oversight

Audit of the Federal Employees Health Benefits Program Operations at PacifiCare of Texas, Inc.

Published by the Office of Personnel Management, Office of Inspector General on 2012-11-01.

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 PacifiCare of Texas, Inc.



                                          Report No. 1C-GF-00-12-030

                                          Date:         November 1, 2012




                                                      -- 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
                                            PacifiCare of Texas, Inc.
                                    Contract Number CS 2908 - Plan Code GF
                                              Cypress, California



                 Report No. 1C-GF-00-12-030                                           Date: November 1, 2012




                                                                                      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
                                PacifiCare of Texas, Inc.
                        Contract Number CS 2908 - Plan Code GF
                                  Cypress, California


         Report No. 1C-GF-00-12-030                     Date: November 1, 2012


The Office of the Inspector General performed an audit of the Federal Employees Health
Benefits Program (FEHBP) operations at PacifiCare of Texas, Inc. (Plan). The audit covered
contract years 2009 through 2011, and was conducted at the Plan’s office in Cypress, California.

This report questions $627,859 for inappropriate health benefit charges to the FEHBP in contract
years 2009 through 2011. The questioned amount includes $604,829 for defective pricing and
$23,030 due the FEHBP for lost investment income, calculated through October 31, 2012.

For contract years 2009 through 2011, we found the FEHBP was inappropriately charged a state
assessment fee. We removed the state assessment fee from our audited FEHBP rates. We also
found two FEHBP claims not properly coordinated with Medicare which increased the FEHBP
rates in 2011. We determined the FEHBP was overcharged $16,291 in 2009, $158,245 in 2010,
and $430,293 in 2011.

Consistent with the FEHBP regulations and contract, the FEHBP is due $23,030 for lost
investment income, calculated through October 31, 2012, on the defective pricing findings. In
addition, we recommend that the contracting officer recover lost investment income starting
November 1, 2012, until all defective pricing amounts have been returned to the FEHBP.




                                                i
                                                        CONTENTS

                                                                                                                       Page

     EXECUTIVE SUMMARY .............................................................................................. i

  I. INTRODUCTION AND BACKGROUND .................................................................... 1

II. OBJECTIVES, SCOPE, AND METHODOLOGY ......................................................... 3

III. AUDIT FINDINGS AND RECOMMENDATIONS ...................................................... 5

     Premium Rate Review ..................................................................................................... 5

     1. Defective Pricing........................................................................................................ 5

     2. Coordination of Benefits ............................................................................................ 6

     3. Lost Investment Income ............................................................................................. 7

IV. MAJOR CONTRIBUTORS TO THIS REPORT............................................................ 9

      Exhibit A (Summary of Questioned Costs)

      Exhibit B (Defective Pricing Questioned Costs)

      Exhibit C (Lost Investment Income)

      Appendix (Pacificare of Texas, Inc.’s August 17, 2012, response to the draft report)
                       1. INTRODUCTION AND BACKGROUND


Introduction

We completed an audit of the Federal Employees He alth Benefits Program (FEH BP) operations
at Pacifi Care of Texas, Inc. (Plan). The audit covere d contrac t years 2009 through 20 11. Th e
audit wa s conduc ted pursuant to the provisions of Contrac t CS 2908; 5 U S c. Cha pter 89 ; an d 5
Co de of Fed eral Regul ati ons (C FR) Chapter 1, Part 890. TIle audit wa s performed by the O ffic e
of Personne l Management' s (OPM) Office of the Inspector Genera l (DIG), as establishe d by the
Inspe ctor Gene ral Act of 1978, as ame nded.

Background

The FEHBP wa s establi shed by the Federal Employees Health Ben efits Ac t (Public Law 86­
382), enac ted a ll September 28, 1959. TIle FEHBP wa s created to provide health insur ance
benefits for federal employee s, annuitants, and dependent s . The FEHBP is administered by
OPM' s Healthcare and Insur an ce Office. TIle provi sions of the Fed eral Emp loyees Health
Benefits Ac t are implem ent ed by OPM through regulati ons codified in Chapter 1, Part 890 of
Titl e 5, CFR. Health insuran ce coverage is provided thr ou gh contrac ts with he alth insur ance
carriers who provide serv ice bene fits, indemnity benefits, or co mprehe nsive m edi cal serv ices.

