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 ALLIANCE PLAN Report Number 1C-52-00-17-031 May 10, 2018 EXECUTIVE SUMMARY Audit of the Federal Employees Health Benefits Program Operations at Health Alliance Plan Report No. 1C-52-00-17-031 May 10, 2018 Why Did We Conduct the Audit? What Did We Find? The primary objective of the audit was This report identified overstated OPM MLR credits totaling to determine if Health Alliance Plan $1,215,409 for contract years 2013 and 2014. Specifically, (Plan) was in compliance with the provisions of its contract and the laws these overstated credits were derived due to the following and regulations governing the Federal identified errors: Employees Health Benefits Program (FEHBP). To accomplish this objective, x The Plan used inconsistent membership timeframes to we verified whether the Plan met the calculate the quality health improvement and tax Medical Loss Ratio (MLR) requirements allocation expenses for 2013. and thresholds established by the U.S. Office of Personnel Management (OPM). x The Plan included claims for unsupported disabled and ineligible overage dependents in their 2013 and 2014 Because of Program changes resulting from OPM’s roll-out of its MLR claims data. Program, we are no longer performing a review of the FEHBP’s rates. We corrected the above errors in our audited MLR Consequently, this change to our audit calculations for each year. Consequently, this audit shows process only allows us to verify whether that the Plan overstated its reported 2013 and 2014 MLR the calculated percentage of the credits by $437,844 and $777,565, respectively. premium paid is spent on patient related health care expenses. It does not allow us to assess the fairness of the premium Our audit did not disclose any findings related to the Plan’s paid for benefits received. procedures for fraud and abuse, debarment, and off-shore contracting. Additionally, our audit did not disclose any What Did We Audit? findings related to our claim reviews for coordination of benefits, deceased members, high dollar scripts, member Under Contract CS 1092, the Office of eligibility, or non-covered benefits. the Inspector General (OIG) completed a performance audit of the FEHBP MLR submissions to OPM for contract years 2013 and 2014. Our audit fieldwork was conducted from May 15, 2017, through October 4, 2017, at the Plan’s office in Southfield, Michigan and in our OIG Offices. _______________________ Michael R. Esser Assistant Inspector General for Audits i ABBREVIATIONS CFR Code of Federal Regulations FEHBAR Federal Employees Health Benefits Acquisition Regulations FEHBP Federal Employees Health Benefits Program MLR Medical Loss Ratio OIG Office of the Inspector General OPM U.S. Office of Personnel Management Plan Health Alliance Plan QHI Quality Healthcare Improvement QI Quality Improvement 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 ................................................6 A. Medical Loss Ratio Review ....................................................................................6 1. Overstated Medical Loss Ratio Credit...............................................................6 a. QHI and Tax Allocation ..........................................................................6 b. MLR Claims Data ...................................................................................8 i. Disabled Dependents ..........................................................................8 ii. Late Terminations ...............................................................................9 iii. Coordination of Benefits ..................................................................10 iv. Deceased Members............................................................................10 v. High Dollar Pharmacy Scripts ..........................................................10 vi. Member Eligibility ...........................................................................10 vii. Non-Covered Benefits ......................................................................10 B. Fraud and Abuse Review ......................................................................................12 C. Debarment Review ................................................................................................13 D. Offshore Contracting