oversight

Audit of Aging Refunds, Fraud Recoveries, and Medical Drug Rebates for a Sample of BlueCross and/or BlueShield Plans

Published by the Office of Personnel Management, Office of Inspector General on 2017-01-31.

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
     AGING REFUNDS, FRAUD RECOVERIES, AND
     MEDICAL DRUG REBATES FOR A SAMPLE OF
      BLUECROSS AND/OR BLUESHIELD PLANS

                                     Report Number 1A-99-00-16-010
                                             January 31, 2017

                                                      -- CAUTION --
This report has been distributed to Federal officials who are responsible for the administration of the subject program. This non-public
version may contain confidential and/or proprietary information, including information protected by the Trade Secrets Act, 18 U.S.C. §
1905, and the Privacy Act, 5 U.S.C. § 552a. Therefore, while a redacted version of this report is available under the Freedom of
Information Act and made publicly available on the OIG webpage (http://www.opm.gov/our-inspector-general), this non-public version
should not be further released unless authorized by the OIG.
              EXECUTIVE SUMMARY
              Audit of Aging Refunds, Fraud Recoveries, and Medical Drug Rebates for a Sample of BlueCross and/or
                                                        BlueShield Plans

Report No. 1A-99-00-16-010                                                                                                                    January 31, 2017


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

We conducted this limited scope audit                      We questioned $208,659 in aging health benefit refunds, fraud
to obtain reasonable assurance that                        recoveries, medical drug rebates, and lost investment income (LII)
the BlueCross and/or BlueShield                            for nine BCBS plans. We also identified a procedural finding
(BCBS) plans are complying with the                        regarding corporate funds that were held in the dedicated FEP
provisions of the Federal Employees                        investment account by a BCBS plan. The BlueCross BlueShield
Health Benefits Act and regulations                        Association and applicable BCBS plans agreed with all of the
pertaining to health benefit refunds,                      questioned amounts as well as the procedural finding.
fraud recoveries, and medical drug
rebates that are included, by                              Our audit results are summarized as follows:
reference, in the Federal Employees                        	 Aging Health Benefit Refunds – Our audit determined that two
Health Benefits Program (FEHBP).                              BCBS plans had not returned $7,160 in aging FEP refunds to
Specifically, the objectives of our                           the FEHBP as of June 30, 2015. As a result, we questioned
audit were to determine whether the                           $7,160 for these aging FEP refunds and $26 for LII on these
24 BCBS plans in our sample                                   refunds. We also questioned $5,281 for unidentified refunds
returned aging Federal Employee                               that were held in the FEP investment account by a BCBS plan
Program (FEP) health benefit refunds,                         and identified a procedural finding regarding corporate funds
fraud recoveries, and medical drug                            that were held in the FEP investment account by another BCBS
rebates to the FEHBP in accordance                            plan. We noted that the BCBS plans have returned all of these
with the terms of the contract and                            questioned amounts to the FEHBP.
applicable regulations.
                                                           	 Fraud Recoveries – We questioned $7,824 for fraud recoveries
What did we audit?                                            that had not been returned to the FEHBP as June 30, 2015, by
                                                              two BCBS plans, and $1,081 for LII on fraud recoveries that
Our focused audit covered aging FEP
                                                              were returned untimely to the FEHBP during the audit scope
health benefit refunds as of June 30,
                                                              by another BCBS plan. We verified that these BCBS plans
2015, for a sample of 24 BCBS plans,
                                                              have returned all of these questioned amounts to the FEHBP.
as well as fraud recoveries and
medical drug rebates from 2012                             	 Medical Drug Rebates – Our audit determined that five BCBS
through June 30, 2015, for these                              plans had not returned $182,051 in medical drug rebates to the
plans.                                                        FEHBP as of June 30, 2015. As a result, we questioned
                                                              $182,051 for these medical drug rebates and $5,236 for LII on
                                                              these rebates. We subsequently verified that these BCBS plans
                                                              have returned all of these questioned amounts to the FEHBP.
______________________
Michael R. Esser
Assistant Inspector General
for Audits                                                                 i
       This report is non-public and should not be further released unless authorized by the OIG, because it may contain confidential and/or proprietary
       information that may be protected by the Trade Secrets Act, 18 U.S.C. § 1905, or the Privacy Act, 5 U.S.C. § 552a.
                                             ABBREVIATIONS

     Association                    BlueCross BlueShield Association
     BC                             BlueCross
     BCBS                           BlueCross BlueShield or BlueCross and/or BlueShield
     CFR                            Code of Federal Regulations
     FAR                            Federal Acquisition Regulations
     FEHB                           Federal Employees Health Benefits
     FEHBP                          Federal Employees Health Benefits Program
     FEP                            Federal Employee Program
     LOCA                           Letter of Credit Account
     LII                            Lost Investment Income
     OIG                            Office of the Inspector General
     OPM                            U.S. Office of Personnel Management




                                                                        ii
This report is non-public and should not be further released unless authorized by the OIG, because it may contain confidential and/or proprietary
information that may be protected by the Trade Secrets Act, 18 U.S.C. § 1905, or the Privacy Act, 5 U.S.C. § 552a.
IV. MAJOR CONTRIBUTORS
          TABLE OF CONTENTS
                       TO THIS REPORT

                                                                                                                                          Page 

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


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


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


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


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


                A. Aging Health Benefit Refunds.................................................................................6 


                B. Fraud Recoveries .....................................................................................................9 


                C. Medical Drug Rebates............................................................................................12 


     IV.        SCHEDULES

                A. SUMMARY OF AGING HEALTH BENEFIT REFUNDS - UNIVERSE
                   TOTALS, SAMPLE SELECTIONS, AND QUESTIONED AMOUNTS

                B. SUMMARY OF FRAUD RECOVERIES - UNIVERSE TOTALS, SAMPLE
                   SELECTIONS, AND QUESTIONED AMOUNTS

                C. SUMMARY OF MEDICAL DRUG REBATES - UNIVERSE TOTALS,
                   SAMPLE SELECTIONS, AND QUESTIONED AMOUNTS

                APPENDIX: BlueCross BlueShield Association’s Draft Report Response, dated
                September 1, 2016

                REPORT FRAUD, WASTE, AND MISMANAGEMENT




This report is non-public and should not be further released unless authorized by the OIG, because it may contain confidential and/or proprietary
information that may be protected by the Trade Secrets Act, 18 U.S.C. § 1905, or the Privacy Act, 5 U.S.C. § 552a.
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 a
sample of 24 BlueCross and/or BlueShield (BCBS) plans, pertaining to aging health benefit
refunds, fraud recoveries, and medical drug rebates.

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 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 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 BlueCross BlueShield, 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), 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.
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-99-00-16-010
This report is non-public and should not be further released unless authorized by the OIG, because it may contain confidential and/or proprietary
information that may be protected by the Trade Secrets Act, 18 U.S.C. § 1905, or the Privacy Act, 5 U.S.C. § 552a.
Compliance with laws and regulations applicable to the FEHBP is the responsibility of the
management for the Association and each BCBS plan. Also, working in partnership with the
Association, management of each BCBS plan is responsible for establishing and maintaining a
system of internal controls.

