
releasing the report to the general public as it may contain propriety information that was redacted from the publicly distributed copy.
AUDIT REPORT
Federal Employees Health Benefits Program
Service Benefit Plan Contract CS 1039
BlueCross BlueShield Association
Plan Code 10
Aging Health Benefit Refunds
Sample of BlueCross and BlueShield Plans
November 6, 2012
REPORT NO. 1A-99-00-12-021 DATE: ______________
______________________
Michael R. Esser
Assistant Inspector General
for Audits
--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, caution needs to be exercised before
releasing the report to the general public as it may contain propriety information that was redacted from the publicly distributed copy.
EXECUTIVE SUMMARY
Federal Employees Health Benefits Program
Service Benefit Plan Contract CS 1039
BlueCross BlueShield Association
Plan Code 10
Aging Health Benefit Refunds
Sample of BlueCross and BlueShield Plans
REPORT NO. 1A-99-00-12-021 November 6, 2012
DATE: ______________
This final audit report on the Federal Employees Health Benefits Program (FEHBP) operations
at a sample of 21 BlueCross and BlueShield (BCBS) plans questions $225,031 in health benefit
refunds and lost investment income (LII). The BlueCross BlueShield Association agreed with
$89,112 and disagreed with $135,919 of the questioned amount.
Our limited scope audit was conducted in accordance with Government Auditing Standards. The
audit covered all aging Federal Employee Program (FEP) health benefit refunds as of
September 30, 2011 for a sample of 21 BCBS plans. Specifically, we reviewed these BCBS
plans’ health benefit refund aging schedules to determine whether the plans were holding FEP
refunds as of September 30, 2011 that were not deposited into the FEP investment account
within 30 days after receipt and/or returned to the FEHBP letter of credit account within 60 days
after receipt. We determined that 14 of these 21 BCBS plans had not returned 280 health benefit
refunds, totaling $214,066 to the FEHBP. After receiving our audit notification letter (dated
October 3, 2011), the BCBS plans disclosed that 278 of these questioned health benefit refunds,
totaling $189,188, were subsequently returned to the FEHBP, as well as applicable LII of
$10,965. However, BCBS of Idaho has not returned two of the questioned health benefit
refunds, totaling $24,878, to the FEHBP.
i
CONTENTS
PAGE
EXECUTIVE SUMMARY .............................................................................................. i
I. INTRODUCTION AND BACKGROUND .....................................................................1
II. OBJECTIVE, SCOPE, AND METHODOLOGY ............................................................3
III. AUDIT FINDING AND RECOMMENDATIONS .........................................................5
Aging Health Benefit Refunds .................................................................................5
IV. MAJOR CONTRIBUTORS TO THIS REPORT ............................................................9
V. SCHEDULE A – AGING HEALTH BENEFIT REFUND UNIVERSE AND
AMOUNTS QUESTIONED
APPENDIX (BlueCross BlueShield Association response, dated May 23, 2012, to the
draft audit report)
I. INTRODUCTION AND BACKGROUND
INTRODUCTION
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 a
sample of 21 BlueCross BlueShield (BCBS) plans.
The audit was performed by the Office of Personnel Management’s (OPM) Office of the
Inspector General (OIG), as established by the Inspector General Act of 1978, as amended.
BACKGROUND
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 BCBS plans, has
entered into a Government-wide Service Benefit Plan contract (CS 1039) with OPM to provide a
health benefit plan authorized by the FEHB Act. The Association delegates authority to
participating local BCBS plans throughout the United States to process the health benefit claims
of its federal subscribers. There are approximately 64 local BCBS plans participating in the
FEHBP.
The Association has established a Federal Employee Program (FEP 1) 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 BlueCross BlueShield, located in Washington,
D.C. These activities include acting as fiscal intermediary between the Association and member
plans, verifying subscriber eligibility, approving or disapproving the reimbursement of local plan
payments of FEHBP claims (using computerized system edits), maintaining a history file of all
FEHBP claims, and maintaining an accounting of all program funds.
