oversight

Audit of the Federal Employees Health Benefits Program Operations at Aetna Open Access -Plan Code 8G

Published by the Office of Personnel Management, Office of Inspector General on 2010-10-19.

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

                                           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 Aetna Open Access - Plan

                         Code 8G




                                  Report No. 1C-8G-OO-1O-044


                                  Date:    October 19 ( 2010




                                              -- CAUTION··

This audit report has been distributed to Federal 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 report is available under the Freedom of Information Act and made
available to the public on the OIG web page, caution needs to be exercised before releasing 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
Inspector General




                                                  AUDIT REPORT




                                        Federal Employees He~llth Benefits I'rogr:.tm

                                    COinmunit)'-R~lted Health M~,intenance Organization

                                                     Actna Open Acccss

                                          Contr:.lct Numbcl' 2867 - Plan Codc 8G

                                                   Rlue Bell, I'ennsyl\'ania




                        I~cport   No. I C-8C-OO-IO-044                 Date:     October 19, 2010




                                                                           M idmcl R. Esser
                                                                           Assist~lnt InSI)cctor   Ccncr-al
                                                                              fo,' Audits




        www.opm.IlO v                                                                                 www.usaJobs·llov
                          UNITED STATES OFFICE OF PERSONNEL MANAGEMENT

                                              Washington, DC 20415


  Office of the
Inspector General




                                      EXECUTIVE SUMMARY





                                federal Employees I-Ic~lItb Benefits Program

                            Communit)'-R~ltCcJ Health M~,intcnance Organization

                                            Aetna Open Access

                                   Contract Number 2867 - Plan Code 8e

                                          Blue Bell, Pennsylvania




                    Report No. 1C-8G-00-l0-044                  Date:   October 19. 2010


       The Office or the Inspector General performed an audit of the Federal Employees Ilcalth Benefits
       Program (FEIIBP) operations at Aetna Open Access - Plan Code 8G (Plan). The audit covered
       contract years 2006 through 2009 and was conducted at the Plan's ofTice in Blue Bell,
       Pennsylvania. We found that the FEI-IBP rates were developed in accordance with applicable
       laws, regulations. and the Omce or Personnel Management" s rating instructions for the years
       audited.




        www.opm.gov                                                                         www.Y58jobs.gov
                             CONTENTS



                                          Page

   EXECUTIVE SUMMARY                        1


 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 - Plan Code 80 (Plan). The audit covered contract years 2006 through
2009 and was conducted at the Plan's office in Blue Bell, Pennsylvania. The audit was
conducted pursuant to the provisions ofeantract CS 2867; 5 U.S.C. Chapter 89; and 5 Code of
Federal Regulations (CFR) Chapter I, Part 890. The audit was performed by the Office of
Personnel Management's (OPM) Office of the Inspector General (010), 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
Retirement and Benefits 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 various health insurance carriers
that 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 rate,                     FEHBP Contracts/Members
which is defined as the best rate offered to                         March 31

either of the two groups closest in size to          8,000
the FEHBP. In contracting with
community-rated carriers, OPM relies on               6,000
carrier compliance with appropriate laws
and regulations and, consequently, does not
                                                     4,000
negotiate base rates. OPM negotiations
relate primarily to the level of coverage and
                                                      2,000
other unique features of the FEHBP.

The chart to the right shows the number of                0
                                                                       2007
                                                              2006              2008    2009
FEHBP contracts and members reported by
                                                • Contracts   1,562    2.326    3,209   2,610
the Plan as of March 31 for each contract       o Members     3,795    5.841    7,720   5,930
year audited.
The Plan has participated in the FEHBP since 2005 and provides health benefits to FEHBP
members throughout Houston, Texas. This was the first audit of the Plan conducted by our
office.

The preliminary 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 applicable laws, regulations, and instructions, we did not issue a draft
report.




                                                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.



We conducted this performance audit in accordance with               FEHBP Premiums Paid to Plan
generally accepted government auditing standards.
Those standards require that we plan and perform the                $40
audit to obtain sufficient, appropriate evidence to
provide a reasonable basis for our findings and
conclusions based on our audil objectives. We believe
that the evidence obtained provides a reasonable basis
for our findings and conclusions based on our audit
objectives.

This performance audit covered contract years 2006
                                                                          2006    2007    2008     2009
through 2009. For these years, the FEHBP paid                                                     $28.6
                                                              • Revenue   $13.8   $20.9   $31.3
approximately $94.7 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 aPM 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 \vere reasonable and equitable.


                                                  3
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 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 performed 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 Blue Bell, Pennsylvania, during May
20 I O. Additional audit work was completed at our offices in Jacksonville, Florida, and
Washington, D.C.

Methodology

We examined the Plan's federal rate submissions and related documents as a basis for validating
the market price rates. Further, we examined claim payments to verify that the cost data used to
develop the FEHBP rates was accurate, complete, and valid. 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


OUT 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 2009.
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

                      , Auditor

                    , Auditor



                  , Chief

                 Senior Tearn Leader




                                         6