oversight

Audit of the Federal Employees Health Benefits Program Operations at Capital Group Health Services of Florida, Inc.

Published by the Office of Personnel Management, Office of Inspector General on 2012-06-04.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                                                    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 1986 and provides health benefits to FEHBP
members in the Tallahassee, Florida area. The prior two audits of the Plan conducted by our
office included a rate reconciliation review for contract year 2011 and a full scope audit of
contract years 2003 through 2007. No deficiencies were noted during the rate reconciliation
review however, the full-scope audit questioned $496,959 due to an erroneous durable medical
equipment load applied in contract years 2003 and 2004. The questioned costs were paid by the
Plan, and all findings 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.




                                                 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                       $14
auditing standards. Those standards require that                    $12




                                                      Millions
we plan and perform the audit to obtain                             $10
sufficient, appropriate evidence to provide a                        $8
                                                                     $6
reasonable basis for our findings and conclusions
                                                                     $4
based on our audit objectives. We believe that
                                                                     $2
the evidence obtained provides a reasonable                          $0
basis for our findings and conclusions based on                            2008      2009         2010
                                                                 Revenue   $11.1     $12.1        $13.9
our audit objectives.

This performance audit covered contract years
2008 through 2010. For those contract years, the FEHBP paid approximately $37.1 million in
premiums to the Plan. The premiums paid for each contract year audited are 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
                                                 3
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 conducted in December 2011, and additional audit work was completed
at our offices located in Cranberry Township, Pennsylvania and 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 community rated carriers for contract years 2008
through 2010. 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

               k, Auditor


               , Jr., Chief

                 , Senior Team Leader




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