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 MVP HEALTH PLAN, INC. – WESTERN REGION Report Number 1C-GV-00-15-006 May 18, 2015 -- 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 MVP Health Plan, Inc. - Western Region Report No. 1C-GV-00-15-006 May 18, 2015 Why Did We Conduct the Audit? What Did We Find? The objectives of our audit were to We determined that the FEHBP rates were developed by the Plan determine if MVP Health Plan, Inc. - in accordance with applicable laws, regulations, and the U.S. Western Region (Plan) offered the Office of Personnel Management’s Rate Instructions to Federal Employees Health Benefits Community-Rated Carriers for the years audited. We therefore did Program (FEHBP) market price rates not issue a draft report and are not making any recommendations. and that the loadings applied to the FEHBP rates were reasonable and equitable. 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 2362, the Office of the Inspector General completed a performance audit of the FEHBP’s rates offered for contract years 2013 and 2014. Our audit fieldwork was conducted from November 10, 2014 through November 14, 2014 at the Plan’s office in Schenectady, New York. _______________________ Michael R. Esser Assistant Inspector General for Audits i ABBREVIATIONS CFR Code of Federal Regulations FEHBP Federal Employees Health Benefits Program FY Fiscal Year OIG Office of the Inspector General OPM U.S. Office of Personnel Management Plan MVP Health Plan, Inc. – Western Region 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………………………..7 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 MVP Health Plan, Inc. – Western Region (Plan). The audit covered contract years 2013 and 2014, and was conducted at the Plan’s office in Schenectady, New York. The audit was conducted pursuant to FEHBP contract CS 2362; 5 U.S.C. Chapter 89; and 5 Code of Federal Regulations (CFR) 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. The FEHBP 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. The chart to the right shows the number of FEHBP contracts and members reported by FEHP Contracts/Members the Plan as of March 31 of each year audited. March 31 The FEHBP should pay a market price rate, 8,793 8,113 9,000 which is defined as the best rate offered to 8,000 7,000 either of the two groups closest in size to the 6,000 3,685 4,189 Contracts 5,000 FEHBP. In contracting with community- 4,000 Members 3,000 rated carriers, OPM relies on carrier 2,000 1,000 compliance with appropriate laws and 0 regulations and, consequently, does not 2013 2014 negotiate base rates. OPM negotiations relate primarily to the level of coverage and other unique features of the FEHBP. 1 Report No. 1C-GV-00-15-006 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 scope audit conducted by our office of the Plan covered contract years 2010 through 2012. 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-GV-00-15-006 IV. MAJOR CONTRIBUTORS II. OBJECTIVES, SCOPE, AND TO THIS REPORT METHODOLOGY Objectives The primary objectives of the audit were to determine if the Plan offered the FEHBP market price rates and 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 We conducted this performance audit in FEHBP Premiums Paid to Plan accordance with generally accepted government auditing standards. Those standards require that $47.2 $50.0 $41.4 we plan and perform the audit to obtain $40.0 sufficient, appropriate evidence to provide a In Millions $30.0 reasonable basis for our findings and Income conclusions based on our audit objectives. We $20.0 believe that the evidence obtained provides a $10.0 reasonable basis for our findings and $0.0 conclusions based on our audit objectives. 2013 2014 This performance audit covered contract years 2013 and 2014. For these years, the FEHBP paid approximately $88.6 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 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 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 Report No. 1C-GV-00-15-006 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 performed from November 10, 2014 through November 14, 2014 at the Plan's office in Schenectady, New York. Additional audit work was completed at our offices in Washington, D.C. and Jacksonville, Florida. Methodology We examined the Plan’s federal rate submission 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 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-GV-00-15-006 IV. MAJORIII. CONTRIBUTORS TO THIS REPORT RESULTS OF AUDIT Our audit showed that the Plan’s rating of the FEHBP was in accordance with applicable laws, regulations, and the rate instructions for contract years 2013 and 2014. Consequently, the audit did not identify any questioned costs and no corrective action is necessary. 5 Report No. 1C-GV-00-15-006 IV. MAJOR CONTRIBUTORS TO THIS REPORT COMMUNITY-RATED AUDITS GROUP , Auditor-in-Charge , Lead Auditor , Senior Team Leader , Group Chief 6 Report No. 1C-GV-00-15-006 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 -- 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. 7 Report No. 1C-GV-00-15-006
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 2015-05-18.
Below is a raw (and likely hideous) rendition of the original report. (PDF)