oversight

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)

                                                   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