Review ...............................................................................13 Exhibit A (Summary of MLR Credit Adjustment) Exhibit B (2013 MLR Credit Adjustment) Exhibit C (2014 MLR Credit Adjustment) Exhibit D (Medical Claims Sample Selection Criteria/Methodology) Exhibit E (Pharmacy Claims Sample Selection Criteria/Methodology) APPENDIX (Health Alliance Plan’s January 12, 2018, Response to the Draft Report) REPORT FRAUD, WASTE, AND MISMANAGEMENT IV. MAJOR CONTRIBUTORS TO THIS REPORT I. BACKGROUND This final report details the audit results of the Federal Employees Health Benefits Program (FEHBP) operations at Health Alliance Plan (Plan). The audit was conducted pursuant to the provisions of Contract CS 1092; 5 United States Code (U.S.C.) Chapter 89; and 5 Code of Federal Regulations (CFR) Chapter 1, Part 890. The audit covered contract years 2013 and 2014, and was conducted at the Plan’s office in Southfield, Michigan. 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 the U.S. Office of Personnel Management’s (OPM) Healthcare and Insurance Office. The provisions of the Federal Employees Health Benefits Act are implemented by OPM through regulations codified in 5 CFR Chapter 1, Part 890. Health insurance coverage is provided through contracts with health insurance carriers who provide service benefits, indemnity benefits, or comprehensive medical services. In April 2012, OPM issued a final rule establishing an FEHBP-specific Medical Loss Ratio (MLR) requirement to replace the similarly-sized subscriber group (SSSG) comparison requirement for most community-rated FEHBP carriers (77 FR 19522). MLR is the proportion of FEHBP premiums collected by a carrier that is spent on clinical services and quality health improvements. The MLR for each carrier is calculated by dividing the amount of dollars spent for FEHBP members on clinical services and health care quality improvements by the total amount of FEHBP premiums collected in a calendar year. The MLR was established to ensure that health plans are meeting specified thresholds for spending on medical care and health care quality improvement measures, and thus limiting spending on administrative costs, such as executive salaries, overhead, and marketing. For example, the threshold of 85 percent requires carriers to spend 85 cents of every premium dollar on patient care and limits the amount that can go to administrative expenses and profit to 15 cents of every dollar. However, the MLR does not provide an assessment of the fairness of the premium paid for benefits received, only that the calculated percentage of the premium paid is spent on patient related health care expenses. The FEHBP-specific MLR rules are based on the MLR standards established by the Affordable Care Act (P.L. 111-148) and defined by the U.S. Department of Health and Human Services in 45 CFR Part 158. In 2012, community-rated FEHBP carriers could elect to follow the FEHBP- specific MLR requirements, instead of the SSSG requirements. Beginning in 2013, however, the MLR methodology was required for all community-rated carriers, except those that are state- 1 Report No. 1C-52-00-17-031 mandated to use traditional community rating. State-mandated traditional community-rated carriers continue to be subject to the SSSG comparison rating methodology. Starting with the pilot program in 2012 and for all non-traditional community-rated FEHBP carriers in 2013, OPM required the carriers to submit an FEHBP-specific MLR. This FEHBP- specific MLR calculation required carriers to report information related to earned premiums and expenditures in various categories, including reimbursement for clinical services provided to enrollees, activities that improve health care quality, and all other non-claims costs. If a carrier fails to meet the FEHBP-specific MLR threshold, it must make a subsidization penalty payment to OPM within 60 days of notification of amounts due. 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 FEHBP Contracts/Members March 31 regulations promulgated by OPM. 25,000 The number of FEHBP contracts and 20,000 members reported by the Plan as of 15,000 March 31 for each contract year audited is shown in the chart on the right. 