oversight

Audit of Coventry Health Care as Underwriter & Administrator for the Mail Handlers Benefit Plan - Rockville, MD

Published by the Office of Personnel Management, Office of Inspector General on 2010-04-14.

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

Subject:



      AUDIT OF COVENTRY HEALTH CARE

AS UNDERWRITER AND ADMINISTRATOR FOR THE

        MAIL HANDLERS BENEFIT PLAN

           ROCKVILLE, MARYLAND



                                            Report No. 1B-45-00-09-062

                                            Date:         April 14,             2010




                                                          --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 lJ.S.c. 1905). Therefore, while this audit report is available
under the )<'reedom of Information Aet and made available to the public on the DIG web page, caution needs to be exercised hefore
releasing the report to the general public as it may contain proprietary information that was redacted from the publidy distribnted copy.
                       UNITED STATES OFFICE OF PERSONNEL MANAGEMENT
                                           Washington, DC 20415


   Office of the
Inspector Gcneral




                                         AUDIT REPORT




                              Federal Employees Health Benefits Program

                                      Employee Organization Plan


                                        Coventry Health Care

                                as Underwriter and Administrator for the

                                      Mail Handlers Benefit Plan


                          Contract CS 1146              Plan Codes 45 and 48

                                         Rockville, Maryland





                      REPORT NO. IB-45-00-09-062           DATE: April 14, 2010




                                                          &?~
                                                            Michael R. Esser
                                                            Assistant Inspector General
                                                              for Audits




        www.opm.goY                                                                       www.usajobs.goY
                          UNITED STATES OFFICE OF PERSONNEL MANAGEMENT

                                                Washington, DC 20415



  Office of the
Inspector General




                                         EXECUTIVE SUMMARY




                                   Federal Employees Health Benefits Program

                                           Employee Organization Plan


                                            Coventry Health Care

                                    as Underwriter and Administrator for the

                                          Mail Handlers Benefit Plan


                              Contract CS 1146              Plan Codes 45 and 48

                                             Rockville, Maryland





                        REPORT NO. IB-45-00-09-062               DATE: April 14, 2010

        This      audit report on the Federal Employees Health Benefits Program (FEHBP) operations at
        Coventry Health Care (Plan), as underwriter and administrator for the Mail Handlers Benefit Plan,
        questions $2,300,076 in health benefit charges. The Plan agreed (A) with the questioned charges.

        Our limited scope audit was conducted in accordance with Government Auditing Standards. The
        audit covered claim payments from October 1, 2007 through August 31, 2008.

        Questioned health benefit charges are summarized as follows:

        •    Coordination of Benefits with Medicare (A)                                       $1,614,575

             The Plan incorrectly paid 2,237 claim lines, resulting in overcharges of $1,614,575 to the
             FEHBP. Specifically, the Plan did not properly coordinate 2,195 claim line payments with
             Medicare as required by the FEHBP contract. As a result, the FEHBP paid as the primary
             insurer for these claims when Medicare was the primary insurer. Therefore, we estimate that
             the FEHBP was overcharged by $1,594,882 for these 2,195 claim lines. The remaining 42
             claim line payments were not coordination of benefit errors but contained other Plan payment
             errors, resulting in overcharges of $19,693 to the FEHBP.




        www.opm.goY                                                                          www.usajobs.goY
•   Claims Paid for Ineligible Patients rA)                                             $509,559

    The Plan paid 770 claims that were incurred during gaps in patient coverage or after
    termination of patient coverage with the Mail Handlers Benefit Plan, resulting in overcharges
    of $469,782 to the FEHBP. In addition, the Plan paid 165 claims for patients with no
    enrollment identification numbers, resulting in overcharges of$39,777 to the FEHBP. In
    total, the FEHBP is due $509,559 for these claim overcharges.

•   Duplicate Claim Payments rA)                                                        $175,942

    During our review of potential duplicate claim payments, we found that the Plan incorrectly
    paid 174 claims, resulting in net overcharges of$175,942 to the FEHBP. Specifically, we
    determined that the Plan improperly charged the FEHBP $169,305 for 164 duplicate claim
    payments. Also, we identified 10 claims that were not duplicate claim payments but contained
    other Plan payment errors, resulting in net overcharges of$6,637 to the FEHBP. In total, the
    Plan overpaid 173 claims by $176,917 and underpaid 1 claim by $975.




                                                11
                                        CONTENTS

                                                                                     PAGE

       EXECUTIVE SUMMARY	                                                                i


 I.    INTRODUCTION AND BACKGROUND	                                                     1


 II.   OBJECTIVES, SCOPE, AND METHODOLOGy	                                              3


III.   AUDIT FINDINGS AND RECOMMENDAnONS	                                               5


       A.   HEALTH BENEFIT CHARGES	                                                     5


            1. Coordination of Benefits with Medicare	                                  5


            2. Claims Paid for Ineligible Patients	                                     9


            3. Duplicate Claim Payments	                                               11


 IV.   MAJOR CONTRIBUTORS TO THIS REPORT.	                                             13


 V.    SCHEDULE A       HEALTH BENEFIT CHARGES AND AMOUNTS QUESTIONED

       APPENDIX A	 (Coventry Health Care's reply, dated February 17,2010, to Audit
                   Inquiry 1 - Duplicate Claim Payments)