Community-rated carr iers participating in the FE HBP are subj ect to various federal, state and
local laws, regul ati ons, and ordinances . While most carr iers are subj ect to state jurisdicti on ,
man y are further subj ect to the He alth Maintena nc e Organizatio n Ac t of 1973 (Public Law 93 ­
222 ), as ame nded (i.e ., man y comm unity-rated carri ers are federally qua lified). In addition,
parti cip ati on in the FEHBP subj ects the carri ers to the Fed eral Emp loyee s Health B enefits Ac t
and implementing regulati ons promulgated by OP1.1.

                                                                       FEHBP Contracts/Members

The FEHBP should pay a marke t pri ce                                         March 31

rate, which is defined as the best rate
offered to eithe r of the two groups closest                 6,000
in size to the FEHBP. In co ntrac ting with
community-ra ted carr iers, OPM relies on                    5,000

carrier complianc e with appropriate laws                    4,000
and regulations and, consequently, doe s
                                                             3,000
not negotiate base rates. OPM negotiati ons
relate primarily to the level of cove rage                   2,000
and other unique fea tur es of the FEHBP.
                                                             1,000

The cha rt to the right sho ws the number of                     o
FEHBP co ntrac ts and members report ed by               . Con/racts
the Plan as of March 3 1 for eac h contract              IJ Members
year audited .




                                                    I

The Plan has participated in the FEHBP since 1983 and provides health benefits to FEHBP
members in the San Antonio, Texas area. The last audit of the Plan conducted by our office was
a full scope audit of contract years 2006 through 2008. For that audit, we found the FEHBP rates
were 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. A draft report was also provided to the Plan for review and
comment. The Plan’s comments were considered in preparation of this report and included, as
appropriate, in the Appendix.




                                                 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                       $30
auditing standards. Those standards require that                    $25




                                                      Millions
we plan and perform the audit to obtain                             $20
sufficient, appropriate evidence to provide a                       $15
reasonable basis for our findings and conclusions                   $10
based on our audit objectives. We believe that                       $5
the evidence obtained provides a reasonable                          $0
basis for our findings and conclusions based on                            2009      2010         2011
                                                                 Revenue   $29.7     $12.0        $14.9
our audit objectives.

This performance audit covered contract years
2009 through 2011. For these contract years, the FEHBP paid approximately $56.6 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.



                                                 3
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
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 during January 2012 in Cypress, California, 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.

To test the Plan’s compliance with the FEHBP health benefit provisions regarding coordination
of benefits, we selected and reviewed a judgmental sample of claims for contract years 2009
through 2011. This audit included a 2009 sample of 12 claims from 286,604 claim lines, a 2010
sample of 6 claims from 27,237 claim lines, and a 2011 sample of 10 claims from 100,355 claim
lines. The results from the samples were not projected to the population as a whole.




                                                 4
              III. AUDIT FINDINGS AND RECOMMENDATIONS
Premium Rate Review

1. Defective Pricing                                                                    $604,829

   The Certificates of Accurate Pricing Pacificare of Texas, Inc. (Plan) signed for contract years
   2009 through 2011 were defective. In accordance with Federal regulations, the Federal
   Employees Health Benefits Program (FEHBP) is therefore due a rate reduction for these
   years. Application of the defective pricing remedy shows that the FEHBP is entitled to a
   premium adjustment totaling $604,829 (see Exhibit A).

   Carriers proposing rates to OPM are required to submit a Certificate of Accurate Pricing
   certifying that the proposed subscription rates, subject to adjustments recognized by OPM,
   are market price rates. FEHBP regulations refer to a market price rate in conjunction with
   the rates offered to similarly sized subscriber groups (SSSG). SSSGs are the Plan’s two
   employer groups closest in size to the FEHBP. If it is found that the FEHBP was charged
   higher than the market price rate (i.e., the best rate offered to an SSSG), a condition of
   defective pricing exists, requiring a downward adjustment of the FEHBP premiums to the
   equivalent market price rate.

   Texas Health Insurance Pool (THIP)

   During our review of contract years 2009 through 2011, we found the Plan inappropriately
   charged the FEHBP a 1.17 percent state tax assessment related to the THIP. The THIP
   provides medical insurance coverage for residents who are unable to obtain their own health
   insurance from individual commercial insurers.

   5 U.S.C 8909(f)(1) prohibits the imposition of taxes, fees or other monetary payment, directly
   or indirectly, on FEHB premiums by any State, the District of Columbia, the Commonwealth
   of Puerto Rico, or by any political subdivision or other governmental authority of those
   entities. Further, the THIP filing instructions specifically state the FEHBP is not subject to
   the state assessment.