10,000 5,000 The Plan has participated in the FEHBP since 1962 and provides health benefits 0 2013 2014 to FEHBP members in the Detroit and Contracts 10,143 8,771 Southeastern Michigan areas. Members 20,534 17,100 There were no previous MLR audits of the Plan. However, a prior audit of the Plan covered contract years 2009 through 2011. The audit found that the FEHBP premium rates were developed in accordance with the Office of Personnel Management's rules and regulations for the years audited. 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 comments were considered in preparation of this report and are included, as appropriate, as an Appendix to the report. 2 Report No. 1C-52-00-17-031 IV. OBJECTIVES, II. MAJOR CONTRIBUTORS SCOPE, ANDTO THIS REPORT METHODOLOGY OBJECTIVES The primary objective of this performance audit was to determine whether the Plan was in compliance with the provisions of its contract and the laws and regulations governing the FEHBP. Specifically, we verified whether the Plan met the MLR requirements and thresholds established by OPM and paid the correct amount to the Subsidization Penalty Account, if applicable. Additional tests were also performed to determine whether the Plan was in compliance with the provisions of other applicable laws and regulations. Further, we reviewed the fraud and abuse, debarment, and offshore contracting program areas to ensure that the Plan had adequate policies and procedures covering these areas. Our audits of the MLR submission filed with OPM are completed in accordance with the criteria expressed in OPM’s rating instructions. The MLR audit evaluation includes an assessment of key components of the MLR calculation, including allowable claims, health care expenses, and quality health improvements (numerator), and the premium received, excluding applicable tax expenses (denominator). The result of the MLR calculation must meet OPM’s prescribed thresholds. If the calculation falls below the threshold, the health plan must pay a penalty determined by the variance between the actual MLR ratio and the established threshold. Although the FEHBP premiums used in the MLR calculation are ultimately determined by the premium rates proposed by the Plan and certified and paid by OPM, the OPM rating instructions no longer provide sufficient criteria to evaluate the fairness of those rates against the standard market value of similarly-sized groups. Furthermore, per the OPM rating instructions, health plans can utilize OPM’s total reported premium, as the denominator in the MLR calculation, which when utilized is not subject to audit. Since the majority of health plans choose this option, the premiums utilized in the MLR calculation are very frequently not available for audit and the fairness of the FEHBP premium rates cannot be evaluated. SCOPE We conducted this performance audit in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, 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. 3 Report No. 1C-52-00-17-031 This performance audit covered contract years 2013 and 2014. For FEHBP Premiums Paid to Plan these years, the FEHBP paid approximately $236.5 million in $140.0 premiums to the Plan. $120.0 Millions $100.0 The Office of the Inspector General’s $80.0 (OIG) audits of community-rated $60.0 carriers are designed to test carrier $40.0 compliance with the FEHBP contract, $20.0 applicable laws and regulations, and the $0.0 2013 2014 rate instructions. These audits are also Revenue $115.0 $121.5 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. Our review of internal controls was limited to the procedures the Plan has in place to ensure that: x The FEHBP MLR calculations were accurate, complete, and valid; claims were processed accurately; appropriate allocation methods were used; and that any other costs associated with its MLR calculations were appropriate. 