       APPENDIX B (Coventry Health Care's reply, dated February 17,2010, to Audit
                  Inquiry 2 - Claims Paid for Ineligible Patients)

       APPENDIX C	 (Coventry Health Care's reply, dated February 17,2010, to Audit
                   Inquiry 3 - Coordination of Benefits with Medicare)
                          I. INTRODUCTION AND BACKGROUND


INTRODUCTION

This final audit report details the findings, conclusions, and recommendations resulting from our
limited scope audit of the Federal Employees Health Benefits Program (FEHBP) operations at
Coventry Health Care (Plan) as underwriter and administrator for the Mail Handlers Benefit Plan
(MHBP). The Plan is located in Rockville, Maryland.

The audit was performed by the Office of Personnel Management's (OPM) Office of the Inspector
General (OIG), as established by the Inspector General Act of 1978, as amended.

BACKGROUND

The FEHBP was established by the Federal Employees Health Benefits (FEHB) Act (Public Law
86-382), enacted on September 28, 1959. The FEHBP was created to provide health insurance
benefits for federal employees, annuitants, and dependents. OPM's Retirement and Benefits
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.

MHBP is an experience-rated employee organization plan offering health care benefits to its
subscribers. MHBP is open to all Federal employees and annuitants who are eligible to enroll in
the FEHBP and who are, or become, members or associate members of the National Postal Mail
Handlers Union (Union). The Union is the sponsor of the MHBP, operating under Contract CS
1146 to provide a health benefits plan authorized by the FEHB Act. During 2007, the Union had
the following contractual arrangement with affiliates of Coventry Health Care:

   •	 First Health Life and Health Insurance Company and Cambridge Life Insurance Company
      to underwrite the MHBP;
   •	 Claims Administration Corp to perform the administrative functions; and
   •	 First Health Group Corporation to provide pharmacy benefit management and health
      benefit services.

During 2008, these contractual arrangements remained the same, except for Coventry Health
Care National Accounts assuming the responsibility of providing the health benefit services.

The MHBP's contract (CS 1146) with OPM is experience-rated. Thus, the costs of providing
service benefits in the prior years are reflected in current and future year's premium rates. In
addition, the contract provides that in the event of termination, unexpended program funds revert
to the Federal Government (FEHBP Trust Fund). In recognition of these provisions, the contract
requires an accounting of program funds to be submitted at the end of each contract year. The
accounting is made on a statement of operations known as the Annual Accounting Statement.




                                                1

Compliance with laws and regulations applicable to the FEHBP is the responsibility of the Plan
management Also, management of the Plan is responsible for establishing and maintaining a
system of internal controls.

Findings from our previous audit of the Plan (Report No. IB-45-00-08-016, dated March 26,
2009) for contract years 2002 through 2006 (2005 though September 30,2007 for claim
payments) are in the process of being resolved.

The results of this audit were provided to the Plan in written audit inquiries and were discussed
with Plan officials throughout the audit and at an exit conference. The Plan's comments offered
in response to our audit inquiries were considered in preparing our final report and are included
as Appendices to this report. Since the Plan agreed with our audit inquiries, we bypassed the
draft report and only issued a final report. The Plan agreed with this decision.




                                                2

                   II. OBJECTIVES, SCOPE, AND METHODOLOGY


OBJECTIVES

The objectives of this audit were to determine whether the Plan complied with contract
provisions relative to coordination of benefits, duplicate payments, and patient enrollment
eligibility.

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.

We reviewed the MHBP's FEHBP Annual Accounting Statements for contract years 2007 and
2008. During this period, the Plan paid approximately $3.5 billion in health benefit charges (See
Schedule A). Specifically, we reviewed approximately $16 million in claim payments made from
October 1, 2007 through August 31, 2008 for coordination of benefits, duplicate payments and
patient enrollment eligibility. I

In planning and conducting our audit, we obtained an understanding of the Plan's internal control
structure to help determine the nature, timing, and extent of our auditing procedures. This was
determined to be the most effective approach to select areas of audit. For those areas selected,
we primarily relied on substantive tests of transactions and not tests of controls. Based on our
testing, we did not identify any significant matters involving the Plan's internal control structure
and its operation. However, since our audit would not necessarily disclose all significant matters
in the internal control structure, we do not express an opinion on the Plan's system of internal
controls taken as a whole.

We also conducted tests to determine whether the Plan had complied with the contract, the
applicable procurement regulations (i.e., Federal Acquisition Regulations (FAR) and Federal
Employees Health Bene1its Acquisition Regulations (FEHBAR), as appropriate), and the laws
and regulations governing the FEHBP. The results of our tests indicate that, with respect to the
items tested, the Plan did not comply with all provisions of the contract and federal procurement
regulations. Exceptions noted in the areas reviewed are set forth in detail in the "Audit Findings
and Recommendations" section of this audit report. With respect to the items not tested, nothing
came to our attention that caused us to believe that the Plan had not complied, in all material
respects, with those provisions.


-_ _-------­
       ...