This is our first focused audit of aging FEP refunds, fraud recoveries, and medical drug rebates
for these 24 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 June 10, 2016. 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 November 7, 2016, was considered in
preparing our final report.




                                                                        2                             Report No. 1A-99-00-16-010
This report is non-public and should not be further released unless authorized by the OIG, because it may contain confidential and/or proprietary
information that may be protected by the Trade Secrets Act, 18 U.S.C. § 1905, or the Privacy Act, 5 U.S.C. § 552a.
II.
IV. OBJECTIVES, SCOPE, ANDTO
     MAJOR CONTRIBUTORS   METHODOLOGY
                             THIS REPORT
 OBJECTIVES

 The objectives of this audit were to determine whether the 24 BCBS plans in our sample returned
 health benefit refunds, fraud recoveries, and medical drug rebates to the FEHBP in accordance
 with the terms of the contract and applicable regulations. Specifically, our objectives were as
 follows:

      	 To determine whether these BCBS plans held FEP refunds as of June 30, 2015, that had
         not been deposited into the FEP investment account within 30 days after receipt and/or
         returned to the FEHBP within 60 days after receipt.

      	 To determine whether these BCBS plans properly allocated (if applicable) and timely
         returned fraud recoveries and medical drug rebates to the FEHBP.

 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.

 For a sample of 24 BCBS plans, the audit covered all aging FEP health benefit refunds that were
 held by these plans as of June 30, 2015, as well as fraud recoveries and medical drug rebates that
 were received by these plans from 2012 through June 30, 2015.2 Our sample included all BCBS
 plans with FEHBP health benefit payments of $350 million or less in contract year 2014 (except
 for several BCBS plans that are part of multi-plan companies, such as Anthem Inc. and
 Regence). For the 24 BCBS plans in our sample, the aging FEP health benefit refunds totaled
 $5,331,111 as of June 30, 2015; and the fraud recoveries and medical drug rebates for FEP
 totaled $2,783,480 and $1,162,363, respectively, from 2012 through June 30, 2015. Specifically,
 we reviewed these BCBS plans’ aging health benefit refund schedules to determine if there were
 FEP refunds held by the plans as of June 30, 2015, that had not been deposited into the FEP


 2
  Our sample consisted of the following BCBS plans: BCBS of Arkansas, Highmark BCBS of Delaware, BCBS of
 Hawaii, BCBS of Idaho, Wellmark BCBS (Iowa/South Dakota), BCBS of Kansas, BCBS of Louisiana, BCBS of
 Michigan, BCBS of Mississippi, BCBS of Kansas City (Missouri), BCBS of Montana, BCBS of Nebraska, BCBS of
 Western New York, Excellus BCBS (New York), BCBS of North Dakota, Capital BlueCross (Pennsylvania),
 Independence BlueCross (Pennsylvania), BlueCross of Northeastern Pennsylvania, Triple-S, Inc. of Puerto Rico,
 BCBS of Rhode Island, BCBS of South Carolina, BCBS of Vermont, Highmark BCBS of West Virginia, and BCBS
 of Wyoming.
                                                                         3                             Report No. 1A-99-00-16-010
 This report is non-public and should not be further released unless authorized by the OIG, because it may contain confidential and/or proprietary
 information that may be protected by the Trade Secrets Act, 18 U.S.C. § 1905, or the Privacy Act, 5 U.S.C. § 552a.
investment account within 30 days after receipt and/or returned to the FEHBP letter of credit
account (LOCA) within 60 days after receipt. We also reviewed these BCBS plans’ fraud
recoveries and medical drug rebates for the purpose of determining if the applicable FEP
amounts were timely deposited into the FEP investment account within 30 days after receipt and
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 in our sample had complied with the
contract, the applicable procurement regulations (i.e., Federal Acquisition Regulations (FAR)
and Federal Employees Health Benefits Acquisition Regulations), and the laws and regulations
governing the FEHBP as they specifically relate to health benefit refunds, fraud recoveries, and
medical drug rebates. 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 and applicable regulations
relative to health benefit refunds, fraud recoveries, and medical drug rebates. 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 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 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, 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 our office in Jacksonville, Florida from January 25, 2016, through
June 10, 2016. During the fieldwork phase, we also made short on-site visits to BCBS of South
Carolina from February 17th – 19th and BCBS of Louisiana from March 15th – 17th. Throughout
the audit process, we encountered numerous instances where the BCBS plans and/or FEP
Director’s Office responded untimely, or initially provided incomplete responses, to various
requests for supporting documentation. As a result, completion of our audit fieldwork and
issuance of our draft and final reports were delayed.




                                                                        4                             Report No. 1A-99-00-16-010
This report is non-public and should not be further released unless authorized by the OIG, because it may contain confidential and/or proprietary
information that may be protected by the Trade Secrets Act, 18 U.S.C. § 1905, or the Privacy Act, 5 U.S.C. § 552a.
METHODOLOGY

We reviewed the BCBS plans’ policies, procedures, and accounting records during our audit of
aging FEP health benefit refunds, fraud recoveries, and medical drug rebates. To test the BCBS
plans’ compliance with the contract provisions and applicable regulations relative to the return of
health benefit refunds, fraud recoveries, and medical drug rebates to the FEHBP, we selected for
review the following FEP items from the 24 BCBS plans in our sample:

     	 117 aging health benefit refunds, totaling $1,525,139, from a universe of       aging
        refunds, totaling $          , that were held by these BCBS plans as of June 30, 2015
        (see Schedule A for a summary of the universe totals and sample selections).3

     	 107 fraud recoveries, totaling $1,673,642, from a universe of     fraud recoveries,
        totaling $         , that were received by these BCBS plans from 2012 through June 30,
        2015 (see Schedule B for a summary of the universe totals and sample selections).4

     	 All     medical drug rebate amounts, totaling $       that were received by these
        BCBS plans from 2012 through June 30, 2015 (see Schedule C for a summary of the
        universe totals and sample selections).

We reviewed these samples to determine if the health benefit refunds, fraud recoveries, and
medical drug rebates were timely deposited into the FEP investment account and returned to the
FEHBP. The results of these samples were not projected to the applicable FEP universes of
aging health benefit refunds, fraud recoveries, and/or medical drug rebates.




3
  After analyzing the BCBS plans’ FEP refund aging schedules, we judgmentally selected for review all aging
refunds greater than $55,000 for Highmark BCBS of West Virginia; $10,000 for Highmark BCBS of Delaware;
$3,500 for BCBS of South Carolina; $3,000 for Wellmark BCBS and BCBS of Nebraska; $1,500 for BCBS of
Idaho, BCBS of Kansas City, and BCBS of Louisiana; $1,000 for BCBS of Arkansas, BCBS of Michigan, Capital
BlueCross, Independence BlueCross, BCBS of Rhode Island, BCBS of Vermont, and BCBS of Wyoming; and $100
for BCBS of Hawaii, BCBS of Kansas, Excellus BCBS, and BCBS of North Dakota.
4
  After analyzing the BCBS plans’ FEP fraud recovery schedules, we judgmentally selected for review all fraud
recoveries greater than $30,000 for Wellmark BCBS and BCBS of Mississippi; $10,000 for BCBS of Nebraska;
$5,000 for BCBS of Louisiana, BCBS of Michigan, and BCBS of North Dakota; $3,000 for Capital BlueCross,
BCBS of Rhode Island, and BCBS of Vermont; $1,000 for BCBS of Arkansas, BCBS of Hawaii, BCBS of Idaho,
BCBS of Kansas, BCBS of Kansas City, BCBS of Montana, Excellus BCBS, and BCBS of South Carolina. For
BCBS of Western New York, we selected for review all of this plan’s FEP fraud recoveries.