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 May 15, 2017, through October 4, 2017, at the Plan’s office in Southfield, Michigan and in our offices in Jacksonville, Florida; Cranberry Township, Pennsylvania; and Washington, D.C. 4 Report No. 1C-52-00-17-031 METHODOLOGY We examined the Plan’s MLR calculations and related documents as a basis for validating the MLR. Further, we examined claim payments, quality health expenses, taxes and regulatory fees, and any other applicable costs to verify that the cost data used to develop the MLR was accurate, complete, and valid. We also examined the methodology used by the Plan in determining the premium in the MLR calculations. Finally, we used the contract, the Federal Employees Health Benefits Acquisition Regulations (FEHBAR), and the rate instructions to determine the propriety of the Plan’s MLR calculation. To gain an understanding of the internal controls in the Plan’s claims processing system, we reviewed the Plan’s claims processing policies and procedures and interviewed appropriate Plan officials regarding the controls in place to ensure that claims were processed accurately. Other auditing procedures were performed as necessary to meet our audit objectives. Additionally, we interviewed Plan officials and reviewed the Plan's policies and procedures associated with its internal controls over the fraud and abuse, debarment, and offshore contracting programs. The tests performed for the medical and pharmacy claims, along with the methodology, are detailed in the Exhibits D and E at the end of this report. Finally, we examined the Plan’s financial information and evaluated the Plan’s financial condition and ability to continue operations as a viable ongoing business concern. 5 Report No. 1C-52-00-17-031 III. AUDIT FINDINGS AND RECOMMENDATIONS A. Medical Loss Ratio Review 1. Overstated Medical Loss Ratio Credit $1,215,409 In order to assess the appropriateness of the Plan’s premium rates in 2013 and 2014, the Plan was required to file an MLR calculation under OPM’s MLR program. The MLR program replaced SSSG requirements with an MLR threshold. Simply stated, the MLR is the ratio of the FEHBP’s incurred claims (including expenses for quality healthcare improvements (QHI)) to total premium revenue determined by OPM. For contract years 2013 and 2014, OPM established an MLR threshold of 85 percent and created an MLR corridor. This threshold requires carriers to spend 85 cents of every health care premium dollar on health care expenses. If a carrier’s MLR falls between 85 and 89 percent, no penalty is due. If a carrier’s MLR is less than 85 percent, the carrier will owe a subsidization penalty equal to the difference between the threshold and the carrier’s actual MLR, multiplied by the denominator of the MLR. If the MLR is over 89 percent, the carrier receives a credit equal to the difference between the carrier’s reported MLR and 89 percent, multiplied by the denominator of the MLR. For contract year 2013, this credit can be used to offset any future MLR penalty and is available until it is used up by the Plan or the Plan exits the FEHBP. For contract year 2014, the credit can be used to offset any future MLR penalties for a period of five years. The Plan calculated an MLR of 93.92 percent for contract year 2013 and 91.61 percent for contract year 2014. Since these ratios exceeded the OPM established threshold of 89 percent, the Plan received an MLR credit of $5,647,791 for 2013 and $3,120,141 for 2014. However, during our review of the Plan’s MLR submission, we identified issues that resulted in an audited MLR that was lower than that calculated by the Plan for both years. As a result, we determined that the Plan’s MLR credit should be reduced by $437,844 and $777,565 in contract years 2013 and 2014, respectively. The specific issues that led to the credit adjustments were the following. a. QHI and Tax Allocation The Plan used a member-based methodology to calculate the FEHBP’s QHI and tax allocation expenses for contract year 2013. Specifically, the Plan calculated a membership ratio using the large group membership as of March 31, 2014, and the FEHBP membership as of December 31, 2013. While we are not opposed to the use 6 Report No. 1C-52-00-17-031 of a membership ratio to allocate expenses, it is our position that the large group and FEHBP membership used by the Plan should be consistent and capture the same timeframes. Section 3.3(a)(4) of the Plan's contract with OPM states that participating carriers cannot submit or keep in their files data or information of any description that is not complete, accurate, and current, as support for the FEHBP rate. Additionally, the Plan did not maintain written policies and procedures for calculating the allocation of their QHI and tax expenses to the FEHBP. Therefore, some of the Plan's calculations could not be traced or recalculated using supporting