oversight

Audit of the Federal Employees Health Benefits Program Operations of Aetna Open Access - Plan Code JN

Published by the Office of Personnel Management, Office of Inspector General on 2009-02-03.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

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                                                          US OFFICE OF PERSONNELMANAGE:MENT
                                                              .QFFICEOF THE INSPECTOR GENERAL.
                                                                               OFFIQEOFAUDITS
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         This audit report hlls.been distributed to Federal and non-Federal officials whIt are responsible for th~ administration of .
         tile audited contract. This report may contaiil proprietary data which is protected by Federal law (I8 U.S.c. 1905); .
         therefore, while this report is avallableundertheFr~dont of Information Act, caution needs to be exerdsed before
       . I'eleasingthe reportto thegener:tlpublic.· . .                                         . .
                           UNITED STATES OFFICE OF PERSONNEL MANAGEMENT

                                                Washington, DC 20415



   Office of the
Inspector Uencral




                                                AUDIT REPORT




                                Federal Employees Health Benefits Program

                             Community-Rated Health Maintenance Organization

                                            Aetna Open Access

                                   Contract Number 1766 - Plan Code IN

                                         Blue Bell, Pennsylvania




                         Report No.   lC-JN~OO-09-012         Date: February 3, 2009




                                                                   MichaelR. Esser
                                                                   Assistant Inspector General
                                                                     for Audits




                                                                                                 www.usajobs.goY
           www.opm.goY
                          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 1766 - Plan Code IN

                                         Blue BeU, Pennsylvania

                                                           I




                        Report No. lC-JN-OO-09-012             Date: Febraury 3, 2009


         The Office of the Inspector General performed an auditofthe Federal Employees Health
         Benefits Program (FEHBP) operations at Aetna Open Access - Plan Code IN. The audit
         covered contract years 2006 through 2008 and was conducted at our field office in Jacksonville,
         Florida. We found that the FEHBP rates were developed in accordance with the Office of
         Personnel Management's rules and regulations in 2006,2007, and 2008.




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          www.opm.gov
                            CONTENTS


                                         Page

   EXECU'fIVE SUMMARY                     i


 1. INTRODUCTION AND BACKGROUND           I


II. OBJECTIVES, SCOPE, AND METHODOLOGy    3


III. RESULTS OF 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
of Aetna Open Access - Plan Code IN (Plan) in Blue Bell, Pennsylvania. The audit covered
contract years 2006 through 2008. The audit was conducted pursuant to the provisions of
Contract 1766; 5 U.S.C. Chapter 89; and 5 Code of Federal Regulations (CFR) Chapter 1, Part
890. The audit was perfonned by the Office ofPersonne1 Management's (OPM) Office of the

Inspector General, as established by the Inspector General Act of 1978, as amended.


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 insurance
benefits for federal employees, annuitants, and dependents. The FEHBP is administered by
OPM's Center for Retirement and Insurance Services. The provisions of the Federal Employees
Health Benefits Act are implemented by aPM through regulations codified in Chapter 1, Part
890 of Title 5, CFR. Health insurance coverage is provided through contracts with various
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 su~jects the carriers to the Federal Employees Health Benefits Act
  and implementing regulations promulgated by OPM.

The FEHBP should pay a market price rate,                            FEHBP Contracts/Members

which is defined as the best rate offered to either                         March 31


of the two groups closest in size to the FEHBP.
In contracting with community-rated carriers,             130,000
OPM relies on carrier compliance with                     110,000
appropriate laws and regulations and,                      90,000
consequently, does not negotiate base rates.
                                                           70,000
aPM negotiations relate primarily to the level
of coverage and other unique features of the               50,000
FEHBP.                                                     30.000

                                                           10,000
The chart to the right shows the number of                            2006        2007           2008

FEHBP contracts and members reported by the            • Contracts    52,280     52,689         51,397
Plan for March 31 of each contract year audited.       o Members     114,203     114,501        111,085




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The Plan began participating in the FEHBP in 1982 and provides health benefits to FEHBP
members throughout Washington D.C., Maryland, and Virginia. The last audit of the Plan
conducted by our office was a full scope audit of contract years 2003 through 2005. As a result
ofthat audit, we found that the Plan's rating of the FEHBP was in accordance with the applicable
laws, regulations, and aPM rating instructions for the years audited.

The preliminary results of this audit were discussed with Plan officials at an exit conference.
Since the audit showed that the Plan's rating ofthe FEHBP was in accordance with the
applicable laws, regulations, and instructions, we did not issue a draft report.




                                                 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 detennine whether the Plan was in compliance with the
 provisions of the laws and regulations governing the FEHBP.



 We conducted this performance audit in accordance with generally accepted government
 auditing standards. Those standards require that we plan and perform the audit to obtain
 sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions
 based on our audit objectives. We believe that the evidence obtained provides a reasonable basis
 for our findings and conclusions based on our audit objectives.

 This performance audit covered contract years                              FEHBP Premiums Paid to Plan
 2006 through 2008'. For contract years 2006
 and 2007, the FEHBP paid approximately
 $792.8 million in premiums to the Plan. The                             $450
                                                                        $400
 premiums paid for each contract year audited
                                                                        $350
 are shown on the chart to the right.                                   $300
                                                                        $250
  OIG audits of community-rated carriers are                            $200
                                                                        $150
  designed to test carrier compliance with the                          $100
  FEHBP contract, applicable laws and                                    $50
  regulations, and OPM rate instructions. These

                                                                   • Revenue
  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
 infonnation to determine the nature, timing, and extent of our audit procedures. However, the
 audit included such tests of the Plan's rating systems and such other auditing procedures as we
 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 an SSSG); and

            •	 the loadings to the FEHBP rates were reasonable and equitable.

 J   The Subscription Income Report for 2008 was not available at the time this report was completed.

                                                            3

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 ofthe data generated by
the various infonnation 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
determined that the data available was sufficient to achieve our audit objectives. Except as noted
above, the audit was performed in accordance with generally accepted government auditing
standards, issued by the Comptroller General of the United States.

The audit fieldwork was conducted at our Jacksonville, Florida, field office during November
and December 2008.

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 SSSGs, to detennine if the 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
systems.

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 FEHBP was in accordance with the applicable
laws, regulations, and OPM's rating instructions for contract years 2006, 2007, and 2008.
Consequently, we did not identify any questioned costs and there are no corrective actions
necessary.




                                               5

             IV. MAJOR CONTRIBUTORS TO THIS REPORT


Community-Rated Audits Group

                   Auditor-In-Charge

                    Auditor



                     Group Chief

                          Senior Team Leader




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