oversight

Audit of Aetna HealthFund Blue Bell, Pennsylvania

Published by the Office of Personnel Management, Office of Inspector General on 2010-07-27.

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 the Federal Employees Health Benefits

        Program Operations at Aetna HealthFund




                                 Report No. lC-22-00-10-010


                                 Date:     July 27, 2010




                                            -- CAUTION -­

This audit report has been distributed to Federal and non-Federal officials who are responsible for the
administration of the audited program. This audit report may contain proprietary data which is protected by
Federal law (18 U.S.c. 1905). Therefore, while this report is available under the Freedom of Information Act
and made available to the public on the OIG webpage, caution needs to be exercised before releasing the
report to the general public as it may contain proprietary information that was redacted from the publicly
distributed copy.
                        UNITED STATES OFFICE OF PERSONNEL MANAGEMENT

                                           Washington, DC 20415



   Office of the
Inspector General




                                            AUDIT REPORT



                                 Federal Employees Health Benefits Program

                              Community-Rated Health Maintenance Organization

                                            Aetna HealthFund

                                   Contract Number 2900 - Plan Code 22

                                          Blue Bell, Pennsylvania




                     Report No. lC-22-00-10-01O                    Date:   July 27, 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

                             Community-Rated Health Maintenance Organization

                                           Aetna HealthFund

                                  Contract Number 2900 - Plan Code 22

                                         Blue Bell, Pennsylvania




                     Report No. lC-22-00-10-010                  Date:    July 27, 2010

         The Office of the Inspector General performed an audit of the Federal Employees Health Benefits
         Program (FEHBP) operations at Aetna Healthfund (Plan). The audit covered contract years 2005
         through 2009 and was conducted at the Plan's office in Blue Bell, Pennsylvania. We found that
         the FEHBP rates were developed in accordance with the applicable laws, regulations, and the
         Office of Personnel Management's rating instructions for the years audited. However, we did
         find issues with the Plan paying 18 non-covered abortion-related claims for FEHBP members.
         These claims were either paid inappropriately or the supporting documentation was not adequate
         to justify the claim payment.




       www.opm.goy                                                                         www.usajobs.goY
                                      CONTENTS


                                                                    Page

   EXECUTIVE SUMMARY	                                                 i


 I. INTRODUCTION AND BACKGROUND	                                     1


II.	 OBJECTIVES, SCOPE, AND METHODOLOGY                              3


III.	 AUDIT FINDINGS AND RECOMMENDATION                              5


   1. Premium Rate Review	                                           5


   2. Claims Review	                                                 5


      Non-Covered Abortion-Related Claims                            5


IV.	 MAJOR CONTRIBUTORS TO THIS REPORT                               7


   Appendix (Aetna's June 18,2010, response to the draft report)

                     I. INTRODUCTION AND BACKGROUND


Introduction

We completed an audit of the Federal Employees Health Benefits Program (FEHBP) operations
at Aetna HealthFund (Plan). The audit covered contract years 2005 through 2009 and was
conducted at the Plan's office in Blue Bell, Pennsylvania. The audit was conducted pursuant to
the provisions of Contract CS 2900; 5 U.S.C. Chapter 89; and 5 Code of Federal Regulations
(CFR) Chapter 1, Part 890. 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 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. The FEHBP is administered by OPM's
Retirement and Benefits Office. The provisions of the Federal Employees Health Benefits Act
are implemented by OPM through regulations codified in Chapter 1, Part 890 of Title 5, CFR.
Health insurance coverage is provided through contracts with various health insurance carriers
that provide service benefits, indemnity benefits, or comprehensive medical services.

Community-rated carriers participating in the FEHBP are subject to various federal, state and
local laws, regulations, and ordinances. While most carriers are subject to state jurisdiction,
many are further subject to the Health Maintenance Organization Act of 1973 (Public Law 93­
222), as amended (i.e., many community-rated carriers are federally qualified). In addition,
participation in the FEHBP subjects the carriers to the Federal Employees Health Benefits Act
and implementing regulations promulgated by OPM.

The FEHBP should pay a market price rate,                  FEHBP Contracts/Members
which is defined as the best rate offered to                      March 31

either of the two groups closest in size to
the FEHBP. In contracting with
community-rated carriers, OPM relies on
carrier compliance with appropriate laws
and regulations and, consequently, does not
negotiate base rates. OPM negotiations
relate primarily to the level of coverage and
other unique features of the FEHBP.

The chart to the right shows the number of                        2006    2007   2008    2009
FEHBP contracts and members reported by                           7,654   12,114 18,466 32,631
the Plan as of March 31 for each contract                        15,571 24,489 37,826 67,802
year audited.
The Plan has participated in the FEHBP since 2005, and provides health benefits to FEHBP
members throughout the entire United States, except Hawaii. This is the first full-scope audit of
the Plan.

