U.S. OFFICE OF PERSONNEL MANAGEMENT OFFICE OF THE INSPECTOR GENERAL OFFICE OF AUDITS Final Au.dlt Report . Subject: Audit oftbeFederalEmployees fl~althBenefits .. . ", c , _ .' . ···.Progr~m Operatio~lS of Kaiser FQl1Ii<l3 tionHealth . ·. . .... . PIall, Inc.H3waiiRegion . . Report No. 1<::-63-00~09~034 Date: Aug~st 6,2009 -- CAUTION,. . . .Thislludit reporl has been distributed to Federlll.oflicials who ar~ responsible for the administration of the audited program. This audit report may contain proprietary data which isprotetted by Federal law (18 U.S.c. [905). Ther:efore, while this aUi:!il reporlh available under the Freedom of ~llformalion Act and made available to the public On the OIC webpage, caution needs to be exercised before releasing the report to the general public as it may contain rroprielary information that w'asrcdaCled from tlie pUblicly· dislti bUled copy. UNITED STATES OFFICE OF PERSONNEL MANAGEMENT Washington, DC 20415 Office of the rnspector General AUDIT REPORT Federal Employees Healtb Benefits Program Commuuity-:Rated Health Maintenance Organization Kaisci' Foundatioll Health Plan, Inc. Hawaii Region Contract Numbcl' 1060 - Plan Code 63 Honolulu, Hawaii Report No. 1C-63-00-09-034 Date: August 6, 2009 2l?FrL- Michael R. Esser Assistant InspectOi' Gencl'al for Audits .. _---~-~~-_._----~----_._------_ --_._----_. .... www.opm.goY www.usajobs.goY UNITED STATES OFFICE OF PERSONNEL MANAGEMENT Washington. DC 20415 Office of the Inspector General EXECUTIVE SUMMARY Federal Employees Health .Benefits Program Community-Rated Health Maintenance Organization Kaiser Foundation Health ))Ian, Inc. Hawaii Region Contract Number] 060 - Plan Code 63 HOllolulu, Hawaii Repol-t No. IC-63-00-09-034 Date: Aug}] st 6, 2009 The Office of the Inspector General performed an audit of the Federal Employees Health Benefits Program (FEHBPl operations at Kaiser Foundation Health Plan, Inc. Hawaii Region (Plan). The audit covered contract years 2006 through 2008 and was conducted at the Plan's office in Honolulu, Hawaii. The audit sho\ved that the Plan's rating of the FEHBP was in accordance with applicable laws, regulations, ancl the Office of Personnel Management's rating instructions for the years audited. www.opm.gov www.usajobs.gov CONTENTS Page EXECUTIVE SUMMARY ~ , .i 1. INTRODUCTION AND BACKGROUND 1 II. OBJECTIVES, SCOPE, AND METHODOLOGY 3 III. RESULTS OF AUDIT 5 N. MAJOR CONTRIBUTORS TO THIS REPORT 6 I. INTRODUCTION AND BACKGROUND Introduction We completed an audit ofthe Federal Employees Health Benefits Program (FEHBP) operations at Kaiser Foundation Health Plan, Inc. Hawaii Region (Plan). The audit covered contract years 2006 through 2008 and was conducted at the Plan's office in Honolulu, Hawaii. The audit was conducted pursuant to the provisions of Contract CS 1060; 5 U.S.C. Chapter 89; and 5 Code of Federal Regulations (CFR) Chapter 1, Part 890. The audit was pelformed by the Office of Personnel Management's (OPM) Office of the Inspector General (OIG), as established by the Inspector General Act of 1978, as amended. Background The FEHBP was established by the Federal Employees Health Benefits Act (Public Law 86-382), enacted on September 28, 1959. The FEHBP was created to provide health insurance benefits for federal employees, annuitants, and dependents. The FEHBP is administered by OPM's Center for Retirement and Insurance Services. The provisions of the Federal Employees Health Benefits Act are implemented by OPM through regulations codified in Chapter I, Part 890 of Title 5, CFR. 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. While most caniers are subject to state jurisdiction, many are further subject to the Health Maintenance Organization Act of 1973 (Public Law 93 222), as amended (i.e., many community-rated carriers are federally qualified). In addition, participation in the FEHBP Contracts/Members FEHBP subjects the carriers to the Federal Employees March 31 Health Benefits Act and implementing regulations 16,000 promulgated by OPM. 14,000 12,000 The FEHBP should pay a market price rate, which is defined as the best rate offered to either of the two 10,000 groups closest in size to the FEHBP. In contracting with 8,000 community-rated carriers, aPM relies on carrier 6,000 compliance with appropriate laws and regulations and, 4,000 consequently, does not negotiate base rates. OPM 2,000 negotiations relate primarily to the level of coverage and a 2006 2007 2008 other unique features of the FEHBP. • Contracts 8,696 8,496 8,089 TIle chart to the right shows the number of FEHBP o Members 15,822 15,418 15,242 contracts and members reported by the Plan as of March 31 for each contract year audited. The Plan has participated in the FEHBP since 1960 and provides health benefits to FEHBP members throughout the islands .of Kauai, Maui, Oahu, and Hawaii. The last full-scope audit covered contract years 2000 through 2005. There were no findings. The prcIirninary results of this audit were discussed with Plan officials at an exit conference and through subsequent correspondence. Since the audit showed that the Plan's rating of the FEHBP was in accordance with the applicable laws, regulations, and instructions, we did not issue a draft report. 2 II. OBJECTIVES, SCOPE, AND METHODOLOGY Objectives The primary objectives ofthe audit were to verify that the Plan offered market price rates to the FEHBP and to verify that the loadings to the FEHBP rates wen~ reasonable and equitable. Additional tests were performed to determine whether the Plan was in compliance with the provisions of the laws and regulations governing the FEHBP. FEHBP Premiums Paid to Plan We conducted this performance audit in accordance with $75 generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to $50 provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe $25 that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. $0 • Revenue This performance audit covered contract years 2006 through 2008. For these contract years, the FEHBP paid approximately $172.6 million in premiums to the Plan. The premiums paid for each contract year audited are shown on the chart to the right. 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 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 was performed at the Plan's office in Honolulu, Hawaii, during March 2009. Additional audit work was completed at our office in Washington, D.C. 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's policies and procedures, interviewed appropriate Plan officials, and performed other auditing procedures ne<;:essary to meet our audit objectives. 4 III. RESULTS OF AUDIT Our audit showed that the Plan's rating of the FEHBP was in accordance with the applicable laws, regulations, and OPM's rating instructions to carriers for contract years 2006 through 2008. Consequently, the audit did not identitY 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 CRAG Group Chief Senior Team Leader 6
Audit of Kaiser Foundation Health Plan Hawaii Region - Honolulu, Hawaii
Published by the Office of Personnel Management, Office of Inspector General on 2009-08-06.
Below is a raw (and likely hideous) rendition of the original report. (PDF)