                                                                        5	                            Report No. 1A-99-00-16-010
This report is non-public and should not be further released unless authorized by the OIG, because it may contain confidential and/or proprietary
information that may be protected by the Trade Secrets Act, 18 U.S.C. § 1905, or the Privacy Act, 5 U.S.C. § 552a.
III. AUDIT FINDINGS AND RECOMMENDATIONS

 A. AGING HEALTH BENEFIT REFUNDS                                                                                                   $12,467

      Our audit determined that two BCBS plans had not returned $7,160 in aging FEP health
      benefit refunds to the FEHBP as of June 30, 2015. These questioned aging FEP refunds
      consist of $5,674 for BCBS of Arkansas and $1,486 for BCBS of Rhode Island. As a result,
      we questioned $7,160 for these aging FEP refunds and $26 for lost investment income (LII)
      on these refunds. Also, we questioned $5,281 for unidentified refunds that were held in the
      dedicated FEP investment account by BCBS of Vermont and identified a procedural finding
      regarding corporate funds that were held in the dedicated FEP investment account by BCBS
      of Idaho. We noted that the BCBS plans of Arkansas, Rhode Island, and Vermont returned
      all of these questioned amounts to the FEHBP more than 60 days after receipt, after receiving
      our audit notification letter (dated July 1, 2015), and/or as a result of our audit.

      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.” Part III, Section 3.5 (a) of this
      contract states, "The Carrier and/or its underwriter shall keep all FEHBP funds for this
      contract (cash and investments) physically separate from funds obtained from other sources."

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

      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.”

      Only 19 of the 24 BCBS plans in our sample reported aging FEP refunds as of June 30, 2015.
      We judgmentally selected and reviewed 117 of these aging FEP refunds, totaling $1,525,139,
      from a universe of      aging FEP refunds, totaling $          , for these 19 BCBS plans
      (see Schedule A for a summary of the universe totals and sample selections by BCBS plan
      for the aging FEP refunds). Based on our review of these sample selections, we determined
      that the BCBS plans of Arkansas and Rhode Island had not returned aging FEP refunds,

                                                                         6                             Report No. 1A-99-00-16-010
 This report is non-public and should not be further released unless authorized by the OIG, because it may contain confidential and/or proprietary
 information that may be protected by the Trade Secrets Act, 18 U.S.C. § 1905, or the Privacy Act, 5 U.S.C. § 552a.
     totaling $7,160, to the FEHBP as of June 30, 2015, in accordance with the terms of the
     contract.

     For the sample of 24 BCBS plans, we also reviewed each plan’s quarterly FEP investment
     account reconciliation (as of June 30, 2015) to identify possible aging refunds that may have
     been held in the plan’s dedicated FEP investment account. Based on this review, we
     determined that BCBS of Vermont held unidentified refunds of $5,281 in the dedicated FEP
     investment account as of June 30, 2015.

     The following schedule summarizes the questioned refunds and applicable LII for these three
     BCBS plans.

                                                                  Questioned            Questioned               Total
                    BCBS Plan                                      Refunds                 LII                 Questioned
            BCBS of Arkansas                                          $5,674                    $0                 $5,674
            BCBS of Rhode Island                                        1,486                   26                   1,512 
            BCBS of Vermont                                             5,281                     0                  5,281
                         Total                                       $12,441                   $26                $12,467

     As part of our review, we verified the following corrective actions by these three BCBS
     plans:

     	 For BCBS of Arkansas, the plan returned the questioned aging FEP refunds of $5,674 to
        the FEHBP in July 2015, more than 60 days after receipt (i.e., 26 days late) and after
        receiving our audit notification letter. However, since our calculated LII on these
        questioned refunds is immaterial, we did not include LII for this finding.

     	 For BCBS of Rhode Island, the plan returned the questioned aging FEP refund of $1,486
        to the FEHBP in August 2015, more than 60 days after receipt (i.e., 264 days late) and
        after receiving our audit notification letter. Also, the plan calculated and returned LII of
        $26 to the FEHBP in August 2015. We reviewed and accepted the Plan’s LII calculation.

     	 For BCBS of Vermont, the plan returned the questioned unidentified refunds of $5,281 to
        the FEHBP in August 2016, as a result of this audit.




                                                                        7	                            Report No. 1A-99-00-16-010
This report is non-public and should not be further released unless authorized by the OIG, because it may contain confidential and/or proprietary
information that may be protected by the Trade Secrets Act, 18 U.S.C. § 1905, or the Privacy Act, 5 U.S.C. § 552a.
                                                       In total, we are questioning $12,441 for refunds that were
        The BCBS plans returned
                                                       returned to the FEHBP more than 60 days after receipt, after
          the questioned refund
                                                       receiving our audit notification letter, and/or as a result of
         amounts of $12,441 and
                                                       our audit. We are also questioning $26 for applicable LII
         applicable LII of $26 to
                                                       on aging FEP refunds that were returned untimely to the
               the FEHBP.
                                                       FEHBP.

     While reviewing BCBS of Idaho’s quarterly FEP investment account reconciliation, we also
     identified that this plan held excess corporate funds of $5,733 in the dedicated FEP
     investment account. According to the plan, these corporate funds were bank fee
     reimbursements for October 2014 through June 2015 that were inadvertently not transferred
     to the plan’s corporate account. As a result, we are including this exception as a procedural
     finding since only necessary funds should be maintained in the plan’s dedicated FEP
     investment account.

     Association Response:

     The Association agrees with this finding. The Association states that the FEP Director’s
     Office will also work with BCBS of Idaho to develop corrective actions regarding the
     plan’s dedicated FEP investment account.

     OIG Comment:

     We verified that the BCBS plans of Arkansas, Rhode Island, and Vermont returned $12,467
     to the FEHBP for this audit finding, consisting $7,160 for the questioned aging FEP refunds,
     $5,281 for the questioned unidentified refunds, and $26 for applicable LII.

     Recommendation 1

     We recommend that the contracting officer require the BCBS plans to return $7,160 to the
     FEHBP for the questioned aging FEP refunds. (These questioned aging FEP refunds consist
     of $5,674 for BCBS of Arkansas and $1,486 for BCBS of Rhode Island.) However, since we
     verified that these BCBS plans returned $7,160 to the FEHBP for the questioned aging FEP
     refunds, no further action is required for this amount.