The preliminary results of this audit were discussed with Plan officials at an exit conference and
through subsequent correspondence. A draft report was also provided to the Plan for review and
comment. The Plan's comments were considered in the preparation of this final report and are
included, as appropriate, as the Appendix.




                                                 2

                II. OBJECTIVES, SCOPE, AND METHODOLOGY


Objectives

The primary objectives of the audit were to verify that the Plan offered market price rates to the
FEHBP and to verify that the loadings to the FEHBP rates were reasonable and equitable.
Additional tests were performed to determine whether the Plan was in compliance with the
provisions of the laws and regulations governing the FEHBP.
                                                                         FEHBP Premiums Paid to Plan


                                                                  $225
We conducted this performance audit in accordance with
                                                                  $200
generally accepted government auditing standards.                 $175
Those standards require that we plan and perform the          ~   $150
audit to obtain sufficient, appropriate evidence to           ~ $125
provide a reasonable basis for our findings and               j   $100
conclusions based on our audit objectives. We believe              $75
that the evidence obtained provides a reasonable basis             $50
for our findings and conclusions based on our audit                $25
objectives.                                                         $0


This performance audit covered contract years 2005

through 2009. For these years, the FEHBP paid

approximately $462.8 million in premiums to the Plan.

The premiums paid for each contract year audited are shown on the chart to the right.


DIG audits of community-rated carriers are designed to test carrier compliance with the FEHBP

contract, applicable laws and regulations, and OPM rate instructions. These audits are also

designed to provide reasonable assurance of detecting errors, irregularities, and illegal acts.


We obtained an understanding of the Plan's internal control structure, but we did not use this

information to determine the nature, timing, and extent of our audit procedures. However, the

audit included such tests of the Plan's rating system and such other auditing procedures

considered necessary under the circumstances. Our review of internal controls was limited to the

procedures the Plan has in place to ensure that:


       •	 The appropriate similarly sized subscriber groups (SSSG) were selected;

       •	 the rates charged to the FEHBP were the market price rates (i.e., equivalent to the best
          rate offered to SSSGs); and,

       •	 the loadings to the FEHBP rates were reasonable and equitable.



                                                 3
In conducting the audit, we relied to varying degrees on computer-generated billing, enrollment,
and claims data provided by the Plan. We did not verify the reliability ofthe data generated by
the various information systems involved. However, nothing came to our attention during our
audit testing utilizing the computer-generated data to cause us to doubt its reliability. We believe
that the available data was sufficient to achieve our audit objectives. Except as noted above, the
audit was performed in accordance with generally accepted governrnent auditing standards,
issued by the Comptroller General of the United States.

The audit fieldwork was performed at the Plan's office in Blue Bell, Pennsylvania, during
November 2009. Additional audit work was completed at our offices in Cranberry Township,
Pennsylvania and Jacksonville, Florida.

Methodology

We examined the Plan's federal rate submissions and related documents as a basis for validating
the market price rates. Further, we examined claim payments to verify that the cost data used to
develop the FEHBP rates was accurate, complete and valid. In addition, we examined the rate
development documentation and billings to other groups, such as the SSSGs, to determine if the
market price was actually charged to the FEHBP. Finally, we used the contract, the Federal
Employees Health Benefits Acquisition Regulations, and OPM's Rate Instructions to
Community-Rated Carriers to determine the propriety of the FEHBP premiums and the
reasonableness and acceptability of the Plan's rating system.

To gain an understanding of the internal controls in the Plan's rating system, we reviewed the
Plan's rating system's policies and procedures, interviewed appropriate Plan officials, and
performed other auditing procedures necessary to meet our audit objectives.




                                                 4

               III. AUDIT FINDINGS AND RECOMMENDATION



1. Premium Rate Review

   Our audit showed that the Plan's rating of the FEHBP was in accordance with the applicable
   laws, regulations, and OPM's rating instructions to carriers for contract years 2005 through
   2009. Consequently, the audit did not identify any questioned costs.

2. Claims Review

   According to FEHBP Carrier Letters 2007-09 and 2008-09, OPM requires all carriers to keep
   on file all data necessary to justify its Adjusted Community Rating rate development and save
   back-up copies of its claims databases for audit purposes. We reviewed FEHBP claims data
   used to develop rates for contract years 2008 and 2009. We ran queries on the claims data
   that relate to hospital, physician, out-of-area, prescription and injectible drugs, large claims,
   coordination of benefits, bundling of claims, and non-covered benefits according to the
   FEHBP benefit brochures.