   The Plan did not realize that the FEHBP is not subject to the THIP. As a result, the FEHBP
   is entitled to reclaim all charges associated with the THIP. These findings include $16,291
   for 2009, $158,245 for 2010, and $205,980 for 2011.

   Plan’s Comments (see Appendix):

   The Plan agrees with our finding and acknowledges that the charges were incorrectly applied
   to the FEHBP. The Plan has corrected the THIP calculation for contract year 2012 and
   forward.

   The Plan requested the audited work papers that support the calculation of the impact of
   removing the 1.17 percent attributable to the THIP. The Plan has not yet received those work

                                                5
   papers. The Plan reserved the right to challenge the calculation of the finding amounts based
   on the work papers.

   OIG’s Response to Plan’s Comments:

   We spoke with the Plan by telephone, as well as email follow-up, regarding the work papers
   they wanted to review. The Plan specifically requested our 2011 audited FEHBP rate
   development. We provided the Plan the work paper in support of our 2011 audit findings.

   We granted a request from the Plan for an additional two-week extension so they could
   review our work paper. We contacted the Plan several days after the due date to follow up
   on their review. The Plan did not respond. Therefore, we moved forward with the final
   report.

2. Coordination of Benefits (COB)

   During our COB review, we found two FEHBP claims not properly coordinated with
   Medicare that inappropriately increased the 2011 FEHBP rates. The paid amounts were
   $77,400 and $48,450. The Plan should have paid these claims as the secondary payor to
   Medicare. The Medicare rules set forth in the Plan’s contract with OPM state when an
   annuitant or their covered spouse who are age 65 or over and has both Medicare and FEHBP
   coverage, the primary payor is Medicare and the secondary payor is this Plan.

   The Plan states there was no COB information available at the time of the claim payments
   and once the COB information was available, it was beyond the 180-day Medicare recovery
   window. It is the Plan’s responsibility to keep its COB information current.

   We adjusted the FEHBP claims experience used in our audited rate development to account
   for the two COB claims. As a result, the FEHBP was overcharged $224,313 in contract year
   2011 (see Exhibit A).

   Plan’s Comments (see Appendix):

   The Plan acknowledges that the two claims in question were not coordinated with Medicare.
   However, the Plan relied on information from the member regarding other coverage. This
   information is requested on a routine basis, and the Plan’s systems are updated accordingly.
   The Plan feels strongly that the information utilized at the time of claim adjudication was
   correct, and therefore, the claims in question were processed appropriately according to the
   information provided by the respective members.

   OIG’s Response to Plan’s Comments:

   We maintain that these claims were not properly coordinated with Medicare. It is the Plan’s
   responsibility to keep the Medicare status of its members current so that proper COB
   procedures are followed.


                                               6
   Recommendation 1

   We recommend that the contracting officer require the Plan to return $604,829 to the FEHBP
   for defective pricing.

   Recommendation 2

   We recommend the contracting officer require the Plan to take the necessary steps to ensure
   that COB is performed in a timely, accurate, and effective manner.

3. Lost Investment Income                                                                  $23,030

   In accordance with the FEHBP regulations and the contract between OPM and the Plan, the
   FEHBP is entitled to recover lost investment income on the defective pricing findings in
   contract years 2009 through 2011. We determined that the FEHBP is due $23,030 for lost
   investment income, calculated through October 31, 2012 (see Exhibit C). In addition, the
   FEHBP is entitled to lost investment income for the period beginning November 1, 2012,
   until all defective pricing finding amounts have been returned to the FEHBP.

   Federal Employees Health Benefits Acquisition Regulation 1652.215-70 provides that if any
   rate established in connection with the FEHBP contract was increased because the carrier
   furnished cost or pricing data that were not complete, accurate, or current as certified in its
   Certificate of Accurate Pricing, the rate shall be reduced by the amount of the overcharge
   caused by the defective data. In addition, when the rates are reduced due to defective
   pricing, the regulation states that the government is entitled to a refund and simple interest on
   the amount of the overcharge from the date the overcharge was paid to the carrier until the
   overcharge is liquidated.

   Our calculation of lost investment income is based on the United States Department of the
   Treasury's semiannual cost of capital rates.

   Plan’s Comments (see Appendix):

   The Plan agrees that the FEHBP is entitled to lost investment income on any overpayments
   due to the FEHBP. The Plan stated they calculated a different amount of overpayment for
   which the lost investment income calculation should be based on, and the FEHBP is due lost
   investment income only for that amount of overpayment.