                                                                        8                             Report No. 1A-99-00-16-010
This report is non-public and should not be further released unless authorized by the OIG, because it may contain confidential and/or proprietary
information that may be protected by the Trade Secrets Act, 18 U.S.C. § 1905, or the Privacy Act, 5 U.S.C. § 552a.
     Recommendation 2

     We recommend that the contracting officer require BCBS of Vermont to return $5,281 to the
     FEHBP for the questioned unidentified refunds. However, since we verified that this BCBS
     plan returned $5,281 to the FEHBP for these questioned unidentified refunds, no further
     action is required for this amount.

     Recommendation 3

     We recommend that the contracting officer require BCBS of Rhode Island to return $26 to
     the FEHBP for LII on aging FEP refunds that were returned untimely to the FEHBP.
     However, since we verified that this BCBS plan returned $26 to the FEHBP for the
     questioned LII, no further action is required for this LII amount.

     Recommendation 4

     We recommend that the contracting officer require the Association to provide evidence or
     supporting documentation ensuring that BCBS of Idaho implements corrective actions so that
     only necessary funds are maintained in the FEP investment account, and corporate funds
     (such as approved LOCA drawdown reimbursements) are timely transferred to the plan’s
     corporate account.

B. FRAUD RECOVERIES                                                                                                                   $8,905

     Our audit determined that two BCBS plans had not returned fraud recoveries, totaling
     $7,824, to the FEHBP as of June 30, 2015. These questioned fraud recoveries consist of
     $5,603 for BCBS of Louisiana and $2,221 for BCBS of Idaho. These BCBS plans
     subsequently returned the questioned fraud recoveries to the FEHBP more than 60 days after
     receipt and after receiving our audit notification letter (dated July 1, 2015). Additionally,
     BCBS of Western New York untimely returned fraud recoveries to the FEHBP during the
     audit scope and prior to receiving our audit notification letter. As a result of our audit, these
     BCBS plans returned $8,905 to the FEHBP for this audit finding, consisting of $7,824 for the
     questioned fraud recoveries and $1,081 for LII on fraud recoveries 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.


                                                                        9                             Report No. 1A-99-00-16-010
This report is non-public and should not be further released unless authorized by the OIG, because it may contain confidential and/or proprietary
information that may be protected by the Trade Secrets Act, 18 U.S.C. § 1905, or the Privacy Act, 5 U.S.C. § 552a.
     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.”

     Only 18 of the 24 BCBS plans in our sample reported FEP fraud recoveries for the period
     2012 through June 30, 2015. We judgmentally selected and reviewed 107 of these fraud
     recoveries, totaling $1,673,642, from a universe of       FEP fraud recoveries, totaling
     $           , that were received by these 18 BCBS plans (see Schedule B for a summary of
     the universe totals and sample selections by BCBS plan for fraud recoveries). Based on our
     review, we determined that the BCBS plans of Idaho and Louisiana had not returned fraud
     recoveries, totaling $7,824, to the FEHBP as of June 30, 2015; and BCBS of Western New
     York untimely returned fraud recoveries to the FEHBP during the audit scope.

     The following schedule summarizes the questioned fraud recovery and/or LII amounts for
     these three BCBS plans.

                                                                 Questioned              Questioned                Total
                      BCBS Plan                                  Recoveries                 LII                  Questioned
            BCBS of Louisiana                                        $5,603                       $0                 $5,603
            BCBS of Idaho                                              2,221                       0                  2,221
            BCBS of Western New York                                       0                   1,081                  1,081
                         Total                                       $7,824                  $1,081                  $8,905

     As part of our review, we verified the following corrective actions by these three BCBS
     plans:

     	 For BCBS of Louisiana, the plan returned the questioned fraud recovery of $5,603 to the
        FEHBP in March 2016, approximately 2 ¾ years late and after receiving our audit
        notification letter. However, since our calculated LII on this questioned fraud recovery is
        immaterial, we did not include LII for this finding.

     	 For BCBS of Idaho, the plan returned the questioned fraud recovery of $2,221 to the
        FEHBP in February 2016, approximately 2 ½ years late and after receiving our audit
        notification letter. However, since our calculated LII on this questioned fraud recovery is
        immaterial, we did not include LII for this finding.




                                                                       10 	                           Report No. 1A-99-00-16-010
This report is non-public and should not be further released unless authorized by the OIG, because it may contain confidential and/or proprietary
information that may be protected by the Trade Secrets Act, 18 U.S.C. § 1905, or the Privacy Act, 5 U.S.C. § 552a.
     	 For BCBS of Western New York, the plan untimely returned fraud recoveries of $22,601
        to the FEHBP during the audit scope (i.e., from 19 to 1,113 days late). Since the plan
        returned these fraud recoveries to the FEHBP during the audit scope and prior to
        receiving our audit notification letter, we did not question these amounts as a monetary
        finding. However, since these fraud recoveries were returned untimely to the FEHBP, we
        are questioning LII of $1,081 on these funds. As a result of this finding, the plan returned
        this questioned LII to the FEHBP in November 2016.


             The BCBS plans                          In total, we are questioning $7,824 for fraud recoveries
         returned the questioned                     returned to the FEHBP late and after receiving our audit
            fraud recoveries of                      notification letter. We are also questioning $1,081 for LII on
         $7,824 and LII of $1,081                    the fraud recoveries that were returned untimely to the
              to the FEHBP.                          FEHBP during the audit scope.


     Association Response:

     The Association agrees with this finding.

     OIG Comment:

     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
     $8,905 for this audit finding, consisting of $7,824 for fraud recoveries and $1,081 for
     applicable LII. We verified that the BCBS plans of Idaho, Louisiana, and Western New
     York returned $8,905 to the FEHBP, consisting of $7,824 for the questioned fraud recoveries
     and $1,081 for the questioned LII.

     Recommendation 5

     We recommend that the contracting officer require the BCBS plans to return $7,824 to the
     FEHBP for the questioned fraud recoveries. (These questioned fraud recoveries consist of
     $5,603 for BCBS of Louisiana and $2,221 for BCBS of Idaho.) However, since we verified
     that these BCBS plans returned $7,824 to the FEHBP for the questioned fraud recoveries, no
     further action is required for this amount.




                                                                       11 	                           Report No. 1A-99-00-16-010
This report is non-public and should not be further released unless authorized by the OIG, because it may contain confidential and/or proprietary
information that may be protected by the Trade Secrets Act, 18 U.S.C. § 1905, or the Privacy Act, 5 U.S.C. § 552a.
     Recommendation 6

     We recommend that the contracting office require BCBS of Western New York to return
     $1,081 to the FEHBP for LII on fraud recoveries that were returned untimely to the FEHBP.
     However, since we verified that this BCBS plan returned $1,081 to the FEHBP for the
     questioned LII, no further action is required for this LII amount.

