oversight

Audit of the Federal Employees Health Benefits Program Operations at Aetna Open Access - Los Angeles and San Diego, California

Published by the Office of Personnel Management, Office of Inspector General on 2012-03-28.

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 Open Access­ 

             Los Angeles and San Diego, California 




                                            Report No. lC-2X-OO-12-008

                                           Date:           March 28, 2012




                                                       -- CAUTION -­
This audit report has been distributed to Federal officials who are responsible for the administration of the audited prOJ!:ram. This audit
report may contain proprietary data which is protected by Federal law (18l1.S.C. 1905). Therefore. while this audit report is available
under the Freedom of Information Act and made available to the public on the OIG wcbpagc, caution needs to be exercised before
releasing the report to the general public as it may contain proprietary information that was redacted from the publirly distributed COP)'
                                UNITED STATES OFFICE OF PERSONNEL MANAGEMENT
                                                               Wa~hington,     DC 20415


   Office of the
Inspcchlr General



                                                            AUDIT REPORT



                                          Federal Employees Health Benefits Program 

                                      Community-Rated Health Maintenance Organization 

                                   Aetna Open Access - Los Angeles and San Diego, California 

                                           Contract Number CS 2867 - Plan Code 2X 

                                                    Blue Bell, Pennsylvania 




                         Report No. lC-2X-OO-12-008                                          Date:          03/28/12




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                                                                                              c ~'J: ~ z-·--­
                                                                                             Michael R. Esser
                                                                                             Assistant Inspector General
                                                                                               for Audits


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




        www.opm.gov                                                                                                             www.usajobs.gov
                           UNITED STATES OFFICE OF PERSONNEL MANAGEMENT
                                              Wa-.hington, DC 20415


  Of1ice of the
Inspector General




                                       EXECUTIVE SUMMARY 





                                 Federal Employees Health Benefits Program 

                             Community-Rated Health Maintenance Organization 

                          Aetna Open Access - Los Angeles and San Diego, California 

                                  Contract Number CS 2867 - Plan Code 2X 

                                           Blue Bell, Pennsylvania 




                    Report No. lC-2X-OO-12-008                   Date:   _~O=.3L/£:..2~8L/.!..1£:..2_ __



       The Office of the Inspector General performed an audit of the Federal Employees Health
       Benefits Program (FEHBP) operations at Aetna Open Access - Los Angeles and San Diego.
       California (Plan). The audit covered contract years 2008 through 2011. We found that the
       FEHBP rates were developed in accordance with applicable laws. regulations, and the Office of
       Personnel Management's rating instructions for the years audited.




        www.opm.gov                                                                                   www.usajobs.gov
                                                    CONTENTS

                                                                                                                   Page

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

  I. INTRODUCTION AND BACKGROUND..................................................................... 1

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

III. RESULTS OF THE AUDIT ............................................................................................ 5

IV. MAJOR CONTRIBUTORS TO THIS REPORT ............................................................ 6
The Plan has participated in the FEHBP since 2002 and provides health benefits to FEHBP
members in the Los Angeles and San Diego, California areas. The last audit of the Plan
conducted by our office was a full scope audit of contract years 2003 through 2007 and did not
identify any deficiencies.

The preliminary results of this audit were discussed with Plan officials at an exit conference and
in subsequent correspondence. Since the audit concluded that the Plan’s rating of the FEHBP
was in accordance with applicable laws, regulations, and instructions, a draft report was not
issued.




                                                 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.

Scope
                                                                     FEHBP Premiums Paid to Plan

We conducted this performance audit in
accordance with generally accepted government                       $40
                                                                    $35
auditing standards. Those standards require that
                                                                    $30




                                                      Millions
we plan and perform the audit to obtain                             $25
sufficient, appropriate evidence to provide a                       $20
reasonable basis for our findings and conclusions                   $15
based on our audit objectives. We believe that                      $10
                                                                     $5
the evidence obtained provides a reasonable                          $0
basis for our findings and conclusions based on                            2008    2009    2010    2011
                                                                 Revenue   $27.6   $31.8   $37.0   $39.1
our audit objectives.

This performance audit covered contract years
2008 through 2011. For those contract years, the FEHBP paid approximately $135.5 million in
premiums to the Plan. The premiums paid for each contract year audited are shown on the chart
above.

OIG 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 the SSSGs); and

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


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 of the data generated by
                                                 3
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 conducted in accordance with generally accepted government auditing standards,
issued by the Comptroller General of the United States.

The audit fieldwork and additional audit work was completed at our offices located in
Washington, D.C.; 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. 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 policies and procedures, interviewed appropriate Plan officials, and
performed other auditing procedures necessary to meet our audit objectives.




                                                 4
                           III. RESULTS OF THE AUDIT
Our audit showed that the Plan’s rating of the FEHBP was in accordance with applicable laws,
regulations, and OPM’s rating instructions to carriers for contract years 2008 through 2011.
Consequently, the audit did not identify any questioned costs and no corrective action is
necessary.




                                              5
            IV. MAJOR CONTRIBUTORS TO THIS REPORT

Community-Rated Audits Group

                  , Auditor-in-Charge

                     Lead Auditor

                 Auditor

                 Auditor


                  ., Chief

                  Senior Team Leader




                                        6