oversight

FEHBP 2015-16 Ops the Health Insurance Plan of New York in NY

Published by the Office of Personnel Management, Office of Inspector General on 2017-12-13.

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 THE FEDERAL EMPLOYEES HEALTH
    BENEFITS PROGRAM OPERATIONS AT
   HEALTH INSURANCE PLAN OF NEW YORK

          Report Number 1C-51-00-16-057
                December 13, 2017
             EXECUTIVE SUMMARY 

               Audit of the Federal Employees Health Benefits Program Operations at                      

                                 Health Insurance Plan of New York 

Report No. 1C-51-00-16-057                                                                  December 13, 2017


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

The primary objectives of this            This report questions $1,579,859 for inappropriate health benefit
performance audit were to determine       charges to the FEHBP in contract years 2015 and 2016.
whether Health Insurance Plan of          Specifically, our audit identified the following:
New York (Plan) developed the
Federal Employees Health Benefits            	 In contract years 2015 and 2016, we found that the
Program (FEHBP) premium rates                    FEHBP’s rates were developed with an incorrect
using complete, accurate and current             children’s loading, an incorrect copay value for dialysis,
data, and that the rates are equivalent          and an inappropriate loading for preventative dental. We
to the Plan’s Similarly-Sized                    also determined that the FEHBP Medicare loading
Subscriber Groups, as provided in the            calculation contained errors relating to incorrect benefit
Federal Employees Health Benefits                loadings, a misstatement of FEHBP Medicare enrollment,
Acquisition Regulations 1652.216-                and unsupported Medicare Advantage rates. Finally, we
70(a). Additional tests were                     determined that an unsupported and inconsistently
performed to determine if the Plan               applied regional adjustment factor was applied to the
was in compliance with the provisions            FEHBP. Due to these errors, we found the FEHBP was
of the laws and regulations governing            overcharged $1,132,938 and $371,707 in 2015 and 2016,
the FEHBP.                                       respectively.

What Did We Audit?                           	 The FEHBP is due $75,214 for lost investment income on
                                                 the defective pricing overcharges calculated through
Under Contract CS 1040, the Office               November 30, 2017.
of the Inspector General (OIG)
completed a performance audit of the
FEHBP’s rates offered for contract
years 2015 and 2016. Our audit
fieldwork was conducted from
August 8, 2016, through June 22,
2017, at the Plan’s office in New
York, New York, and in our OIG
offices.


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


COB      Coordination of Benefit

FEHBAR   Federal Employees Health Benefits Acquisition Regulations
FEHBP    Federal Employees Health Benefits Program

OIG      Office of the Inspector General
OPM      U.S. Office of Personnel Management
PCP      Primary Care Provider
Plan     Health Insurance Plan of New York
SSSG     Similarly Sized Subscriber Group
U.S.C.   United States Code




                               ii
IV. MAJOR CONTRIBUTORS TO THIS REPORT
          TABLE OF CONTENTS

                                                                                                                            Page 

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


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


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


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


  III.   AUDIT FINDINGS AND RECOMMENDATIONS.................................................5


         A. Defective Pricing .....................................................................................................5 


         B. Lost Investment Income.........................................................................................10 


         EXHIBIT A (Summary of Questioned Costs) 


         EXHIBIT B (Defective Pricing Questioned Costs)


         EXHIBIT C (Lost Investment Income)


         APPENDIX (Health Insurance Plan’s August 31, 2017, response to the draft report, 

         revised October 2017) 


         REPORT FRAUD, WASTE, AND MISMANAGEMENT
IV. MAJOR CONTRIBUTORS
            I. BACKGROUND
                       TO THIS REPORT

This final report details the audit results of the Federal Employees Health Benefits Program
(FEHBP) operations at the Health Insurance Plan of New York (Plan). The audit was conducted
pursuant to FEHBP contract CS 1040; 5 United States Code (U.S.C.) Chapter 89; and 5 Code of
Federal Regulations Chapter 1, Part 890. 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 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 and is administered by OPM’s
Healthcare and Insurance Office. Health insurance coverage is provided through contracts with
health insurance carriers who 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. In addition, participation in the FEHBP subjects the
carriers to the Federal Employees Health Benefits Act and implementing regulations
promulgated by OPM.
                                                                FEHBP Contracts/Members
For 2015, the FEHBP should pay a                                       March 31
premium rate that is equivalent to the
                                                     14,000
best rate given to either of the two
groups closest in subscriber size to the             12,000

FEHBP. However, starting in 2016, this               10,000

premium comparison was limited to one                 8,000
similarly-sized subscriber group (SSSG).              6,000
In contracting with community-rated
                                                      4,000
carriers, OPM relies on carrier
                                                      2,000
compliance with appropriate laws and
                                                          0
regulations and, consequently, does not                                2015               2016
negotiate base rates. OPM negotiations              Contracts          8,440              7,937
                                                    Members           12,407              11,323
relate primarily to the level of coverage
and other unique features of the FEHBP.

