Office of Personnel Management, Office of Inspector General | U.S. Office of Personnel Management | Audit of the Federal Employees Health Benefits Program Operations at Capital Health Plan of Tallahassee

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)

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

Report No. 1C-EA-00-15-051