oversight

Audit of Global Claims-to-Enrollment Match for Blue Cross and Blue Shield Plans

Published by the Office of Personnel Management, Office of Inspector General on 2016-01-21.

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
     GLOBAL CLAIMS-TO-ENROLLMENT MATCH FOR
         BLUE CROSS AND BLUE SHIELD PLANS

                                    Report Number 1A-99-00-15-008
                                           January 21, 2016




                                                        -- CAUTION –
This audit report has been distributed to Federal officials who are responsible for the administration of the audit 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.
             EXECUTIVE SUMMARY 

                             Audit of Global Claims-to-Enrollment Match

Report No. 1A-99-00-15-008                                                             January 21, 2016

Why Did We Conduct the Audit?            What Did We Find?

The objectives of our audit were to      Our limited scope audit was conducted in accordance with
determine whether the Blue Cross and     Government Auditing Standards. This report questions
Blue Shield (BCBS) plans charged         $13,258,298 in health benefit charges. These questioned health
costs to the Federal Employee Health     benefit charges are summarized as follows:
Benefits Program (FEHBP) and
provided services to the FEHBP           A. Member Enrollment Issues – Dollar Threshold Review
members in accordance with the              	 Our review determined that the FEHBP was overcharged
terms of its contract with the U.S.            $10,051,009 in health benefit charges for claims that were
Office of Personnel Management.                paid for ineligible patients.
Specifically, our objective was to
determine whether the BCBS plans         B. Member Enrollment Issues – Statistical Sample Review
complied with contract provisions           	 Our review of a statistical sample of claims where there
relative to claims paid for ineligible         was a conflict with enrollment coverage for patients with
patients.                                      cumulative claim line payments less than $2,500 projected
                                               that the FEHBP was overcharged $3,207,289 in health
What Did We Audit?                             benefit charges for claims that were paid for ineligible
                                               patients.
The Office of the Inspector General
has completed a limited scope audit
of the FEHBP operations at all BCBS
plans. The audit covered claim
payments from January 1, 2012,
through September 30, 2014, as
reported in the Blue Cross and Blue
Shield Association’s Government-
wide Service Benefit Plan Annual
Accounting Statements. Specifically,
we identified claims from this period
that were paid when the patient’s
enrollment status was identified as
ineligible.

 _______________________
 Michael R. Esser
 Assistant Inspector General
 for Audits
                                                      i
              ABBREVIATIONS

ACA           Affordable Care Act
Association   Blue Cross Blue Shield Association
APM           Administrative Procedures Manual
BCBS          Blue Cross Blue Shield
CFR           Code of Federal Regulations
DO            Director’s Office
FEHB          Federal Employees Health Benefits
FEHBP         Federal Employees Health Benefits Program
FEP           Federal Employee Program
FEP OC        Federal Employee Program Operations Center
FOIA          Freedom of Information Act
OPM           U.S. Office of Personnel Management
Plan(s)       Blue Cross and Blue Shield Plan(s)




                           ii
IV. MAJORTABLE
          CONTRIBUTORS TO THIS REPORT
               OF CONTENTS

                                                                                                                      Page 

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


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


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


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


III.   AUDIT FINDINGS AND RECOMMENDATIONS.................................................6

       A. Member Enrollment Issues - Dollar Threshold Review ...........................................6 

       B. Member Enrollment Issues - Statistical Sample Review ........................................13 


IV.    MAJOR CONTRIBUTORS TO THIS REPORT ..................................................18 


       APPENDIX A: Blue Cross Blue Shield Association’s March 10, 2015 response to
       the Draft Audit Report, issued December 12, 2014.

       APPENDIX B: Blue Cross Blue Shield Association’s August 14, 2015 response to
       the Statistical Review Audit Inquiry, issued July 27, 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 all
Blue Cross and Blue Shield (BCBS) plans. The audit was performed by the U.S. Office of
Personnel Management’s (OPM) Office of the Inspector General (OIG), as authorized by the
Inspector General Act of 1978, as amended.

The FEHBP was established by the Federal Employees Health Benefits (FEHB) Act (Public Law
86-382), enacted on September 28, 1959. The FEHBP was created to provide health insurance
benefits for federal employees, annuitants, and dependents. OPM’s Healthcare and Insurance
Office has overall responsibility for administration of the FEHBP. The provisions of the FEHB
Act are implemented by OPM through regulations, which are codified in Title 5, 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 Blue Cross Blue Shield 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 64 local BCBS plans participating in the FEHBP.

The Association has established a Federal Employee Program (FEP1) Director’s Office (DO) in
Washington, D.C. to provide centralized management for the Service Benefit Plan. The FEP DO
coordinates the administration of the contract with the Association, member BCBS plans, and
OPM.

The Association has also established an FEP Operations Center (OC). The activities of the
FEP OC 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.




1
  Throughout this report, when we refer to "FEP", we are referring to the Service Benefit Plan lines of business at
the Plan(s). When we refer to the "FEHBP", we are referring to the program that provides health benefits to federal
employees.

                                                         1                                Report No. 1A-99-00-15-008
Compliance with laws and regulations applicable to the FEHBP is the responsibility of the
Association and Plan management. Also, management of each BCBS plan is responsible for
establishing and maintaining a system of internal controls.

Findings from our previous global claims-to-enrollment match audit of all BCBS plans
(Report No. 1A-99-00-10-061, dated September 8, 2011) for claims reimbursed from
July 1, 2008 through September 30, 2010, have been resolved.