The chart to the right shows the number of FEHBP contracts and members reported by the Plan
as of March 31 for each contract year audited.

                                                1                          Report No. 1C-51-00-16-057
The Plan has participated in the FEHBP since 1960 and provides health benefits to FEHBP
members in the Greater New York area. The last audit of the Plan was conducted in 2014 and
covered contract years 2013 and 2014. All findings associated with the prior audit have been
resolved.

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




                                                 2                   Report No. 1C-51-00-16-057
IV. OBJECTIVES,
II.  MAJOR CONTRIBUTORS
                SCOPE, ANDTO THIS REPORT
                          METHODOLOGY

 OBJECTIVES

 The primary objectives of the audit were to determine if the FEHBP premium rates were
 developed using complete, accurate and current data, and were equivalent to the Plan’s SSSG, as
 provided in Federal Employees Health Benefits Acquisition Regulation (FEHBAR) 1652.216-
 70(a). Additional tests were performed to determine whether the Plan was in compliance with
 the provisions of the laws and regulations governing the FEHBP.

 SCOPE

 We conducted this performance audit in
                                                                       FEHBP Premiums Paid to Plan
 accordance with generally accepted government
 auditing standards. Those standards require that
 we plan and perform the audit to obtain sufficient,               $93.0
                                                                   $91.0
 appropriate evidence to provide a reasonable basis
                                                       Millions



                                                                   $89.0
 for our findings and conclusions based on our                     $87.0
                                                                   $85.0
 audit objectives. We believe that the evidence                    $83.0
 obtained provides a reasonable basis for our                      $81.0
                                                                   $79.0
 findings and conclusions based on our audit                       $77.0
 objectives.                                                       $75.0
                                                                                2015                 2016
                                                                  Revenue       $91.4                $81.3

 This performance audit covered contract years
 2015 and 2016. For these years, the FEHBP paid
 approximately $172.7 million in premiums to the Plan.

 OIG audits of community-rated carriers are designed to test carrier compliance with the FEHBP
 contract, applicable laws and regulations, and the 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 had in place to ensure that:

         The appropriate SSSGs were selected;

                                                  3                          Report No. 1C-51-00-16-057
        the rates charged to the FEHBP were developed using complete, accurate, and current
         data, and were equivalent to the best rate given 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
the various information systems involved. However, nothing came to our attention during our
audit 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 was performed from August 8, 2016, through June 22, 2017, at the Plan’s
office in New York, New York. Additional audit work was completed at our Cranberry
Township, Pennsylvania; Jacksonville, Florida; and Washington, D.C. offices.

METHODOLOGY

We examined the Plan’s Federal rate submission and related documents as a basis for validating
its Certificates of Accurate Pricing. In addition, we examined the rate development
documentation and billings to other groups, such as the SSSGs, to determine if the FEHBP rates
were reasonable and equitable. Finally, we used the contract, the FEHBAR, and the rate
instructions 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                    Report No. 1C-51-00-16-057
III. AUDIT FINDINGS AND RECOMMENDATIONS

 A. DEFECTIVE PRICING                                                               $1,504,645

   The Certificates of Accurate Pricing Health Insurance Plan signed for contract years 2015
   and 2016 were defective. In accordance with Federal regulations, the FEHBP is, therefore,
   due a rate reduction for these years. Application of the defective pricing remedy shows that
   the FEHBP is due a premium adjustment totaling $1,504,645 (see Exhibit A).

   FEHBAR 1652.216-70 provides that carriers proposing rates to OPM are required to submit
   a Certificate of Accurate Pricing certifying that the proposed subscription rates, subject to
   adjustments recognized by OPM, are market price rates. OPM regulations refer to a market
   price rate in conjunction with the rates offered to an SSSG. For 2015, the SSSGs are the
   Plan’s two employer groups closest in subscriber size to the FEHBP. For 2016 and forward,
   however, the SSSGs are limited to the single employer group closest in size to the FEHBP.
   If it is found that the FEHBP was charged higher than the market price rate (i.e., best rate
   offered to an SSSG), a condition of defective pricing exists, requiring a downward
   adjustment of the FEHBP premiums to the equivalent market price rate.

