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 UPMC Health Plan Report No. 1C-8W-00-13-040 Date: September 23, 2013 -- 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 U.S.C. 1905). Therefore, while this audit report is available under the Freedom of Information Act and made available to the public on the OIG webpage, 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. AUDIT REPORT Federal Employees Health Benefits Program Community-Rated Health Maintenance Organization UPMC Health Plan Contract Number CS 2856-A - Plan Code 8W Pittsburgh, Pennsylvania Report No. 1C-8W-00-13-040 Date: September 23, 2013 Michael R. Esser Assistant Inspector General for Audits -- 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 U.S.C. 1905). Therefore, while this audit report is available under the Freedom of Information Act and made available to the public on the OIG webpage, 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. EXECUTIVE SUMMARY Federal Employees Health Benefits Program Community-Rated Health Maintenance Organization UPMC Health Plan Contract Number CS 2856-A - Plan Code 8W Pittsburgh, Pennsylvania Report No. 1C-8W-00-13-040 Date: September 23, 2013 The Office of the Inspector General performed an audit of the Federal Employees Health Benefits Program (FEHBP) operations at UPMC Health Plan (Plan). The audit was conducted in the Plan’s Pittsburgh, Pennsylvania offices and covered contract year 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 year audited. i 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 UPMC Health Plan (Plan). The audit covered contract year 2011 . The audit was conducted pursuant to the provisions of Contract CS 2856-A; 5 U.S .C. Chapter 89; and 5 Code of Federal Regulations (CFR) Chapter 1, Prui 890. The audit was perf01med 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 ru·e implemented by OPM through regulations codified in Chapter 1, Prui 890 of Title 5, CFR. Health insurance coverage is provided through contracts with health insurance caniers who provide service benefits, indemnity benefits, or comprehensive medical services. Community-rated cruTiers pruiicipating in the FEHBP ru·e subj ect to vru·ious federal, state and local laws, regulations, and ordinances. While most caniers ru·e subject to state jurisdiction, many ru·e fiuiher subject to the Health Maintenance Organization Act of 1973 (Public Law 93 222), as runended (i.e., many cormmmity-rated caniers ru·e federally qualified). In addition, pruiicipation in the FEHBP subjects the cruTiers to the Federal Employees Health Benefits Act and implementing regulations promulgated by OPM. The FEHBP should pay a mru·ket price rate, FEHBP Contracts/Members March 31 which is defined as the best rate offered to either of the two groups closest in size to the FEHBP. In conu·acting with cormnunity-rated cruTiers, OPM relies on canier compliance with appropriate laws and regulations and, consequently, does not negotiate base rates. OPM negotiations relate primarily to the level of coverage and other lmique fe atures of the FEHBP. The cha1i to the right shows the number of FEHBP conu·acts and members reported by the Plan as ofMru·ch 31, 201 1. The Plan has pruiicipated in the FEHBP since Januruy 1, 2000 and provides health benefits to FEHBP members in Allegheny, Annsu·ong, Beaver, Bedford, Blair, Butler , Crunbria, Cruneron, Clru·ion, Cleru·field, Crawford, Elk, Erie, Fayette, Forest, Greene, Huntingdon, Indiana, Jefferson, 1 Lawrence, McKean, Mercer, Potter, Somerset, Venango, Warren, Washington, and Westmoreland counties. The last audit of the Plan conducted by our office was a full scope audit of contract years 2007 through 2010. All issues related to that 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 OPM’s Rate Instructions to Community Rated Carriers (rate 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 auditing standards. Those standards require that Millions we plan and perform the audit to obtain $80 sufficient, appropriate evidence to provide a $60 reasonable basis for our findings and conclusions $40 based on our audit objectives. We believe that $20 the evidence obtained provides a reasonable $0 basis for our findings and conclusions based on 2011 Revenue $78.7 our audit objectives. This performance audit covered contract year 2011, during which the FEHBP paid approximately $78.7 million in premiums to the Plan, as 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 the 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 audit testing utilizing the computer-generated data to cause us to doubt its reliability. We believe 3 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 at the Plan’s office in Pittsburgh, Pennsylvania during March 2013. Additional audit work was completed at our office located in Cranberry Township, Pennsylvania. 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 the rate instructions 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 the rate instructions for contract year 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 ., Chief , Senior Team Leader 6
Audit of the Federal Employees Health Benefits Program Operations at UPMC Health Plan
Published by the Office of Personnel Management, Office of Inspector General on 2013-09-23.
Below is a raw (and likely hideous) rendition of the original report. (PDF)