   OIG’s Response to Plan’s Comments

   We were not made aware of the overpayment amount calculated by the Plan. We provided
   the requested work paper to the Plan to support our overpayment calculation. The Plan was
   granted two weeks to review our overpayment calculation. We contacted the Plan after the
   two-week period to discuss their review. The Plan did not respond, and we received no
   notification that the Plan disagrees with our overpayment calculation. Therefore, we will


                                                 7
move forward with the lost investment income calculation as it pertains to our calculation of
the questioned costs.

Recommendation 3

We recommend that the contracting officer require the Plan to return $23,030 to the FEHBP
for lost investment income for the period January 1, 2009, through October 31, 2012. In
addition, we recommend that the contracting officer recover lost investment income on
amounts due for the period beginning November 1, 2012, until all defective pricing amounts
have been returned to the FEHBP.




                                            8
            IV. MAJOR CONTRIBUTORS TO THIS REPORT

Community-Rated Audits Group

               , Auditor-in-Charge

                  , Auditor

              , Auditor



                 Chief

              , Senior Team Leader




                                     9
                                                                              Exhibit A


                                      Pacificare of Texas, Inc.
                                    Summary of Questioned Costs



Defective Pricing Questioned Costs


         Contract Year 2009                                         $16,291
         Contract Year 2010                                        $158,245
                                1
         Contract Year 2011                                        $430,293


         Total Defective Pricing Questioned Costs                             $604,829


Lost Investment Income:                                                        $23,030


Total Questioned Costs                                                        $627,859




1 This represents $205,980 for THIP and $224,313 for COB errors.
                                                                                                      Exhibit B

                                                  Pacificare of Texas, Inc.
                                             Defective Pricing Questioned Costs

2009
                                                                                  Self   Family
  FEHBP Line 5 - Reconciled Rate
  FEHBP Line 5 - Audited Rate

  Bi-weekly Overcharge

  To Annualize Overcharge:
     March 31, 2009 Enrollment
     X 26 Pay Periods                                                             26      26
  Subtotal

  Total 2009 Defective Pricing Questioned Costs                                                   $16,291

2010
                                                                                  Self   Family
  FEHBP Line 5 - Reconciled Rate
  FEHBP Line 5 - Audited Rate

  Bi-weekly Overcharge

  To Annualize Overcharge:
     March 31, 2010 Enrollment
     X 26 Pay Periods                                                             26      26
  Subtotal

  Total 2010 Defective Pricing Questioned Costs                                                   $158,245

2011
                                                                                  Self   Family
  FEHBP Line 5 - Reconciled Rate
  FEHBP Line 5 - Audited Rate

  Bi-weekly Overcharge

  To Annualize Overcharge:
     March 31, 2011 Enrollment
     X 26 Pay Periods                                                             26      26
  Subtotal

  Total 2011 Defective Pricing Questioned Costs                                                   $430,293

Total Defective Pricing Questioned Costs                                                          $604,829
                                                                                                                             EXHIBIT C

                                                           Pacificare of Texas, Inc.
                                                           Lost Investment Income



  Year                                                  2009              2010            2011            31-Oct-2012        Total
Audit Findings:

1. Defective Pricing                                           $16,291       $158,245        $430,293                   $0      $604,829


                                  Totals (per year):           $16,291       $158,245        $430,293                 $0        $604,829
                                 Cumulative Totals:            $16,291       $174,536        $604,829           $604,829        $604,829

                       Avg. Interest Rate (per year):      5.2500%            3.1875%        2.5625%             1.8750%

                  Interest on Prior Years Findings:                $0             $519           $4,472           $9,576         $14,567

                             Current Years Interest:             $428            $2,522          $5,513                 $0           $8,463


    Total Cumulative Interest Calculated Through
                               October 31, 2012:                 $428            $3,041          $9,985           $9,576         $23,030
                                                    APPENDIX




LLB&L
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                                                                                                     reeoncoe       213-4B5-1S00
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Locke Lord niss('l1~ Liddell ,                                                                Direct Telepnone" " " ' "
Attorne ys & Counselors                                                                                   tperry@ lockelord com




                             RECEI~EO AUG 201011                             By E-Ma il and UPS O verni ght




August 17, 20 12




Chief, Community-Rated Audits Group
U.S.Office of Personnel Management
Office of the Inspector General
800 Cranberry Woods Drive, Suite 270
Cranberry Township, Pennsylvania 16066