documentation. Consequently, we recalculated the FEHBP's expenses using the December 31, 2013, large group and FEHBP membership totals that were supportable. The Plan’s QHI expense totaled $514,112 and the tax expense totaled $278,193 for 2013. However, our audited calculations resulted in a total QHI and tax expense amount of $510,026 and $327,150, respectively. A comparison of the Plan’s total expense to our audited expense resulted in a QHI expense variance of $4,086 and a tax expense variance of $48,957. We used our audited QHI and tax expense amounts in our audited 2013 MLR calculation. Plan Response: HAP used the 3/31/14 MLR filing as a basis for their membership, the support of which comes from the annual filing information prepared in February for the State on the Supplemental Healthcare Exhibit. The effective date of the membership that is included in the State’s filing is 12/31/13. Additionally, HAP’s member months totaling 224,378 was only 2 member months off of the OIG’s total member months of 224,376. HAP is not sure how the OIG derived their member month amount, but the difference changed the expense allocation by $4,085, which reduced the credit by the same amount. Furthermore, the taxes and fees percentage allocated by the OIG increased their amount by $48,957. In doing so, the OIG actually increased the credit by $43,952. “In summary, the net of these two items increased the credit by [$]39,487. The two figures [$]4,085 and [$]43,952 do not net to the difference, since it is a formula and one effects the numerator and one effects the denominator.” The main reason for the decrease in the credit amount comes from the changes to the adjusted incurred claims. 7 Report No. 1C-52-00-17-031 OIG Comment: Our audited QHI and tax calculations include the December 31, 2013, large group membership of 3,301,364 that tied to the Supplemental Healthcare Exhibit and the MLR filing. The Plan’s calculation included 3,275,157 membership for the large group. Their membership tied to the March 31, 2014, HHS filing. The total FEHBP membership of 244,376 derived from the Plan’s enrollment support provided for 2013. We determined the percentage of taxes allocated to HAP by using their Quality Improvements (QI) workbook, which was consistent with the methodology used in the 2014 tax allocation calculation. The Plan allocated 83.96 percent of their taxes to HAP, however, the QI workbook shows that 83.1 percent of their taxes should have been allocated. We calculated our audited rates using the revised tax allocation percentage and the December 31, 2013, large group and FEHBP membership data. The Plan did not provide any written policies and procedures in response to the draft report. Our position has remained unchanged for this finding. b. MLR Claims Data i. Disabled Dependents The Plan does not maintain adequate supporting documentation for disabled dependents and was unable to retrieve documentation to support their eligibility prior to January 1, 2011. The FEHBP Handbook states that it is the responsibility of the subscriber's enrollment office A lack of supporting to provide documentation for disabled dependents. documentation resulted However, the Plan is responsible for maintaining in the payment of this documentation per OPM Contract 1092 Section claims for possible 1.11(b), which requires insurance carriers to ineligible members. maintain all records relating to the contract and to make these records available for a period of time specified by FEHBAR 1652.204-70. Additionally, FEHBAR 1652.204-70 is incorporated into the contracts at Section 3.4, which requires the carrier to maintain individual enrollee and/or patient claim 8 Report No. 1C-52-00-17-031 records "for six years after the end of the contract term to which the claim records relate." By not maintaining eligibility documentation, which is necessary to ensure that the Plan is properly including claims for eligible disabled dependents in its incurred claims amounts, the Plan is not only potentially overstating its MLR, but it is also not in compliance with contractual and regulatory requirements for the maintenance of records. To test the impact that this lack of supporting documentation had on the claims universe, we reviewed five medical members and two pharmacy members, identified as disabled dependents, as