C. MEDICAL DRUG REBATES                                                                                                           $187,287

     Our audit determined that five BCBS plans had not returned $182,051 in medical drug
     rebates to the FEHBP as of June 30, 2015. The questioned medical drug rebates consist of
     $142,140 for BCBS of Western New York; $15,196 for BCBS of Michigan; $15,017 for
     BCBS Rhode Island; $7,173 for Highmark BCBS of Delaware; and $2,525 for BlueCross
     (BC) of Northeastern Pennsylvania. These BCBS plans subsequently returned these
     questioned medical drug rebate amounts to the FEHBP more than 60 days after receipt, after
     receiving our audit notification letter (dated July 1, 2015), and/or as a result of our audit. In
     total, we are questioning $187,287 for this audit finding, consisting of $182,051 for medical
     drug rebates and $5,236 for applicable LII on rebates returned untimely to the FEHBP.

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

     As previously cited from Contract CS 1039, all health benefit refunds and recoveries must be
     deposited into the FEP investment account within 30 days and returned to the FEHBP within
     60 days after receipt by the Carrier. As previously cited from FAR 52.232-17(a), all amounts
     that become payable by the Carrier should include simple interest from the date due.

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

     Many of the BCBS plans participate in medical drug rebate programs with various drug
     manufacturers. The drug rebates are determined based on medical claims for the applicable
     drugs, which are primarily administered in a physician’s office. These medical drug rebates
     are received multiple times a year (usually on a quarterly basis) by the BCBS plans and
     credited to the participating groups, including the FEP.


                                                                       12                             Report No. 1A-99-00-16-010
This report is non-public and should not be further released unless authorized by the OIG, because it may contain confidential and/or proprietary
information that may be protected by the Trade Secrets Act, 18 U.S.C. § 1905, or the Privacy Act, 5 U.S.C. § 552a.
     From 2012 through June 30, 2015, only 12 of the 24 BCBS plans in our sample participated
     in medical drug rebate programs. During this period, these 12 BCBS plans received
     medical drug rebate amounts, totaling $            , for all of the participating groups. Of
     these amounts, $           were allocated to the FEP by these BCBS plans. We selected and
     reviewed all of the FEP medical drug rebate amounts, and specifically determined if the
     BCBS plans properly allocated and timely returned these FEP rebate amounts to the FEHBP
     (see Schedule C for a summary of the universe totals and sample selections by BCBS plan
     for medical drug rebates).

     Based on our review, we determined that five BCBS plans had not returned FEP medical
     drug rebate amounts, totaling $182,051, to the FEHBP as of June 30, 2015. The following
     schedule summarizes these questioned medical drug rebate amounts and the applicable LII
     amounts for these five BCBS plans.

                                                                   Questioned             Questioned               Total
                       BCBS Plan                                  Drug Rebates               LII                 Questioned
            BCBS of Western New York                                 $142,140                  $4,265              $146,405
            BCBS of Michigan                                            15,196                    358                 15,554
            BCBS of Rhode Island                                        15,017                       0                15,017
            Highmark BCBS of Delaware                                    7,173                    613                  7,786
            BC of Northeastern Pennsylvania                              2,525                       0                 2,525
                          Total                                      $182,051                  $5,236              $187,287

     As part of our review, we verified the following corrective actions by these five BCBS plans:

     	 For BCBS of Western New York, the plan returned the questioned medical drug rebates
        of $142,140 to the FEHBP through multiple LOCA drawdown adjustments in March and
        May 2016, more than 60 days after receipt (i.e., from 309 to 1,647 days late) and after
        receiving our audit notification letter. Also, the plan returned the questioned LII of
        $4,265 to the FEHBP through a LOCA drawdown adjustment in August 2016.

     	 For BCBS of Michigan, the plan returned the questioned medical drug rebates of $15,196
        to the FEHBP through a LOCA drawdown adjustment in September 2015, more than 60
        days after receipt (i.e., from 273 to 443 days late) and after receiving our audit
        notification letter. Also, the plan returned the questioned LII of $358 to the FEHBP
        through a LOCA drawdown adjustment in October 2015.




                                                                       13 	                           Report No. 1A-99-00-16-010
This report is non-public and should not be further released unless authorized by the OIG, because it may contain confidential and/or proprietary
information that may be protected by the Trade Secrets Act, 18 U.S.C. § 1905, or the Privacy Act, 5 U.S.C. § 552a.
     	 For BCBS of Rhode Island, the plan inadvertently excluded the FEP in the medical drug
        rebate collection process. As a result of our audit, the plan submitted the FEP medical
        drug claims to the drug manufacturer and attempted to collect the applicable FEP rebates.
        The plan recovered $15,017 in FEP medical drug rebates from the drug manufacturer,
        applicable to claims that were incurred from October 2014 through June 2015. However,
        the plan could not recover $11,976 in FEP medical drug rebates applicable to claims that
        were incurred from 2012 through September 2014, due to the plan’s untimely submission
        of these claims for rebate collection. The plan returned the recovered medical drug
        rebates of $15,017 to the FEHBP through multiple LOCA drawdown adjustments in
        December 2015 and February 2016.

     	 For Highmark BCBS of Delaware, the plan returned the questioned medical drug rebates
        of $7,173 to the FEHBP through a LOCA drawdown adjustment in March 2016, more
        than 60 days after receipt (i.e., approximately 4 years late) and after receiving our audit
        notification letter. Also, the plan returned the questioned LII of $613 to the FEHBP
        through a LOCA drawdown adjustment in March 2016.

     	 For BC of Northeastern Pennsylvania, the plan returned the questioned medical drug
        rebates of $2,525 to the FEHBP through a LOCA drawdown adjustment in January 2016,
        more than 60 days after receipt (i.e., from 181 to 272 days late) and after receiving our
        audit notification letter. However, since our calculated LII on these questioned medical
        drug rebates is immaterial, we did not include LII for this finding.

                                                        In total, we are questioning $182,051 for medical drug
        The BCBS plans returned
                                                        rebates returned to the FEHBP more than 60 days after
         the questioned medical
                                                        receipt, after receiving our audit notification letter, and/or
        drug rebates of $182,051
                                                        as a result of our audit. We are also questioning $5,236 for
         and LII of $5,236 to the
                                                        applicable LII on medical drug rebates that were returned
                FEHBP.
                                                        untimely to the FEHBP.

     Association Response:

     The Association agrees with this finding.

     OIG Comment:

     We verified that the BCBS plans of Delaware, Michigan, Western New York, Northeastern
     Pennsylvania, and Rhode Island returned $187,287 to the FEHBP for this audit finding,
     consisting of $182,051 for the questioned medical drug rebates and $5,236 for applicable LII.



                                                                       14 	                           Report No. 1A-99-00-16-010
This report is non-public and should not be further released unless authorized by the OIG, because it may contain confidential and/or proprietary
information that may be protected by the Trade Secrets Act, 18 U.S.C. § 1905, or the Privacy Act, 5 U.S.C. § 552a.
     Recommendation 7

     We recommend that the contracting officer require the BCBS plans to return $182,051 to the
     FEHBP for the questioned medical drug rebates. (These questioned medical drug rebates
     consist of $142,140 for BCBS of Western New York; $15,196 for BCBS of Michigan;
     $15,017 for BCBS Rhode Island; $7,173 for Highmark BCBS of Delaware; and $2,525 for
     BC of Northeastern Pennsylvania.) However, since we verified that these BCBS plans
     returned $182,051 to the FEHBP for the questioned medical drug rebate amounts, no further
     action is required for this amount.

