oversight

Audit of the Federal Employees Health Benefits Program Operations at Aetna Open Access - Northern New Jersey

Published by the Office of Personnel Management, Office of Inspector General on 2015-03-23.

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 





                Audit of the Federal Employees Health Benefits
                 Program Operations at Aetna Open Access
                             Northern New Jersey

                                            Report Number 1C-JR-00-14-058 

                                                    March 23,2015 





                                                              --CAUTION-­
This audit r epot·t has been distributed to Federal officials who are n sponsible for the administration of the audited program. This audit report may
contain pt·opl'ietat·y data which is protected by Federal l aw (18 U.S.C. 1905). Therefot·e, while this audit report is available undet· the Freedom of
Information Act and made available to the public on the OIG webpage (http:lhmmv.opm.govl our-iuspector-geuernl), caution needs to be exercised
before releasing the t·epot·t to the general public as it may contain proprietary information that was redacted from the publicly distributed copy.
            EXECUTIVE SUMMARY 

         Audit ofthe Federal Employees Health Benefits Program Operations at Aetna
                                  Access - Northern New ~


Why Did We Conduct the Audit?            What Did We Find?

The objectives of om audit were to       We detennined th at th e FEHBP rates were developed by the Plan
detennine if Aetna Open Access -         in accordan ce with applicable laws, regulations, an d the U.S .
Notthem New Jersey (Plan) offered        Office of Personnel Management's Rate Instructions to
the Federal Employees Health             Commlmity-Rated Can iers for the year audited. We therefore did
Benefits Program (FEHBP) market          not issue a draft repott and are not making any recommendations.
price rates and that the loadings
applied to the FEHBP rates were
reasonable and equitable. Additional
tests were perfotmed to dete1mine if
the Plan was in compliance with the
provisions of the laws and regulations
goveming the FEHBP.

What Did We Audit?

Under contract 2914, the Office of
the Inspector General completed a
perfotmance audit of the FEHBP's
rates offered for contract year 2011.
Om audit fieldwork was conducted
from August 11 , 2014 tluough
August 16, 2014 at the Plan's office
in Blue Bell, Pennsylvania.




Michael R. Esser
Assistant I nspector General
f or Audits
                ABBREVIATIONS

CFR      Code of Federal Regulations
FEHBP    Federal Employees Health Benefit Program
FY       Fiscal Year
OIG      Office of the Inspector General
OPM      U.S. Office of Personnel Management
Plan     Aetna Open Access – Northern New Jersey
SSSG     Similarly Sized Subscriber Group
U.S.C.   United States Code




                              ii
                               TABLE OF CONTENTS 


                                                                                                                          Page 

         EXECUT IVE SUMMARY ......................................................................................... i 


         ABBREVIATIONS ..................................................................................................... ii 


I. 	     BACK GROUND .......................................................................................................... ! 


II. 	    OBJECTIVES, SCOPE, AND METHODOLOGY ..................................................3 


III. 	   RESULTS OF THE AUDIT .......................................................................................5 


IV. 	    MAJOR C ONTRIBUTORS TO TillS REPORT ....................................................6 


         REPORT FRAUD, WAST E, AND MI SMANAGEMENT ...................................... ? 

                                I. BACKGROUND 



This final rep01t details the audit results of the Federal Employees Health Benefits Program
(FEHBP) operations at Aetna Open Access - N01them N ew Jersey (Plan). The audit covered
contract year 2011 , an d was conducted at the Plan ' s office in Blue Bell, Pennsylvania.

The audit was conducted pursuant to FEHBP contract CS 2914; 5 U.S .C. Chapter 89; and 5 Code
of Federal Regulations (CFR) Chapter 1, Part 890. The audit was perf01m ed 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 Benefi ts 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 Healthcar e and Insurance Office. Health insuran ce coverage is provided through
contracts with health insurance can iers th at provide service benefits, indemnity benefi ts, or
comprehensive medical services.

Commlmity-rated caniers patticipating in the FEHBP are subject to various Federal, state and
local laws, regulations, and ordinan ces. While most can iers are subject to state j urisdiction,
many are further subject to the Health Maintenance Organization Act of 1973 (Public Law 93­
222), as am ended (i.e. , many community-rated caniers ar e federally qualified) . In addition,
pruticipation in th e FEHBP subjects the caniers to the Federal Employees Health Benefits Act
and implementing regulations promulgated by OPM.

