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)