RE: Comments to the Draft Audit Report on PacifiCare of Texas, Plan Code OF, Report No.
    1C-GF-OQ-12-030



We represent PacifiCare of Texas, a UnitedHealthcare Company r U n ited H ea lth ca re~) in
connection with the above referenced matter. UnitedHealthcare Company is responding to thls
audit on behalf of PacifiCare of Texas ("PacifiCare,M~ P ac if i C a re of Texas," or "the Plan,")

On May 15, 2012, the United States Office of Personnel Management, Office of the Inspedor
General ("OPM/OIG") submitted to the Plan a "Draft Report- (1C-GF-OQ-12-030) ("Draft
Report"), detailing the results of its audit of the Federal Employees Health Benefits Program
("FEHBp·) operations of PacifiCare of Texas for Contract YeaTS 2009 through 2011 . Upon
submission, OPMlOIG requested that the Plan provide comments to the Draft Report.

The Plan appreciates the opportunity to respond to this Draft Report and the willingness of OPM
to help resolve the outstanding issues in this audit. The Plan has used its best efforts to obtain
all relevant information to respond to the Draft Report's findings and recommendations, This
Response will address each issue presented in the Draft Report.


 DEFECTIVE PRICING

 Texas Health Insurance Pool (THIP)




  Atlanta. Auslirl. Boston, c ncaco. Dallas, Houston, LOndon, Los Pongeles New Orleans, New Yol1<.. s scarner se WashIngton DC
                                           APPEND I X


August 17, 2012
Page 2



In its Draft Report , the auditors state that PacifiCare of Texas inappropriately charged the
FEHBP a 1.17 percent state tax assessment related to the THIP. Upon further review, the Plan
has determined that the amount charged to the FEHBP was in fact representative of the THIP
from which the FEHBP is exempt. The Plan acknowledges that the charges were incorrectly
applied to the FEHBP and has corrected the calculation for Contract Year 2012 and beyond .

The Plan has requested the auditors' work papers that support their calculation of the impact of
removing the 1.17 percent attributable to the THIP. The Plan has not yet received those work
papers . The Plan is reserving its rights to challenge the auditors' calculation based on
information the Plan receives from the auditors .            .


Coordination of Benefits (COB)

The Draft Report contains the following statement by OIG auditors:

              "During our COB review, we found two FEHBP claims not properly
       coordinated with Medicare that inappropriately increased the 2011 FEHBP rates.
       The paid amounts were $77,400 and $48,450. Medicare should have paid as
       primary instead of the Plan.

       The Plan states there was no COB information available at the time of the claim
       payment and once the COB information was available, it was beyond the 180­
       day Medicare recovery window. It is the Plan's responsibility to keep its COB
       information up-to-date.

       We adjusted the FEHBP claims experience used in our audited rate development
       to account for the two COB claims . As a result, the FEHBP was overcharged
       $224, 313 in contract year 2011."

The Plan acknowledges that the two claims in question were not coordinated with Medicare .
However, the Plan relied on information from the member as to any other coverage that they
were entitled to. This information is requested on a routine basis and the Plan's systems are
updated accordingly. The Plan feels strongly that the information utilized at the time of claim
adjudication was correct and therefore the claims in question were processed appropriately
according to the information provided by the respective members.


Lost Investment Income

OPM/OIG has asserted that it is entitled to recover lost investment income on the defective
pricing for contract years 2009 - 2011. It has calculated that amount to be $17,486 through
April 30, 2012. The Plan agrees that the FEHBP is entitled to lost investment income on any
overpayments actually due to FEHBP. However, the Plan has calculated a different amount of
overpayment by the FEHBP and therefore the FEHBP is due lost investment income only for
that amount of overpayment.




                                                                                                   2
                                        APPENDIX

August 17, 2012
Page 3



CONCLUSION

In conclusion, PacifiCare has reviewed OPMlOIG's findings for CY 2009 - 2011, presented in
the Draft Report 1C-GF-QO-12-030. Based on our review of the information, PacifiCare has
determined that, although there was an overpayment by FEHBP, the amount is less than that
calculated by OPMlOIG .

Once you have had an opportunity to review our response, please contact me at the address,
phone number or e-mail on this letterhead if you have any questions or require additional
information. Thank you for your ongoing cooperation.


                                   Very truly yours,


                                    LOCKE, LORD, BISSELL & liDDELL LLP





cc:
       1~1!!~!twriting
        UnitedHealthcare




                                                                                             3