I Effective September 1,2008, the Plan started processing the claims for the Mail Handlers Benefit Plan on a

different claims system (Coventry Health Care's lOX claims system). This audit is a close-out of the claims that
were processed on Coventry Health Care's previous claims system.



                                                         3

In conducting our audit, we relied to varying degrees on computer-generated data provided by the
Plan. Due to time constraints, we did not verifY the reliability of the data generated by the
various information systems involved. However, while utilizing the computer-generated data
during our audit testing, 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 Cranberry Township, Pennsylvania from September 1,
2009 through February 17,2010.

The Plan did a great job supporting our audit and promptly responded to our questions, samples,
information requests, and audit inquiries. Also, the Plan was very cooperative and well prepared
for our audit.

METHODOLOGY

We obtained an understanding of the internal controls over the Plan's claims processing system
by inquiry of Plan officials.

To test the Plan's compliance with the FEHBP health benefit provisions, we selected and
reviewed samples of25,279 claims. 2 We used the FEHBP contract, the benefit plan brochure,
and the Plan's provider agreements to determine the allowability of benefit payments. The
results of these samples were not projected to the universe of claims.




2 See the audit findings for "Coordination of Benefits with Medicare" (A I), "Claims Paid for Ineligible Patients" (A2),
and "Duplicate Claim Payments" (A3) on pages 5 through 13 for specific details of our sample selection
methodologies.




                                                          4

            III. AUDIT FINDINGS AND RECOMMENDATIONS


A. HEALTH BENEFIT CHARGES


  1. Coordination of Benefits with Medicare                                             $1,614,575

     The Plan incorrectly paid 2,237 claim lines, resulting in overcharges of $1 ,614,575 to the
     FEHBP. Specifically, the Plan did not properly coordinate 2,195 claim line payments
     with Medicare as required by the FEHBP contract. As a result, the FEHBP paid as the
     primary insurer for these claims when Medicare was the primary insurer. Therefore, we
     estimate that the FEHBP was overcharged by $1,594,882 for these 2,195 claim lines. The
     remaining 42 claim line payments were not coordination of benefit errors but contained
     other Plan payment errors, resulting in overcharges of $19,693 to the FEHBP.

     The 2008 Mail Handlers Benefit Plan brochure, page 127, Primary Payer Chart, illustrates
     when Medicare is the primary payer. In addition, page 21 of that brochure states, "We
     limit our payment to an amount that supplements the benefits that Medicare would pay
     under Medicare Part A (Hospital Insurance) and Medicare Part B (Medical Insurance),
     regardless of whether Medicare pays."

     Contract CS 1146, Part II, section 2.6 states, "(a) The Carrier shall coordinate the payment
     of benefits under this contract with the payment of benefits under Medicare, ... (b) The
     Carrier shall not pay benefits under this contract until it has determined whether it is the
     primary carrier ...." Also, Part III, section 3.2 (b)(1) states, "The Carrier may charge a
     cost to the contract for a contract term if the cost is actual, allowable, allocable, and
     reasonable ...."

     In addition, Contract CS 1146, Part II, section 2.3(g) states, "If the Carrier or OPM
     determines that a Member's claim has been paid in error for any reason          the Carrier
     shall make a prompt and diligent effort to recover the erroneous payment           "

     For claims incurred and paid from October 1, 2007 through August 31, 2008, we
     performed a computer search and identified 103,145 claim lines, totaling $8,223,759 in
     payments that potentially were not coordinated with Medicare. From this universe, we
     selected for review a sample of25,783 claim lines, totaling $5,061,941 in payments, to
     determine whether the Plan complied with the contract provisions relative to coordination
     of benefits (COB) with Medicare. When we submitted our sample of potential COB
     errors to the Plan on June 15, 2009, the claims were within the Medicare timely filing
     requirement and could be filed with Medicare for coordination of benefits.




                                               5

          The following table is a summary of the claim lines that were selected for review:

                  Claim Type                       Claim I~ounts                         Sample Selection
                                                   Lines!   Paid                           Methodology ~

          Medicare Part A Primary for                267 I $1,690,730           Patients with cumulative
          Inpatient (liP) Facility                                              claims of $1 ,000 or more
          Medicare Part A Primary for                318 I        $455,367      Patients with cumulative
          Skilled Nursing, Home Health         i                                claims of $1 ,000 or more

          ~~~i~:::~~~d::i:~ef~:re                     48    1     $362,169 Patients with            cumula(i~~
          Certain liP Facility Char-,,~gLle_s_-+            +-            -+_c_la_im_s_o_f-,$_2-,-,5_0_0,---0_r_m__o_r_e_--{!
          Medicare Part B Primary for                   0                $0 The potential COB errors
          Skilled Nursing, HHC, and                                            were immaterial. Therefore,
      ! Hospic~e_C_a_r_e                       i - -_ _i - ­              '---r-n_o_c_la_im_l_in_e_s_\_v~er_e_s_e_Ie_c_te_d_'--I
      IMedicare Part B Primary for             I                  $542,652      Patients with cumulative
      k?utpatient C h a r g e s .                                               claims of $1 ,000 or more
      ! Medicare Part B Primary for                              $2,011,023     Patients with cumulative
        Professional
                        Total

          Generally, Medicare Part A covers 100 percent of inpatient care in hospitals, skilled
          nursing facilities, hospice care, and home health care. For each Medicare Benefit Period,
          there is a one-time deductible, followed by a daily copayment beginning with the 61 51 day.
          Beginning with the 91 51 day of the Medicare Benefit Period, Medicare Part A benefits
          may be exhausted, depending on whether the patient elects to use their Lifetime Reserve
          Days. For the uncoordinated Medicare Part A claims, we estimate that the FEHBP was
          overcharged for the total claim payment amounts.

