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 Kaiser Foundation Health Plan of the Mid-Atlantic States, Inc. Report No. lC-E3-00-12-005 Date: February 29, 2012 -- CAUTION - This audit report has been distributed to Federal onicials who arc responsible for the administration ofthe audited program. This audit report may contain pfnprietary data which is protected hy Federal law (18 l:.S.C. 1905). Thereforc. while this audit repoft is a\ailablc under the hccdom of Information Act and made availahle tn the public on the OIG webpage. caution needs to be cwrciscd before releasing the report to the general public as it may contain proprietary information that was redacted from the publici), distributed cop}'. UNITED STATES OFFICE OF PERSONNEL MANAGEMENT Wa:.hington, DC 20415 Office of the In~pcctor(;eneral EXECUTIVE SUMMARY Federal Employees Health Benefits Program Community-Rated Health Maintenance Organization Kaiser Foundation Health Plan ofthe Mid-Atlantic States, Inc. Contract Number 1763 - Plan Code E3 Rockville, Maryland Report No. lC-E3-00-12-00S Date: 02/29/12 The Otlice of the Inspector General performed an audit of the Fcderal Employees Health Benefits Program (FEHBP) operations at Kaiser Foundation Health Plan of the Mid-Atlantic States, Inc. (Plan). The audit covered contract years 2009 through 201 L 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 years audited. www.opm.gOIl www.usajobs.gov UNITED STATES OFFICE OF PERSONNEL MANAGEMENT Washington, DC 20415 Oftiee of the Impector Genera! AUDIT REPORT Federal Employees Health Benefits Program Community-Rated Health Maintenance Organization Kaiser Foundation Health Plan of the Mid-Atlantic States, Inc. Contract Number 1763 - Plan Code E3 Rockville, Maryland Report No. lC-E3-00-12-00S Date: 02/29/12 U(J:/ Michael R. Esser Assistant Inspector General for Audits www.opm.gov www.usajobs.gov 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 Kaiser Foundation Health Plan of the Mid-Atlantic States, Inc. (Plan). The audit covered contract years 2009 through 2011 and was conducted at the Plan's office in Rockville, Maryland. The audit was conducted pursuant to the provisions of Contract CS 1763; 5 U.S.C. Chapter 89; and 5 Code of Federal Regulations (CFR) Chapter 1, Part 890. The audit was performed by the Otlice 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 benelits, 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 arc federally qualified). In addition, participation in the FEHBP subjects the carriers to the Federal Employees Health Benefits Act and implementing regulations promulgated by OPM. FEHBP Contracts/Members The FEHBP should pay a market price March 31 rate, which is defined as the best rate offered to either of the two groups closest 140,000 in size to the FEHBP. In contracting with community-rated carriers, OPM relies on 120,000 carrier compliance with appropriate laws 100,000 and regulations and, consequently, does 80,000 not negotiate base rates. OPM 60,000 negotiations relate primarily to the level 40,000 of coverage and other unique features of 20.000 the FEHBP. 0 The chart to the right shows the number DMembers of FEHBP contracts and members reported by the Plan as of March 31 for each contract year audited. The Plan has participated in the FEHBP since 1975 and provides health benefits to FEHBP members in the Metropolitan Washington, D.C. and Metropolitan Baltimore, Maryland areas. The last audit of the Plan conducted by our office was in 2008. 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 instructions, a draft report was not issued. 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 Rockville, Maryland during October 2011. Additional audit work was completed at our offices in Cranberry Township, Pennsylvania 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 intemal 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. 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 2009 through 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 , Lead Auditor ., Chief Senior Team Leader 6
Audit of the Federal Employees Health Benefits Program Operations at Kaiser Foundation Health Plan of the Mid-Atlantic States, Inc.
Published by the Office of Personnel Management, Office of Inspector General on 2012-02-29.
Below is a raw (and likely hideous) rendition of the original report. (PDF)