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 United Healthcare Insurance Company, Inc. Report No. lC-E9-00-12-007 Date: March 1, 2012 -- CAUTION - This audit report has been distributed to Federal officials who are re 'ponsible for tbe administration of the audited prog ram. This audit report may contain proprietary data which is protected by Federal law (18 U.S.C. 1905). Therefore, while tbis 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 ge neral public as it may contain proprietary information that was redacted from Ihe publicl y distributed copy. UNITED STATES OFFICE OF PERSONNEL MANAGEMENT Washington, DC 20415 Office of the Inspector General AUDIT REPORT Federal Employees Health Benefits Program Community-Rated Health Maintenance Organization United Healthcare Insurance Company, Inc. Contract Number 2913 - Plan Code E9 Hartford, Connecticut Report No. lC-E9-00-12-007 Dak: March 1, 2012 Michael R. Esser Assistant Inspector General for Audits www.opm.gov www.usajobs.gov UNITED STATES OFFICE OF PERSONNEL MANAGEMENT Was hingto n, DC 204 15 Office of the In pee tor General EXECUTIVES~ARY Federal Employees Health Benefits Program Community-Rated Health Maintenance Organization United Healthcare Insurance Company, Inc. Contract Number 2913 - Plan Code E9 Hartford, Connecticut Report No. lC-E9-00-12-007 Date: March 1, 2012 The Office of the Inspector General perfom1ed an audit of the Federal Employees Health Benefits Program (FEHBP) operations at United Healthcare Insurance Company, Inc. (Plan). The audit covered contract year 2009 and was conducted at the Plan' s office in Hartford, Connecticut. 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. The Plan ceased participation in the FEHBP on December 31, 2010. 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 The Plan has participated in the FEHBP since 2007 and provides health benefits to FEHBP members in Arizona, Arkansas, California, Colorado, the District of Columbia, Florida, Georgia, Illinois, Iowa, Kansas, Louisiana, Maryland, Mississippi, Missouri, New Mexico, North Carolina, Nevada, Ohio, Oklahoma, Oregon, Rhode Island, Tennessee, Texas, Virginia, Washington State, and Wisconsin. The last audit conducted by our office was a rate reconciliation audit that covered contract year 2010. There were no issues identified during that audit. The Plan ceased participation in the FEHBP on December 31, 2010. 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. 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 $20 Millions we plan and perform the audit to obtain $15 sufficient, appropriate evidence to provide a $10 reasonable basis for our findings and conclusions based on our audit objectives. We believe that $5 the evidence obtained provides a reasonable $0 basis for our findings and conclusions based on 2009 Revenue $19.0 our audit objectives. This performance audit covered contract year 2009. For this year, the FEHBP paid approximately $19.0 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 OPM 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 performed at the Plan’s office in Hartford, Connecticut, during October 2011. Additional audit work was completed at our offices 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 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 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 OPM’s rating instructions to carriers for contract year 2009. 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 United Healthcare Insurance Company, Inc.
Published by the Office of Personnel Management, Office of Inspector General on 2012-03-01.
Below is a raw (and likely hideous) rendition of the original report. (PDF)