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 of Aetna Open Access Plan Code JC Report No. 1C-JC-OO-09-049 Date: October 28. 2009 -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. UNITED STATES OFFICE OF PERSONNEL MANAGEMENT Washington, DC 20415 Office of the Inspector General EXECUTIVE SUMMARY Federal Employees Health Benefits Program Community-Rated Health Maintenance Organization Aetna Open Access Contract Number 2914 - Plan Code JC Blue Bell, Pennsylvania Report No. 1C-,JC-Ofl-fl9-049 Date: october 28, 2009 The Office of the Inspector General performed an audit of the Federal Employees Health Benefits Program (FEHBP) operations at Aetna Open Access - Plan Code .Ie (Plan). The audit covered contract years 2005 through 2008 and was conducted at the Plan's office in Blue Bell. Pennsylvania. The audit showed that the Plan's ratings of the FEIIBP were developed in accordance with applicable laws, regulations, and the Office of Personnel Management's rating instructions for the years audited. www.opm.goY www.usaJobs.gOY UNITED STATES OFFICE OF PERSONNEL MANAGEMENT Washington, DC 20415 Office of the Inspector General AUDIT REPORT Federal Employees Health Benefits Program Community-Rated Health Maintenance Organization Aetna Open Access Contract Number 2914 - Plan Code .IC Blue Bell, Pennsylvania Report No. 1C-.IC-OO-09-049 Da~: october 28, 2009 ~~ Michael R. Esser Assistant Inspector General for Audits www.opm.gov CONTENTS Page EXECUTfVE SUMMARY i I. INTRODUCTION AND BACKGROUND 1 11. OBJECTIVES. SCOPE. AND METHODOLOGY 3 III. RESlJLTS OF Al][)[T 5 rv. 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 Aetna Open Access - Plan Code .lC (Plan) in Blue Bell, Pennsylvania. The audit covered contract years 2005 through 2008. The audit was conducted pursuant to the provisions of Contract CS 2914; 5 U.S.c. Chapter 89; and 5 Code of Federal Regulations (CFR) Chapter L Part 890. The audit was performed by the Office of Personnel Management's (OPM) Office of the Inspector General (OIG), as established by the Inspector General Act of 1978, as amended. Background The FEIIBP 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 Center for Retirement and Insurance Services. The provisions ofthe Federal Employees IIealth Benefits Act are implemented by OPM through regulations codified in Chapter I, Part 890 of Title 5. CFR. Health insurance coverage is provided through contracts with health insurance carriers who 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 arc federally qualified). In addition, participation in the FEHEP subjects the carriers to the Federal Employees IIealth Benefits Act and implementing regulations promulgated by OPM. The FEHBP should pay a market price rate, FEHBP Contracts/Members March 31 which is defined as the best rate offered to either of the two groups closest in size to 35,000 the r"EHBP. In contracting with 30,000 community-rated carriers. Ol'M relies on 25,000 carrier compliance with appropriate laws 20,000 and regulations and, consequently, does not negotiate base rates. OPM negotiations 15,000 relate primarily to the level of coverage and 10,000 other unique features of the FEHBP. 5,000 The chart to the right shows the number of a FFIIBP contracts and members reported by • Contracts 14,312 the Plan as of March 31 lor each contract o Members 31.940 year audited. The Plan has participated in the FEHBP since] 983 and provides comprehensive medical services to the FEHBP as a mixed-model plan. Primary health care services are provided to Plan rnern bel's throughout the Connecticut, New York City, and Upstate New York areas. The last audit conducted by our office covered contract years 200],2003, and 2004. All noted exceptions were resolved and amounts questioned were returned to the Plan. The preliminary results of this audit were discussed with Plan officials at an exit conference and through subsequent correspondence. Since the audit showed that the Plan's rating of the FElIBP was in accordance with the applicable laws, regulations, and instructions, we did not issue a draft report. 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. FEHBP Premiums Paid to Plan We conducted this performance audit in accordance $125 with generally accepted government auditing standards. Those standards require that we plan and $120 II) perform the audit to obtain sufficient, appropriate c $115 evidence to provide a reasonable basis for our ~ i findings and conclusions based on our audit $110 objectives. We believe that the evidence obtained $105 provides a reasonable basis for our findings and conclusions based on our audit objectives. $100 • Revenue This performance audit covered contract years 2005 through 2008. For these contract years the FEHBP paid approximately $474.3 million in premiums to the Plan. The premiums paid for each contract year audited are shown on the chart to the right. 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 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 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 performed at the Plan's office in Blue Bell, Pennsylvania during June 2009. Additional audit work was completed at our offices in Washington, D.C. 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 ifthe 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's policies and procedures, interviewed appropriate Plan officials, and performed other auditing procedures necessary to meet our audit objectives. 4 III. RESULTS OF AUDIT Our audit showed that the Plan's rating of the FElIBP was in accordance with the applicable laws, regulations, and OPM's rating instructions to carriers for contract years 2005 through 2008. 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 FEHBP of Aetna Open Access Plan Code JC, Blue Bell, Pennsylvania
Published by the Office of Personnel Management, Office of Inspector General on 2009-10-28.
Below is a raw (and likely hideous) rendition of the original report. (PDF)