part of our overage dependent claims review. We found that the Plan did not maintain appropriate documentation to support the eligibility for all seven disabled dependents. Consequently, we expanded our review to query all 2013 and 2014 medical and pharmacy claims for disabled dependents. Once these members were identified, we used SAS to query all 2013 and 2014 claims incurred for these members. The claims identified from this query were removed from the numerator of our audited 2013 and 2014 MLR calculations. Specifically, we removed 753 medical claims totaling $241,843 and 1,250 pharmacy claims totaling $163,055 from the numerator of the 2013 MLR calculation. Similarly, we removed 857 medical claims totaling $211,145 and 1,161 pharmacy claims totaling $135,501 from the numerator of the 2014 MLR calculation. ii. Late Terminations The Plan did not terminate coverage for ineligible overage dependents until the end of the calendar year. During our audit we met with Plan personnel to discuss their dependent termination policies and procedures. Per the Plan, they do not terminate dependent coverage for The Plan’s 2013 and overage dependents until either contacted by OPM 2014 MLRs included or on their failsafe date of December 31st. improperly paid claims However, according to the FEHBP benefit for dependents over the brochures, dependent coverage ends once age of 26. dependents turn 26 years of age, unless they are incapable of self-support. It should also be noted that dependents have coverage for an additional 31 days after their 26th birthday. Our sample of late terminations included 20 medical members and 22 pharmacy members. During our review, we found that the Plan did not properly terminate dependent coverage for all 42 members 31 days after their 26th birthday. Due to 9 Report No. 1C-52-00-17-031 the systematic late terminations in our 2014 medical and pharmacy overage dependent samples, we queried all medical and pharmacy claims for members over age 26 that were not identified as subscribers, spouses, or disabled for contract years 2013 and 2014. We also queried members from the Plan's disabled member lists for both years. Once we identified our target universe for testing, we queried any claims that were processed for these members after the extension of coverage date (31 days after the member’s 26th birthday). The claims identified as being improperly paid were removed from the numerator of our audited MLR calculations for 2013 and 2014. We removed 252 medical claims totaling $63,343 and 214 pharmacy claims totaling $9,089 from the numerator of the 2013 MLR calculation. Similarly, we removed 777 medical claims totaling $382,754 and 665 pharmacy claims totaling $48,165 from the numerator of the 2014 MLR calculation. iii. Coordination of Benefits Based on our review, we concluded that the Plan correctly coordinated claims for members over age 65. iv. Deceased Members Based on our review, we concluded that the Plan did not pay any medical or pharmacy claims for deceased members. v. High Dollar Pharmacy Scripts Based on our review, we concluded that the Plan supported all high dollar claims with an original script. vi. Member Eligibility Based on our review, we concluded that the Plan did not pay any medical benefits for members, other than those identified above, after they were terminated by the Plan, dropped coverage, or during a gap in coverage. vii. Non-Covered Benefits Based on our review, we concluded that the Plan did not pay for benefits not covered in the FEHBP Plan brochure. 10 Report No. 1C-52-00-17-031 Plan Response: “The sample size audited was for members in 2013 [and] 2014. These were not new disabled dependents to HAP and were coded in our system prior to these dates. Unfortunately, any documentation received from the payroll offices for the sample members are in an offsite storage as these members were coded as permanently disabled prior to 2011. … HAP maintains all documentation it receives for FEHB members. As of August 2016, that documentation is now scanned into a workflow system and is readily available for review. … If HAP does not receive proper documentation from a payroll office for a disabled dependent – our enrollment specialist will reach out to the payroll office [three] times to obtain this approval documentation. These attempts will