   1. 2015

      We found that the Plan overcharged the FEHBP $1,132,938 in contract year 2015. The
          The Plan did not        Plan selected
       follow the regulations                 and                                    as the
      and rating instructions SSGs for contract year 2015. We agree with its selections.
          in developing the       Our analysis of the rates charged shows that       and
       FEHBP’s 2015 rates,                          did not receive a discount.
        resulting in Program
           overcharges of          Our audit showed that the Plan inappropriately charged the
             $1,132,938.           FEHBP        percent for coverage of dependent children to
                                   age 26. The state approved filed rate for this benefit is
      percent for all groups, and was consistently applied to          and                   .
      To account for the additional 31 days of coverage for FEHBP dependents turning 26,
      OPM’s rating instructions allow Traditional Community Rated plans to include a
      percent extension of coverage loading, which the Plan applied to the FEHBP’s rates.
      However, the Plan also added the additional percent to the FEHBP’s children’s
      loading, essentially double charging the FEHBP for this 31 day extension of coverage.
      Consequently, we applied the percent children’s loading and the percent extension of


                                               5                   Report No. 1C-51-00-16-057
coverage loading to the audited FEHBP rates to account for the dependent coverage to
age 26 plus the 31 day extension of coverage.

Additionally, the Plan incorrectly adjusted the 2015 rates for a $20 primary care provider
(PCP) dialysis benefit. The FEHBP purchased a $20 PCP / $40 Specialist dialysis
benefit, as supported by the FEHBP brochure. Also, the Plan charged the FEHBP for a
preventative dental benefit, even though this particular benefit is listed as a non-FEHBP
benefit that is not part of the FEHBP contract or premium. Per Section 1.13(a) of the
2015 contract between OPM and the Plan, “The Carrier [Plan] bears full responsibility
for the accuracy of its FEHBP brochure.” Also, Section 2.2(a) states, “The Carrier shall
provide the Benefits as described in the agreed upon brochure text … .” Based on the
contract specifications and the benefits outlined in the FEHBP brochure, we adjusted the
FEHBP’s audited rates to account for the actual dialysis benefit and removed the loading
for the preventative dental benefit.

Moreover, we analyzed the FEHBP’s 2015 Medicare loading and found the following
issues:

   	 The Plan credited the FEHBP Medicare members for a $45 eyeglass hardware
      benefit. However, the $45 eyeglass hardware benefit is a non-FEHBP benefit that
      is not part of the FEHBP contract or premium. Therefore, the FEHBP should
      receive no adjustment for this benefit.

   	 The Plan utilized an unsupported Medicare advantage base rate of $             for all
      FEHBP Medicare advantage members in all areas (New York City, Queens,
      Nassau, and Suffolk and Westchester). Utilizing the $            as the medical rate
      for the Medicare advantage product netted the credit/loading for the FEHBP
      Medicare advantage members to percent. However, by utilizing the Medicare
      advantage rates published in the Plan’s Medicare advantage brochures and
      adjusting those rates to account for the special benefits offered to Medicare
      advantage members in the FEHBP brochure, we determined that the Medicare
      advantage medical rates are $          for FEHBP members living in New York
      City and Queens, $          for those living in Nassau, and $         for those living
      in Suffolk and Westchester. The overall impact was an         percent reduction in
      cost for those FEHBP members receiving the Medicare advantage plan.

   	 The Plan incorrectly categorized 28 FEHBP Medicare members as having “No
      Medicare” coverage. However, of these 28 members we found that 15 have


                                         6	                   Report No. 1C-51-00-16-057
          Medicare Part A, 4 have Medicare Part B, and 9 have Medicare Part A and B. We
          adjusted the FEHBP Medicare enrollment to account for these changes.

  Finally, the Plan applied a regional adjustment factor to the FEHBP’s rates that was
  based on unsupported membership. The total FEHBP regional membership varied
  percent from the total FEHBP membership reported to OPM for that same time period.
  Without accurate membership data by region, the regional adjustment factor can be
  manipulated to increase or decrease group rates. Furthermore, the rate development for
  the other SSSG,                    , did not include a regional adjustment factor. Since
  the Plan provided regional enrollment files that were incomplete and inaccurate, and the
  regional adjustment factor was not consistently applied to all SSSGs, we removed this
  factor from the FEHBP’s rates.

  A comparison of our audited rates to the Plan's reconciled rates shows that the FEHBP
  was overcharged $1,132,938 in contract year 2015 (see Exhibit B).

2. 2016

   We found that the Plan overcharged the FEHBP
                                                           The Plan did not follow the
   $371,707 in contract year 2016. The Plan
                                                       regulations and rating instructions
   selected            as the SSSG for contract year
                                                        in developing the FEHBP’s 2016
   2016. We agree with the Plan’s selection. Our
                                                           rates, resulting in Program
   analysis of the rates charged shows that
                                                            overcharges of $371,707.
             did not receive a discount.