Compliance with laws and regulations applicable to the FEHBP is the responsibility of the
management for the Association and each BCBS plan. Also, management of each BCBS plan is
responsible for establishing and maintaining a system of internal controls.
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
This is our first audit of aging FEP health benefit refunds covering multiple BCBS plans. The
results of this audit were discussed with the Association and BCBS plan officials throughout the
audit and at an exit conference on March 22, 2012. 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. Also, additional documentation provided by the Association and BCBS
plans on various dates through August 7, 2012 was considered in preparing our final report.
2
II. OBJECTIVE, SCOPE, AND METHODOLOGY
OBJECTIVE
The objective of this audit was to determine whether BCBS plans complied with contract
provisions relative to the return of health benefit refunds to the FEHBP. Specifically, our
objective was to determine whether BCBS plans held FEP refunds as of September 30, 2011 that
were not deposited into the FEP investment account within 30 days after receipt and/or returned
to the FEHBP letter of credit account (LOCA) within 60 days after receipt.
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 objective. We believe that the evidence obtained provides a
reasonable basis for our findings and conclusions based on our audit objective.
The audit covered all aging FEP health benefit refunds as of September 30, 2011 for a sample of
21 BCBS plans. 2 Our sample included all BCBS plans with FEHBP health benefit payments of
$250 million or less in contract year 2010 (except for Capital BlueCross and several other BCBS
plans that are part of multi-plan organizations, such as WellPoint, Inc.). Specifically, we
reviewed these BCBS plans’ aging schedules to determine if there were FEP refunds held by the
BCBS plans as of September 30, 2011 that were not deposited into the FEP investment account
within 30 days after receipt and/or returned to the LOCA within 60 days after receipt.
We did not consider each BCBS plan’s internal control structure in planning and conducting our
auditing procedures. Our audit approach consisted mainly of substantive tests of transactions
and not tests of controls. Therefore, we do not express an opinion on each BCBS plan’s system
of internal controls taken as a whole.
We conducted tests to determine whether the BCBS plans had complied with the contract and the
laws and regulations governing the FEHBP as they relate to the return of health benefit refunds
to the FEHBP. The results of our tests indicate that, with respect to the items tested, the BCBS
plans did not fully comply with the provisions of the contract relative to the return of health
benefit refunds to the FEHBP. Exceptions noted in the areas reviewed are set forth in detail in
the “Audit Finding and Recommendations” section of this report. With respect to the items not
tested, nothing came to our attention that caused us to believe that the BCBS plans had not
complied, in all material respects, with those provisions.
2
Our sample consisted of the following BCBS plans: BCBS of Arkansas, BCBS of Delaware, BCBS of Hawaii,
WellMark BCBS of Iowa and South Dakota, BCBS of Idaho, BCBS of Kansas, BCBS of Louisiana, BCBS of
Kansas City, BCBS of Mississippi, BCBS of Montana, BCBS of North Dakota, BCBS of Nebraska, BCBS of
Western New York, Excellus BCBS, Independence BlueCross, BlueCross of Northeastern Pennsylvania, BCBS of
Rhode Island, BCBS of Vermont, Mountain State BCBS of West Virginia, BCBS of Wyoming, and Triple-S
Salud, Inc. of Puerto Rico.
3
In conducting our audit, we relied to varying degrees on computer-generated data provided by
the FEP Director’s Office and the BCBS plans. 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 testing, nothing came to our attention to
cause us to doubt its reliability. We believe that the data was sufficient to achieve our audit
objective.
The audit was performed at our office in Cranberry Township, Pennsylvania from January 17
through March 22, 2012.
METHODOLOGY
To test each of the 21 BCBS plans’ compliance with contract provisions relative to the return of
health benefit refunds to the FEHBP, we requested that these BCBS plans provide FEP health
benefit refund aging schedules as of September 30, 2011. The FEP refund aging schedules
provided by these BCBS plans contained 1,728 refunds, totaling $966,258, that were received by
the plans as of September 30, 2011. 3 Based on our analysis of these refund aging schedules, we
selected and reviewed a judgmental sample of 355 refunds, totaling $635,241. Specifically, we
selected for review all refunds that were not deposited into the FEP investment account within 30
days and/or returned to the LOCA within 60 days of receipt. Additionally, we selected for
review the two highest dollar refunds from each BCBS plan that were deposited into the FEP
investment account and returned to the LOCA within 30 days and 60 days of receipt,
respectively.
3
All of these BCBS plans provided FEP refund aging schedules except for the BCBS of Rhode Island and Triple-S
Salud, Inc. plans, which certified that they did not have any aging refunds as of September 30, 2011.
4
III. AUDIT FINDING AND RECOMMENDATIONS
Aging Health Benefit Refunds $225,031
Based on our review of the FEP health benefit refund aging schedules for a sample of 21 BCBS
plans, we determined that 14 of these plans had not returned 280 refunds, totaling $214,066, to
the FEHBP. 4 After receiving our audit notification letter (dated October 3, 2011), the BCBS
plans disclosed that 278 of these questioned health benefit refunds, totaling $189,188, were
subsequently returned to the FEHBP, as well as applicable lost investment income (LII) of
$10,965. However, BCBS of Idaho has not returned two of the questioned health benefit
refunds, totaling $24,878, to the FEHBP.
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.
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.”
The FEP health benefit refund aging schedules provided by the BCBS plans contained 1,728
refunds, totaling $966,258, that were received by the plans as of September 30, 2011. 5 Based on
our analysis of these refund aging schedules, we selected and reviewed a judgmental sample of
355 health benefit refunds, totaling $635,241. Specifically, we selected for review all refunds
that were not deposited into the FEP investment account within 30 days and/or returned to the
LOCA within 60 days of receipt. Additionally, we selected for review the two highest dollar
refunds from each BCBS plan that were deposited into the FEP investment account and returned
to the LOCA within 30 days and 60 days of receipt, respectively.
4
Our sample consisted of the following 21 BCBS plans: BCBS of Arkansas, BCBS of Delaware, BCBS of Hawaii,
WellMark BCBS of Iowa and South Dakota, BCBS of Idaho, BCBS of Kansas, BCBS of Louisiana, BCBS of
Kansas City, BCBS of Mississippi, BCBS of Montana, BCBS of North Dakota, BCBS of Nebraska, BCBS of
Western New York, Excellus BCBS, Independence BlueCross, BlueCross of Northeastern Pennsylvania, BCBS of
Rhode Island, BCBS of Vermont, Mountain State BCBS of West Virginia, BCBS of Wyoming, and Triple-S
Salud, Inc. of Puerto Rico. This sample included all BCBS plans with FEHBP health benefit payments of $250
million or less in contract year 2010 (except for Capital BlueCross and several other BCBS plans that are part of
multi-plan organizations, such as WellPoint, Inc.).
5
All of the BCBS plans in our sample provided FEP refund aging schedules except for the BCBS of Rhode Island
and Triple-S Salud, Inc. plans, which certified that they did not have any aging refunds as of September 30, 2011.
5
Based on our review, we noted the following exceptions:
• 50 health benefit refunds, totaling $135,919, were not deposited into the FEP investment
account within 30 days of receipt as of September 30th, but were returned to the LOCA
within 60 days after receipt. For this exception, we are questioning the principal amounts of
these refunds and applicable LII.
• 44 health benefit refunds, totaling $4,150, were deposited into the FEP investment account
within 30 days of receipt, but were not returned to the LOCA within 60 days of receipt as of
September 30th. For this exception, we are questioning only the principal amounts of these
refunds and not LII since the funds were deposited timely into the FEP investment account.
• 186 health benefit refunds, totaling $73,997, were not deposited into the FEP investment
account within 30 days of receipt nor adjusted through the LOCA within 60 days of receipt
as of September 30th. For this exception, we are questioning the principal amounts of these
refunds and applicable LII.
After receiving our audit notification letter (dated October 3, 2011), the BCBS plans disclosed
that 278 of the questioned health benefit refunds, totaling $189,188, and applicable LII of
$10,965, were subsequently returned to the FEHBP. However, based on supporting
documentation, we only verified that the BCBS plans returned $152,262 of these questioned
refunds to the FEHBP as well as the applicable LII. We also noted that BCBS of Idaho has not
returned two of the questioned health benefit refunds, totaling $24,878, to the FEHBP.
In total, we are questioning $225,031, consisting of $214,066 for 280 health benefit refunds that
were returned untimely or not returned to the FEHBP, as well as $10,965 for LII on the refunds
that were deposited untimely into the FEP investment account.
Association’s Response:
The Association agrees with $89,295 of the questioned amount from the draft report, consisting
of $78,330 for health benefit refunds and $10,965 for LII. The Association states, “For 45
refunds totaling $4,333, we agree that the funds were deposited into the FEP investment account
timely, but were not adjusted against LOCA within 60 days. For 186 refunds totaling $73,997,
we agree that the refunds were not deposited in the FEP investment account or adjusted against
LOCA within 60 days. We also agree with the assessment of LII in the amount of $10,965.”
The Association disagrees with the remaining questioned amount. The Association states, “We
agree that 50 health benefit refunds, totaling $135,919, were not deposited into the FEP
investment account within 30 days of receipt and that LII was not calculated; however since the
refunds were returned to the LOCA within 60 days of receipt in accordance with CS1039, we
contest inclusion of the principal amount in the questioned amount as an untimely refund.”
The Association states that all of the questioned refunds have been returned to the FEHBP.
Additionally, to ensure that the BCBS plans are complying with the FEHBP contract
6
requirements for the treatment of refunds, the Association states that the “Plans implemented the
following:
• Converted manual refund processes to automated processes;
• Monitoring of the FEP claims processing system to ensure that the activity is accurately
identified;
• A refund timeliness Service Level Agreement goal to meet CS1039 refund timeliness
requirements; and
• Improved, robust communications between Plan Treasury and Claims staff to ensure
timeliness goals are met.
Also, the FEP Director’s Office (FEPDO) continues to require Plans to submit quarterly refund
balances for review and follow-up on aged balances. The FEPDO will also issue an audit alert to
all Plans emphasizing the need for assessing LII on refunds not deposited into the FEP
investment account within 30 days of receipt as soon as funds are deposited in the FEP
investment account and re-emphasizing the need to return refunds to the Program within the 60
day contract requirement.”
OIG Comments:
After reviewing the Association’s response and additional documentation provided by the
Association and/or BCBS plans, we revised the questioned amount from our draft report to
$225,031. For our revised questioned amount, we determined that the Association agrees with
$89,112, consisting of $78,147 for health benefit refunds and $10,965 for LII. (Note: In the
draft report response, the Association agreed with $78,330 of the questioned health benefit
refunds. However, after reviewing additional documentation, we removed one of these
uncontested refunds, totaling $183, from the audit finding.)
We will continue to question the 50 contested refunds, totaling $135,919, since the funds were
deposited untimely into the FEP investment account, i.e., more than 30 days after receipt.
Although these refunds were actually returned timely to the LOCA, the funds were deposited late
into the FEP investment account after receiving our audit notification letter (dated October 3,
2011).
Although we verified that the BCBS plans returned $152,262 of the questioned health benefit
refunds to the FEHBP as well as the applicable LII, we did not request the necessary
documentation to verify if the remaining questioned refunds, totaling $61,804, were returned to
the FEHBP. This remaining amount includes two refunds, totaling $24,878, that have not been
deposited into the FEP investment account by BCBS of Idaho (according to the Association via
an email, dated March 8, 2012). Additionally, the remaining amount includes 210 refunds,
totaling $36,926, that 8 BCBS plans (Wellmark BCBS, BCBS of Kansas City, BCBS of
Montana, BCBS of Nebraska, Excellus BCBS, BlueCross of Northeastern Pennsylvania, BCBS
of Vermont, and Mountain State BCBS of West Virginia) disclosed were returned to the FEHBP,
but we did not request the necessary documentation to verify if these refunds were actually
returned to the FEHBP.
7
Recommendation 1
Since we verified that the BCBS plans returned $152,262 of the questioned health benefit
refunds to the FEHBP, no further action is required for this amount.
Recommendation 2
We recommend that the contracting officer verify that the BCBS plans returned $61,804 to the
FEHBP for the remaining questioned health benefit refunds.
Recommendation 3
Since we verified that the BCBS plans returned $10,965 to the FEHBP for LII on the health
benefit refunds deposited untimely into the FEP investment account, no further action is required
for this LII amount.
8
IV. MAJOR CONTRIBUTORS TO THIS REPORT
Experience-Rated Audits Group
, Auditor-In-Charge
, Auditor
Chief
, Senior Team Leader
9
V. SCHEDULE A
AGING HEALTH BENEFIT REFUNDS
SAMPLE OF BLUECROSS AND BLUESHIELD PLANS
AGING HEALTH BENEFIT REFUND UNIVERSE AND AMOUNTS QUESTIONED
Universe Finding Association and/or BCBS Plans' Status of Finding
Refunds Returned Untimely* to Refunds Not
Aging Refunds
State/ Refunds not Deposited and/or Returned FEP Investment Account and/or Returned to FEP
Plan Code Plan Name as of
Territory Timely LOCA after Audit Notification Investment Account
September 30, 2011
on October 3, 2011 and/or LOCA
Count Amount Count Amount LII Total Count Amount LII Count Amount
20/520 AR BCBS of Arkansas 85 $ 52,119 3 $ 40,646 $ 200 $ 40,846 3 $ 40,646 $ 200 0 $ -
70/570 DE BCBS of Delaware 38 $ 53,243 2 $ 16,599 $ 9 $ 16,608 2 $ 16,599 $ 9 0 $ -
471/971 HI BCBS of Hawaii 6 $ 1,051 0 $ - $ - $ - 0 $ - $ - 0 $ -
140/640/889 IA/SD Wellmark BCBS 334 $ 131,810 2 $ 88 $ - $ 88 2 $ 88 $ - 0 $ -
110/610 ID BCBS of Idaho 2 $ 24,878 2 $ 24,878 $ - $ 24,878 0 $ - $ - 2 $ 24,878
150/650 KS BCBS of Kansas 11 $ 742 0 $ - $ - $ - 0 $ - $ - 0 $ -
170/670 LA BCBS of Louisiana 46 $ 116,085 0 $ - $ - $ - 0 $ - $ - 0 $ -
240/740 MT BCBS of Kansas City 112 $ 75,999 5 $ 131 $ - $ 131 5 $ 131 $ - 0 $ -
230/730 MS BCBS of Mississippi 6 $ 179,855 0 $ - $ - $ - 0 $ - $ - 0 $ -
250/751 MT BCBS of Montana 76 $ 5,016 42 $ 828 $ - $ 828 42 $ 828 $ - 0 $ -
320/820 ND BCBS of North Dakota 18 $ 42,696 1 $ 38,164 $ 78 $ 38,242 1 $ 38,164 $ 78 0 $ -
260/760 NE BCBS of Nebraska 688 $ 157,174 26 $ 8,413 $ 7 $ 8,420 26 $ 8,413 $ 7 0 $ -
301/800/801 NY BCBS of Western NY 8 $ 261 0 $ - $ - $ - 0 $ - $ - 0 $ -
304/305/306/804/805/806 NY Excellus BCBS 14 $ 3,515 7 $ 1,777 $ - $ 1,777 7 $ 1,777 $ - 0 $ -
362 PA Independence BC 12 $ 9,074 11 $ 8,743 $ 112 $ 8,855 11 $ 8,743 $ 112 0 $ -
364 PA BC of Northeastern PA 67 $ 32,407 21 $ 15,703 $ - $ 15,703 21 $ 15,703 $ - 0 $ -
370/870 RI BCBS of Rhode Island 0 $ - - $ - $ - $ - 0 $ - $ - 0 $ -
415/915 VT BCBS of Vermont 10 $ 2,911 5 $ 137 $ - $ 137 5 $ 137 $ - 0 $ -
443/943 WV Mountain State BCBS 172 $ 71,236 145 $ 56,166 $ 10,559 $ 66,725 145 $ 56,166 $ 10,559 0 $ -
460/960 WY BCBS of Wyoming 23 $ 6,186 8 $ 1,793 $ - $ 1,793 8 $ 1,793 $ - 0 $ -
973 Puerto Rico Triple-S Salud, Inc. 0 $ - 0 $ - $ - $ - 0 $ - $ - 0 $ -
Totals 1,728 $ 966,258 280 $ 214,066 $ 10,965 $ 225,031 278 $ 189,188 $ 10,965 2 $ 24,878
* Untimely returned refunds are refunds that were not deposited into the FEP Investment Account within 30 days of receipt and/or not returned to the LOCA within 60 days of receipt.
FEP = Federal Employee Program
LOCA = Letter of Credit Account
May 23, 2012
, Group Chief Federal Employee Program
Experience-Rated Audits Group 1310 G Street, N.W.
Office of the Inspector General Washington, D.C. 20005
202.942.1000
U.S. Office of Personnel Management Fax 202.942.1125
1900 E Street, Room 6400
Washington, DC 20415-11000
Reference: OPM DRAFT AUDIT REPORT
Aging Health Benefit Refunds
Audit Report Number 1A-99-00-12-021
Dear :
This is the Blue Cross and Blue Shield Association’s response to the above referenced
U.S. Office of Personnel Management (OPM) Draft Audit Report covering the Federal
Employees’ Health Benefits Program (FEHBP) health benefit refunds.
Our comments concerning the finding in the report are as follows:
AGING HEALTH BENEFIT REFUNDS $239,615
We have received your Draft Audit Report, dated March 23, 2012, in which you
questioned the return of 325 refunds totaling $228,650 and lost investment income (LII)
totaling $10,965.
We agree that 50 health benefit refunds, totaling $135,919, were not deposited into the
FEP investment account within 30 days of receipt and that LII was not calculated;
however since the refunds were returned to the LOCA within 60 days of receipt in
accordance with CS1039, we contest inclusion of the principal amount in the questioned
amount as an untimely refund. For 45 refunds totaling $4,333, we agree that the funds
were deposited into the FEP investment account timely, but were not adjusted against
LOCA within 60 days. For 186 refunds totaling $73,997, we agree that the refunds were
not deposited in the FEP investment account or adjusted against LOCA within 60 days.
We also agree with the assessment of LII in the amount of $10,965. We contest the
remaining 44 refunds, totaling $14,401, because the Plan adjusted the LOCA from its
corporate bank account within 30 days of receipt to return the funds to the Program.
Using this methodology, the Plan returned funds to the Program faster than if they had
deposited the funds in the FEP investment account and then adjusted LOCA. As a
result, the Plan was in compliance with Contract requirements.
May 23, 2012
Page 2 of 2
To-date, all refunds have been returned to the Program. We provided supporting
documentation for returned refunds and applicable LII to the lead auditor.
In order to ensure that Plans are in compliance with CS1039 requirements for the
treatment of refunds Plans implemented the following:
• Converted manual refund processes to automated processes;
• Monitoring of the FEP claims processing system to ensure that the activity is
accurately identified;
• A refund timeliness Service Level Agreement goal to meet CS1039 refund timeliness
requirements; and
• Improved, robust communications between Plan Treasury and Claims staff to ensure
timeliness goals are met.
Also, the FEP Director’s Office (FEPDO) continues to require Plans to submit quarterly
refund balances for review and follow-up on aged balances. The FEPDO will also issue
an audit alert to all Plans emphasizing the need for assessing LII on refunds not
deposited into the FEP investment account within 30 days of receipt as soon as funds
are deposited in the FEP investment account and re-emphasizing the need to return
refunds to the Program within the 60 day contract requirement.
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,
Director, Program Assurance
Audit of Aging Health Benefit Refunds Sample of BlueCross and BlueShield Plans
Published by the Office of Personnel Management, Office of Inspector General on 2012-11-06.
Below is a raw (and likely hideous) rendition of the original report. (PDF)