oversight

Audit of the Federal Employees Health Benefits Program Operations at Humana Employers Health Plan of Georgia, Inc.

Published by the Office of Personnel Management, Office of Inspector General on 2014-03-10.

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 Humana Employers Health
                   Plan of Georgia, Inc.


                                          Report No. 1C-DG-00-14-013

                                          Date:         March 10, 2014




                                                      -- 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
                                  Employers Health Plan of Georgia, Inc.
                                 Contract Number CS 2923 - Plan Code DG
                                           Louisville, Kentucky



              Report No. 1C-DG-00-14-013                                                    March 10, 2014
                                                                                     Date: _________________




                                                                                      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
                     Humana Employers Health Plan of Georgia, Inc.
                       Contract Number CS 2923 - Plan Code DG
                                 Louisville, Kentucky


         Report No. 1C-DG-00-14-013                      Date: March 10, 2014


The Office of the Inspector General performed an audit of the Federal Employees Health
Benefits Program (FEHBP) operations at Humana Employers Health Plan of Georgia, Inc.
(Plan). The audit covered contract years 2010 through 2012. The audit was conducted at the
Plan’s office in Louisville, Kentucky. We found that the FEHBP rates were developed in
accordance with applicable laws, regulations, and the Office of Personnel Management’s Rate
Instructions to Community-Rated Carriers for the years 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 Humana Employers Health Plan of Georgia, Inc. (Plan). The audit covered contract years
2010 through 2012, an d was conducted at the Plan's office in Louisville, Kentucky. The audit
was conducted pursuant to the provisions of Contract CS 2923; 5 U.S .C. Chapter 89; an d 5 Code
of Federal Regulations (CFR) Chapter 1, Pmi 890. The audit was perfonned by the Office of
Personnel Management's (OPM) Office of the Inspector General (OIG), as established by the
Inspector General Act of 1978, as am ended.

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, an d dependents. The FEHBP is administered by
OPM 's Healthcare and Insurance Office. The provisions of the Federal Employees Health
Benefits Act ar e implemented by OPM through regulations codified in Chapter 1, Pmi 890 of
Title 5, CFR. Health insuran ce coverage is provided through contracts with health insurance
can iers who provide service benefits, indemnity benefits, or comprehensive m edical services.

Community-rated caniers patiicipating in the FEHBP are subject to various federal, state and
local laws, regulations, and ordinances. While most can1ers are subject to state j urisdiction,
many are fmi her subject to the Health Maintenan ce Organization Act of 1973 (Public Law 93 ­
222), as am ended (i.e., many community-rated cmTiers are federally qualified). In addition,
pmiicipation in the FEHBP subjects the caniers to the Federal Employees Health Benefits Act
and implem enting regulations promulgated by OPM.

The FEHBP should pay a market price rate,                  FEHBP Cont racts/Members
                                                                  March 31
which is defined as the best rate offered to
either of the two groups closest in size to
the FEHBP. In contracting with
commlmity-rated can iers, OPM relies on
can ier 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 featmes of the FEHBP.

The chmi to the right shows the number of
FEHBP contracts and members rep01ied by
the Plan as of March 31 for each contract
year audited.

                                                1

The Plan has participated in the FEHBP since 2010 and provides health benefits to FEHBP
members in the Atlanta, Georgia area. This is 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
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                              $20
accordance with generally accepted government                       $18
auditing standards. Those standards require that                    $16
                                                                    $14




                                                      Millions
we plan and perform the audit to obtain                             $12
sufficient, appropriate evidence to provide a                       $10
                                                                     $8
reasonable basis for our findings and conclusions                    $6
based on our audit objectives. We believe that                       $4
                                                                     $2
the evidence obtained provides a reasonable                          $0
basis for our findings and conclusions based on                            2010        2011        2012
                                                                 Revenue   $6.2        $8.9        $11.0
our audit objectives.

This performance audit covered contract years
2010 through 2012. For these contract years, the FEHBP paid approximately $26 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
                                                 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 was performed at the Plan’s office in Louisville, Kentucky during November
2013. Additional audit work was completed at our office in 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 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 years 2010 through 2012. 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