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

Audit of the Federal Employees Health Benefits Program Operations at MVP Health Plan, Inc. - Western Region

Published by the Office of Personnel Management, Office of Inspector General on 2014-03-14.

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
MVP Health Plan, Inc. – Western Region

Report No. 1C- GV-00-13-066

Date: March 14, 2014

-- 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
MVP Health Plan, Inc. – Western Region
Contract Number CS 2362 - Plan Code GV
Schenectady, New York

Report No. 1C-GV-00-13-066 Date: March 14, 2014

Michael R. Esser
Assistant Inspector General
for Audits

Federal Employees Health Benefits Program
Community-Rated Health Maintenance Organization
MVP Health Plan, Inc. – Western Region
Contract Number CS 2362 - Plan Code GV
Schenectady, New York

Report No. 1C-GV-00-13-066 Date: March 14, 2014

The Office of the Inspector General performed an audit of the Federal Employees Health
Benefits Program (FEHBP) operations at MVP Health Plan, Inc. – Western Region (Plan). The
audit covered contract years 2010 through 2012, and was conducted at the Plan’s office in
Schenectady, New York. We found that the FEHBP rates were developed in accordance with
applicable laws, regulations, and the Office of Personnel Management’s Rating Instructions to
Community-Rated Carriers 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
I. INTRODUCTION AND BACKGROUND

Introduction

We completed an audit of the Federal Employees Health Benefits Program (FEHBP) operations
at MVP Health Plan, Inc. - Westem Region (Plan). The audit covered contract years 2010
through 2012, an d was conducted at the Plan's office in Schenectady, New York. The audit was
conducted pursuant to the provisions of Contract CS 2362; 5 U.S.C. Chapter 89; and 5 Code of
Federal Regulations (CFR) Chapter 1, Pmi 890. The audit was perfonned by the Office of
Personnel Management's (OPM) Office of the Inspector General (OIG), as established by the
Inspector General Act of 1978, as am ended.

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 insuran ce
benefits for federal employees, annuitants, an d dependents. The FEHBP is administered by
OPM 's Healthcare and Insurance Office. The provisions of the Federal Employees Health
Benefits Act m·e implemented by OPM through regulations codified in Chapter 1, Pmi 890 of
Title 5, CFR. Health insuran ce coverage is provided through contracts with health insurance
can iers who provide service benefits, indemnity benefits, or comprehensive m edical services.

Community-rated caniers pa1i icipating in the FEHBP are subject to various federal, state and
local laws, regulations, and ordinances. While most can1ers are subject to state j urisdiction,
many are fmi her subject to the Health Maintenan ce Organization Act of 1973 (Public Law 93
222), as am ended (i.e., many community-rated cmTiers are federally qualified). In addition,
pmiicipation in the FEHBP subjects the cmTiers to the Federal Employees Health Benefits Act
and implementing regulations promulgated by
OPM. FEHBP Contracts/Members
March 31 ---

The FEHBP should pay a mm·ket price rate,
which is defined as the best rate offered to either
of the two groups closest in size to the FEHBP.
In contracting with community-rated can iers,
OPM relies on cmTier compliance with
appropriate laws and regulations and,
consequently, does not negotiate base rates.
OPM negotiations relate primm·ily to the level of
coverage and other unique features of the
FEHBP.

The chmi to the right shows the number of
FEHBP contracts and members rep01ied by the Plan as of March 31 for each contract year
audited .1

1The Plan's reported figmes for contract year 2011 are inaccmate. We used OPM's reported contract figme for
contract year 2011 , however the OPM member figme was not available.
1

The Plan has participated in the FEHBP since 1988 and provides health benefits to FEHBP
members in the New York counties of Monroe, Genesee, Livingston, Ontario, Orleans, Seneca,
Steuben, Wayne, Wyoming, and Yates. The last full audit of the Plan conducted by our office
covered contract years 2006 through 2009. All issues from that audit have been resolved.

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’s Rate Instructions to
Community-Rated Carriers (rate 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 $40
standards. Those standards require that we plan $35
$30

Millions
and perform the audit to obtain sufficient, $25
appropriate evidence to provide a reasonable basis $20
for our findings and conclusions based on our audit $15
objectives. We believe that the evidence obtained $10
$5
provides a reasonable basis for our findings and $0
conclusions based on our audit objectives. 2010 2011 2012
Revenue $32.6 $36.2 $37.0

This performance audit covered years 2010 through
2012. For these contract years, the FEHBP paid
approximately $105.8 million in premiums to the Plan, as 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 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
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
3
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 Schenectady, New York, during
September 2013. Additional audit work was completed at our offices located in Jacksonville,
Florida and Cranberry Township, Pennsylvania.

Methodology

We examined the Plan’s Federal rate submission and related documents as a basis for validating
the market price rate. 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 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
III. RESULTS OF THE AUDIT
Our audit showed that the Plan’s rating of the FEHBP was in accordance with applicable laws,
regulations, and rate instructions for contract years 2010 through 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

, Lead Auditor

Chief

, Senior Team Leader