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. 1C-F8-00-13-009 Date: March 28, 2013 -- 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, 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. AUDIT REPORT Federal Employees Health Benefits Program Community-Rated Health Maintenance Organization Kaiser Foundation Health Plan of Georgia, Inc. Contract Number CS 2163 - Plan Code F8 Atlanta, Georgia Report No. 1C-F8-00-13-009 Date: March 28, 2013 Michael R. Esser Assistant Inspector General for Audits -- 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, 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 Federal Employees Health Benefits Program Community-Rated Health Maintenance Organization Kaiser Foundation Health Plan of Georgia, Inc. Contract Number CS 2163 - Plan Code F8 Atlanta, Georgia Report No. 1C-F8-00-13-009 Date: March 28, 2013 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 2011 and 2012. 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. i 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 1. INTRODUCTION AND BACKGROUND Introduction We comp leted an audi t of the Federal Employees Health Benefits Program (FEHBP) operations at Kai ser Foundati on Health Plan of Georgia , Inc. (Plan). TIle audit covere d contract yea rs 20 11 and 20 12. The audit was co nducted pursuant to the provisions of Co ntrac t CS 2 163; 5 U.s.c. Chapter 89; and 5 Code of Federal Regul ations (CFR) Chapter 1, Part 890 . The audit wa s performed by the Office of Persomtel Ma nage ment' s (OPM) Office of the Inspector Ge nera l (DIG), as established by the Inspector Genera l Act of 1978, as amended. Background The FEHEP wa s estab lished by the Federal Employees Health Benefi ts Act (Public Law 86 382), enac ted a ll September 28 , 1959. The FEHBP wa s crea ted to provid e health insurance benefits for federal employees, annuitants, and dependents . The FEHBP is administered by OPM ' s Healthcare and Insurance Office . TIle provisions of the Federal Employees Health Benefits Act are implemented by OPM through regul ations codified in Chapter 1, Part 890 of Title 5, CFR . Health insurance coverage is provided through co ntract s with health insurance carriers who provid e service benefit s, indemnity benefits, or comprehensive m edical serv ices. Commun ity-rated ca rriers parti cipating in the FEHBP are subject to various fede ral, state and local laws, regul ations, and ordinance s. While most carriers are subject to state j uri sdic tion, many are further subj ect to the Health Ma intenance Orga nization Act of 1973 (Public Law 93 222), as amended (i.e., many commun ity-rated carriers are federa lly qualified). In addition, parti cipation in the FEHBP subjects the carriers to the Fede ral Employees Health Benefits Act and impl ementing regulations promulgated by OPM. The FEHBP should pay a market price FEHBP Contracts/Member s March 31 rate , which is de fined as the best rate offered to either of the two groups closest in size to the FEHBP. In co ntrac ting with 30,000 community-rated carriers, OPM re lies on 25,000 carrie r co mpliance with appro pria te laws 20,000 and regul ations and, consequently, does not negotiate base rates. OPM negoti ations 15,000 re late primaril y to the level of coverage 10,000 and other unique features of the FEHBP. 5,000 The chart to the right shows the number of o FEHBP co ntrac ts and member s report ed by 2011 2012 . Con/racts 13,198 12,983 the Plan as of Ma rch 3 1 for eac h co ntract c Members 29,988 29,398 yea r audited. I The Plan has participated in the FEHBP since 1987 and provides health benefits to FEHBP members in the Atlanta, Georgia metropolitan area and Athens, Columbus, Macon and Savannah service areas. The last audit of the Plan conducted by our office was a full scope audit of contract years 2008 through 2010. During that audit, we found the FEHBP rates were developed in accordance with applicable laws, regulations, and the Office of Personnel Management’s rate instructions. 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 Millions we plan and perform the audit to obtain $150 sufficient, appropriate evidence to provide a $100 reasonable basis for our findings and conclusions based on our audit objectives. We believe that $50 the evidence obtained provides a reasonable $0 basis for our findings and conclusions based on 2011 Revenue $136.7 our audit objectives. This performance audit covered contract years 2011 and 2012. For contract year 2011, the FEHBP paid approximately $136.7 million in premiums to the Plan, as shown on the chart above 1. 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 1 At the time of the report, the 2012 subscription income was not available. 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 conducted at the Plan’s office in Atlanta, Georgia, during the month of November 2012. Additional audit work was completed at our offices located in Jacksonville, Florida, and Cranberry Township, Pennsylvania. 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 rate instructions to community-rated carriers for contract years 2011 and 2012. 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 , Auditor ., Chief , Senior Team Leader 6
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 2013-03-28.
Below is a raw (and likely hideous) rendition of the original report. (PDF)