oversight

Audit of the Federal Employees Health Benefits Program Operations at Kaiser Foundation Health Plan of Georgia, Inc.

Published by the Office of Personnel Management, Office of Inspector General on 2011-11-09.

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
SUbject:

      Audit of the Federal Employees Health Benefits 

     Program Operations at Kaiser Foundation Health 

                    Plan of Georgia, Inc. 




                                          Report No. lC-F8-00-11-021

                                         Date:       November 9,              2011




                                                     -- 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 web page, 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.
                           UNITED STATES OFFICE OF PERSONNEL MANAGEMENT 

                                                Washington, DC 20415 



   Office of the
Inspector General




                                       EXECUTIVE SUMMARY 





                                Federal Employees Health Benefits Program 

                             Community-Rated Health Maintenance Organization 

                               Kaiser Foundation Health Plan of Georgia, Inc. 

                                   Contract Number 2163 - Plan Code FS 

                                             Atlanta, Georgia 




                    Report No. lC-FS-OO-U-021                     Date:   November 9, 2011

      The Office of the Inspector General performed an audit of the Federal Employees Health Benefits
      Program (FEHBP) operations at Kaiser Foundation Health Plan of Georgia, Inc, (Plan), The
      audit covered contract years 2008 through 2010 and was conducted at the Plan's office in
      Atlanta, Georgia, 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,




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                           UNITED STATES OFFICE OF PERSONNEL MANAGEMENT 

                                              Washington, DC 20415 



   Office of the
in'pector Gcneral




                                           AUDIT REPORT



                                  Federal Employees Health Benefits Program 

                               Community-Rated Health Maintenance Organization 

                                 Kaiser Foundation Health Plan of Georgia, Inc. 

                                     Contract Number 2163 - Plan Code FS 

                                               Atlanta, Georgia 




                      Report No. 1C-FS-OO-ll-021                       Date: November 9, 2011




                                                                       ~s;~
                                                                       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 Georgia, Inc. (Plan). The audit covered contract years 2008
through 2010 and was conducted at the Plan’s office in Atlanta, Georgia. The audit was
conducted pursuant to the provisions of Contract CS 2163; 5 U.S.C. Chapter 89; and 5 Code of
Federal Regulations (CFR) Chapter 1, Part 890. The audit was performed by the Office 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 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.

The FEHBP should pay a market price                          FEHBP Contracts/Members
rate, which is defined as the best rate                             March 31

offered to either of the two groups closest         30,000
in size to the FEHBP. In contracting with
                                                    25,000
community-rated carriers, OPM relies on
carrier compliance with appropriate laws            20,000
and regulations and, consequently, does
                                                    15,000
not negotiate base rates. OPM
negotiations relate primarily to the level          10,000
of coverage and other unique features of
                                                     5,000
the FEHBP.
                                                        0
                                                              2008        2009         2010
The chart to the right shows the number                      12,869      13,128        13,096
                                               Contracts
of FEHBP contracts and members                 Members       28,835      28,965        28,668
reported by the Plan as of March 31 for
each contract year audited.

                                                1
The Plan has participated in the FEHBP since 1987 and provides health benefits to FEHBP
members in Atlanta, Georgia. The last audit of the Plan conducted by our office was in 2007.
All issues related to that audit have been resolved.




                                               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                       $130
auditing standards. Those standards require that




                                                      Millions
we plan and perform the audit to obtain                             $120
sufficient, appropriate evidence to provide a
reasonable basis for our findings and conclusions                   $110
based on our audit objectives. We believe that
the evidence obtained provides a reasonable basis                   $100
for our findings and conclusions based on our                               2008       2009      2010

audit objectives.                                                Revenue   $110.7     $118.6    $126.7


This performance audit covered contract years 2008 through 2010. For these contract years, the
FEHBP paid approximately $356 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

                                                 3
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
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 Atlanta, Georgia, during February
2011. Additional audit work was completed at our offices in Washington, D.C. 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’s 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 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

                    , Lead Auditor
_______________________________________________________________________

                  ., Chief

                 Senior Team Leader




                                          6