Our sample selections, instructions, and preliminary audit results of the potential enrollment
errors were presented to the Association in a draft report, dated December 12, 2014. 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 December 8, 2015, was
considered in preparing our final report.




                                               2                          Report No. 1A-99-00-15-008
 IV. MAJOR CONTRIBUTORS
 II. OBJECTIVES, SCOPE, AND TO THIS REPORT
                            METHODOLOGY

Objectives
The objectives of our audit were to determine whether the BCBS plans charged costs to the
FEHBP and provided services to the FEHBP members in accordance with the terms of the
contract. Specifically, our objective was to determine whether the plans complied with contract
provisions relative to claims paid for ineligible patients.

Scope
The audit covered health benefit payments from January 1, 2012 through September 30, 2014, as
reported in the Blue Cross and Blue Shield Association’s Government-wide Service Benefit Plan
Annual Accounting Statements. To test each BCBS plan’s compliance with the FEHBP health
benefit provisions related to enrollment eligibility, we performed a computer search on our claims
data warehouse to identify all BCBS claims that were reimbursed for potentially ineligible
patients from January 1, 2012 through September 30, 2014. This universe is comprised of claims
for two distinct potential member enrollment issues. The first category, “Conflict with
Enrollment Coverage,” consists of claims incurred during gaps in patient coverage or after
termination of patient coverage. The second category, “No Enrollment Record on File,” consists
of claims incurred when no patient enrollment records existed. Exhibit I contains a summary of
the total claims universe for this audit.

                     Exhibit I – Universe of Potentially Ineligible Patients
                            Category                           Claim    Amounts
                                                    Patients
                                                               Lines     Paid
                Conflict with Enrollment Coverage   34,747     248,591 $34,406,164
                No Enrollment Record on File
                                                     1,097     23,969   $2,789,145
                                           Total    35,844     272,560 $37,195,309


From this universe we selected two separate samples of claims to review as part of this audit.
The first sample included a review of all claim lines in both categories for patients with
cumulative claim payments over $2,500. The second was a statistical sample of claim lines from
only the “Conflict with Enrollment Coverage” category for patients with cumulative claim
payments under $2,500. Exhibit II contains a summary of the sample selections.




                                                3                          Report No. 1A-99-00-15-008
                          Exhibit II – Summary of Sample Selections
                                           Sample Selection         Claim       Amounts
                 Category
                                                 Criteria           Lines        Paid
       Conflict with Enrollment        All claims for patients
       Coverage AND                    with cumulative claim       108,718     $27,950,803
       No Enrollment Record on File    payments over $2,500.
       Conflict with Enrollment        Statistical sample of
       Coverage                        claims for patients with
                                                                    7,650       $1,812,595
                                       cumulative claim
                                       payments under $2,500.

Methodology
The claims selected for review were submitted to each BCBS plan for their review and response.
We then conducted a limited review of the plans’ “paid correctly” responses and an expanded
review of the plans’ “paid incorrectly” responses. Specifically, we verified supporting
documentation and the accuracy and completeness of the plans’ responses, determined if the
claims were paid correctly, and/or calculated the appropriate questioned amounts for the claim
payment errors. Additionally, we verified on a limited test basis if the BCBS plans had initiated
recovery efforts, adjusted or voided the claims, and/or completed the recovery process by the
audit request due date (i.e., February 23, 2015) for the claim payment errors in our sample.

The determination of the questioned amount is based on the FEHBP contract, the 2012 through
2014 Service Benefit Plan brochures, and the Association’s FEP Administrative Procedures
Manual (APM).

We conducted our limited scope performance audit in accordance with generally accepted
government auditing standards. Those standards require that we plan and perform the audit to
obtain sufficient and appropriate evidence to provide a reasonable basis for our findings and
conclusions based on our audit objectives. We believe that the evidence obtained provides a
reasonable basis for our findings and conclusions based on our audit objectives.

We 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 also 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 claims paid for ineligible
patients. 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 claims paid for ineligible
patients. Exceptions noted are explained in detail in the “Audit Findings and
Recommendations” section of this audit report. With respect to the items not tested, nothing
                                                   4                            Report No. 1A-99-00-15-008
came to our attention that caused us to believe that the BCBS plans 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 DO, the FEP OC, and the BCBS plans. Through audits and a reconciliation process, we
have verified the reliability of the BCBS claims data in our data warehouse, which was used to
identify the universe of potential enrollment claim payment errors. The BCBS claims data is
provided to us on a monthly basis by the FEP OC, and after a series of internal steps, uploaded
into our data warehouse. However, due to time constraints, we did not verify the reliability of
the data generated by the BCBS plans’ local claims systems. While utilizing the computer-
generated data during our audit, nothing came to our attention to cause us to doubt its reliability.
We believe that the data was sufficient to achieve our audit objectives.

Audit fieldwork was performed at our offices in Washington, D.C., Cranberry Township,
Pennsylvania and Jacksonville, Florida through July 2015.




                                                 5                            Report No. 1A-99-00-15-008
   IV. AUDIT
 III.   MAJOR  CONTRIBUTORS
             FINDINGS       TO THIS REPORT
                      AND RECOMMENDATIONS

  The sections below detail the results of our review of claims that were potentially paid for
  members that did not have active FEP coverage on the date the service was incurred. This
  review was done in two parts – a review of all claims over a dollar threshold and a review of a
  statistical sample of claims.