          Medicare Part B pays 80 percent of most outpatient charges and professional claims after
          the calendar year deductible has been met. Also, Medicare Part B covers a portion of
          inpatient facility charges for ancillary services such as durable medical equipment,
          medical supplies, diagnostic tests, and clinical laboratory services. Based on our
          experience, ancillary items account for approximately 30 percent of the total inpatient
          claim payment. Therefore, we estimate that the FEHBP was overcharged 25 percent for
          these inpatient claim lines (0.30 x 0.80 0.24 ~ 25 percent).

           Based on our review of the potential COB errors in our sample, we identified 2,237 claim
           lines that were paid incorrectly, resulting in overcharges of$I,614,575 to the FEHBP. 3




3 In addition, there were 234 claim lines, totaling $167,237 in payments, with COB errors that were identified and
adjusted by the Plan prior to receiving our sample of potential COB errors. Since these COB errors were
identified and adjusted by the Plan prior to receiving our sample, we did not question these COB errors in the final
report.




                                                            6

The following table details the questioned payments by claim type:

           Claim Type              Claim        Amounts            Amounts
                                   Lines         Paid             Questioned
 Medicare Part A Primary for             83       $912,232           $905,454
 I/P Facility
 Medicare Part A Primary for             26        $19,344            $19,344
 Skilled Nursing, HHC, and
 Hospice Care
 Medicare Part B Primary for                4      $23,379             $5,845
 Certain liP Facility Charges
 Medicare Part B Primary for                0            $0                $0
 Skilled Nursing, HHC, and
 Hospice Care
 Medicare Part B Primary for            439       $375,647           $300,969
 Outpatient Charges
 Medicare Part B Primary for          1,685       $475,250           $382,963
 Professional Charges                                                           !
              Total                   2,~?I~                       $1,614,575

Our audit disclosed the following for the claim payment errors:

•	 For 2,046 (91.5 percent) of the claim lines questioned, there was incorrect or no
   Medicare COB information on the Plan's claims system to identify Medicare as the
   primary payer when the claims were paid. However, when the correct Medicare COB
   information was subsequently added to the claims system, the Plan did not review
   and/or adjust the patient's prior claims back to the Medicare effective dates. As a
   result, we estimate that the FEHBP was overcharged $1,534,326 for these claim lines
   that were not coordinated with Medicare.

•	 For 140 (6.3 percent) of the claim lines questioned, human processor errors caused
   improper coordination of the claim lines. As a result, we estimate that the FEHBP
   was overcharged $56,202 for these claim lines that were not coordinated with
   Medicare.

•	 For 42 (l.8 percent) of the claim lines questioned, we found that these claim lines
   were not actually COB errors but contained other Plan payment errors. As a result,
   we determined that the FEHBP was overcharged $19,693 for these claim payment
   errors.

•	 For nine (0.4 percent) of the claim lines questioned, various other errors caused the
   claim lines to be processed incorrectly. As a result, we estimate that the FEHBP was
   overcharged $4,354 for these claim lines that were not coordinated with Medicare.




                                        7
Of the $1.614,575 in questioned charges, $47,908, or 3 percent, were identified by the
Plan prior to receiving our sample of potential COB errors on June 15, 2009. However,
since the Plan had not completed the recovery process and/or adjusted these claims by
June 15, 2009, we are continuing to question these COB errors. The remaining
questioned charges of $1,566,667 (97 percent) were identified as a result of our audit.

Plan's Response:

The Plan agrees with this finding and states that these payments were good faith erroneous
benefit payments. The Plan promptly initiated efforts to recover these overpayments after
determining that an error had occurred. Also, the recovery efforts are ongoing and comply
with procedures outlined in the Plan's OPM-approved Overpayment Recovery Guidelines.

The Plan states that "the January 1, 2007-August 31,2008 time period encompassed by this
audit coincides with the time period in which the OIG conducted its audit of the MHBP
resulting in its March 26,2009, issuance of Final Audit Report No. IB-45-00-08-16. That
Report, in addition to containing a similar finding regarding Medicare COB, recommended
that the MHBP 'ha[ve] procedures in place to review all claims incurred back to the
Medicare effective dates when updated ... and determine if already paid claims are
affected.' The MHBP addressed that recommendation in detail with OPM's contracting
office shortly after the OIG issued that Report, summarizing both the efforts it had taken to
date and those it planned to implement in response to that recommendation. Please further
be advised that in addition to those efforts outlined in that correspondence, the Plan (i)
conducted intensive one-on-one training of claims examiners identified as having quality-
related errors pertaining to Medicare COB        and (ii) provided formal classroom training
on Medicare COB to all claims examiners          In sum, the Plan already has taken substantial
steps towards reducing the frequency with which Medicare COB errors occur on a
prospective basis."

