us, OFFICE OF PERSOJ\t"NEL MANAGEMENT OfFiCE OF THE INSPECTOR GENEIV\L OFFICE OF AUDITS Final Audit Report Subject: Audit of the Federal Employees Health Benefits Program Operations at HMO Health Ohio Report No. 1C-L4-00-1 0-040 Date: Octohpr 20 2010 -- CAlTION-- ThiS &udit rellurl ha~ be("1) di:;.i ....ibll!(O lu I-'cd<'ral oftirblls ~~hl) :\r" rf~p()nsibli.. f()f lh(" lldmil~iSIl"'~fiorl orlhc- sud;'l~d program. Thi§: ~ud~l repOrll1ln~ canlain (lrop6elary llllia ~~Ihi .. h t~ fll""ltdrd b~' F~rlHlolll:l\~ 'Us L .S.L:. (9051. Thcn::forc. 'Olo'hilr lhis 1I11L1U rt:oror1 is ~n'ail:able undtr lhe' Fn~e<.Jom (Il"tnJor-m.ll.tioli o-'\,el flntl Ol<luC lI\;lil.=lble 10 l~l\' pUblic on Ihe ole webp:age,c311Iion l1r;'eds 10 bt "xrni~N' hefOre n:leB~il"lg the repOtllu the gCrll:r>11 pllhli~ :l~, It mll~ rOI\hlill rr(ll1f'icu.r\ ir,fOl'ln:lliun (hl'll W~<; '/1d;,tC'ieu from the publkly di,~lr~tlUlcd copy. UNITED STATES OFFICE OF PERSONNEL MANAGEMENT \VJshingtorJ. DC 204.15 Ojl1n- of Ihl," Jn~p(:\.·(DrGcneml AUDIT REPORT Federal Employees Health Benefits Program Community-Rated Health Maintenance Organization HMO Health Ohio Contract Number CS 20lS - Plan Code L4 Cleveland, Ohio Report No. 1C-L4-00-1O-040 D~le: October 20 , 20 1 0 Michael R. Esser Assistant Inspector General for Audits www_opm.J,!l!v U ITED STATES OFFICE OF PERSONNE1. MANAGEMENT Office of !he I n~I!'S10'f 'Gcner ;11 EXECUTIVE SUMMARY Federal Employees lIeallh Bellefits P"ogram Community-Rated Health Maintenance Organization HMO Health Ohio Contract Number CS 2015 - PlaD Code L4 Cleveland, Ohio Report No. lC-L4-00-10-040 Date: October 20, 2010 The Office of the Inspector General performed an audit of the Federal Employees Heallh Benefits Program (FEHBP) operations at HMO Health Ohio (Plan). The audit covered contract years 2006 through 2009 and was conducted at the Plan's office in Clevelalld. Ohio. We found that the FEHBP rates were developed in accordance with the applicable laws, regulations, and the Office of Personnel Management'~ rating instrLlctions for the years audited. www.opm.gov CONTENTS Page EXECCTIVE SU\<lMARY 1 I. INTRODUCTION A):D BACKGROU~O 1 JI. OBJECTIVES, SCOPE, AND 1\fETHODOLOGY 3 III. RESULTS OF THE AUDIT.. 5 IV. MAJOR CONTRIBUTORS TO THIS REPORT " 6 1. INTRODUCTIO~ AND BACKGROUND Introduction We completed an audit of the Federal Employees Health Benefits Program (FEHBP) operations at HMO Health Ohio (Plan) in Cleveland. Ohio. The audit covered contract years 2006 through 2009. The audit was conductcd pursuant to the provlsions of Contract CS 2015: 5 U.S.c. Chapter 89; and 5 Code of Federal Regulations (CFR) Chapte, I, Part 890. The audit was perfonned by the Ofiice of Personne.l i\'!anagel11ent's (OPlvl) 0 ffi ce of the Inspector General (OIG), as established by the Inspector Generai Act of 1978. as amended. Background The FEHBP was established by the Federal Employees He,1lth Beneftts Act (Public La,,·; 86-382). enacted on September 28, 1959. The FEHI3P \\'as crea,ed to provide health insurance benefits for federal employees. annuitants. and dependents. The FEHEP is administered by OPM's Retirement and Benefits Office. Tile provisions of the Federal Employees Health Benefits Act are implemented by OP1"1 through regulations codified in Chapter ], Palt 890 of Title 5. CFR. Health insurance coverage is provided through contracts with health insurance carriers \\'ho provide service benefits, indel11n<ty benefits. or comprehensive medical services. Cummunity-rated carriers panicipating in the FEHBP are sllbject to various federal, state and local laws, regulations, and urdinances. \"ihile ,nost carriers are subject to Slate jurisdiction, many are further subject to tne Health I'l/laintemmce Organization Act of [973 (Public Law 93 222), as amendec (i.e .. many communi:y-rated carriers are federally qualified), In addttion, participation in the FFHBP subjects the carriers (0 the l'ederal Employees Health Benefits ....ct and implementing regulations promulgated by OPi\1. The FEHBP should pay a market price rate. FEHBP Contracts/Members whi",h is uefineu a, Llle best rate olrercLi tu March 31 either oflhe two groups closest in size to 5,000 tbe FEHBP. tn contTRcting with '.500 community-rated carriers. OP/vi relies on ',000 carrier compliance with appropriale laws 3.500 3.000 and regulations and. consequently, does not 2,500 negotiate base rales. OPM negolia1 ions 2,000 relate primarily to the level of coverage and 1.500 other unique features oflhe FEHEP. 