oversight

Audit of the Federal Employees Health Benefits Program Operations at Coventry Health Care of Louisiana, Inc.

Published by the Office of Personnel Management, Office of Inspector General on 2015-01-14.

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 





             AUDIT OF THE FEDERAL EMPLOYEES HEALTH 

            BENEFITS PROGRAM OPERATIONS AT COVENTRY 

                  HEALTH CARE OF LOUISIANA, INC. 


                                            Rep ort Number 1C-BJ-00-14-052 

                                                    J anua r y 14, 2015 





                                                              -- CAUTION -­
This audit •·eport has been distributed to Federal officials who are responsible fo1· the administr ation of the audited program. T his audit report may
contain proprieta1-y data which is protected by Federal law (18 U.S.C. 1905) . T herefore, while this audit rep011 is available under the Freedom of
Information Act and made available to the public on the OIG webpage (http://wn~v.opm.go•>lour-inspector-geuernl), caution needs to be exercised
before releasing the •·eport to the general public as it may contain p 1·oprietary information that was redacted from the publicly distributed copy.
           EXECUTIVE SUMMARY 

       Audit ofthe F ederal Employees Health Benefits Program Operations at Coventry 

                               Health Care               Inc. 



Why Did We Conduct The Audit?            What Did We Find?

The obj ectives of om audit were to      We fmmd that the FEHBP rates were developed in accordance
detennine if the Plan offered the        with applicable laws, regulations, and the Office of Personnel
Federal Employees Health Benefits        Management's Rate lnst:Iuctions to Commlmity-Rated Caniers for
Program (FEHBP) market price rates       the year audited. We therefore did not issue a dr aft repoti and are
and that the loadings to the FEHBP       not making any recommendations.
rates were reasonable and equitable .

What Did We Audit?

The Office of the Inspector General
has completed a perfotmance audit of
the FEHBP operations at Covent:Iy
Health Care of Louisiana, Inc. (Plan).
The audit covered contract year 2011 ,
and was conducted at the Plan's
office in Downers Grove, illinois
dming June 2014.




Michael R. Esser
Assistant Inspector General
for Audits
                ABBREVIATIONS

CFR      Code of Federal Regulations
FEHBP    Federal Employees Health Benefit Program
OIG      Office of the Inspector General
OPM      Office of Personnel Management
SSSG     Similarly Sized Subscriber Group
U.S.C.   United State Code




                                ii
                               TABLE OF CONTENTS 


                                                                                                                           Page 

         EXECUTIVE SUMMARY ......................................................................................... i 


         ABBREVIATIONS ................................................................................................ ..... ii 


I. 	     BACK GROUND ................................................................ .......................................... ! 


II. 	    OBJECTIVES, SCOPE, AND METHODOLOGY ................................................. .3 


III. 	   AUDIT FINDING S AND REC OMMENDATIONS ................................................5 


IV. 	    MAJOR C ONTRIBUTORS TO T HIS REPORT ....................................................6 


         REPORT FRAUD, WAST E, AND MI SMANAGEMENT 

                               I. BACKGROUND 



This final audit rep01t details the findings, conclusions, an d recommendations resulting fro m om
perfonnance audit of the Federal Employees Health Benefits Program (FEHBP) operations at
Coventry Health Care of Louisian a, Inc. (Plan) . The audit was perf01m ed by OPM's Office of the
Inspector General (OIG), as authorized by the Inspector General Act of 1978, as am ended.

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 insm ance
benefits for federal employees, annuitants, an d dependents . The FEHBP is administered by
OPM's Healthcare and Insm ance Office. The provisions of the Federal Employees Health
Benefits Act are implem ented by OPM through regulations codified in Chapter 1, Pmt 890 of
Title 5, CFR. Health insm ance coverage is provided through contmcts with health insm an ce
cmTiers who provide service benefits, indemnity benefi ts, or comprehensive medical services.

Community-rated cmTiers pmticipating in the FEHBP m·e subj ect to various federal, state and
local laws, regulations, and ordinances. While most caniers ar e subject to state j m isdiction,
many m·e fmt her subject to the Health Maintenan ce Organization Act of 1973 (Public Law 93­
222), as am ended (i.e., m any community-rated cmTiers m·e federally qualified). In addition,
pmticipation in the FEHBP subjects the can'iers to the Federal Employees Health Benefits Act
and implementing regulations promulgated by OPM.

The FEHBP should pay a mm·ket price rate, which is defined as the best rate offered to either of
th e two groups closest in size to the FEHBP. In contracting with community-rated cmTiers,
OPM relies on catTier compliance with appropriate laws and regulations and, consequently, does
not negotiate base rates. OPM negotiations relate primarily to the level of coverage and other
unique featm es of the FEHBP.