Recommendation 1

We recommend that the contracting officer disallow $1,594,882 for uncoordinated claim
payments and verifY that the Plan returns all amounts recovered to the FEHBP.

Recommendation 2

We recommend that the contracting officer disallow $19,693 in claim overcharges
resulting from other Plan payment errors and verifY that the Plan returns all amounts
recovered to the FEHBP.




                                          8

2.	 Claims Paid for Ineligible Patients                                               $509,559

   The Plan paid 770 claims that were incurred during gaps in patient coverage or after
   termination of patient coverage with the Mail Handlers Benefit Plan, resulting in
   overcharges of $469,782 to the FEHBP. In addition, the Plan paid 165 claims for patients
   with no enrollment identification (ID) numbers, resulting in overcharges of $39,777 to the
   FEHBP. In total, the FEHBP is due $509,559 for these claim overcharges.

   As previously cited from Contract CS 1146, 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.

   Enrollees with No Coverage during Dates of Service

   We performed a computer search to identifY claims that were incurred and paid during
   gaps in patient coverage or after termination of patient coverage with the Mail Handlers
   Benefit Plan. For the period October 1, 2007 through August 31, 2008, we identified
   claim payments, totaling $10,733,291, for 3,075 patients that met this search criteria.

   From this universe of 3,075 patients, we selected for review all patients with cumulative
   claims of$5,000 or more. This sample included 7,917 claims, totaling $9,113,744 in
   payments, for 261 patients. Our review of this sample identified 770 claims, totaling
   $469,782 in payments, that were incurred and paid during gaps in patient coverage or
   after termination of coverage. As a result, the FEHBP is due $469,782 for these improper
   payments.

   Patients with No Enrollment Record

   We performed a computer search to identifY claims incurred and paid for patients with no
   enrollment ID numbers. For the period October 1, 2007 through August 31, 2008, our
   search identified 5,049 claim payments, totaling $1,449,750, for 518 patients with no
   enrollment ID numbers. We reviewed all claims for patients in this universe. Our review
   identified 165 claims, totaling $39,777 in payments, that were made for patients with no
   enrollment ID number. As a result, the FEHBP is due $39,777 for these payments.

   Summary of Claims Paid to Ineligible Patients

   In total, the Plan charged the FEHBP $509,559 for 935 claim payments madc for

   ineligible patients. Our audit disclosed the following reasons for the errors:


   •	 For 732 of the claims questioned, the Plan received retroactive termination of patient
      coverage from the Federal agency's payroll office. However, when the termination
      dates were subsequently received, the Plan did not review and/or adjust the patient's
      prior claims back to the termination date. As a result, the FEHBP was overcharged
      $431,644 in claim payments for patients not eligible for benefits.




                                             9
•	 For 201 of the claims questioned, there were various eligibility errors. For example,
   we identified multiple cases where the patient was not eligible for coverage due to
   loss in coverage from a divorce and the Plan erroneously paid these claims. As a
   result, the FEHBP was overcharged $77,408 in claim payments for patients not
   eligible for benefits.

•	 For two of the claims questioned, the claim processors entered incorrect data. As a
   result, the FEHBP was overcharged $507 in claim payments for patients not eligible
   for benefits.

Plan's Response:

The Plan agrees wi th this tinding and states that these payments were good faith
erroneous benefit payments made during gaps in member coverage or after termination of
member coverage. The Plan initiated efforts to recover these overpayments in accordance
with the procedures outlined in the Plan's OPM-approved Overpayment Recovery
Guidelines.

The Plan states, "As with the OIG's prior inquiry, the MHBP observes that the January 1,
2007-August 31, 2008, time period encompassed by this audit coincides with the time
period during which the OIG conducted its prior audit of the MHBP, the results of which
are memorialized in the OIG's March 26, 2009, Final Audit Report No. IB-45-00-08-16.
That Report contains a finding similar in nature to the one proposed in this inquiry,
together with a recommendation that the OPM Contracting Officer verity that the MHBP
has procedures in place to identify and initiate efforts to recover post-termination benefit
payments attributable to the aforementioned types of reporting delays. A comparison of
the OIG's finding in that Report and its proposed finding here illustrates the existence and
operation of those procedures: in that earlier Report, the OIG correctly identified 65% of
the claim lines sampled as having been paid during a gap in the enrollee's coverage
(l 0,275 out of 15,864 claim lines sampled), and 8% of the claim lines sampled as having
been paid after the enrollee's termination (2,617 out of 26,826 claim lines sample). Here,
however, the incidence has been reduced considerably (770 claim lines out of 7,917
sampled, or 10%, and 165 claim lines out of 5,049 sampled, or 3%).

Furthermore, as the auditors know Coventry transitioned to a new claims processing
system tor the MHBP effective September 1, 2008. Coventry is conducting an ongoing
review of the reports that system generates to ensure that this notable improvement not
only is maintained, but is enhanced."

Recommendation 3

We recommend that the contracting officer disallow $509,559 for claims paid for ineligible
patients and verify that the Plan returns all amounts recovered to the FEHBP.




