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 at Blue Care Network of Michigan, Inc. Report No. 1C-LX-00-12-071 Date: February 21, 2013 -- 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, 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. AUDIT REPORT Federal Employees Health Benefits Program Community-Rated Health Maintenance Organization Blue Care Network of Michigan, Inc. Contract Number CS 2011 - Plan Code LX Southfield, Michigan Report No. 1C-LX-00-12-071 Date: 02/21/13 Michael R. Esser Assistant Inspector General for Audits -- 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, 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 Federal Employees Health Benefits Program Community-Rated Health Maintenance Organization Blue Care Network of Michigan, Inc. Contract Number CS 2011 - Plan Code LX Southfield, Michigan Report No. 1C-LX-00-12-071 Date: 02/21/13 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 2010 and 2011. We found that the FEHBP rates were developed in accordance with applicable laws, regulations, and the Office of Personnel Management’s rating instructions for the years audited. i CONTENTS Page EXECUTIVE SUMMARY .............................................................................................. i I. INTRODUCTION AND BACKGROUND..................................................................... 1 II. OBJECTIVES, SCOPE, AND METHODOLOGY ......................................................... 3 III. RESULTS OF THE AUDIT ............................................................................................ 5 IV. MAJOR CONTRIBUTORS TO THIS REPORT ............................................................ 6 1. INTRODUCTION AND BACKGROUND Introduction We completed an audit of the Federal Employees He alth Benefits Program (FEHBP) operations at Blue Care Network of M ichigan, Inc. (Plan). The audit cove red contract years 20 10 and 20 11. The audi t was conducted pursuant to the provisions of Contract CS 20 11; 5 U.S .C. Chapter 89 ; and 5 Code of Fed eral Re gulations (CFR) Cha pter 1, Part 890 . TIle audit was performed by the Offic e of' Personnel Ma nagement' s (OPM) Office of the Inspe ctor General (DIG) , as established by the Inspector Ge ne ral Ac t of 1978, as amended . Background The FEHBP wa s establi shed by the Federal Employees Health Ben efits Ac t (Public Law 86 382), enac ted a ll September 28, 1959. TIle FEHBP wa s crea ted to provide health insur ance benefits for federal employee s, annuitants, and dependents . The FEHBP is administered by OPM' s Healthcare and Insuran ce Office. TIle provi sions of the Fed eral Emp loyees Health Benefits Ac t are implemented by OPM through regulations codified in Chapter 1, Part 890 of Title 5, CFR. Health insuran ce coverage is provided thr ough contracts with health insur ance carriers who provide serv ice bene fits, indemnity benefits, or co mprehe nsive m edical serv ices. