oversight

Audit of the Federal Employees Health Benefits Program Operations at Humana Medical Plan, Inc. - Tampa

Published by the Office of Personnel Management, Office of Inspector General on 2015-09-21.

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

         AUDIT OF THE FEDERAL EMPLOYEES HEALTH
         BENEFITS PROGRAM OPERATIONS AT HUMANA
                MEDICAL PLAN, INC. - TAMPA

                                            Report Number 1C-LL-00-15-036
                                                  September 21, 2015




                                                             -- 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 (http://www.opm.gov/our-inspector-general), 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.
             EXECUTIVE SUMMARY 

         Audit of the Federal Employees Health Benefits Program Operations at Humana
                                   Medical Plan, Inc. - Tampa
Report No. 1C-LL-00-15-036                                                                  September 21, 2015

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

The primary objectives of the audit      We determined that the FEHBP rates were developed by the Plan
were to determine if Humana Medical      in accordance with applicable laws, regulations, and the U.S.
Plan, Inc. - Tampa (Plan) developed      Office of Personnel Management’s Rate Instructions to
the Federal Employees Health             Community-Rated Carriers for the years audited. We therefore did
Benefits Program (FEHBP) premium         not issue a draft report and are not making any recommendations.
rates using complete, accurate and
current data, and that the rates were
equivalent to the Plan’s Similarly
Sized Subscriber Groups, as provided
in Federal Employees Health Benefits
Acquisition Regulation 1652.215-
70(a). Additional tests were
performed to determine whether the
Plan was in compliance with the
provisions of the laws and regulations
governing the FEHBP.

What Did We Audit?

Under contract 2110, the Office of the
Inspector General completed a
performance audit of the FEHBP’s
rates offered for contract years 2010
through 2012. Our audit fieldwork
was conducted from March 9, 2015
through March 13, 2015 at the Plan’s
office in Louisville, Kentucky.




 _______________________
 Michael R. Esser
 Assistant Inspector General
 for Audits
                                                      i
              ABBREVIATIONS

CFR      Code of Federal Regulations
FEHBAR   Federal Employees Health Benefits Program Acquisition Regulations
FEHBP    Federal Employees Health Benefits Program
OIG      Office of the Inspector General
OPM      U.S. Office of Personnel Management
Plan     Humana Medical Plan, Inc. - Tampa
SSSG     Similarly Sized Subscriber Group
U.S.C.   United States Code




                               ii
IV. MAJOR CONTRIBUTORS TO THIS REPORT
          TABLE OF CONTENTS

                                                                                                                         Page 

          EXECUTIVE SUMMARY ......................................................................................... i 


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


  I.	     BACKGROUND ..........................................................................................................1 


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


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


  IV.	    MAJOR CONTRIBUTORS TO THIS REPORT ....................................................6 


          REPORT FRAUD, WASTE, AND MISMANAGEMENT

IV. MAJOR CONTRIBUTORS
            I. BACKGROUND
                       TO THIS REPORT

This final report details the audit results of the Federal Employees Health Benefits Program
(FEHBP) operations at Humana Medical Plan, Inc. - Tampa (Plan). The audit covered contract
years 2010 through 2012, and was conducted at the Plan’s office in Louisville, Kentucky.

The audit was conducted pursuant to FEHBP contract CS 2110, 5 United States Code (U.S.C.)
Chapter 89; and 5 Code of Federal Regulations (CFR) Chapter 1, Part 890. The audit was
performed 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 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, and is administered by OPM’s
Healthcare and Insurance Office. Health insurance coverage is provided through contracts with
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 subjects the carriers to the Federal Employees Health Benefits Act
and implementing regulations promulgated by OPM.                 FEHBP Contracts/Members
                                                                            March 31

The FEHBP should pay a premium rate that is
equivalent to the best rate given to either of the           900
two groups closest in subscriber size to the                 800
FEHBP. In contracting with community-rated                   700
carriers, OPM relies on carrier compliance with              600
appropriate laws and regulations and,                        500
consequently, does not negotiate base rates.                 400
OPM negotiations relate primarily to the level               300
of coverage and other unique features of the                 200
FEHBP.                                                       100
                                                               0
                                                                     2010              2011   2012
The chart to the right shows the number of               Contracts   319               369     367
FEHBP contracts and members reported by the              Members     647               784    809
Plan as of March 31 for each contract year
audited.


                                                     1                         Report No. 1C-LL-00-15-036
The Plan has participated in the FEHBP since 1989 and provides health benefits to FEHBP
members in the Tampa, Florida area. This is the first audit of this plan code.

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-LL-00-15-036
IV. OBJECTIVES,
II.  MAJOR CONTRIBUTORS
                SCOPE, ANDTO THIS REPORT
                          METHODOLOGY

 Objectives
 The primary objectives of the audit were to determine if the FEHBP premium rates were
 developed using complete, accurate and current data, and were equivalent to the Plan’s Similarly
 Sized Subscriber Groups (SSSGs), as provided in Federal Employees Health Benefits
 Acquisition Regulation (FEHBAR) 1652.215-70(a). Additional tests were performed to
 determine whether the Plan was in compliance with the provisions of the laws and regulations
 governing the FEHBP.

 Scope
 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
                                                              FEHBP Premiums Paid to the Plan
 reasonable basis for our findings and
 conclusions based on our audit objectives. We
 believe that the evidence obtained provides a           $4.0
                                                         $3.5
 reasonable basis for our conclusions based on
                                                         $3.0
                                                      Millions




 our audit objectives.
                                                                   $2.5
                                                                   $2.0
 This performance audit covered contract years                     $1.5
 2010 through 2012. For these years, the                           $1.0

 FEHBP paid approximately $11 million in                           $0.5
                                                                   $0.0
 premiums to the Plan.                                                     2010     2011        2012
                                                                 Revenue   $3.1     $3.9        $4.0

 OIG audits of community-rated carriers are
 designed to test carrier compliance with the
 FEHBP contract, applicable laws and
 regulations, and the 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 had in place to ensure that:

        • The appropriate SSSGs were selected;




                                                  3                               Report No. 1C-LL-00-15-036
       • the rates charged to the FEHBP were developed using complete, accurate and current
       data, and were equivalent to the best rate given to the 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
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 in March 2015 at the Plan's office in Louisville, Kentucky.

Methodology
We examined the Plan’s Federal rate submission and related documents as a basis for validating
its Certificates of Accurate Pricing. In addition, we examined the rate development
documentation and billings to other groups, such as the SSSGs, to determine if the FEHBP rates
were reasonable and equitable. Finally, we used the contract, the FEHBAR, 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.




                                                 4                           Report No. 1C-LL-00-15-036
IV. MAJOR
        III.CONTRIBUTORS  TO
             RESULTS OF THE  THIS REPORT
                            AUDIT

 Our audit showed that the Plan’s rating of the FEHBP was in accordance with applicable laws,
 regulations, and the rate instructions for contract years 2010 through 2012. Consequently, the
 audit did not identify any questioned costs and no corrective action is necessary.




                                             5                             Report No. 1C-LL-00-15-036
IV. MAJOR CONTRIBUTORS TO THIS REPORT

COMMUNITY-RATED AUDITS GROUP 


         , Auditor-in-Charge

          , Lead Auditor




           , Senior Team Leader

           , Group Chief




                                  6   Report No. 1C-LL-00-15-036
                                                                                                                         



                                       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
                     
                                                                                                                         
                                                                                                                         



                                                             -- 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 (http://www.opm.gov/our-inspector-general), 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.

                                                                                                                   Report No. 1C-LL-00-15-036