U.S. OFFICE OF PERSONNEL MANAGEMENT OFFICE OF THE INSPECTOR GENERAL OFFICE OF AUDITS Final Audit Report AUDIT OF THE FEDERAL EMPLOYEES HEALTH BENEFITS PROGRAM OPERATIONS AT CAPITAL HEALTH PLAN OF TALLAHASSEE Report Number 1C-EA-00-15-051 March 28, 2016 -- 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 (http://www.opm.gov/our-inspector-general), 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 Audit of the Federal Employees Health Benefits Program Operations at Capital Health Plan of Tallahassee Report No. 1C-EA-00-15-051 March 28, 2016 Why Did We Conduct the Audit? What Did We Find? The primary objectives of the audit We determined that the 2012 FEHBP rates were developed by the were to determine if Capital Health Plan in accordance with applicable laws, regulations, and the U.S. Plan of Tallahassee (Plan) developed Office of Personnel Management’s Rate Instructions to the Federal Employees Health Community-Rated Carriers. Therefore, we did not issue a draft Benefits Program (FEHBP) premium report and are not making any recommendations. rates using complete, accurate and current data, and that the rates were equivalent to the Plan’s Similarly- Sized Subscriber Groups, as provided in Federal Employees Health Benefits Acquisition Regulation 1652.215- 70(a). Additional tests were performed to determine if the Plan was in compliance with the provisions of the laws and regulations governing the FEHBP. What Did We Audit? Under contract 2034, the Office of the Inspector General completed a performance audit of the FEHBP’s rates offered for contract year 2012. Our audit fieldwork was conducted from September 14, 2015, through September 18, 2015, at the Plan’s office in Tallahassee, Florida. _______________________ Michael R. Esser Assistant Inspector General for Audits i ABBREVIATIONS FEHBAR Federal Employees Health Benefits Acquisition Regulations FEHBP Federal Employees Health Benefits Program OIG Office of the Inspector General OPM U.S. Office of Personnel Management Plan Capital Health Plan of Tallahassee SSSG Similarly-Sized Subscriber Group U.S.C. United States Code ii IV. MAJOR CONTRIBUTORS TO THIS REPORT TABLE OF CONTENTS Page EXECUTIVE SUMMARY ......................................................................................... i ABBREVIATIONS ..................................................................................................... ii I. BACKGROUND ..........................................................................................................1 II. OBJECTIVES, SCOPE, AND METHODOLOGY ..................................................3 III. RESULTS OF THE AUDIT .......................................................................................5 IV. MAJOR CONTRIBUTORS TO THIS REPORT ....................................................6 REPORT FRAUD, WASTE, AND MISMANAGEMENT IV. MAJOR CONTRIBUTORS I. BACKGROUND TO THIS REPORT This final report details the audit results of the Federal Employees Health Benefits Program (FEHBP) operations at Capital Health Plan of Tallahassee (Plan). The audit covered contract year 2012, and was conducted at the Plan’s office in Tallahassee, Florida. The audit was conducted pursuant to FEHBP contract CS 2034; 5 United States Code (U.S.C.) Chapter 89; and 5 Code of Federal Regulations Chapter 1, Part 890. The audit was performed by the U.S. Office of Personnel Management’s (OPM) Office of the Inspector General (OIG), as established by the Inspector General Act of 1978, as amended. 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, and is administered by OPM’s Healthcare and Insurance Office. Health insurance coverage is provided through contracts with health insurance carriers that provide service benefits, indemnity benefits, 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 are 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 March 31 The FEHBP should pay a premium rate that is equivalent to the best rate given to either of the two groups closest in subscriber size to the FEHBP. In 3,500 contracting with community-rated carriers, OPM relies 3,000 on carrier compliance with appropriate laws and 2,500 regulations and, consequently, does not negotiate base 2,000 rates. OPM negotiations relate primarily to the level 1,500 of coverage and other unique features of the FEHBP. 1,000 500 The chart to the right shows the number of FEHBP 0 contracts and members reported by the Plan as of 2012 Contracts 1,399 March 31 for the contract year audited. Members 3,118 The Plan has participated in the FEHBP since 1986 1 Report No. 1C-EA-00-15-051 and provides health benefits to FEHBP members in Tallahassee, Florida. The last full scope audit of the Plan, which was conducted by our office, covered contract years 2008 through 2010. There were no issues identified during that audit. 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 Rate Instructions to Community- Rated Carriers (rate instructions), a draft report was not issued. 2 Report No. 1C-EA-00-15-051 IV. MAJOR CONTRIBUTORS II. OBJECTIVE, SCOPE, AND TO THIS REPORT METHODOLOGY Objectives The primary objectives of the audit were to determine if the FEHBP premium rates were developed using complete, accurate, and current data, and were equivalent to the Plan’s Similarly-Sized Subscriber Groups (SSSGs), as provided in Federal Employees Health Benefits Acquisition Regulation (FEHBAR) 1652.215-70(a). Additional tests were performed to determine whether the Plan was in compliance with the provisions of the laws and regulations governing the FEHBP. Scope We conducted this performance audit in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our conclusions based on our audit objectives. This performance audit covered contract year 2012. For this year, the FEHBP paid approximately $14.5 million in premiums to the Plan. 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 SSSGs were selected; • the rates charged to the FEHBP were developed using complete, accurate, and current data, and were equivalent to the best rate given 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 Report No. 1C-EA-00-15-051 the various information systems involved. However, nothing came to our attention during our audit 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 from September 14, 2015, through September 18, 2015, at the Plan's office in Tallahassee, Florida. Additional audit work was completed at our offices in Cranberry Township, Pennsylvania, and Washington, D.C. Methodology We examined the Plan’s Federal rate submission and related documents as a basis for validating its Certificates of Accurate Pricing. In addition, we examined the rate development documentation and billings to other groups, such as the SSSGs, to determine if the FEHBP rates were reasonable and equitable. Finally, we used the contract, the FEHBAR, 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 Report No. 1C-EA-00-15-051 IV. MAJOR III. CONTRIBUTORS TOAUDIT RESULTS OF THE THIS REPORT Our audit showed that the Plan’s rating of the FEHBP was in accordance with applicable laws, regulations, and the rate instructions for contract year 2012. Consequently, the audit did not identify any questioned costs and no corrective action is necessary. 5 Report No. 1C-EA-00-15-051 IV. MAJOR CONTRIBUTORS TO THIS REPORT COMMUNITY-RATED AUDITS GROUP , Auditor-in-Charge , Senior Team Leader , Group Chief 6 Report No. 1C-EA-00-15-051 Report Fraud, Waste, and Mismanagement Fraud, waste, and mismanagement in Government concerns everyone: Office of the Inspector General staff, agency employees, and the general public. We actively solicit allegations of any inefficient and wasteful practices, fraud, and mismanagement related to OPM programs and operations. You can report allegations to us in several ways: By Internet: http://www.opm.gov/our-inspector-general/hotline-to- report-fraud-waste-or-abuse By Phone: Toll Free Number: (877) 499-7295 Washington Metro Area: (202) 606-2423 By Mail: Office of the Inspector General U.S. Office of Personnel Management 1900 E Street, NW Room 6400 Washington, DC 20415-1100 -- 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 (http://www.opm.gov/our-inspector-general), 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. Report No. 1C-EA-00-15-051
Audit of the Federal Employees Health Benefits Program Operations at Capital Health Plan of Tallahassee
Published by the Office of Personnel Management, Office of Inspector General on 2016-03-28.
Below is a raw (and likely hideous) rendition of the original report. (PDF)