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 - CAUTION- T h is l udi , rtport hu bc'tn di~ l ribUlrd to Ffiltr.1officills who In ru polu iblc for Ihe t d millislrllion orlhe audited prog l1ilm. Th i51 ud it rfpo rt mlly tonl~in prupri r lllr')' dab whirh is prultt lt tl by Ftd rfll i law ( 18 U.s.C. 1 90~). Thtrdnrc, "'hilr Ihi s lIudit rt'porl i~ , ..ailahlr undrr Ih t Frt rd onl of Inrorlnuion ,\ cland mll dt Ivai'ahlt 10 Iht puhlif o n rht O IG w~bp.gr. nUlion "rrdS10 be' uucisetllxforr rdusinl.: Iht rrporl lu Ihr I.:tncnl i publk u i, mll y cun tll;n ,)roprithlr}, infnrmMlion th., "' ''5 rt'd u trd frum Ihe publicly diSlrihu lfd COP)'. 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. www.uuJob•. ,o~ 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. 1 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 6
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)