1,000 500 The chan to the right shows the number of o FEHBP contracts and members reponed by • Con!racts the Plan as of :--"'Iareh 31 [or each eOluraCI o A1etr;·bers d.SS2 3448 3,024 year audited. The Plan has participated in the FEHBP since 1985 and provides bealth benefits to FEHBP members throughout Nonheast Ohio. The last audit conducted by our offi.ce was a full scope audit and covered contract years 200] through 2005. All issues related to that audit have been resolved. The preliminary results ofth;s audil were discussed vlith Plan officials at an exit conference and in subsequent conespondence. Since the a"dit showed that tbe Plan's rating of the FEHBP was in accordance with the applicable laws, regulations, and instructions, \ve did not issue a draft report. II. OBJECTIVES, SCOPE, AND METHODOLOGY ObjectiHs The primary objectives of the audit were to verify that the Plan offered matket price rates to the FEHBP and to verify that the loadings to the FEHBP rates were reasonable and equitable. Additional tests were performed to dctermir,e whether the Plan was in compliance with the provisions of the laws and regulations governing the FEHBP. FEH8P Premiums Paid to Plan 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 sufticient. 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 audir objectives. This performance audit covered contract years 2006 through 2009. For these years. the FEHBP paid approximately $6 1.5 million in premiums to the Plan. The premiums paid for each contract year audited are shown on the chart above. DIG 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 ,tmcture, but we did not use this infonnation lo deternline the nature, timing, and extent of au, audit procedures. However, the audi t included such tests of the Plan's rating system and such other auditing procedures considered necessary under the circumstances, Our review of inlernal 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 \Vere the market plice rates (i.e., equivalent 10 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 varying degrees on c01l1puter-generated billing, ellroHmenL and claims data provided by the Plan. We did not verify the reliability of the data generated by the variolls il1fonnation systems involved. However, nothing came 10 our attention during our audit testing utilizing the computer-generated data to cause LIS to doubt its reliability. Vv'e 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 Lnited States. The audit fieldwork was performed at the Plan's office in Cleveland, Ohio, during April 2010. Additional audit work was completed at our field offices in Jacksonville, Florida, and Cranbeny Township. Pennsylvania, Methodologv We examined the Plan's federal rate submissions and related documents as a basis for validating the market price rates. Further. we examined claim payments to verify that the cost data used to develop the fEHBP rates was accurate, complete, and valid. In addition, we examined the rate development documentation and billings to other groups, such as the SSSGs, to detennine if the market price was actually charged to the FEHBP, Finally, v,'e used the contract, the Federal Employees Health Benefits Acquisition Regulations (FEHBAR), 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 rati ng system, To gain an understanding oCthe internal controls in the Plan's rating system, we reviewed the Plan's rating system's policies and procedures, interviewed appropriate Plan offLciaJs, and performed other auditing procedures necessary to meet our audit objectives, 4 Ill. RESULTS OF THE AUDIT Our audit showed thm The Plan's rating of the FEHEP was in accordance with the applicable laws, reguJaiions, and OrM's rating inSlruclions to caTTier;, for contract years 2006 through 2009, Consequently, the audit did not idenrify any qUc;tiol1ed costs and no corrective action is necessary. 5 IV, MAJOR CONTRIBUTORS TO THIS REPORT Coromunitv-Rated Audits Group Auditor- rn-Charge Staff Auditor Staff Audi(Or Staff Audi(o~ Chief Senior Team Leader 6
Audit of the Federal Employees Health Benefits Program Operations at HMO Health,Ohio
Published by the Office of Personnel Management, Office of Inspector General on 2010-10-20.
Below is a raw (and likely hideous) rendition of the original report. (PDF)