   We determined that the Plan inappropriately charged the FEHBP          percent for coverage
   of dependent children to age 26. The state approved filed rate for this benefit is percent
   for all groups, and was consistently applied to         . To account for the additional 31
   days of coverage for FEHBP dependents turning 26, OPM’s rating instructions allow
   Traditional Community Rated plans to include a percent extension of coverage
   loading, which the Plan applied to the FEHBP’s rates. However, the Plan also added the
   additional percent to the FEHBP’s children’s loading, essentially double charging the
   FEHBP for this 31 day extension of coverage. Consequently, we applied the percent
   children’s loading and the percent extension of coverage loading to the audited FEHBP
   rates to account for the dependent coverage to age 26 plus the 31 day extension of
   coverage.




                                            7                   Report No. 1C-51-00-16-057
Additionally, the Plan incorrectly adjusted the 2016 rates for a $30 PCP dialysis benefit.
The FEHBP purchased a $30 PCP / $50 Specialist dialysis benefit, as supported by the
FEHBP brochure. Also, the Plan charged the FEHBP for a preventative dental benefit,
even though this particular benefit is listed as a non-FEHBP benefit that is not part of the
FEHBP contract or premium. Per Section 1.13(a) of the 2016 contract between OPM and
the Plan, “The Carrier [Plan] bears full responsibility for the accuracy of its FEHBP
brochure.” Also Section 2.2(a) states, “The Carrier shall provide the Benefits as
described in the agreed upon brochure text … .” Based on the contract specifications and
the benefits outlined in the FEHBP brochure, we adjusted the FEHBP’s audited rates to
account for the actual dialysis benefit and removed the loading for the preventative dental
benefit.

Moreover, we analyzed the FEHBP’s 2016 Medicare loading and found the following
issues:

   	 The Plan charged the FEHBP Medicare members for a $40 outpatient physical
      therapy benefit. Per the FEHBP brochure, the outpatient physical therapy benefit
      is covered under a $50 copay. Therefore, we credited the FEHBP Medicare
      benefits for the higher $50 copay.

   	 The Plan did not adjust for the FEHBP Medicare members benefit increase to a
      maximum out-of-pocket benefit of $6,850. To account for this benefit, we
      applied the filed credit.

   	 The Plan credited the FEHBP Medicare members for a $45 eyeglass hardware
      benefit. However, the $45 eyeglass hardware benefit is a non-FEHBP benefit that
      is not part of the FEHBP contract or premium. Therefore, we removed the credit
      from the FEHBP Medicare benefits.

   	 The Plan utilized an unsupported Medicare advantage base rate of $            for all
      FEHBP Medicare advantage members in all areas (Brooklyn, New York, Queens,
      Nassau, Suffolk, and Westchester). However, by utilizing the Medicare
      advantage rates published in the Plan’s Medicare advantage brochures and
      adjusting those rates to account for the special benefits offered to Medicare
      advantage members in the FEHBP brochure, we determined that the Medicare
      advantage medical rates are $          for FEHBP members living in Brooklyn;
      $         for those living in New York, Queens, and Nassau; and $          for those
      living in Suffolk and Westchester. We updated these rates in the audited FEHBP


                                         8	                   Report No. 1C-51-00-16-057
       Medicare loading calculation and found the FEHBP Medicare members should
       receive an percent reduction instead of the percent applied by the Plan.

   	 Even though the Plan submitted the FEHBP Coordination of Benefit (COB)
      Medicare enrollment in the 2016 reconciliation, the Plan did not utilize that data
      in the 2016 FEHBP Medicare loading. Furthermore in the COB enrollment data,
      the Plan incorrectly categorized 157 FEHBP Medicare members as having “No
      Medicare” and “Medicare Risk” coverage. However, of these 157 members we
      found that 67 have Medicare Part A, 2 have Medicare Part B, and 88 have
      Medicare Part A and B. We adjusted the FEHBP Medicare enrollment to account
      for these changes and applied the revised enrollment amounts to the FEHBP
      Medicare loading calculation.

Finally, the Plan applied a regional adjustment factor to the FEHBP’s rates that was
based on unsupported membership. The total FEHBP regional membership varied more
than       percent from the total FEHBP membership reported to OPM for that same time
period. Without accurate membership data by region, the regional adjustment factor can
be manipulated to increase or decrease a group’s rate. Since the Plan provided regional
enrollment files that were incomplete and inaccurate, we removed the factor from the
FEHBP’s rates.

A comparison of our audited rates to the Plan's reconciled rates shows that the FEHBP
was overcharged $371,707 in contract year 2016 (see Exhibit B).

Plan Response:

Except as discussed below, the Plan agreed with all of the defective pricing findings
questioned in 2015 and 2016.