The cha1t on the following page shows the number of FEHBP contracts and members reported
by the Plan as of March 31 for the contract year 2011 .




                                                 1                          Rep01t No. 1C-BJ-00-14-052
                           FEHBP Contracts/Members


                                  March 31



                            3,000
                            2,000
                            1,000
                                0
                                                2011
                          Contracts             1,126
                          Members               2,367



The Plan has participated in the FEHBP since 2002 and provides health benefits to FEHBP
members throughout the New Orleans area. The last audit conducted by our office was a full
scope audit and covered contract years 2007 through 2010. There were no issues identified
during that audit.

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 Rate Instructions to Community-
Rated Carriers (rate instructions), a draft report was not issued.
.




                                                2                             Report No. 1C-BJ-00-14-52
 II. OBJECTIVES, SCOPE, AND METHODOLOGY 



Objectives
The primary objectives of the audit were to detennine if the Plan offered the FEHBP market
price rates and that the loadings to the FEHBP rates were reasonable and equitable. Additional
tests were perf01m ed to dete1mine whether the Plan was in complian ce with the provisions of the
laws and regulations goveming the FEHBP.

Scope
We conducted this perfonnance audit in accordance with generally accepted govemment
auditing stan dards. Those stan dards require that we plan and perf01m the audit to obtain
sufficient, appropriate evidence to provide a reasonable basis for om findings an d conclusions
based on om audit objectives. We believe that the evidence obtained provides a reasonable basis
for om findings and conclusions based on om audit objectives.

This perf01m an ce audit covered contract year 201 1. For this year , the FEHBP paid
approximately $13.3 million in premiums to the Plan .

OIG audits of community-rated caniers are designed to test cruTier compliance with the FEHBP
contract, applicable laws and regulations, and the rate instmctions. These audits are also
designed to provide reasonable assm ance of detecting en ors, in egulru·ities, and illegal acts.

We obtained an understanding of the Plan 's intem al control structure, but we did not use this
inf01m ation to dete1mine th e natm e, timing, and extent of om audit procedm es. However, the
audit included such tests of the Plan's rating system and such other auditing procedm es
considered necessa1y under the circumstan ces. Om review of intem al conti·ols was limited to the
procedmes the Plan has in place to ensm e that:

       • 	The appropriate Similru·ly Sized Subscriber Groups (SSSG) were selected;

       • 	 the rates charged to the FEHBP were th e mru·ket price rates (i.e., equivalent to the best
           rate offered to the SSSGs); an d

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

In conducting the audit, we relied to vruying degrees on computer-generated billing, em ollment,
and claims data provided by the Plan. We did not verify the reliability of the data gen erated by
th e vru·ious infonnation systems involved. However, nothing came to om attention dming om
audit testing utilizing th e computer-generated data to cause us to doubt its reliability. We believe



                                                 3	                           Rep01i N o. 1C-BJ-00-14-052
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 performed at the Plan's office in Downers Grove, Illinois during June
2014. Additional audit work was completed at our offices in Cranberry Township, Pennsylvania
and Washington, D.C.

Methodology
We examined the Plan’s federal rate submission 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                            Report No. 1C-BJ-00-14-52
III. AUDIT FINDINGS AND RECOMMENDATIONS 



Our audit showed that the Plan ' s rating of the FEHBP was in accordance with applicable laws, 

regulations, and the rate instm ctions for contract year 2011. Consequently, the audit did not 

identify any questioned costs and no conective action is necessary . 





                                            5                              Rep01i No. 1C-BJ-00-14-052
 IV. MAJOR CONTRIBUTORS TO THIS REPORT

COMMUNITY-RATED AUDITS GROUP



            , Auditor-in-Charge




         , Senior Team Leader

           , Group Chief




                                  6   Report No. 1C-BJ-00-14-052
                                        Report Fraud, Waste, and 

                                            Mismanagement


                                                  Fraud, waste, and mismanagement in
                                               Government concerns everyone: Office of
                                                   the Inspector General staff, agency
                                                employees, and the general public. We
                                              actively solicit allegations of any inefficient
                                                    and wasteful practices, fraud, and
                                               mismanagement related to OPM programs
                                              and operations. You can report allegations
                                                          to us in several ways:


                     By Internet:                  http://www.opm.gov/our-inspector-general/hotline-to-
                                                   report-fraud-waste-or-abuse


                         By Phone:		               Toll Free Number:                              (877) 499-7295
                                                   Washington Metro Area:                         (202) 606-2423


                            By Mail:               Office of the Inspector General
                                                   U.S. Office of Personnel Management
                                                   1900 E Street, NW
                                                   Room 6400
                                                   Washington, DC 20415-1100




                                                             -- 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 (http://www.opm.gov/our-inspector-general), 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.

                                                                                                                 Report No. 1C-BJ-00-14-052