u.s. OFFICE OF PERSONNEL MANAGEMENT OFFICE OF THE INSPECTOR GENERAL OFFICE OF AUDITS Final Audit Report SUbject: Audit of the Federal Employees Health Benefits Program Operations at "umana Health Plan, Inc. Chicago Report No. lC-7S-00-12-038 Date: June 21, 2012 -- CAUTION - This audit report has been distributed to hderal officials who are responsible for the administration of the audited program. This audit report may contain proprietary data which is protected by Federal law (18 V.S.c. 1905). Therefore, while this audit report is available under the heedom of Information :\ct and made available to the public on the OIG wcbpagc. caution needs to be exercised before relcasing the report to the general public as it may contain proprietary information that was redacted from the publicly distributed copy. UNITED STATES OFFICE OF PERSONNEL MANAGEMENT Washington, DC 20415 Office of the Impedor General AUDIT REPORT Federal Employees Health Benefits Program Community-Rated Health Maintenance Organization Humana Health Plan, Inc. - Chicago Contract Number CS 1570 - Plan Code 75 Louisville, Kentucky Report No. lC-75-00-12-038 Date: 06/2 1 / 1 2 ,;; /7 ./ /l ,//~--1£/ ~ , <--"-G.o_-_· Michael R. Esser Assistant Inspector General for Audits -- CAUTION - This audit report has been distributed to Federal officials who are responsihle for the administration of the audited program. This audit report may contain proprietary data which is protected by Federal law (18li.S.C. 1905). Therefore, while thi~ audit report i~ availahle under the Freedom of Information Act and made available to the public on the OIG web page, caution needs to be exercised before rclea~ing the report to the general public as it may contain proprietary information that was redacted from the publicly distributed eop~'. www.opm.goy www.usajobs.goy UNITED STATES OfFICE OF PERSONNEL MANAGEMENT Washinglon, DC 20415 Office of the Inspector General EXECUTIVE SUMMARY Federal Employees Health Benefits Program Community-Rated Health Maintenance Organization Humana Health Plan, Inc. - Chicago Contract Number CS 1570 - Plan Code 75 Louisville, Kentucky Report No. lC-75-00-12-038 Date: 06/21 /1 2 The Office of the Inspector General perfonned an audit of the Federal Employees Health Benefits Program (FEHBP) operations at Humana Health Plan, Inc. - Chicago (Plan). The audit covered contract years 2008 through 2011. We found that the FEHBP rates were developed in accordance with applicable laws, regulations, and the Office of Personnel Management's rating instructions for the years audited. www.opm.gov www.usajobs.gov CONTENTS Page EXECUTIVE SUMMARY .............................................................................................. i I. INTRODUCTION AND BACKGROUND..................................................................... 1 II. OBJECTIVES, SCOPE, AND METHODOLOGY ......................................................... 3 III. RESULTS OF THE AUDIT ............................................................................................ 5 IV. MAJOR CONTRIBUTORS TO THIS REPORT ............................................................ 6 The Plan has participated in the FEHBP since 1975 and provides health benefits to FEHBP members in the Chicago metropolitan area. The last audit of the Plan conducted by our office was a full scope audit of contract years 2005 through 2007 and identified $788,247 in defective pricing. All issues identified in the previous audit have been resolved. The preliminary results of this audit were discussed with Plan officials at an exit conference and in subsequent correspondence. Since the audit concluded that the Plan’s rating of the FEHBP was in accordance with applicable laws, regulations, and instructions, a draft report was not issued. 2 II. OBJECTIVES, SCOPE, AND METHODOLOGY Objectives The primary objectives of the audit were to verify that the Plan offered market price rates to the FEHBP and to verify that the loadings to the FEHBP rates were reasonable and equitable. Additional tests were performed to determine whether the Plan was in compliance with the provisions of the laws and regulations governing the FEHBP. Scope FEHBP Premiums Paid to Plan We conducted this performance audit in accordance with generally accepted government $100 $90 auditing standards. Those standards require that $80 Millions we plan and perform the audit to obtain $70 $60 sufficient, appropriate evidence to provide a $50 reasonable basis for our findings and conclusions $40 $30 based on our audit objectives. We believe that $20 $10 the evidence obtained provides a reasonable $0 basis for our findings and conclusions based on 2008 2009 2010 2011 Revenue $84.2 $81.4 $92.4 $90.0 our audit objectives. This performance audit covered contract years 2008 through 2011. For these contract years, the FEHBP paid approximately $348 million in premiums to the Plan. The premiums paid for each contract year audited are shown on the chart above. OIG audits of community-rated carriers are designed to test carrier compliance with the FEHBP contract, applicable laws and regulations, and OPM rate instructions. These audits are also designed to provide reasonable assurance of detecting errors, irregularities, and illegal acts. We obtained an understanding of the Plan’s internal control structure, but we did not use this information to determine the nature, timing, and extent of our audit procedures. However, the audit included such tests of the Plan’s rating system and such other auditing procedures considered necessary under the circumstances. Our review of internal controls was limited to the procedures the Plan has in place to ensure that: • The appropriate similarly sized subscriber groups (SSSG) were selected; • the rates charged to the FEHBP were the market price rates (i.e., equivalent to the best rate offered to the SSSGs); and • the loadings to the FEHBP rates were reasonable and equitable. In conducting the audit, we relied to varying degrees on computer-generated billing, enrollment, and claims data provided by the Plan. We did not verify the reliability of the data generated by the various information systems involved. However, nothing came to our attention during our 3 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 conducted during the month of March 2012, and additional audit work was completed at our offices located in Washington, D.C. and Jacksonville, Florida. Methodology We examined the Plan’s federal rate submissions and related documents as a basis for validating the market price rates. In addition, we examined the rate development documentation and billings to other groups, such as the SSSGs, to determine if the market price was actually charged to the FEHBP. Finally, we used the contract, the Federal Employees Health Benefits Acquisition Regulations, and OPM’s Rate Instructions to Community-Rated Carriers to determine the propriety of the FEHBP premiums and the reasonableness and acceptability of the Plan’s rating system. To gain an understanding of the internal controls in the Plan’s rating system, we reviewed the Plan’s rating system policies and procedures, interviewed appropriate Plan officials, and performed other auditing procedures necessary to meet our audit objectives. 4 III. RESULTS OF THE AUDIT Our audit showed that the Plan’s rating of the FEHBP was in accordance with applicable laws, regulations, and OPM’s rating instructions to carriers for contract years 2008 through 2011. Consequently, the audit did not identify any questioned costs and no corrective action is necessary. 5 IV. MAJOR CONTRIBUTORS TO THIS REPORT Community-Rated Audits Group , Auditor-in-Charge Lead Auditor , Staff ., Chief , Senior Team Leader 6
Audit of the Federal Employees Health Benefits Program Operations at Humana Health Plan, Inc. Chicago
Published by the Office of Personnel Management, Office of Inspector General on 2012-06-21.
Below is a raw (and likely hideous) rendition of the original report. (PDF)