     Recommendation 8

     We recommend that the contracting officer require the BCBS plans to return $5,236 to the
     FEHBP for LII on the questioned medical drug rebates. (The LII for the questioned medical
     drug rebates consists of $4,265 for BCBS of Western New York, $613 for Highmark BCBS
     of Delaware, and $358 for BCBS of Michigan.) However, since we verified that these BCBS
     plans returned $5,236 to the FEHBP for the questioned LII, no further action is required for
     this LII amount.

     Recommendation 9

     Since only 12 of the 24 BCBS plans in our sample participated in medical drug rebate
     programs during the audit scope, we recommend that the contracting officer instruct the
     Association to ensure that all BCBS plans are aware of and/or participate in medical drug
     rebate programs that are offered by various drug manufacturers.

     Recommendation 10

     We recommend that the contracting officer instruct the Association to verify that BCBS of
     Rhode Island has implemented the necessary controls to ensure that the FEP is included in
     the medical drug rebate collection process.




                                                                       15                             Report No. 1A-99-00-16-010
This report is non-public and should not be further released unless authorized by the OIG, because it may contain confidential and/or proprietary
information that may be protected by the Trade Secrets Act, 18 U.S.C. § 1905, or the Privacy Act, 5 U.S.C. § 552a.
                                                                                                    IV. SCHEDULES
                                                                                                                           SCHEDULE A
                                                                        AGING REFUNDS, FRAUD RECOVERIES, AND MEDICAL DRUG REBATES 

                                                                               SAMPLE OF BLUECROSS AND/OR BLUESHIELD PLANS 

                                                    SUMMARY OF AGING HEALTH BENEFIT REFUNDS - UNIVERSE TOTALS, SAMPLE SELECTIONS, AND QUESTIONED AMOUNTS 



                                                                                                                                                  Aging Refunds (as of June 30, 2015)                                                Questioned Amounts

                                                                                                                Universe                                                     Sample Selections                                    Refunds Returned Untimely*

           Plan Codes                 State or Territory                   Plan Name                    Count          Amount           Count           Amount                           Selection Methodology                   Refunds    LII       Total
            020/520                           AR              BCBS of Arkansas                                                             5               $11,672     Judgmentally selected all refunds greater than $1,000.     $5,674      $0       $5,674

            070/570                           DE              Highmark BCBS of Delaware                                                   11               268,896     Judgmentally selected all refunds greater than $10,000.         0       0               0

            471/971                           HI              BCBS of Hawaii                                                               5                  2,086    Judgmentally selected all refunds greater than $100.            0       0               0

          140/640/889                       IA/SD             Wellmark BCBS                                                                7                 40,914    Judgmentally selected all refunds greater than $3,000.          0       0               0
            110/610                           ID              BCBS of Idaho                                                                4                  9,866    Judgmentally selected all refunds greater than $1,500.          0       0               0

            150/650                           KS              BCBS of Kansas                                                               3                  2,798    Judgmentally selected all refunds greater than $100.            0       0               0

            170/670                           LA              BCBS of Louisiana                                                            7                 29,889    Judgmentally selected all refunds greater than $1,500.          0       0               0
            210/710                           MI              BCBS of Michigan                                                             6                 45,994    Judgmentally selected all refunds greater than $1,000.          0       0               0
            240/740                           MO              BCBS of Kansas City                                                          4                  6,886    Judgmentally selected all refunds greater than $1,500.          0       0               0
            230/730                           MS              BCBS of Mississippi                                                          0                      0    N/A                                                             0       0               0

            250/751                           MT              HCSC – BCBS of Montana                                                       0                      0    N/A                                                             0       0               0
            320/820                           ND              BCBS of North Dakota                                                         1                  1,030    Judgmentally selected all refunds greater than $100.            0       0               0

            260/760                           NE              BCBS of Nebraska                                                             6                 42,339    Judgmentally selected all refunds greater than $3,000.          0       0               0

          301/800/801                         NY              BCBS of Western New York                                                     0                      0    N/A                                                             0       0               0
    304/305/306/804/805/806                   NY              Excellus BCBS                                                                9                  5,038    Judgmentally selected all refunds greater than $100.            0       0               0

               361                            PA              Capital BC                                                                   2                  2,391    Judgmentally selected all refunds greater than $1,000.          0       0               0

               362                            PA              Independence BC                                                              2                 45,058    Judgmentally selected all refunds greater than $1,000.          0       0               0
               364                            PA              BC of Northeastern PA                                                        0                      0    N/A                                                             0       0               0

               973                            PR              Triple-S, Inc.                                                               0                      0    N/A                                                             0       0               0

            370/870                           RI              BCBS of Rhode Island                                                         6                 15,147    Judgmentally selected all refunds greater than $1,000.      1,486      26          1,512
            380/880                           SC              BCBS of South Carolina                                                      11               152,164     Judgmentally selected all refunds greater than $3,500.          0       0               0

            415/915                           VT              BCBS of Vermont                                                              2                 30,183    Judgmentally selected all refunds greater than $1,000.      5,281       0          5,281

            443/943                           WV              Highmark BCBS of West Virginia                                              21               802,157     Judgmentally selected all refunds greater than $55,000.         0       0               0
            460/960                           WY              BCBS of Wyoming                                                              5                 10,631    Judgmentally selected all refunds greater than $1,000.          0       0               0

             Totals                                                                                                                       117           $1,525,139                                                               $12,441     $26      $12,467

* 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.
N/A - These BCBS plans did not have aging FEP refunds as of June 30, 2015.



                                                                                                                                                                                                          Report No. 1A-99-00-16-010
         This report is non-public and should not be further released unless authorized by the OIG, because it may contain confidential and/or proprietary information that may be protected by the Trade Secrets
         Act, 18 U.S.C. § 1905, or the Privacy Act, 5 U.S.C. § 552a.
                                                                                                                          SCHEDULE B
                                                                                       AGING REFUNDS, FRAUD RECOVERIES, AND MEDICAL DRUG REBATES 