   Non-Covered Abortion Related Claims

   The Plan used FEHBP claims experience from calendar years 2006, 2007, and 2008 to
   develop premium rates for contract years 2008 and 2009. Our audit disclosed that from
   May 1,2006 through April 30, 2008, the Plan paid 18 non-covered abortion-related claims
   for FEHBP members. These claims were either paid inappropriately or the supporting
   documentation was not adequate to justify the claim payment.

   Beginning January 1, 1996, Public Law 104-52 requires that FEHBP plans not be permitted
   to payor provide benefits for an abortion except, "where the life of the mother would be
   endangered if the fetus were carried to term, or that the pregnancy is the result of an act of
   rape or incest."

   The Plan's claim processing and information systems did not have adequate controls in place
   to detect, document, and deny payment for non-covered abortion-related claims. Failure to
   adjudicate abortion-related claims correctly increases the risk that the Plan will pay for non­
   covered services and inflate the FEHBP premiums.

   Recommendation

   We recommend that the contracting officer require the Plan to implement claim processing
   policies and procedures that will reasonably assure the prevention of inappropriate payment
   of abortion-related claims and document the reasons for claim payments or denials.



                                                 5
Plan's Comments (See Appendix):

Upon further review of these claims, the Plan agrees with the findings pertaining to
overpayment of elective abortion claims. The Plan has identified that these claims were
processed incorrectly because it appears that not all abortion-related claims were
automatically pended to medical review for approval. This issue is due to lack of specific
coding for abortion-related claims versus any other standard medical claim. The Plan has
established procedures to correct the issues of incorrectly paying abortion-related claims.

OIG's Response to the Plan's Comments:

We acknowledge the Plan's agreement and we will verify the effectiveness of the corrective
actions during our next audit of the Plan.




                                             6

             IV. MAJOR CONTRIBUTORS TO THIS REPORT

Community-Rated Audits Group

                   Auditor- In-Charge

                  Auditor


                    Chief

                   Senior Team Leader




                                        7

                                                                                                                                      Appendix
                                                                                                           .tna Health Inc
                                                                                                         930 Harvest Drive


     )~    Aetna                                                 2010 JUN 23 PM t: 21
                                                                                                         Blue Bell, PA 19422



                                                                                                         FEHBP Underwriting Manager
                                                                                                         Government & Specialty Products


June 18,2010



Chief, Community Rated Audits Group
U.S. Office of Personnel Management
U.S. Office of Inspector General
1900 E Street, NW - Room 6400
Washington, D.C. 20415-1100

RE: Aetna's response to Draft Report NO.1C-22-00-1 0-010



        Aetna submits the following comments to the above mentioned draft audit report issued by the Office of Personnel
Management (OPM) under the Federal Employees Health Benefits Program (FEHBP). The audit covered the FEHBP
contract for the Aetna Health Fund plans (Plan Code 22) for the contract years 2005 through 2009.

         During the Claims Review portion of the audit, the Draft Report questioned 18 abortion-related claims for FEHBP
members that were paid from May 1, 2006 through April 30, 2008. Upon further review of these claims, Aetna agrees
some elective abortion-related claims were processed incorrectly. Aetna has identified that these claims were processed
incorrectly because it appears that not all abortion-related claims were automatically pending to medical review for
approval. This issue is due to a lack of specific coding for abortion-related claims versus any other standard medical
claim.

          Aetna has established the following procedures to correct the issues surrounding abortion-related claims.

    1.	 Elective abortion-related service claim codes will be pended to a medical claim examiner (MCE).
    2.	 The MCE will evaluate both the procedural and diagnostic codes to determine if the claim should be denied or
        approved based on the language in the FEHBP brochure.'
    3.	 If the MCE does not have enough information to process the claim correctly, the claim will be turned over to
        Aetna's Clinical Claim Reviewer (CCR) to determine the proper course of action.
    4.	 If needed, the CCR will contact the provider to determine the specifics surrounding the elective abortion-related
        claim in question.
    5.	 Aetna will have ongoing training with the MCEs on the handling of elective abortion-related claims.

In conclusion, Aetna agrees with the OIG's Draft Report findings pertaining to overpayment of elective abortion claims. In
response to the findings in the Draft Report, Aetna has implemented a course of action to correct this problem. Aetna
believes that the above outlined procedures will help to eliminate future overpayments of elective abortion-related claims

If you have any questions or concerns about the above response, please feel to contact me at                                          or




1 The FEHBP brochure states "that FEHBP plans not be permitted to payor provide benefits for an abortion except. 'where the life of the mother would
be endangered if the fetus were carried to term, or when the pregnancy is the result of an act of rape or incest."