                                         10

    3. Duplicate Claim Payments                                                                           $175,942

        During our review of potential duplicate claim payments, we found that the Plan
        incorrectly paid 174 claims, resulting in net overcharges of$175,942 to the FEHBP.
        Specifically, we determined that the Plan improperly charged the FEHBP $169,305 for
        164 duplicate claim payments. Also, we identified 10 claims that were not duplicate
        claim payments but contained other Plan payment errors, resulting in net overcharges of
        $6,637 to the FEHBP. In total, the Plan overpaid 173 claims by $176,917 and underpaid
        1 claim by $975.

        As previously cited from Contract CS 1146, 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.

        Section 6(h) of the FEHB Act provides that rates should reasonably and equitably reflect
        the costs of benefits provided.

        We performed a computer search for potential duplicate payments on claims paid during
        the period October 1, 2007 through August 31,2008. We selected and reviewed 435
        groups, totaling $412,902 (out of 7,427 groups, totaling $647,071) in potential duplicate
        payments, under our "best matches" criteria. We also selected and reviewed 402 groups,
        totaling $332, 190 (out of 26,484 groups, totaling $1,090,739) in potential duplicate
        payments, under our "near matches" criteria. OUf samples included all groups with
        potential duplicate payments of$250 or more under the "best matches" criteria and $350
        or more under the "near matches" criteria.

        Based on our review, we determined that 117 claim payments in our "best matches"
        sample were duplicates, resulting in overcharges of$136,034 to the FEHBP. Also, we
        determined that 47 claim payments in our "near matches" sample were duplicates,
        resulting in overcharges of $33,271 to the FEHBP. In total, the Plan charged the FEHBP
        $169,305 for these 164 duplicate claim payments from October 1,2007 through
        August 31, 2008. 4 These duplicate claim payments primarily occurred when the claims
        were deferred as potential duplicates on the claims system, but were overridden by the
        processors.

        During our review of these potential duplicate claim payments, we also identified 10
        claims that were not duplicate claim payments but contained other Plan payment errors,
        resulting in net overcharges of $6,637 to the FEHBP. Specifically, the Plan overpaid nine
        ofthese claims by $7,612 and underpaid one claim by $975.




4 In addition, there were 90 duplicate claim payments, totaling $81,552, that were identified and adjusted or voided
by the Plan prior to receiving our samples on June 15,2009. Since these duplicate claim payments were identified
and adjusted or voided by the Plan prior to receiving our samples, we did not question these duplicate claim
payments in the final report.




                                                         11
Plan's Response:

The Plan agrees with this finding and states that these payments were good faith
erroneous benefit payments. The Plan initiated efforts to recover these overpayments in
accordance with the procedures outlined in the Plan's OPM-approved Overpayment
Recovery Guidelines.

The Plan states that "the time period encompassed by this audit ... coincides roughly
with the time period during which the OIG conducted its prior audit of the MHBP, the
results of which are memorialized in the OIG's Final Audit Report No. IB-45-00-08-16
(March 26, 2009). That Report contains a similar finding regarding duplicate claim
payments, along with a recommendation that the MHBP identitY their cause(s) 'and
develop an action plan' to prevent their future occurrence. The duplicate payments
identified in this inquiry occurred months (if not years) before that Report was issued;
nevertheless, the MHBP would like to make the OIG aware ofthe substantial steps it has
taken in 2009 to implement that Report's recommendation.

For example ... the MHBP has conducted a pair of training initiatives directed at the
duplicate claims payment issue. The first initiative, which commenced shortly after that
Report's publication, was providing one-on-one, focused duplicate claim training to all
claims examiners who demonstrated a need for it based on the MHBP's internal audits for
claims processing quality control. The second initiative was provided to all MHBP
claims examiners in October, 2009, and consisted of providing duplicate claims
processing training using materials specially-prepared for that purpose, followed by live
duplicate claims processing overseen by individuals with established expertise in that
area.... While it is too soon to reach ay measurable conclusions about the efficacy of
these training initiatives, the MHBP is optimistic that together they will have a favorable
impact on reducing the frequency with which duplicate claims payments occur."

Recommendation 4

We recommend that the contracting officer disallow $169,305 for duplicate claim
payments and veritY that the Plan returns all amounts recovered to the FEHBP.

Recommendation 5

We recommend that the contracting officer disallow $7,612 in claim overcharges
resulting from other Plan payment errors and veritY that the Plan returns all amounts
recovered to the FEHBP.

Recommendation 6

We recommend that the contracting officer allow the Plan to charge the FEHBP $975 if
an additional payment is made to the provider to correct the underpayment error.