                                                                                                   SAMPLE OF BLUECROSS AND/OR BLUESHIELD PLANS 

                                                                 SUMMARY OF FRAUD RECOVERIES - UNIVERSE TOTALS, SAMPLE SELECTIONS, AND QUESTIONED AMOUNTS 


                                                                                                                           Fraud Recoveries (January 1, 2012 through June 30, 2015)                                                 Questioned Amounts
                                                                                                                                                                                                                                 Fraud Recoveries Returned
                                                                                                   Universe                                                         Sample Selections
                                                                                                                                                                                                                                        Untimely**
                                  State or
        Plan Codes               Territory                   Plan Name                     Count              Amount          Count         Amount                               Selection Methodology                       Recoveries       LII        Total
          20/520                    AR          BCBS of Arkansas                                                                2              $5,826     Judgmentally selected all fraud recoveries greater than $1,000.             $0            $0         $0
          070/570                   DE          Highmark BCBS of Delaware                                                       0                    0    N/A                                                                             0         0            0
          471/971                    HI         BCBS of Hawaii                                                                  3              30,378     Judgmentally selected all fraud recoveries greater than $1,000.                 0         0            0
       140/640/889                 IA/SD        Wellmark BCBS                                                                   6             335,639     Judgmentally selected all fraud recoveries greater than $30,000.                0         0            0
          110/610                    ID         BCBS of Idaho                                                                   4              16,926     Judgmentally selected all fraud recoveries greater than $1,000.          2,221            0        2,221
          150/650                   KS          BCBS of Kansas                                                                  2              58,443     Judgmentally selected all fraud recoveries greater than $1,000.                 0         0            0
          170/670                   LA          BCBS of Louisiana                                                               7             147,158     Judgmentally selected all fraud recoveries greater than $5,000.          5,603             0       5,603
          210/710                   MI          BCBS of Michigan                                                                7             132,949     Judgmentally selected all fraud recoveries greater than $5,000.                 0          0           0
          240/740                   MO          BCBS of Kansas City                                                             3                9,181    Judgmentally selected all fraud recoveries greater than $1,000.                 0         0            0
          230/730                   MS          BCBS of Mississippi                                                             5             255,117     Judgmentally selected fraud recoveries greater than $30,000.*                   0         0            0
          250/751                   MT          HCSC – BCBS of Montana                                                          4              22,300     Judgmentally selected all fraud recoveries greater than $1,000.                 0          0           0
          320/820                   ND          BCBS of North Dakota                                                            3              20,522     Judgmentally selected all fraud recoveries greater than $5,000.                 0          0           0
          260/760                   NE          BCBS of Nebraska                                                                8             486,701     Judgmentally selected all fraud recoveries greater than $10,000.                0          0           0
       140/640/889                  NY          BCBS of Western New York                                                        25             22,601     Selected all fraud recoveries.                                                  0    1,081         1,081
 304/305/306/804/805/806            NY          Excellus BCBS                                                                   6              15,714     Judgmentally selected all fraud recoveries greater than $1,000.                 0          0           0
            361                     PA          Capital BC                                                                      2              26,951     Judgmentally selected all fraud recoveries greater than $3,000.                 0          0           0
            362                     PA          Independence BC                                                                 0                    0    N/A                                                                             0         0            0
            364                     PA          BC of Northeastern PA                                                           0                    0    N/A                                                                             0         0            0
            973                     PR          Triple-S, Inc.                                                                  0                    0    N/A                                                                             0         0            0
          370/870                    RI         BCBS of Rhode Island                                                            6              44,831     Judgmentally selected all fraud recoveries greater than $3,000.                 0          0           0
          380/880                   SC          BCBS of South Carolina                                                          10             28,516     Judgmentally selected all fraud recoveries greater than $1,000.                 0         0            0
          415/915                   VT          BCBS of Vermont                                                                 4              13,889     Judgmentally selected all fraud recoveries greater than $3,000.                 0          0           0
                                                Highmark BCBS of West
          443/943                   WV                                                                                          0                    0    N/A                                                                             0         0            0
                                                Virginia
          460/960                   WY          BCBS of Wyoming                                                                 0                    0    N/A                                                                             0         0            0
          Totals                                                                                                               107         $1,673,642                                                                             $7,824      $1,081     $8,905

* Judgmentally selected one fraud recovery greater than $30,000 (if applicable) from each semi-annual period.

** Untimely returned fraud recoveries are recoveries 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. 

N/A - These BCBS plans did not have fraud recoveries for the period January 1, 2012 through June 30, 2015.





         This report is non-public and should not be further released unless authorized by the OIG, because it may contain confidential and/or proprietary information that may be protected by the Trade Secrets
         Act, 18 U.S.C. § 1905, or the Privacy Act, 5 U.S.C. § 552a.
                                                                                                                SCHEDULE C
                                                                                 AGING REFUNDS, FRAUD RECOVERIES, AND MEDICAL DRUG REBATES 

                                                                                         SAMPLE OF BLUECROSS AND/OR BLUESHIELD PLANS 

                                                 SUMMARY OF MEDICAL DRUG REBATES - UNIVERSE TOTALS, SAMPLE SELECTIONS, AND QUESTIONED AMOUNTS


                                                                                                                                                       Universe                                             Questioned Amounts
                                                                                                                                                                                                        Medical Drug Rebates Returned
                                                                                                                          Medical Drug Rebates (January 1, 2012 through June 30, 2015)                            Untimely*

          Plan Codes                   State or Territory                    Plan Name                         Count             Amount                            Selection Methodology                Rebates       LII         Total
             20/520                           AR                BCBS of Arkansas                                                                 N/A                                                          $0            $0        $0
            070/570                           DE                Highmark BCBS of Delaware                                                        Selected all medical drug rebate amounts for review.      7,173        613         7,786
            471/971                            HI               BCBS of Hawaii                                                                   N/A                                                              0         0             0
          140/640/889                        IA/SD              Wellmark BCBS                                                                    N/A                                                              0         0             0
            110/610                            ID               BCBS of Idaho                                                                    N/A                                                              0         0             0
            150/650                           KS                BCBS of Kansas                                                                   Selected all medical drug rebate amounts for review.             0          0            0
            170/670                           LA                BCBS of Louisiana                                                                Selected all medical drug rebate amounts for review.             0          0            0
            210/710                            MI               BCBS of Michigan                                                                 Selected all medical drug rebate amounts for review.     15,196        358        15,554
            240/740                           MO                BCBS of Kansas City                                                              N/A                                                              0         0             0
            230/730                           MS                BCBS of Mississippi                                                              N/A                                                              0         0             0
            250/751                           MT                HCSC – BCBS of Montana                                                           Selected all medical drug rebate amounts for review.             0          0            0
            320/820                           ND                BCBS of North Dakota                                                             N/A                                                              0         0             0
            260/760                           NE                BCBS of Nebraska                                                                 Selected all medical drug rebate amounts for review.             0          0            0
          301/800/801                         NY                BCBS of Western New York                                                         Selected all medical drug rebate amounts for review.    142,140       4,265      146,405
   304/305/306/804/805/806                    NY                Excellus BCBS                                                                    Selected all medical drug rebate amounts for review.             0          0            0
              364                             PA                Capital BC                                                                       Selected all medical drug rebate amounts for review.      2,525             0      2,525
              362                             PA                Independence BC                                                                  N/A                                                              0         0             0
              361                             PA                BC of Northeastern PA                                                            N/A                                                              0         0             0
              973                              PR               Triple-S, Inc.                                                                   N/A                                                              0         0             0
            370/870                            RI               BCBS of Rhode Island                                                             Selected all medical drug rebate amounts for review.     15,017             0     15,017
            380/880                            SC               BCBS of South Carolina                                                           N/A                                                              0         0             0
            415/915                           VT                BCBS of Vermont                                                                  N/A                                                              0         0             0
            443/943                           WV                Highmark BCBS of West Virginia                                                   Selected all medical drug rebate amounts for review.             0         0             0
            460/960                           WY                BCBS of Wyoming                                                                  Selected all medical drug rebate amounts for review.             0         0             0
             Totals                                                                                                                                                                                     $182,051      $5,236     $187,287

* Untimely returned medical drug rebates are rebates 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.
N/A - These BCBS plans did not have medical drug rebates for the period January 1, 2012 through June 30, 2015.