The Plan does not agree with the high option member premiums that were derived and
used by the OIG for the Medicare load for 2015 and 2016. It expressed that the full
benefit package for the FEHBP population in the Medicare Advantage must be used,
not just the difference between the High Option benefit and the active benefit. It
asserted that the blended rates it used in the development of the High Option premiums
are reasonable and should not be adjusted.

Additionally, the Plan stated that it does not agree with the OIG’s reclassification of
FEHBP Medicare members as having “No Medicare” coverage in 2015 and 2016. It


                                        9	                  Report No. 1C-51-00-16-057
     explained that there was an indicator in its data that showed these members have
     Medicare as secondary coverage; therefore, its original calculation should be used.

     OIG Comment:

     We recognize the Plan’s response regarding the high option member premiums for the
     Medicare load for 2015 and 2016. However, according to Section 1.13(a) of the 2015
     and 2016 contracts between OPM and the Plan, “The Carrier [Plan] bears full
     responsibility for the accuracy of its FEHBP brochure.” The Plan’s brochures specified
     Medicare Advantage base rates along with adjustments to those rates to account for the
     special benefits offered to Medicare Advantage members, which is the information we
     used to calculate the high option member premiums.

     Additionally, while the Plan states that the FEHBP Medicare members had Medicare as
     secondary coverage, it does not change our position that the Plan incorrectly categorized
     the members as having “No Medicare” coverage. In determining our audited FEHBP
     Medicare enrollment we reviewed the data provided by the Plan line by line to verify the
     coverage of each member. Consequently, we maintain that our adjusted FEHBP
     Medicare enrollment amounts are correct for both years.

     Recommendation 1

     We recommend that the contracting officer require the Plan to return $1,132,938 to the
     FEHBP for defective pricing in contract year 2015.

     Recommendation 2

     We recommend that the contracting officer require the Plan to return $371,707 to the
     FEHBP for defective pricing in contract year 2016.

B. LOST INVESTMENT INCOME                                                           $75,214

                                 We found that the FEHBP is due $75,214 for lost investment
  The Plan owes the FEHBP
                                 income on the defective pricing overcharges, calculated
  $75,214 in lost investment
                                 through November 30, 2017.
       income on Plan 

   overcharges for contract 

                                 In accordance with the FEHBP regulations and the contract
     years 2015 and 2016.
                                 between OPM and the Plan, the FEHBP is entitled to recover


                                              10                 Report No. 1C-51-00-16-057
lost investment income on the defective pricing findings in contract years 2015 and 2016.
We determined that the FEHBP is due $75,214 for lost investment income, calculated
through November 30, 2017 (see Exhibit C). In addition, the FEHBP is entitled to lost
investment income for the period beginning December 1, 2017, until all defective pricing
finding amounts have been returned to the FEHBP.

FEHBAR 1652.215-70 provides that, if any rate established in connection with the FEHBP
contract was increased because the carrier furnished cost or pricing data that was not
complete, accurate, or current as certified in its Certificate of Accurate Pricing, the rate shall
be reduced by the amount of the overcharge caused by the defective data. In addition, when
the rates are reduced due to defective pricing, the regulation states that the government is
entitled to a refund and simple interest on the amount of the overcharge from the date the
overcharge was paid to the carrier until the overcharge is liquidated.

Our calculation of lost investment income is based on the United States Department of the
Treasury's semiannual cost of capital rates.

Plan Response:

The Plan did not address this finding within its response to the draft report.

Recommendation 3

We recommend that the contracting officer require the Plan to return $75,214 to the FEHBP
for lost investment income, calculated through November 30, 2017. We also recommend
that the contracting officer recover lost investment income on amounts due for the period
beginning December 1, 2017, until all defective pricing finding amounts have been returned
to the FEHBP.




                                               11                   Report No. 1C-51-00-16-057
                               EXHIBIT A

                     Health Insurance Plan of New York
                        Summary of Questioned Costs



Defective Pricing Questioned Costs


     Contract Year 2015                         $1,132,938
     Contract Year 2016                          $371,707


     Total Defective Pricing Questioned Costs                       $1,504,645


Lost Investment Income                                                 $75,214


Total Questioned Costs                                              $1,579,859




                                                             Report No. 1C-51-00-16-057
                                       EXHIBIT B


                               Health Insurance Plan of New York 

                               Defective Pricing Questioned Costs 



Contract Year 2015
                                                          Self   Family
FEHBP Line 5 - Reconciled Rate                        $          $
FEHBP Line 5 - Audited Rate                           $          $
Bi-weekly Overcharge                                   $          $

To Annualize Overcharge:
   March 31, 2015 enrollment
   Pay Periods                                          26       26
Subtotal                                             $611,155 $521,783

Total Defective Pricing Questioned Costs - 2015                                        $1,132,938