A. Member Enrollment Issues – Dollar Threshold Review                                     $10,051,009
   As mentioned in the Scope section above, our first sample of claims selected for review included
   all claim lines in both categories of enrollment issues for patients with cumulative claim
   payments over the dollar threshold of $2,500. Exhibit III provides a breakdown of this sample
   selection by category.

                        Exhibit III – Summary of Dollar Threshold Review
                                            Claim      Amount Paid for     Claim       Amount
                                            Lines       Claim Lines      Lines Paid    Paid in
                   Category                Reviewed      Reviewed         in Error      Error

      Conflict with Enrollment Coverage     92,032       $25,522,864      39,869      $9,035,056
      No Enrollment Record on File          16,686       $2,427,939        5,604      $1,015,953
                                  Total    108,718       $27,950,803      45,473      $10,051,009


  These claims were reviewed to determine whether the BCBS plans complied with contract
  provisions relative to claims paid for ineligible patients. Our review determined that the BCBS
  plans incorrectly paid 45,473 claim lines, totaling $10,051,009 in payments, for ineligible
  patients.

  These 45,473 claim payment errors are comprised of the following:
  	 40,077 claim lines were questioned due to retroactive enrollment adjustments, resulting in
     overcharges of $8,820,513 to the FEHBP. Retroactive adjustments occur when the patient’s
     enrollment status has changed, but the enrollment system is not timely updated to reflect the
     change. Our review determined these claim payment errors were due to either:
     1) The Federal payroll offices or FEP OC did not receive accurate member information for
         several months or years after the subscriber was due to be terminated, so the ineligible
         patients remained active in the Association’s FEP Express nation-wide claims processing
         system; or



                                               6	                              Report No. 1A-99-00-15-008
   2) The BCBS plans did not initiate recovery after the retroactive enrollment adjustment was
      identified because of the Association’s “60-day recovery limit” policy or because of
      provider contract recovery limitations.
       However, contract CS 1039 does not support the Association’s position on delaying
       recovery on all retroactive enrollment claims errors, and also states that the BCBS plans
       should make a prompt and diligent effort to recover erroneous claim payment errors,
       regardless of the provider contract limitations. See the Procedural Issues section below
       for a discussion of our concerns regarding the “60-day recovery limit” policy.

	 4,742 claim lines were questioned due to FEP Express system processing errors, resulting in
   overcharges of $920,291 to the FEHBP.

	 463 claim lines were questioned due to local system processing errors, resulting in
   overcharges of $219,928 to the FEHBP.

	 176 claim lines were questioned due to manual processor errors, resulting in overcharges of
   $88,875 to the FEHBP.

	 15 claim lines were questioned due to provider billing errors, resulting in overcharges of
   $1,402 to the FEHBP.

Procedural Issues
We have serious concerns with the Association’s efforts to           We have serious concerns
implement corrective actions to prevent claim payments for           regarding the Association’s
ineligible patients. Year-after-year, retroactive enrollment         lack of corrective action to
adjustments are the primary reason for enrollment-related claim      prevent claim payments for
payment errors. Due to the nature of the enrollment process, we ineligible payments.
recognize that some retroactive enrollment errors will occur.
Although the Association has taken steps to identify these errors after the payment has already
been made, this has proven insufficient, and the Association should take additional measures to
reduce the frequency of these errors from occurring in the first place. The procedural controls
that the Association could implement to reduce these improper payments include, but are not
limited to:

	 The Association could evaluate the benefit of implementing an automated process to
   reconcile enrollment discrepancies between the FEP OC and employing agencies. An
   automated reconciliation could leverage all of the electronic data available from the bi-
   weekly enrollment premium reports. The current manual process is not efficient because


                                                7	                          Report No. 1A-99-00-15-008
   FEP OC claims processors are unable to resolve the large volume (approximately 38,000) of
   contract holder discrepancies that are identified each quarter.

	 The Association could modify the FEP Express system to automatically defer claims where a
   member’s enrollment data is incomplete or the member has coverage under another FEP
   number. Claims simply should not be automatically paid without manual review when the
   enrollee’s file is incomplete and/or the enrollee’s file has not been updated.

	 The Association could also implement a process to identify members whose enrollment was
   terminated due to fraud, intentional misrepresentation of information, or non-payment of
   premiums, and then modify the “60-day recovery limit” policy to allow immediate recovery
   of claim payments for these members. The 60-day recovery limit policy was developed by
   the Association because the Affordable Care Act (ACA) prohibits the recovery of claim
   payment errors that were the result of retroactive enrollment changes where the member
   termination is not related to fraud, intentional misrepresentation of information, or non-
   payment of premiums. However, the Association’s policy recommends the BCBS plans
   delay recovery on all claims where the retroactive enrollment error is related to a member
   termination or cancelation. This policy was implemented without addressing the fact that
   many members are not covered by this ACA rule (i.e., those whose termination was related
   to fraud, misrepresentation, or not paying premiums). This policy causes unnecessary delays
   in the recovery process and often results in overpayments not being returned to the FEHBP.

	 We also detected issues with the Association’s process of notifying members that their
   coverage has been terminated. We identified 6,966 ineligible members and determined that
   approximately 9 percent of these individuals were not formally notified of their coverage
   termination. Failure to promptly notify a member that their enrollment has been terminated
   increases the risk that these members will continue to submit claims for services for which
   they were not covered.

Based on our experience in resolving global claims audits with the        $10 million in
Association, we expect that the Association will determine that a         enrollment-related
substantial portion of the $10,051,009 in questioned costs are            claim overpayments
“unrecoverable” due to a variety of reasons such as provider contract     were not made in
limitations or that all recovery efforts have been exhausted. OPM’s       good faith.
contract office has historically accepted the Association’s argument that
these unrecoverable claim payments were made in good faith, and has not required the
Association to return this money to the FEHBP.

Contract CS 1039, Part III, section 2.3 (8)(i) states, “The Carrier may charge the contract for
benefit payments made erroneously but in good faith . . . .” However, we do not agree that these
                                               8	                          Report No. 1A-99-00-15-008
claim payment errors were made in good faith, and therefore we recommend that the entire
$10,051,009 be returned to the FEHBP regardless of the Plan’s ability to recover the funds from
the providers. As discussed on page 14 (Basis for questioning projected costs), we have reported
that the BCBS Plans’ have made significant enrollment-related claim payment errors for at least
10 years, and no prudent business would continue to take only minimal, and unsuccessful,
procedural measures to prevent such a magnitude of improper payments.

Association’s Response:
In response to the draft report which questioned $27,950,803 in potential overpayments, the
Association agrees with $3,364,278 in overpayments and states, “These overpayments were the
result of retroactive enrollment changes where the claim was processed before a termination
notice was received either from the Payroll Office or from the member (in the case of a
divorce, etc.). Where possible, recovery efforts have been initiated for the identified errors.
The Plans will continue to pursue these overpayments as required by CS 1039, Section 2.3
(g)(I). “Any benefit payments the Plans are unable to recover are allowable charges to the
Program. In addition, as good faith erroneous payments, lost investment income is not
applicable to these confirmed overpayments.”

The Association also states, “Due to the nature of the enrollment process, we will continue to
receive retroactive enrollment updates after the claim has been processed. However, the daily
Claims Audit Monitoring Tool (CAMT) Retroactive Enrollment Report updated daily with
retroactive enrollment activity is designed to identify retroactive terminations so that Plans can
timely initiate recoveries on applicable erroneous payments. Additional tools to identify
retroactive terminations include the CAMT Terminated Member roster, which identifies
retroactive terminations that may not have been captured on the daily CAMT Retroactive
enrollment report. We continue to monitor both processes to promote timely identification and
recovery of terminated member claims.

Regarding the remaining questioned charges in the draft report, the Association contested
$24,586,526 due to the following reasons:

	 Members had coverage at the time the claims were incurred; therefore, the claims were paid
   correctly;

	 Potential overpayments were identified before the audit started and were recovered before the
   draft report response was submitted;

	 Overpayments were identified before the audit and recovery was initiated but not yet
   collected or were uncollectible because the retroactive termination notice was received after
   the Plan’s provider contract limit for recovering overpayments had passed.
                                                9	                          Report No. 1A-99-00-15-008
	 The overpayments were below the Plan’s recovery threshold, and further attempts to recover
   these overpayments exceed the cost to recover the overpayments.

Regarding corrective actions, the Association states, “BCBSA [the Association] will work with
the Plans to identify root causes where Plans did not identify and initiate recovery of claims
 . . . before the audit started. BCBSA [the Association] will also work with the FEP
Operations Center [FEP OC] to identify root causes where the retroactive termination notices
were not issued to Plans so that appropriate overpayment recovery activity could be initiated
before the audit started. Once the root cause analysis is completed, BCBSA [the Association]
will work with Plans and the FEPOC to implement the necessary corrective actions so that
terminated member activity is timely detected and recovery is timely initiated to recovery
related overpayments.”

Note – the procedural recommendations were not included in the draft audit report and the
Association has not had the opportunity to respond to them.

OIG Comments:
After reviewing the Association’s response and additional documentation provided by the BCBS
plans, we revised the questioned charges from our draft report to $10,051,009. If claim
overpayments were identified by the BCBS plans before our audit notification date
(i.e., October 1, 2014) and adjusted or voided by the draft report due date (i.e., February 23,
2015), we did not consider these as claim payment errors in this final audit report.

Based on the Association’s response and documentation provided by the BCBS plans, we
determined that the Association and/or plans acknowledge that $9,979,536 in claim
overpayments were made for ineligible patients, and contests that the remaining $71,473 in claim
payments were appropriately paid for actively enrolled members.

Acknowledged claim payment overpayments
The Association acknowledges that $9,979,536 in claim overpayments were made. This amount
is comprised of the following:
 $131,873 represents claim overpayments for which the BCBS plans did not initiate recovery
   because the individual claim lines questioned were under $100, and the Association does not
   consider this material. However, the total overpayment for each of these claims (the sum of
   all claim lines) is greater than $100, and therefore we continue to question these costs.

	 $2,715,123 represents claim overpayments for which the BCBS plans did not initiate recovery
   because they believe they were restricted by contract limitations, or that recovery efforts had
   been exhausted. However, we continue to question these costs because the BCBS Plans are
   required by contract CS 1039 to attempt recovery regardless of provider contract limitations,
                                               10 	                         Report No. 1A-99-00-15-008
    or because they have not provided us with documentation supporting that all recovery efforts
    have been exhausted.

 $7,132,540 represents claim overpayments for which the BCBS plans have committed to
  pursue recovery2.

Contested claim overpayments
The Association contests that $71,473 in claim payments were made for individuals that the
Association believes did have coverage at the time the service was provided. However, the
BCBS plans did not provide sufficient documentation to demonstrate that the member was, in
fact, eligible to receive these benefits, and we therefore continue to question these costs.

Recommendation 1
We recommend that the contracting officer disallow $10,051,009 for claim overpayments and
verify that the BCBS plans return all amounts recovered to the FEHBP, regardless of the Plans’
ability to recover the claim payments from providers.

Recommendation 2
Due to the number of errors related to retroactive enrollment adjustments, we recommend that
the contracting officer verify the Association is timely resolving enrollment discrepancies
identified during the quarterly reconciliation process between the employing agencies and
FEP OC. This includes contacting the appropriate employing agency to obtain the necessary
documentation, issuing the enrollee’s termination notices and terminating the enrollee in the FEP
Express system. The contracting officer should also require the Association to utilize the
enrollee premium files that are made available from the employee agencies every pay period.
This action includes timely identifying enrollment changes and discrepancies, and taking the
necessary actions to resolve the discrepancies with employee agencies.

Recommendation 3
We recommend that the contracting officer require the Association to perform a cost analysis to
determine the benefit of automating the process of updating the FEP Express system when
enrollment discrepancies are identified between the FEP OC and employing agencies. If
determined cost effective, we recommend that the contracting officer require the Association to
implement these automated procedures.


2
 Although the Association acknowledges that there were $7,132,540 in claim payment errors, it contends that
$3,136,596 of this amount should not be labeled as “questioned” because the BCBS Plans initiated recovery efforts
before they received our claims sample. However, Contract CS 1039 states that claims should be reported as
questioned charges unless the Plans initiated recovery prior to receiving notification of the audit. Recovery efforts
for all of these claim overpayments began after the notification letter was issued, therefore we continue to label the
entire $7,132,540 as questioned costs.
                                                          11                                Report No. 1A-99-00-15-008
Recommendation 4
We recommend that the contracting officer require the Association to implement a process to
identify ineligible members who were terminated due to fraud or intentional misrepresentation of
information yet continued to improperly file claims (e.g., medical or pharmacy). This process
should be performed on a monthly basis, and the members identified should be reported to the
OPM OIG Office of Investigations.

Recommendation 5
We recommend that the contracting officer require the Association to immediately update its
“60-day recovery limit” policy that limits the BCBS plans from initiating recovery for at least
60-days on all retroactive enrollment terminations or cancelations. The policy should only
restrict recovery efforts for members who are eligible to contest their enrollment termination, and
should allow for immediate recovery efforts for members whose coverage termination was due
to fraud, intentional misrepresentation of information, or non-payment of premiums. The Claims
Audit Monitoring Tool should be modified to reflect this new policy.

Recommendation 6
We recommend that the contracting officer require the Association to enhance the FEP Express
system by adding an edit that defers claims where a patient’s enrollment is incomplete or who
has coverage under another FEP member number. In addition, the FEP Express system should
defer all claims for members whose enrollment file contains inconsistencies, and not allow
payment on these claims until the member’s enrollment file is properly updated. This edit should
contain a unique deferral code that cannot be overridden by claims processors.

Recommendation 7
We recommend that the contracting officer require the Association to evaluate its procedures for
notifying members that their coverage has been terminated. The Association should attempt to
identify the cause(s) that led to nine percent of the members we reviewed not receiving
notification of coverage termination. Once a cause is identified, appropriate corrective action
should be implemented.




                                                12                          Report No. 1A-99-00-15-008
B. Member Enrollment Issues – Statistical Sample Review                                 $3,207,289
   As mentioned in the Scope section, above, our second sample of claims selected for review was a
   statistical sample of claim lines from only the “Conflict with Enrollment Coverage” category for
   patients with cumulative claim payments under $2,500. Exhibit IV shows this universe of claim
   lines.

                               Exhibit IV – Universe for Statistical Sample
                    Category                             Criteria             Claim Lines      Amount Paid
                                                Patients with cumulative
       Conflict with Enrollment Coverage                                         156,559           $8,883,300
                                                payments under $2,500


  From this universe, we reviewed a statistical sample of 7,650 claim lines, totaling $1,812,595 in
  payments, with the intention of projecting the results to the entire population.

  For our statistical review prediction module, we used a ratio estimator to determine the sample
  size and total overpayment amount. This module used a stratified dollar-unit sample design,
  where each dollar in a stratum’s value had the same probability of selection.

  We used automated software to generate the random-stratified dollar-unit sample, which targeted
  a 4 percent margin of error and a 95 percent confidence level, with a presumed universe error
  rate of 40 percent.3 Each sample unit was identified as a single FEHBP paid claim line. See
  Exhibit V for a summary of our statistical review prediction module.

                                                    Exhibit V
                                              Prediction Module
                                     Estimator Approach       Ratio Method
                                     Margin of Error            4 percent
                                     Confidence Interval       95 percent
                                     Presumed Error Rate       40 percent


  Our review determined that from the statistical sample of 7,650 claim lines the BCBS plans paid
  2,955 claim lines for ineligible patients, resulting in overcharges of $556,851 to the FEHBP.

  These overcharges were the result of the following:

  3
    The presumed universe error rate of 40 percent was calculated using the results from our prior audit
  (Report No. 1A-99-00-10-061). Of the 59,364 claim lines reviewed from our prior audit, the BCBS plans
  incorrectly paid 23,244 claim lines for ineligible patients.
                                                        13                               Report No. 1A-99-00-15-008
	 Retroactive enrollment changes for 2,273 claim lines resulted in $424,617 in overcharges;

	 Recovery was not initiated when a retroactive enrollment change was previously identified for
   509 claim lines, resulting in $96,436 in overcharges;

	 Manual processing errors for 135 claim lines resulted in $26,789 in overcharges;

	 FEP Express system processing errors for 35 claim lines resulted in $5,734 in overcharges;
   and

	 Provider billing errors for three claim lines resulted in $3,275 in overcharges.

Based on our projection of the sample results, we are 95 percent confident that the true value of
claims paid for ineligible patients from the universe described above is between $3,114,869 and
$3,299,709. Our best estimate of the true value, the point estimate, is $3,207,289, and this is the
amount we are questioning in this report. Exhibit VI shows a summary of this statistical review.

                          Exhibit VI – Summary of Statistical Review
          Universe of       Claim Lines      Claim Lines      Overcharges    Projection of
          Claim Lines        Sampled        Paid in Error     from Sample    Overcharges
                                            from Sample
            156,559            7,650            2,955           $566,851      $3,207,289


Basis for questioning projected costs
The FEPDO’s guidance to the BCBS plans regarding the enrollment process appears inadequate
and lacks sufficient oversight. Our prior global claims-to-enrollment match audits determined
that $7.92 million in claims were paid for ineligible patients during the period between 2005 and
September 30, 2010. This represents approximately $1.38 million in enrollment claim payment
errors per year. In this current audit our Member Enrollment Issues – Dollar Threshold Review
questions over $10 million in claims that were paid for ineligible patients for the period of 2012
through September 30, 2014. This represents approximately $3.64 million in enrollment claim
payment errors per year – a 164 percent increase ($2.26 million) in enrollment claim payment
errors per year since our last audit was performed.

CS 1039 states that costs charged to the FEHBP must be actual, allowable, allocable, and
reasonable. In the conduct of competitive business, no prudent person would continue to take
only minimal, and unsuccessful, measures to prevent such a magnitude of improper payments -
knowing the nature of the enrollment process and the high risk associated with making improper
payments. Therefore, we conclude that the FEP DO unreasonably charged the FEHBP for
claims that were not paid in good faith in accordance with CS 1039. The full amount of the
                                                14 	                       Report No. 1A-99-00-15-008
estimated improper payments should be returned to the FEHBP trust fund, regardless of the FEP
DO’s ability to recover the improper payments from the specific providers to whom they were
made.

As previously cited from CS 1039, costs charged to the FEHBP must be actual, allowable,
allocable, and reasonable. If errors are identified, the Plan is required to make a diligent effort to
recover the overpayments.

48 CFR 31.201-3 states, “(a) A cost is reasonable if, in its nature and amount, it does not exceed
that which would be incurred by a prudent person in the conduct of competitive business.”

Association’s Response:
“BCBSA [the Association] contests the OIG’s additional questioned amount of $3,207,289
because it does not allow BCBSA [the Association] to successfully resolve questioned claims in
accordance with requirements as stated in CS 1039 related to Audit Resolution and Reportable
findings. Further, BCBSA [the Association] does not agree to the validity or understand the
statistical calculations performed to derive the additional questioned amounts. . . .

When OIG issues a Draft Report of findings to the Carrier, the Carrier must respond with all
available, accurate and relevant documentation to validate or invalidate the findings. This
must be done within the timeframe specified in the OIG Draft Report transmittal letter.

To enable this, Carriers must expeditiously tender all documentation necessary for resolution
of the audit. This includes overpayment recoveries via check or certification, full
documentation of the Carriers position for findings being contested, evidence supporting due
diligence assertions, and support for all other pertinent issues which OPM must consider, as
appropriate . . . .

Because Plans do not have the exact claims that are being questioned, there is no way that
they can determine which claims to provide support for uncollectible, contested or recovered
claims, thus Plans are unable to resolve the audit finding. . .”

The Association also states, “The distribution of the Universe appears to be skewed towards the
lower dollar end of the scale. This does not appear to correlate to the OIG point estimate of
$3,207,289.

If the approach is to be from a statistical perspective, we should have a clear and an agreed
upon understanding of the Methodology used to determine the;

   Population to be sampled (how/why was a cumulative amount of $2,500 derived)
                                                 15                            Report No. 1A-99-00-15-008
   Sample Size determination
   Error Rate Calculation
   Factor(s) used to determine Point estimation
   Point estimation used (i.e., Average, Median)

...

In summary, because detail claims questioned as errors is not provided with the OIG
questioned amount and due to insufficient documentation was provided to replicate/validate
the point value estimate of $3,207,289 used in the report, BCBSA [the Association] disagrees
to the proposed total questioned amount of $3,207,289 for Enrollment claim errors paid by the
Program as non-covered charges.”

OIG Comments:
We acknowledge that the statistical sampling methodology          Claim overpayments were not
used in this review does not present the Association with         “reasonable”, and therefore
the specific claim lines questioned, and that it is therefore     funds should be returned to the
unable to research and resolve these claims in accordance         FEHBP regardless of the
with CS 1039.                                                     Association’s ability to tie the
                                                                  questioned dollars to a specific
However, the elements of CS 1039 cited by the                     claim line.
Association are only applicable to claim overpayments
made in good faith. As mentioned above, the Association has continued to make repeated
overpayments without taking effective measures to prevent them. In other words, the payments
were not “reasonable” as defined by the CFR, and therefore we do not consider the Association’s
inability to associate the questioned dollars to a specific claim line applicable to this audit finding.

With regards to the details of the sampling methodology, we believe that all of the relevant
statistical information is contained in the explanation above, but will directly address the specific
elements questioned by the Association.

	 The population sampled for this review was “Conflict with Enrollment Coverage” claims with
   cumulative payments under $2,500. The $2,500 threshold was judgmentally selected as the
   point below which it is not feasible to review every individual claim, and where statistical
   sampling would be more appropriate to determine the overpayments from this universe. In
   our opinion, it is not financially practical to initiate individual recovery for these claims, but
   the total volume of claims, and error rate, in this universe warrants that we estimate the
   overpayments.




                                                  16 	                          Report No. 1A-99-00-15-008
	 The sample size was determined using statistical analysis software that applied a random
   stratified dollar-unit sample targeting a 4 percent margin of error and a 95 percent confidence
   level, with a presumed universe error rate of 40 percent.

	 The error rate was calculated using the error rate identified in our prior Global Claims-to-
   Enrollment Match audit (Report No. 1A-99-00-10-061).

	 The point estimate was derived using the ratio estimator method, which is an appropriate
   estimator to use in the context of stratified dollar-unit sample designs, where each dollar in a
   stratum’s value has the same probability of selection.

The sampling approach we used during this audit represents a valid statistical sampling
methodology, and all of the relevant details and variables have been outlined in this report.

Recommendation 8
We recommend that the contracting officer disallow $3,207,289 for claims that were not paid in
good faith and unreasonably charged to the FEHBP.




                                                17 	                         Report No. 1A-99-00-15-008
 IV. MAJOR CONTRIBUTORS TO THIS REPORT

Information Systems Audits Group

                , Auditor

            , Auditor-in-Charge


           , Senior Team Leader

             , Group Chief




                                   18   Report No. 1A-99-00-15-008
                                        APPENDIX A 





                                                                                   Federal Employee Program
                                                                                   1310 G. Street, NW
                                                                                   Washington, DC 20005
                                                                                   202.942.1000
                                                                                   Fax 202.942.1125
March 10, 2015

                , Group Chief
Claims & IT Audits Group
U.S. Office of Personnel Management
1900 E Street, Room 6400
Washington, D.C. 20415-1100


Reference:                   OPM DRAFT AUDIT REPORT
                             Global Enrollment Audit
                             Audit Report #1A-99-00-15-008
                             (Report dated and received 12/12/2014)

Dear           :

This is in response to the above referenced U.S. Office of Personnel Management (OPM) Draft
Report concerning the Global Enrollment Audit for claims paid during the period of January 1,
2012 through September 30, 2014, which questioned $27,950,804 in potential payment errors.
Our comments concerning the findings in the report are as follows:

Recommendation 1

We recommend that the contracting officer disallow $27,950,804 for claims paid on behalf of
ineligible patients, and have the BCBS plans return all amounts recovered to the FEHBP.

BCBSA Response

IR1A. Enrollees Coverage Conflicts with Dates of Service                            $25,522,865

Our review of the IR1A that questioned claims paid for members that may have had gaps in
coverage identified $3,132,137 and in overpayments. These overpayments were the result of
retroactive enrollment changes where the claim was processed before a termination notice was
received either from the Payroll Office or from the member (in the case of a divorce, etc.).
Where possible, recovery efforts have been initiated for the identified errors. The Plans will

                                                                   Report No. 1A-99-00-15-008
continue to pursue these overpayments as required by CS 1039, Section 2.3 (g)(I). “Any benefit
payments the Plans are unable to recover are allowable charges to the Program. In addition, as
good faith erroneous payments, lost investment income is not applicable to these confirmed
overpayments”.

Due to the nature of the enrollment process, we will continue to receive retroactive enrollment
updates after the claim has been processed. However, the daily Claims Audit Monitoring Tool
(CAMT) Retroactive Enrollment Report updated daily with retroactive enrollment activity is
designed to identify retroactive terminations so that Plans can timely initiate recoveries on
applicable erroneous payments. Additional tools to identify retroactive terminations include the
CAMT Terminated Member roster, which identifies retroactive terminations that may not have
been captured on the daily CAMT Retroactive enrollment report. We continue to monitor both
processes to promote timely identification and recovery of terminated member claims.

We disagree that the remaining payments totaling $22,390,728 were paid due to the following
reasons:

   $15,435,283 was paid correctly because the Members had coverage at the time the claims
    were incurred.
   $2,638,198 in potential overpayments was identified before the audit started and was
    recovered before the draft report response was submitted.
   $4,148,544 in overpayments was identified before the audit and recovery was initiated but
    not yet collected, was uncollectible because the retro termination notice was received after
    the Plan’s provider contract limit for recovering overpayments had passed.
   $168,703 in overpayments is below the Plan’s recovery threshold, and further attempts to
    recover these overpayments exceed the cost to recover the overpayments.

See Attachment A, for a schedule to support the amount questioned and contested by each Plan.

