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 Blue Care Network of Michigan, Inc. Report No. IC-LX-OO-IO-007 Date: February 19, 2010 -- CAUTION -- ThiS ;ludil ,'epnrl h:ls been i1isl,-ilJuled It, Federal om(i~ls wh(, arc nSJlllusihlcr.,,- tlie ~dnlinislr;llio" of lhe audiled progj'<lul. This audit rqlol" 'Ilay contain propril't<ll"y d<lla "hid, is pWlecled b~' ""ederallaw (18 ll,S.C 19(5), TIH;:n:J(H"c. while litis audit rqll,n is a~ailahlc under the Freedom of luronnalion Act 'Ind made aV;lilable to the public on lhe 01(; webrlllge. e;lulian needs 10 he ewrdsed bet"(.. ,c releasing Ihe report 10 [he genel"al public as il rnay conla;n pJ"OI)rietary information lhal was redacted from Ihe puhlich' distrihnlcd copy. 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 Blue Care Network of Michigan, Inc. Contract Number 2011 - Plan Code LX Southfield, Michigan Report No. IC-LX-00-IO-007 Da~: February 19. 2010 Michael R. Esser Assistant Inspector General for Audits www.opm.gov www.usajobs.gov 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 Blue Care Network of Michigan, Inc. Contract Number 2011 - Plan Code LX Southfield, Michigan Report No. lC-LX-OO-lO-007 Da~: February 19, 2010 The Office of the Inspector General performed an audit of the Federal Employees Health Benefits Program (FEHBP) operations at Blue Care Network of Michigan, Inc. (Plan). The audit covered contract years 2006 through 2009 and was conducted at the Plan's office in Southfield, Michigan. The audit showed that the Plan's rating of the FEHBP was developed in accordance with applicable laws, regulations, and the Office of Personnel Management's rating instructions for the years audited. www.opm.goY www.usiljobs.goY CONTENTS I. INTRODUCTION AND BACKGROUND Introduction We completed an audit of the Federal Employees Health Benefits Program (FEHBP) operations at Blue Care Network of Michigan, Inc. (Plan). The audit covered contract years 2006 through 2009 and was conducted at the Plan's office in Southfield, Michigan. The audit was conducted pursuant to the provisions of Contract CS 2011; 5 V.S.c. Chapter 89; and 5 Code of Federal Regulations (CFR) Chapter 1, 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 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, arumitants, and dependents. The FEHBP is administered by OPM's Retirement and Benefits Office. The provisions of the Federal Employees Health Benefits Act are implemented by OPM through regulations codified in Chapter 1, Part 890 of Title 5, CFR. Health insurance coverage is provided through contracts with health insurance caITiers who provide service benefits, indemnity benefits, or comprehensive medical services. Conununity-rated carriers participating in the FEHBP are subject to various federal, state and local laws, regulations, and ordinances. While most catTiers 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. The FEHBP should pay a market price rate, FEHBP Contracts/Members which is defined as the best rate offered to March 31 either of the two groups closest in size to 20,000 the FEHBP. In contracting with 18,000 community-rated carriers, aPM relies on 16,000 14,000 cani.er compliance with appropriate laws 12,000 and reg:ulations and, consequently, does not 10,000 negotiate base rates. aPM negotiations 8,000 relate primarily to the level of coverage and 6,000 other unique features of the FEHBP. 4,000 2,000 The chaI1 to the right shows the number of o 2006 2007 2008 2009 FEHBP contracts and members reported by 4,279 5,224 7,948 8,257 • Contracts the Plan as of March 31 for each contract o Members 7,730 12,118 18,717 19.415 year audited. The Plan has participated in the FEHBP since 1984 and provides comprehensive medical services to the FEHBP as an individual practice plan. Primary health care services are provided to most of Michigan. The last audit conducted by our office covered contract years 2002 through 2005. All questioned costs associated with that audit have been resolved. 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 FEHBP was in accordance with applicable laws, regulations, and instructions, we did not issue a draft report. 2 II. OBJECTIVES, SCOPE, AND METHODOLOGY Objectives The primary objectives ofthe audit were to verify that the Plan offered market price rates to the FEHBP and to veritY 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. We conducted this perfOlmance audit in accordance FEHBP Premiums Paid to Plan with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate $40 evidence to provide a reasonable basis for our $35 $30 findings and conclusions based on our audit $25 objectives. We believe that the evidence obtained $20 provides a reasonable basis for our findings and $15 conclusions based on our audit objectives. $10 $5 This performance audit covered contract years 2006 $0 through 2009. For 2006 through 2008, the FEHBP paid approximately $108.8 million in premiums to _Revenue the Plan. I The premiums paid for each contract year audited m'e shown on the chart to the right. OlG audits of community-rated caniers 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 ofthe Plan's internal control stmcture, but we did not use this infoffilation to detennine 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 intemal 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 otfered to SSSGs); and • the loadings to the FEHBP rates were reasonable and equitable. 1 The Subscription Income Report for 2009 was not available al the time this report was completed. "J In conducting the audit, we relied to varying degrees on computer-generated billing, ernollment, and claims data provided by the Plan. We did not verify the reliability of the data generated by the various infOlmation 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 perfonned at the Plan's office in Southfield, Michigan during November 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 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 system. To gain an lmderstanding 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 THE AUDIT OUf audit showed that the Plan's rating of the FEHBP was in accordance with the applicable laws, regulations, and OPM's rating instructions to carriers for contract years 2006 through 2009. 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 Lead Auditor Auditor Chief Senior Tearn Leader 6
Audit of the Federal Employees Health Benefits Program Operations of Blue Care Network of Michigan, Inc
Published by the Office of Personnel Management, Office of Inspector General on 2010-02-19.
Below is a raw (and likely hideous) rendition of the original report. (PDF)