Contract Year 2016
                                                          Self   Self + 1   Family
FEHBP Line 5 - Reconciled Rate                        $          $          $
FEHBP Line 5 - Audited Rate                           $          $          $
Bi-weekly Overcharge                                              $          $

To Annualize Overcharge:
   March 31, 2016 enrollment
   Pay Periods                                          26         26          26
Subtotal                                             $200,647    $33,682    $137,378

Total Defective Pricing Questioned Costs - 2016                                        $371,707

Grand Total Defective Pricing Questioned Costs                                         $1,504,645




                                                                 Report No. 1C-51-00-16-057
                                           EXHIBIT C


                                 Health Insurance Plan of New York 

                                      Lost Investment Income 




  Year                                             2015         2016         30-Nov-17           Total
Audit Findings:

1. Defective Pricing                             $1,132,938   $371,707           $0        $1,504,645



                           Totals (per year):    $1,132,938    $371,707          $0        $1,504,645
                          Cumulative Totals:     $1,132,938   $1,504,645     $1,504,645    $1,504,645

                Avg. Interest Rate (per year):    2.2500%      2.1875%        2.4375%

            Interest on Prior Years Findings:       $0         $24,783        $33,619           $58,402


                       Current Years Interest:    $12,746      $4,066            $0             $16,812

        Total Cumulative Interest Calculated
               Through November 30, 2017:         $12,746      $28,849        $33,619           $75,214




                                                                   Report No. 1C-51-00-16-057
                                                APPENDIX




                                                                                      August 31, 2017




Chief, Community-Rated
 Audits Group
Office of Personnel Management
1900 “E” Street, N.W. Room
Washington, DC 20414

Re: HIP HMO (Plan Code 51)
   Audit #1C-51-00-16-057

Dear

On behalf of the HIP HMO FEHB program, enclosed are the Plan’s responses to the 2015 – 2016 Audit #1C-51-00-16-057 findings.

After you have had an opportunity to review the information provided, please do not hesitate to contact me or      with any
questions or if any supplemental data is needed to support our responses. You can reach me at           @EmblemHealth.com or


Sincerely,




Director Account Management

CC: 	                                                  , Sr. Director
                                                , Sr. Account Executive




                                                                  
                                                   HIP 2015 – 2016 Audit

                                                                                                Report No. 1C-51-00-16-057
                                        Report Number 1C-51-00-16-057 


                                   EmblemHealth responses to Audit Findings 


2015

We found that the Plan overcharged the FEHBP $1,132,938 in contract year 2015. The Plan selected
                                        and                                        as the SSSGs for contract
year 2015. We agree with the Plan’s selections. Our analysis of the rates charged show that          and
            did not receive a discount.

Our audit showed that the Plan inappropriately charged the FEHBP          percent for coverage of dependent
children to age 26. The state approved filed rate for this benefit is percent for all groups, and was consistently
applied to           and                 . To account for the additional 31 days of coverage for FEHBP
dependents turning 26, OPM’s rating instructions allow Traditional Community Rated (TCR) plans to include a
   percent extension of coverage loading, which the Plan applied to the FEHBP’s rates. However, the Plan also
added the additional percent to the FEHBP’s children’s loading, essentially double charging the FEHBP for
this 31 day extension of coverage. Consequently, we applied the percent children’s loading and the percent
extension of coverage loading to the audited FEHBP rates to account for the dependent coverage to age 26 plus
the 31 day extension of coverage.

       The Plan agrees with this finding

Additionally, the Plan incorrectly adjusted the 2015 rates for a $20 primary care provider (PCP) dialysis benefit.
The FEHBP purchased a $20 PCP / $40 Specialist (SPC) dialysis benefit, as supported by the FEHBP brochure.
Also, the Plan charged the FEHBP for a preventative dental benefit, even though this particular benefit is listed
as a non-FEHBP benefit that is not part of the FEHBP contract or premium. Per Section 1.13(a) of the 2015
contract between OPM and the Plan, “the Carrier [Plan] bears full responsibility for the accuracy of its FEHBP
brochure.” Also, Section 2.2(a) states, “The Carrier shall provide the Benefits as described in the agreed upon
brochure text…” Based on the contract specifications and the benefits outlined in the FEHBP brochure, we
adjusted the FEHBP’s audited rates to account for the actual dialysis benefit and removed the loading for the
preventative dental benefit.

       The Plan agrees with this finding

Moreover, we analyzed the FEHBP’s 2015 Medicare loading and found the following issues:

   •	 The Plan credited the FEHBP Medicare members for a $45 eyeglass hardware benefit. However, the $45
      eyeglass hardware benefit is a non-FEHBP benefit that is not part of the FEHBP contract or premium.
      Therefore, the FEHBP should receive no adjustment for this benefit.