IR1b. Patients with No Enrollment Record                                           $2,427,939

Our review of IR1b that questioned claims paid for members that did not have an enrollment
record on file identified $232,141 in overpayments. These overpayments were the result of
retroactive enrollment changes where the claim was processed before a notification from the
either the Payroll Office or from the member (in the case of a divorce, etc.) updated the member
enrollment coverage. Where possible, recovery efforts have been initiated for the identified
errors. The Plans will continue to pursue these overpayments as required by CS 1039, Section
2.3 (g)(I). “Any benefit payments the Plans are unable to recover are allowable charges to the
Program. In addition, as good faith erroneous payments, lost investment income is not
applicable to these confirmed overpayments”.


                                                                     Report No. 1A-99-00-15-008
We disagree that the remaining payments totaling $2,195,798 were paid in error based upon the
following reasons:

  $1,251,692 was paid correctly because the Members had coverage at the time the claims
   were incurred.
 $348,348 in potential overpayments was identified before the audit started and was recovered
   before the draft report response was submitted.
	 $579,614 in overpayments was identified before the audit and recovery was initiated but not
   yet collected, was uncollectible because the retro termination notice was received after the
   Plan’s provider contract limit for recovering overpayments had passed.
	 $16,143 in overpayments is below the Plan’s recovery threshold, and further attempts to
   recover these overpayments exceed the cost to recover the overpayments.

See Attachment B, for a schedule to support the amount questioned and contested by
each Plan.

Recommendation 2

We recommend that documentation be provided for each claim payment error that was
identified in this preliminary finding.

BCBSA Response

Documentation to support claims audited was provided to the OIG.

Recommendation 3

We recommend that the contracting officer instruct the Association to have the BCBS
plans identify the root cause(s) of the claim payment errors and implement corrective
actions/procedures to prevent these types of errors in the future.

BCBSA Response

BCBSA will work with the Plans to identify root causes where Plans did not identify and
initiate recovery of claims totaling $3,027,101 for IR1A and $230,067 for IR1B before
the audit started. BCBSA will also work with the FEP Operations Center to identify root
causes where the retroactive termination notices were not issued to Plans so that
appropriate overpayment recovery activity could be initiated before the audit started.
Once the root cause analysis is completed, BCBSA work with Plans and the FEPOC to
implement the necessary corrective actions so that terminated member activity is timely
detected and recovery is timely initiated to recovery related overpayments.




                                                                   Report No. 1A-99-00-15-008
Thank you for the opportunity to provide a response to the Draft Report. If you have any
questions in the interim, please contact                at               @bcbsa.com or at
         .

Sincerely,




Managing Director, FEP Program Assurance

cc: 	            , OPM
                   , FEP




                                                                  Report No. 1A-99-00-15-008
                                          APPENDIX B




Response to Audit Inquiry Global Enrollment
Friday, August 14, 2015

                                   Audit Inquiry 1 Response


BCBSA contests the OIG’s additional questioned amount of $3,207,289 because it does not
allow BCBSA to successfully resolve questioned claims in accordance with requirements as
stated in CS 1039 related to Audit Resolution and Reportable findings. Further, BCBSA does
not agree to the validity or understand the statistical calculations performed to derive the
additional questioned amounts.


CS1039 Requirements

SECTION 3.15 AUDIT RESOLUTIONS (JAN 2011)

When OIG issues a Draft Report of findings to the Carrier, the Carrier must respond with all
available, accurate and relevant documentation to validate or invalidate the findings. This must
be done within the timeframe specified in the OIG Draft Report transmittal letter.

To enable this, Carriers must expeditiously tender all documentation necessary for resolution of
the audit. This includes overpayment recoveries via check or certification, full documentation of
the Carriers position for findings being contested, evidence supporting due diligence assertions,
and support for all other pertinent issues which OPM must consider, as appropriate


SECTION 3.16 REPORTABLE FINDINGS (JAN 2013)

(b) Claim payment findings (i.e., claim overpayments) in the scope of an OIG audit are
reportable as questioned charges unless the Carrier provides documentation supporting that these
findings were already identified (i.e., documentation that the plan initiated recovery efforts) prior
to audit notification letter.

Because Plans do not have the exact claims that are being questioned, there is no way that they
can determine which claims to provide support for uncollectible, contested or recovered claims,
thus Plans are unable to resolve the audit finding.




                                                                      Report No. 1A-99-00-15-008
Evaluation of Statistical Validity of OIG’s Conclusion

The distribution of the Universe appears to be skewed towards the lower dollar end of the scale.
This does not appear to correlate to the OIG point estimate of $3,207,289.

If the approach is to be from a statistical perspective, we should have a clear and an agreed upon
understanding of the Methodology used to determine the;

   Population to be sampled (how/why was a cumulative amount of $2,500 derived)
   Sample Size determination
   Error Rate Calculation
   Factor(s) used to determine Point estimation
   Point estimation used (i.e., Average, Median)

                                              Claim Line Universe
          Measure                             (156,559)
          Sum                                  $    8,883,300.00
          Mean                                 $           57.00
          Standard Deviation                   $          118.00
          Median                               $           25.00
          Minimum                              $            0.01
          Maximum                              $        2,463.00

In summary, because detail claims questioned as errors is not provided with the OIG questioned
amount and due to insufficient documentation was provided to replicate/validate the point value
estimate of $3,207,289 used in the report, BCBSA disagrees to the proposed total questioned
amount of $3,207,289 for Enrollment claim errors paid by the Program as non-covered charges.




                                                                     Report No. 1A-99-00-15-008
                                                                                                                         



                                       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.