                                        12

              IV. MAJOR CONTRIBUTORS TO THIS REPORT

Experience-Rated Audits Group

               Lead Auditor

• • • • • Auditor

               Auditor




              Senior Team Leader




                                   13

                                                    V. SCHEDULE A


                    COVENTRY HEALTH CARE AS UNDERWRITER AND ADMINISTRATOR

                              FOR THE MAIL HANDLERS BENEFIT PLAN

                                        ROCKVILLE, MD


                           HEALTH BENEFIT CHARGES AND AMOUNTS QUESTIONED



HEALTH BENEFIT CHARGES                                                    2007               2008          TOTAL

   HEALTH BENEFIT CHARGES*                                      I   $1,768,957,342        $1,741,915,608   $3,510,872,950   ~




AMOUNTS QUESTIONED                                                        2007               2008          TOTAL

1. COORDINATION OF BENEFITS WITH MEDICARE                                  $275,760          $1,338,815       $1,614,575
2. CLAIMS PAID FOR INELIGIBLE PATIENTS                                      123,009             386,550          509,559
3. DUPLICATE CLAIM PAYMENTS                                                  20,770             155,172          175,942

    TOTAL AMOUNTS QUESTIONED                                    I    --
                                                                           $419,539
                                                                                      .      $1,880,537       $2,300,076 I


* The audit covered claim payments from October 1,2007 through August 31, 2008.
                                                                                  APPENDIX A


                                     COVENTRY

                               T     Hl'ultfl   ['Off'




To:                        Auditor-in-Charge
                           Auditor
                           Auditor

From: Thomas R. Kirkpatrick
      Chief Financial Officer, Group Health Services
      Coventry Health Care

Date:	 February 17, 2010

Re:	   Mail Handlers Benefit Plan Response to OPM OIG Audit Inquiry #1
       - Duplicate Claim Payments


(Deleted by the Office of the Inspector General - Not Relevant to the Final Report)

MHBP Response: The MHBP concurs with the OIG auditors' proposed finding that it made
$169,305 in duplicate payments erroneously but in good faith on 164 of the 837 claims
contained in the auditors' "best matches" and "near matches" duplicate claims payment
samples. The MHBP also concurs with the OIG auditors' proposed finding that $6,637 in net
benefit overpayments were made erroneously but in good faith on an additional 10 claims
identified in those samples. Finally, the MHBP agrees with the OIG's determination that
virtually every such payment error occurred on a claim that the FirstClaim® claims processing
system then in use for the MHBP had identified as a possible duplicate and routed for further
investigation, and that the MHBP claims examiner thereafter mistakenly authorized for
payment. In other words, the payment errors identified in this inquiry were attributable to
human error. The MHBP initiated recovery efforts on each overpayment identified in this
inquiry in accordance with the policies and procedures enumerated in its OPM-approved
Overpayment Recovery Guidelines, including the ability to track and report back to OPM on its
progress in recouping them.

The MHBP observes that the time period encompassed by this audit (January 1, 2007-August
31,2008) coincides roughly with the time period during which the OIG conducted its prior audit
of the MHBP, the results of which are memorialized in the OIG's Final Audit Report NO.1 B-45­
00-08-16 (March 26, 2009). That Report contains a similar finding regarding duplicate claim
payments, along with a recommendation that the MHBP identify their cause(s) "and develop an
action plan" to prevent their future occurrence. The duplicate payments identified in this
inquiry occurred months (if not years) before that Report was issued; nevertheless, the MHBP
would like to make the OIG aware of the substantial steps it has taken in 2009 to implement
that Report's recommendation.
For example, since Report No. AB-45-00-08-16's March 26,2009, issuance date, the MHBP
has conducted a pair of training initiatives directed at the duplicate claims payment issue. The
first initiative, which commenced shortly after that Report's publication, was providing one-on­
one, focused duplicate claim training to all claims examiners who demonstrated a need for it
based on the MHBP's internal audits for claims processing quality control. The second
initiative was provided to all MHBP claims examiners in October, 2009, and consisted of
providing duplicate claims processing training using materials specially-prepared for that
purpose, followed by live duplicate claims processing overseen by individuals with established
expertise in that area. A copy of the materials furnished during this second training initiative
are attached for the OIG auditors' reference. While it is too soon to reach ay measurable
conclusions about the efficacy of these training initiatives, the MHBP is optimistic that together
they will have a favorable impact on reducing the frequency with which duplicate claims
payments occur.

The MHBP trusts the above reply adequately responds to the OIG auditors' Audit Inquiry No.
1. Please do not hesitate to request further clarification or information, however.




                                                 2

                                                                                                               APPENDIXB


                                                 COVENTRY

                                        T       Hl'o/th      tfl('f)




To:                              Auditor-in-Charge
                                 Auditor
                                 Auditor

From: Thomas R. Kirkpatrick
      Chief Financial Officer, Group Health Services
      Coventry Health Care

Date:	 February 17,2010

Re:	    Mail Handlers Benefit Plan Response to OPM OIG Audit Inquiry #2
        - Claims Paid for Ineligible Patients


(Deleted by the Office of the Inspector General - Not Relevant to the Final Report)

MHBP Response: The MHBP concurs with the OIG auditors' proposed finding that it made
935 claims payments totaling $509,559 erroneously but in good faith during gaps in an MHBP
member's coverage, or following their termination. These erroneous payments were out of
12,966 claim lines totaling $10,563,494 in benefit payments that the 01G auditors sampled for
review. The MHBP further concurs with the OIG auditors' determination that these erroneous
claims payments were almost entirely attributable to delays by the responsible entities in
reporting events affecting member eligibility that, had they been reported timely, would have
resulted in the questioned claim line being adjudicated correctly. As indicated in your inquiry,
all but two of those 935 erroneous claims payments were due either to payroll office delays in
reporting enrollment changes (732, or 78.3%), or to other delays such as enrollees failing to
timely notify it of a divorce or other change in family status affecting eligibility (201, or 21.5%).1
The MHBP has initiated recovery efforts on each one of the overpaid claim lines identified in
this inquiry in accordance with the procedures enumerated in its OPM-approved MHBP
Overpayment Recovery Guidelines, including the ability to track and report back to OPM on its
progress in recouping them.