       The Plan agrees with this finding.



                                                                                    Report No. 1C-51-00-16-057
   •	 The Plan utilized an unsupported Medicare advantage base rate of $             for all FEHBP Medicare
      advantage members in all areas (New York City, Queens, Nassau, and Suffolk and Westchester).
      Utilizing the $       as the medical rate for the Medicare advantage product netted the credit/loading
      for the FEHBP Medicare advantage members to percent. However, by utilizing the Medicare
      advantage rates published in the Plan’s Medicare advantage brochures and adjusting those rates to
      account for the special benefits offered to Medicare advantage members in the FEHBP brochure, we
      determined that the Medicare advantage medical rates are $            for FEHBP members living in New
      York City and Queens, $           for those living in Nassau, and $         for those living in Suffolk and
      Westchester. The overall impact was an        percent reduction in cost for those FEHBP members
      receiving the Medicare advantage plan.

                             Deleted by OIG - Not Relevant to the Final Report

   •	 The Plan incorrectly categorized 28 FEHBP Medicare members as having “No Medicare” coverage.
      However, of these 28 members we found that 15 have Medicare Part A, 4 have Medicare Part B, and 9
      have Medicare Part A and B. We adjusted the FFEHBP Medicare enrollment to account for these
      changes.

       The Plan does not agree with this finding

       We see where these numbers are being generated on the COB file. The indicators in columns AO
       and AP of the COB file tab ‘No Medicare’ are the reason for the inclusion. Status ‘I’ indicates
       Medicare inactive in column AO. Otherinsind ‘S’ in column AO, indicates Medicare secondary.
       The load for these members therefore should be greater. The numbers should be kept as they were
       in the original load.

   •	 Finally, the Plan applied a regional adjustment factor to the FEHBP’s rates that was based on
      unsupported membership. The total FEHBP regional membership varied              percent from the total
      FEHBP membership reported to OPM for that same time period. Without accurate membership data by
      region, the regional adjustment factor can be manipulated to increase or decrease group rates.
      Furthermore, the rate development for the other SSSG,                    , did not include a regional
      adjustment factor. Since the Plan provided regional enrollment files that were incomplete and
      inaccurate, and the regional adjustment factor was not consistently applied to all SSSGs, we removed
      this factor from the FEHBP’s rates.

A comparison of our audited rates to the Plan's reconciled rates shows that the FEHBP was overcharged
$1,132,938 in contract year 2015 (see Exhibit B).


2016

We found that the Plan overcharged the FEHBP $371,707 in contract year 2016. The Plan selected
                                       as the SSSG for contract year 2016. We agree with the Plan’s selection.
Our analysis of the rates charged show that         did not receive a discount.

                                                                                     Report No. 1C-51-00-16-057
We determined that the Plan inappropriately charged the FEHBP          percent for coverage of dependent children
to age 26. The state approved filed rate for this benefit is percent for all groups, and was consistently applied
to          . To account for the additional 31 days of coverage for FEHBP dependents turning 26, OPM’s rating
instructions allow Traditional Community Rated (TCR) plans to include a percent extension of coverage
loading, which the Plan applied to the FEHBP’s rates. However, the Plan also added the additional percent to
the FEHBP’s children’s loading, essentially double charging the FEHBP for this 31 day extension of coverage.
Consequently, we applied the percent children’s loading and the percent extension of coverage loading to
the audited FEHBP rates to account for the dependent coverage to age 26 plus the 31 day extension of coverage.

       The Plan agrees with this finding

Additionally, the Plan incorrectly adjusted the 2016 rates for a $30 primary care provider (PCP) dialysis benefit.
The FEHBP purchased a $30 PCP / $50 Specialist (SPC) dialysis benefit, as supported by the FEHBP brochure.
Also, the Plan charged the FEHBP for a preventative dental benefit, even though this particular benefit is listed
as a non-FEHBP benefit that is not part of the FEHBP contract or premium. Per Section 1.13(a) of the 2016
contract between OPM and the Plan, “the Carrier [Plan] bears full responsibility for the accuracy of its FEHBP
brochure.” Also Section 2.2(a) states, “The Carrier shall provide the Benefits as described in the agreed upon
brochure text…” Based on the contract specifications and the benefits outlined in the FEHBP brochure, we
adjusted the FEHBP’s audited rates to account for the actual dialysis benefit and removed the loading for the
preventative dental benefit.

       The Plan agrees with this finding

Moreover, we analyzed the FEHBP’s 2016 Medicare loading and found the following issues:

   •	 The Plan charged the FEHBP Medicare members for a $40 outpatient physical therapy benefit. Per the
      FEHBP brochure, the outpatient physical therapy benefit is covered under a $50 copay. Therefore, we
      credited the FEHBP Medicare benefits for the $50 copay.

