oversight

Audit of the Federal Employees Health Benefits Program Operations at Aetna Open Access Cleveland and Toledo, Ohio

Published by the Office of Personnel Management, Office of Inspector General on 2012-02-02.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                                                           u.s. OFF ICE OF PERSONNEL MANAGEMENT
                                                                        OFF ICE OF THE INSPECTOR GENERAL
                                                                                          OFFICE OF AUDITS




                                       Final Audit Report
S ubj ect:

          Audit of tbe Federal Employees Healtb Benefits 

           Program Operations at Aetna Open Access ­
                    Cleveland and Toledo, Obio 




                                                Re port No. IC-7D-OO-II-065

                                                Da te:        February 2 , 2012




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                           UN ITED STATES OFFI CE OF PERSONNEL MANAGEMENT 

                                              Wash ingto n, DC 20415 



  Office of the
Inspector General



                                            AUDIT REPORT



                                    Federal Employees Health Benefits Program 

                                Co mmunity-Rated Health Maintenance Organization 

                                 Aetna Open Access - Cleveland and Toledo, Ohio 

                                     Contract Number CS 2867 - Plan Code 7D 

                                              Blue Bell, Pennsylvania 




                       Report No. 1C-7D·OO-II-065                   Date: Fe bruary 2, 2 012




                                                                         Michael R. Esser
                                                                         Assistant Inspector General
                                                                           for Audits




        www .opm.gov                                                                           www." a8J ob s·I OV
                             UN ITED STATES OFF ICE OF PERSONNEL MANAGEMENT 

                                                WashinglOn. DC 20415 



  Office uf the
Inspeclm Gcn ...".r




                                         EXECUTIVE SUMMARY 





                                  Federal Emplo,yees Hea lth Benefits Progra m 

                               Community-Rated Healt h Maintena nce Organization 

                                Aetna Open Access - C levehmd and Toledo, O hio 

                                   Con tract Number CS 2867 - Pla n Code 7D 

                                             Bluc Bell, Pennsylvania 




                      Report No. IC-70-00-II-065                 Date: Feb ruary 2 , 20 12


        The OOice of the Inspector Genera l performed an audi t of the Federal Employees Health
        Benefits Program (FEI-IBP) operations at Aetna Open Access - Cleve land and Toledo, Ohi o
        (Plan). The audit covered contract years 2006 through 20 10. We found that the FEHBP rates
        were deve loped in acco rdance with app licable laws. regu lalio ns, and the Office of Personnel
        Management 's rating instruct ions for the years aud ited.




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                                                    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
                     I. INTRODUCTION AND BACKGROUND
Introduction

We completed an audit of the Federal Employees Health Benefits Program (FEHBP) operations
at Aetna Open Access – Cleveland and Toledo, Ohio (Plan). The audit covered contract years
2006 through 2010. The audit was conducted pursuant to the provisions of Contract CS 2867; 5
U.S.C. Chapter 89; and 5 Code of Federal Regulations (CFR) Chapter 1, Part 890. The audit was
performed 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 Healthcare and Insurance Office. The provisions of the Federal Employees Health
Benefits Act are implemented by OPM through regulations codified in Chapter 1, 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 carriers 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 subjects the carriers to the Federal Employees Health Benefits Act
and implementing regulations promulgated by OPM.

The FEHBP should pay a market price                             FEHBP Contracts/Members
                                                                       March 31
rate, which is defined as the best rate
offered to either of the two groups closest          14,000
in size to the FEHBP. In contracting with
                                                     12,000
community-rated carriers, OPM relies on
carrier compliance with appropriate laws             10,000

and regulations and, consequently, does               8,000
not negotiate base rates. OPM negotiations            6,000
relate primarily to the level of coverage
                                                      4,000
and other unique features of the FEHBP.
                                                      2,000
The chart to the right shows the number of                0
FEHBP contracts and members reported by                          2006    2007    2008    2009    2010
                                                    Contracts    3,224   3,833   4,415   5,184   3,012
the Plan as of March 31 for each contract           Members      8,020   9,547   10,721 12,168   6,172
year audited.




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The Plan has participated in the FEHBP since 1983 and provides health benefits to FEHBP
members in the Cleveland and Toledo, Ohio areas. The last audit of the Plan conducted by our
office was a full scope audit of contract years 2001 through 2005 and identified $962,675 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                       $60

auditing standards. Those standards require that                    $50




                                                      Millions
we plan and perform the audit to obtain                             $40
sufficient, appropriate evidence to provide a                       $30
reasonable basis for our findings and conclusions
                                                                    $20
based on our audit objectives. We believe that
the evidence obtained provides a reasonable                         $10

basis for our findings and conclusions based on                      $0
                                                                           2006    2007    2008    2009    2010
our audit objectives.                                            Revenue   $26.8   $33.8   $42.3   $51.1   $33.4


This performance audit covered contract years
2006 through 2010. For those contract years, the FEHBP paid approximately $187.4 million in
premiums to the Plan. The premiums paid for each contract year audited are shown on the chart
above.

OIG audits of community-rated carriers are designed to test carrier compliance with the FEHBP
contract, applicable laws and regulations, and OPM rate instructions. These audits are also
designed to provide reasonable assurance of detecting errors, irregularities, and illegal acts.

We obtained an understanding of the Plan’s internal control structure, but we did not use this
information to determine the nature, timing, and extent of our audit procedures. However, the
audit included such tests of the Plan’s rating system and such other auditing procedures
considered necessary under the circumstances. Our review of internal controls was limited to the
procedures the Plan has in place to ensure that:

        • The appropriate similarly sized subscriber groups (SSSG) were selected;

        • the rates charged to the FEHBP were the market price rates (i.e., equivalent to the best
          rate offered to the SSSGs); and

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


In conducting the audit, we relied to varying degrees on computer-generated billing, enrollment,
and claims data provided by the Plan. We did not verify the reliability of the data generated by
                                                 3
the various information systems involved. However, nothing came to our attention during our
audit testing utilizing the computer-generated data to cause us to doubt its reliability. We believe
that the available data was sufficient to achieve our audit objectives. Except as noted above, the
audit was conducted in accordance with generally accepted government auditing standards,
issued by the Comptroller General of the United States.

The audit fieldwork and additional audit work was completed at our offices located in
Washington, D.C. 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’s 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 2006 through 2010.
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

_______________________________________________________________________

                  ., Chief

                 , Senior Team Leader




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