The chrut to the right shows the number of FEHBP contracts an d members rep01ted by the Plan
as of Mru·ch 31 for the contract year audited.

                                                                   FEHBP
The FEHBP should pay a market price rate,
                                                             Contracts / M embers
which is defmed as the best rate offered to
                                                             As of Marc h 31, 2011
either of the two groups closest in size to the
FEHBP. In contracting with commlmity­                  12,000
                                                       10,000
rated cruTiers, OPM relies on catTier                   8,000
                                                        6,000
complian ce with appropriate laws an d                  4 ,000
                                                        2,000
regulations an d, consequently, does not
negotiate base rates. OPM negotiations
relate primarily to the level of coverage and
oth er lmique features of the FEHBP.




                                                  1                           Rep01t No. 1C-JR-00-14-058
The Plan has participated in the FEHBP since 2002 and provides health benefits to FEHBP
members in the Northern New Jersey area. The last audit conducted by our office was a full
scope audit and covered contract years 2006 through 2010. 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-JR-00-14-058
 II. OBJECTIVES, SCOPE, AND METHODOLOGY 



Objective
The primaty objectives of the audit were to detennine if the Plan offered the FEHBP market
price rates and that the loadings to the FEHBP rates were reasonable and equitable. Additional
tests were perf01med to detetmine whether the Plan was in compliance with the provisions of the
laws and regulations goveming the FEHBP.

Scope
We conducted this perfonnance audit in accordance with generally accepted govemment
auditing stan dards. Those standards require that we plan and perf01m the audit to obtain
sufficient, appropriate evidence to provide a reasonable basis for om findings and conclusions
based on om audit objectives. We believe that the evidence obtained provides a reasonable basis
for om findings and conclusions based on om audit objectives.

This perfonnance audit covered contract year 2011. For this year, the FEHBP paid
approximately $58.8 million in premimns to the Plan.

OIG audits of community-rated can1ers are designed to test catTier compliance with the FEHBP
contract, applicable laws and regulations, and the rate instm ctions . These audits are also
designed to provide reasonable assmance of detecting enors, inegularities, and illegal acts.

We obtained an understanding of the Plan's intemal control structure, but we did not use this
inf01mation to detetmine the natm e, timing, and extent of om audit procedmes. However, the
audit included such tests of the Plan's rating system and such oth er auditing procedmes
considered necessaty lmder the circumstan ces. Om review of intemal conti·ols was limited to the
procedmes the Plan has in place to ensme that:

       • 	 The appropriate Similarly Sized Subscriber Groups (SSSG) were selected;

       • 	 the rates charged to the FEHBP were the mru·ket price rates (i.e., equivalent to the best
           rate offered to the SSSGs); and

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

In conducting the audit, we relied to vruying 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 vru·ious inf01mation systems involved. However, nothing catne to om attention dming om
audit testing utilizing the computer-generated data to cause us to doubt its reliability. We believe
that the available data was sufficient to achieve om audit objectives. Except as noted above, the


                                                 3	                           Rep01i No. 1C-JR-00-14-058
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 August 11, 2014 through August 16, 2014 at the Plan’s
office in Blue Bell, Pennsylvania. Additional audit work was conducted at our field offices in
Jacksonville, Florida and Cranberry Township, Pennsylvania.

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.

To test the Plan’s compliance with the FEHBP health benefit provisions related to coordination
of benefits with Medicare, we selected a judgmental sample of potential uncoordinated claim
lines. We queried the Plan’s FEHBP claims data for any members over the age of 65 and sorted
by the Insurance Amount Paid. We selected all claims over $10,000. This resulted in a universe
of 20 members with 27 claims. We reviewed all the claims in the universe. We sent the entire
universe to the Plan for review to determine if the claims were properly coordinated with
Medicare.




                                                4                           Report No. 1C-JR-00-14-058
                   III. RESULTS OF THE AUDIT 



Our audit showed that the Plan' s rating of the FEHBP was in accordance with applicable laws,
regulations, and the rate instm ctions for conu·act year 2011. Consequently, the audit did not
identify any questioned costs and no con ective action is necessmy.




                                            5                              Rep01i No. 1C-JR-00-14-058
 IV. MAJOR CONTRIBUTORS TO THIS REPORT

COMMUNITY-RATED AUDITS GROUP

          , Auditor-in-Charge

           , Lead Auditor




          , Group Chief

          , Senior Team Leader




                                 6   Report No. 1C-JR-00-14-058
                                                                             



               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
  
                                                                             
                                                                             




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