       The plan agrees that $50 is the correct benefit

   •	 The Plan did not adjust for the FEHBP Medicare members benefit increase to a maximum out-of-pocket
      benefit of $6,850. To account for this benefit, we applied the filed credit.

       The plan agrees that $6,850 is the correct benefit

   •	 The Plan credited the FEHBP Medicare members for a $45 eyeglass hardware benefit. However, the $45
      eyeglass hardware benefit is a non-FEHBP benefit that is not part of the FEHBP contract or premium.
      Therefore, we removed the credit from the FEHBP Medicare benefits.

       The Plan agrees with this finding

   	 The Plan utilized an unsupported Medicare advantage base rate of $    for all FEHBP Medicare
      advantage members in all areas (Brooklyn, New York, Queens, Nassau, Suffolk and Westchester).

                                                                                    Report No. 1C-51-00-16-057
       However, by utilizing the Medicare advantage rates published in the Plan’s Medicare advantage
       brochures and adjusting those rates to account for the special benefits offered to Medicare advantage
       members in the FEHBP brochure, we determined that the Medicare advantage medical rates are $
       for FEHBP members living in Brooklyn, $            for those living in New York and Queens and Nassau,
       and $        for those living in Suffolk and Westchester. We updated these rates in the audited FEHBP
       Medicare loading calculation and found the FEHBP Medicare members should receive an            percent
       reduction instead of the percent applied by the Plan.

                            Deleted by OIG - Not Relevant to the Final Report

   	 Even though the Plan submitted the FEHBP Coordination of Benefit (COB) Medicare enrollment in the
      2016 reconciliation, the Plan did not utilize that data in the 2016 FEHBP Medicare loading. Furthermore
      in the COB enrollment data, the Plan incorrectly categorized 157 FEHBP Medicare members as having
      “No Medicare” and “Medicare Risk” coverage. However, of these 157 members we found that 67 have
      Medicare Part A, 2 have Medicare Part B, and 88 have Medicare Part A and B. We adjusted the FEHBP
      Medicare enrollment to account for these changes and applied the revised enrollment amounts to the
      FEHBP Medicare loading calculation.

       The Plan agrees that there were duplicate members in the “No Medicare” tab. The plan believes,
       similar to 2015, however, that members with Status ‘I’ or Otherinsind ‘S’ belong in this tab

Finally, the Plan applied a regional adjustment factor to the FEHBP’s rates that was based on unsupported
membership. The total FEHBP regional membership varied more than             percent from the total FEHBP
membership reported to OPM for that same time period. Without accurate membership data by region, the
regional adjustment factor can be manipulated to increase or decrease a group’s rate. Since the Plan provided
regional enrollment files that were incomplete and inaccurate, we removed the factor from the FEHBP’s rates.

A comparison of our audited rates to the Plan's reconciled rates shows that the FEHBP was overcharged
$371,707 in contract year 2016 (see Exhibit B).




                                                                                  Report No. 1C-51-00-16-057
Plan Response – October 2017


Membership

The plan would like to review the members no longer deemed “No Medicare”. The plan still believes that
members with Status ‘I’ or Otherinsind ‘S’ belong in this tab and should be included in the Medicare load.


High Option Rates

The plan does not agree with the high option member premiums derived and used for the Medicare load for
2015 or 2016. The Medicare Risk portion of the Medicare load compares the FEHBP active life cost to the high
option benefit package offered to the FEHBP population under Medicare Advantage.

The rates developed by OPM are not comparable. To develop a rate using the methodology in the audited “STL
MR Benefit” tabs, the full benefit package for the FEHBP population in Medicare Advantage must be used, and
not simply the difference between the High Option Medicare Advantage benefit and the active benefit. The HIP
COB responsibility for the High Option Medicare Advantage members is based on the benefits those members
have.

The plan feels that the blended rates used in the development of the High Option premium are reasonable and
should not be adjusted.




                                                                                  Report No. 1C-51-00-16-057
                                                                                 



               Report Fraud, Waste, and
                   Mismanagement 

                        Fraud, waste, and mismanagement in
                     Government concerns everyone: Office of
                         the Inspector General staff, agency
                      employees, and the general public. We
                    actively solicit allegations of any inefficient
                          and wasteful practices, fraud, and
                     mismanagement related to OPM programs
                    and operations. You can report allegations
                                to us in several ways:


     By Internet:        http://www.opm.gov/our-inspector-general/hotline-to-
                         report-fraud-waste-or-abuse


      By Phone:          Toll Free Number:                  (877) 499-7295
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        By Mail:         Office of the Inspector General
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                         Room 6400
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                                                                           Report No. 1C-51-00-16-057