be documented in our workflow system for reference. Unfortunately, it is very difficult to work with many of the payroll offices when we need additional information. We use the contacts in the CLER system but have been unsuccessful in attempts to solidify membership details. … The workflow system houses all information and documentation for FEHB membership and will be readily available and not sent to storage.” “Prior to April 2017, our system was programmed to terminate any 26 year old nondisabled dependent at the end of the calendar year unless we received an EDI transaction for termination or notification from the family or payroll office. … After April 2017, our system is now programmed to terminate 26 year old nondisabled dependents as of the dependents date of birth. We have submitted a request to have the system changed to 31 days after the dependents 26th birthday. This request will be prioritized in 2018.” OIG Comment: We acknowledge the Plan’s claim that they have implemented a system to make the documentation for disabled dependents available onsite after August 2016. However, the necessary documentation for disabled dependents was not available for our audit. We also acknowledge that the Plan is in the process of updating their system to terminate ineligible overage dependents per OPM’s guidelines in 2018. However, ineligible overage dependents were not terminated timely during our audit scope. The Plan did not provide any written policies and procedures in response to the draft report. Therefore, our position has remained unchanged for this finding. 11 Report No. 1C-52-00-17-031 Conclusion We corrected the 2013 and 2014 MLR calculations for the errors identified above. A comparison of our audited 2013 and 2014 MLR calculations to the 2013 and 2014 MLR calculations included in the Plan’s submissions to OPM showed overstated credit amounts in both years. Specifically, we identified overstated MLR credits of $437,844 for 2013 and $777,565 for 2014. Recommendation 1 We recommend that the contracting officer instruct OPM’s Office of the Actuary to decrease the Plan’s MLR credit by $437,844 for 2013. Recommendation 2 We recommend that the contracting officer instruct OPM’s Office of the Actuary to decrease the Plan’s MLR credit by $777,565 for 2014. Recommendation 3 We recommend that the Plan develop written policies and procedures to document their FEHBP QHI and tax allocation expense calculations. Recommendation 4 We recommend that the Plan maintain adequate documentation from the responsible payroll offices for designated FEHBP disabled dependents. Recommendation 5 We recommend that the Plan establish policies and procedures for terminating non- disabled FEHBP dependents 31 days after their 26th birthday. B. Fraud and Abuse Review Based on our review, we concluded that the Plan has adequate procedures in place to provide reasonable assurance of detecting fraud and abuse and other illegal acts. 12 Report No. 1C-52-00-17-031 C. Debarment Review Based on our review, we concluded the Plan has procedures in place to identify providers debarred or suspended from participation in the FEHBP. Also, we determined the Plan has procedures in place to notify both the provider and the subscriber and to stop payment to debarred or suspended providers. D. Offshore Contracting Review Based on our review, we concluded that the Plan has adequate procedures to ensure oversight of their offshore activities. 13 Report No. 1C-52-00-17-031 EXHIBIT A Health Alliance Plan Summary of MLR Credit Adjustment 2013 Overstated MLR Credit ($437,844) 2014 Overstated MLR Credit ($777,565) Total Overstated MLR Credit ($1,215,409) Report No. 1C-52-00-17-031 EXHIBIT B Health Alliance Plan 2013 MLR Credit Adjustment Plan Audited Adjusted Incurred Claims $107,239,111 $106,761,781 Quality Health Improvement Expenses $514,112 $510,026 MLR Numerator $107,753,223 $107,271,807 Premium Income $115,003,397 $115,003,397 Federal and State Taxes and Licensing or Regulatory Fees $278,193 $327,150 MLR Denominator (a) $114,725,204 $114,676,247 FEHBP Medical Loss Ratio (b) 93.92% 93.54% 2013 FEHBP MLR Lower Corridor (c) 85.00% 85.00% 2013 FEHBP MLR Upper Corridor (d) 89.00% 89.00% Penalty Calculation (If (b) is less than (c), ((c-b)*a) $0 $0 Credit Calculation (If (b) is greater than (c), ((b-d)*a) $5,647,791 $5,209,947 Credit Adjustment Due To OPM ($437,844) Report No. 1C-52-00-17-031 EXHIBIT C Health Alliance Plan 2014 MLR Credit Adjustment Plan Audited Adjusted Incurred Claims $108,724,647 $107,947,082 Quality Health Improvement Expenses $882,243 $882,243 MLR Numerator $109,606,890 $108,829,325 Premium Income $122,566,963 $122,566,963 Federal and State Taxes and Licensing or Regulatory Fees $2,918,930 $2,918,930 MLR Denominator (a) $119,648,033 $119,648,033 FEHBP Medical Loss Ratio (b) 91.61% 90.96% 2014 FEHBP MLR Lower Corridor (c) 85.00% 85.00% 2014 FEHBP MLR Upper Corridor (d) 89.00% 89.00% Penalty Calculation (If (b) is less than (c), ((c-b)*a) $0 $0 Credit Calculation (If (b) is greater than (c), ((b-d)*a) $3,120,141 $2,342,576 Credit Adjustment Due To OPM ($777,565) Report No. 1C-52-00-17-031 EXHIBIT D Medical Claims Sample Selection Criteria/Methodology Results Medical Claims Universe Universe Universe Sample Criteria Sample Projected Review Area Criteria (Number) (Dollars) and Size Type to the Universe? Coordination of 15 claims with the Benefits Members greater 82,180 highest amount w/Medicare – than or equal to $17,681,167 Judgmental No claims paid totaling High Dollar 2014 age 65. $1,577,988. Coordination of Used SAS to Members greater Benefits 82,180 randomly select 15 Random No than or equal to $17,681,167 w/Medicare – claims claims totaling age 65. Random 2014 $4,566. Used SAS to Medical claims randomly select 25 Dependent for dependents 170 members from the Eligibility 2014 N/A greater than or members universe after Random No equal to age 26. removing duplicate members. Used SAS to randomly select 25 Deceased Member Members greater 64 members from the 2014 than or equal to N/A members universe after Random No age 90. removing duplicate members. Used SAS to Member Eligibility Members with at 17,204 randomly select 25 2014 least one medical N/A members members from the Random No claim in CY 2014 universe. Report No. 1C-52-00-17-031 EXHIBIT E Pharmacy Claims Sample Selection Criteria/Methodology Results Pharmacy Claims Universe Sample Criteria and Sample Projected Universe Universe Review Area Criteria Size Type to the (Number) (Dollars) Universe? All 18 pharmacy N/A N/A Pharmacy High Dollar Scripts claims in the claims greater 2014 18 claims $399,503 universe totaling than or equal to $399,503. $15,000. Used SAS to randomly select 24 Pharmacy members from the Random No claims for universe after Dependent Eligibility dependents 176 removing duplicate 2014 N/A greater than or members members and any equal to age members selected in 26. the Medical Dependent Eligibility review. Used SAS to randomly select 14 members from the Members universe after Deceased Member greater than or 63 removing duplicate N/A Random No 2014 equal to age members members and any 90. members already selected in the Medical Deceased Member review. Report No. 1C-52-00-17-031 APPENDIX ͳʹǡʹͲͳͺ ǡȂ ǡʹͲͶͳͷ ǡ ǡ ͷʹ ʹͲͳ͵ʹͲͳͶ ǣ DeletedbyOIG–NotRelevanttotheFinalReport ͳ ȂʹͲͳ͵ ͳȌ ͵Ȁ͵ͳȀͳͶǤ ͵Ȁ͵ͳȀͳͶ ǯǡ Ǥ ͳʹȀ͵ͳȀͳ͵Ǥ ʹʹͶǡ͵ͺ ʹʹͶǡ͵Ǥ ʹ ǤʹʹͶǡ͵ǡ ̈́ͶǡͲͺͷǡ Ǥ ʹȌ ǡ ͶͺǡͻͷǤ ʹͺǡͳͻ͵͵ʹǡͳͷͲǤ Ͷ͵ǡͻͷʹǡ Ǥ ͵Ȍ ǡ ͵ͻǡͶͺǤ ͶǡͲͺͷͶ͵ǡͻͷʹ ǡ Ǥ ͵ͻǤ ʹͲͳ͵ ͶǤ Ǥ Ͷ͵ͺ Ǥ Report No. 1C-52-00-17-031 DeletedbyOIG–NotRelevanttotheFinalReport ǤǦǡ͵ ͳȌ ʹͲͳ͵ƬʹͲͳͶǤ Ǥǡ ʹͲͳͳǤ ʹȌ ǤʹͲͳǡ Ǥ ǡǡǡ Ǥ ͵Ȍ Ȃ ͵ Ǥ Ǥǡ Ǥ Ǥ ͶȌ Ǥǡ ʹͲͳǤ DeletedbytheOIG–NotRelevanttotheFinalReport ǤǦǡͶ ͳȌ ʹͲͳǡ ʹ Ǥ ʹȌ ʹͲͳǡʹ Ǥ ͵ͳ ʹ Ǥ ʹͲͳͺǤ DeletedbyOIG–NotRelevanttotheFinalReport Report No. 1C-52-00-17-031 Conclusion ʹͲͳ͵ʹͲͳͶ Ǥ ʹͲͳ͵ʹͲͳͶ ʹͲͳ͵ʹͲͳͶ ǯ Ǥ ǡ ̈́Ͷ͵ǡͺͶʹʹͲͳ͵̈́ǡͷʹͲͳͶǤ Recommendation1 ǯ ǯ ̈́Ͷ͵ǡͺͶʹʹͲͳ͵Ǥ Recommendation2 ǯ ǯ ̈́ǡͷʹͲͳͶǤ Recommendation3 Ǥ Ǥ ǡʹͲͳͶ Ȁ ǡ Ǥ ʹͲͳͷ ʹͲͳ ǡ Ǥ ʹͲͳͶǤ Recommendation4 Ǥ ͳȌ ʹͲͳ͵ƬʹͲͳͶǤ Ǥǡ ʹͲͳͳǤ ʹȌ ǤʹͲͳǡ Ǥ ǡǡǡ Ǥ Report No. 1C-52-00-17-031 ͵Ȍ Ȃ ͵ Ǥ Ǥǡ Ǥ Ǥ ͶȌ Ǥǡ ʹͲͳǤ Recommendation5 ͵ͳ ʹǤ ͳȌ ʹͲͳǡ ʹ Ǥ ʹȌ ʹͲͳǡʹ Ǥ ͵ͳʹǤ ʹͲͳͺǤ DeletedbyOIG–NotRelevanttotheFinalReport ǡ ǡ Report No. 1C-52-00-17-031 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 Washington Metro Area: (202) 606-2423 By Mail: Office of the Inspector General U.S. Office of Personnel Management 1900 E Street, NW Room 6400 Washington, DC 20415-1100
Audit of the Federal Employees Health Benefits Program Operations at Health Alliance Plan
Published by the Office of Personnel Management, Office of Inspector General on 2018-05-10.
Below is a raw (and likely hideous) rendition of the original report. (PDF)