 This report is non-public and should not be further released unless authorized by the OIG, because it may contain confidential and/or proprietary information that may be protected by the Trade Secrets
 Act, 18 U.S.C. § 1905, or the Privacy Act, 5 U.S.C. § 552a.
APPENDIX

September 1, 2016

                                                                                                          Federal Employee Program
                         , Group Chief                                                                    1310 G Street, N.W.
                                                                                                          Washington, D.C. 20005
Experience-Rated Audits Group                                                                             202.942.1000
Office of the Inspector General                                                                           Fax 202.942.1125
U.S. Office of Personnel Management
1900 E Street, Room 6400
Washington, DC 20415-11000

Reference:                                  OPM DRAFT AUDIT REPORT
                                            AGING REFUNDS, FRAUD RECOVERIES, AND MEDICAL
                                            DRUG REBATES
                                            For a Sample of Blue Cross Blue Shield Plans
                                            Audit Report Number 1A-99-00-16-010

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) Pension and Postretirement Benefit
costs for a sample of Blue Cross Blue Shield Plans. Our comments concerning the
findings in the report are as follows:
Medical Drug Rebates                                                                                                              $187,287

Recommendation

We recommend that the contracting officer require the plans to return $182,051 to the
FEHBP for the questioned medical drug rebates. The questioned medical drug rebates
consist of $142,140 for BCBS of Western New York; $15,196 for BCBS of Michigan;
$15,017 for BCBS Rhode Island; $7,173 for Highmark BCBS of Delaware and $2,525
for BC of Northeastern Pennsylvania. However, since we verified that the plans
returned $182,051 to the FEHBP for these questioned medical drug rebate amounts, no
further action is required for this amount.

BCBSA Response

BCBSA agrees with this recommendation.

Recommendation

We recommend that the contracting office require the plans to return $5,236 to the
FEHBP for LII on the questioned medical drug rebates. The LII for the questioned
medical drug rebates consist of $4,265 for BCBS of Western New York; $613 for

                                                                                                      Report No. 1A-99-00-16-010
This report is non-public and should not be further released unless authorized by the OIG, because it may contain confidential and/or proprietary
information that may be protected by the Trade Secrets Act, 18 U.S.C. § 1905, or the Privacy Act, 5 U.S.C. § 552a.
Highmark BCBS of Delaware and $358 for BCBS of Michigan. Since we verified that
Highmark BCBS of Delaware returned $613 for the LII, no further action is required for
this questioned amount. However, the FEHBP is due $4,265 for BCBS of Western New
York and $358 BCBS of Michigan for LII on questioned medical drug rebates.

BCBSA Response

BCBSA agrees with this recommendation. Blue Cross of Western New York submitted
a Special Plan Invoice (SPI) for LII in the amount of $4,265 on June 17, 2016. The Plan
will submit documentation to substantiate the return of the LII to the Program once the
funds are returned. BCBS Michigan submitted a SPI in the amount of $358 for the LII
related to the untimely deposit of Medical Drugs Rebates to the FEP Investment
Account and returned the LII to the Program on October 20, 2015.

Fraud Recoveries                                                                                                                    $31,506

Recommendation

We recommend that the contracting officer require the plans to return $30,425 to the
FEHBP for the questioned fraud recoveries. These questioned fraud recoveries consist
of $22,601 for BCBS of Western New York; $5,603 for BCBS of Louisiana and $2,221
for BCBS of Idaho. We verified that BCBS of Louisiana returned $5,603 and BCBS of
Idaho returned $2,221 to the FEHBP for these questioned fraud recoveries. No further
action is required for these questioned amounts. However, the FEHBP is due $22,601
for fraud recoveries not returned by BCBS of Western New York.

BCBSA Response

Blue Cross Blue Shield of Western New York submitted SPIs for the Fraud Recoveries
in the amount of $22,601 and the Plan returned the funds to the Program on June 4,
2015 and June 30, 2015. No further action is required for the remaining Plans referred
to in the recommendation.

Recommendation

We recommend that the contracting office require BCBS of Western New York to return
$1,081 to the FEHBP for LII (calculated through June 30, 2016) for fraud recoveries not
returned to the FEHBP.




                                                                                                      Report No. 1A-99-00-16-010
This report is non-public and should not be further released unless authorized by the OIG, because it may contain confidential and/or proprietary
information that may be protected by the Trade Secrets Act, 18 U.S.C. § 1905, or the Privacy Act, 5 U.S.C. § 552a.
BCBSA Response

The Plan agrees with this recommendation and will submit a SPI for LII in the amount of
$1,081 for Fraud Recoveries not returned timely to the Program by September 30,
2016.

Aging Health Benefit Refunds                                                                                                        $12,467

Recommendation

We recommend that the contracting officer require the Plans to return $7,186 to the
FEHBP for the questioned aging FEP health benefit refunds and applicable LII. The
questioned amounts consist of $5,674 for BCBS of Arkansas and $1,512 for BCBS of
Rhode Island. Since we verified that BCBS of Arkansas returned $5,674 and BCBS of
Rhode Island returned $1,512 to the FEHBP for these questioned aging health benefit
refunds and applicable LII, no further action is required for these questioned amounts.

BCBSA Response

BCBSA agrees with this recommendation.

Recommendation

We recommend that the contracting officer instruct BCBS of Vermont to immediately
return the questioned excess funds of $5,281 to the FEHBP (unless the plan can
provide evidence or supporting documentation that these funds are not FEHBP funds).

BCBSA Response

The Plan agreed with this recommendation and submitted a SPI for the unidentified
funds in the FEP Investment Account and will return the funds to the Program by
September 30, 2016.

Recommendation

We recommend that the contracting officer require the Association to provide evidence
or supporting documentation ensuring that BCBS of Idaho implements corrective
actions so that only necessary funds are maintained in the FEP investment account,
and corporate funds (such as reimbursements for the plan) are timely transferred to the
plan’s corporate account.


                                                                                                      Report No. 1A-99-00-16-010
This report is non-public and should not be further released unless authorized by the OIG, because it may contain confidential and/or proprietary
information that may be protected by the Trade Secrets Act, 18 U.S.C. § 1905, or the Privacy Act, 5 U.S.C. § 552a.
BCBSA Response

BCBSA will work with the Plan to develop corrective actions to address the Plan’s FEP
Investment Account.


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,




            , CISA
Managing Director, Program Assurance




                                                                                                     Report No. 1A-99-00-16-010
This report is non-public and should not be further released unless authorized by the OIG, because it may contain confidential and/or proprietary
information that may be protected by the Trade Secrets Act, 18 U.S.C. § 1905, or the Privacy Act, 5 U.S.C. § 552a.
                                                                                                                   



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                                    Mismanagement 

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                                         employees, and the general public. We
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                                            Washington, DC 20415-1100
              
                                                                                                                   
                                                                                                                   




                                                                                          Report No. 1A-99-00-16-010
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should not be further released unless authorized by the OIG.