As with the OIG's prior inquiry, the MHBP observes that the January 1, 2007-August 31,2008,
time period encompassed by this audit coincides with the time period during which the OIG
conducted its prior audit of the MHBP, the results of which are memorialized in the OIG's
March 26, 2009, Final Audit Report NO.1 B-45-00-08-16. That Report contains a finding similar
in nature to the one proposed in this inquiry, together with a recommendation that the OPM

I FEHBP enrollees oftentimes continue to list their spouse as a covered dependent after obtaining a divorce from them. It is
common for the MHBP to learn of the divorce only in the event that the enrollee remarries and thereafter tries to add the new
spouse to his/her enrollment.
Contracting Officer verify that the MHBP has procedures in place to identify and initiate efforts
to recover post-termination benefit payments attributable to the aforementioned types of
reporting delays. A comparison of the DIG's finding in that Report and its proposed finding
here illustrates the existence and operation of those procedures: in that earlier Report, the
DIG correctly identified 65% of the claim lines sampled as having been paid during a gap in
the enrollee's coverage (10,275 out of 15,864 claim lines sampled), and 8% of the claim lines
sampled as having been paid after the enrollee's termination (2,617 out of 26,826 claim lines
sample). Here, however, the incidence has been reduced considerably (770 claim lines out of
7,917 sampled, or 10%, and 165 claim lines out of 5,049 sampled, or 3%).

Furthermore, as the auditors know Coventry transitioned to a new claims processing system
for the MHBP effective September 1, 2008. Coventry is conducting an ongoing review of the
reports that system generates to ensure that this notable improvement not only is maintained,
but is enhanced.

The MHBP trusts the above reply adequately responds to the DIG auditors' Audit Inquiry No.
2. Please do not hesitate to request further clarification or information, however.




                                                2

                                                                                                               APPENDIXC


                                                 COVENTRY

                                                Hrall II farr




To:                               Auditor-in-Charge
                                , Auditor
                                  Auditor

From: Thomas R. Kirkpatrick
      Chief Financial Officer, Group Health Services
      Coventry Health Care

Date:	 February 17,2010

Re:	    Mail Handlers Benefit Plan Response to OPM OIG Audit Inquiry #3
        - Coordination of Benefits with Medicare


(Deleted by the Office of the Inspector General - Not Relevant to the Final Report)

MHBP Response: The MHBP concurs that it paid $1,614,575 in charges questioned in this
inquiry erroneously but in good faith as a result of errors made in coordinating the Plan's
benefits with Medicare on 2,237 of the 25,873 claim lines (8.6%) that the OIG auditors selected
for sampling. 1 The MHBP initiated recoupment efforts on each one of those claim lines
promptly after determining that a Medicare coordination of benefits ("COB") error (or other
error) had occurred contemporaneously with its Fall, 2009, response to the OIG auditors'
Information Request ("IR") No.1. Those recovery efforts are ongoing, and comply with the
procedures enumerated in the Plan's OPM-approved Overpayment Recovery Guidelines
(including the ability to track and report to OPM its progress in recouping the payments).

The MHBP also observes that the January 1, 2007-August 31,2008, time period
encompassed by this audit coincides with the time period in which the OIG conducted its audit
of the MHBP resulting in its March 26, 2009, issuance of Final Audit Report NO.1 B-45-00-08­
16. That Report, in addition to containing a similar finding regarding Medicare COB,
recommended that the MHBP "ha[ve] procedures in place to review all claims incurred back to
the Medicare effective dates when updated ... and determine if already paid claims are
affected." The MHBP addressed that recommendation in detail with OPM's contracting office
shortly after the OIG issued that Report, summarizing both the efforts it had taken to date and
those it planned to implement in response to that recommendation. Please further be advised
that in addition to those efforts outlined in that correspondence, the Plan (i) conducted

I  In concurring with this proposed finding, the MHBP notes that based upon its showing, the OPM OIG auditors no longer
question whether the MHBP coordinated 31 questioned claim lines totaling $6,269 improperly with Medicare due to a claims
system error. Rather, the auditors concur that those incorrect claim payments were, like the remaining claim lines questioned
in this inquiry, paid incorrectly as a result of human (i.e., claims examiner) error.
intensive one-on-one training of claims examiners identified as having quality-related errors
pertaining to Medicare COB in June-July of 2009, and (ii) provided formal classroom training
on Medicare COB to all claims examiners in November, 2009. This latter activity took the form
of a 5-6 hour training session, to be supplemented a later, follow-up assessment and additional
one-on-one training as required. In sum, the Plan already has taken substantial steps towards
reducing the frequency with which Medicare COB errors occur on a prospective basis.

The MHBP trusts the above reply adequately responds to the OIG auditors' Audit Inquiry No.
3. Please let us know if you require further information, however.




                                               2