oversight

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)

         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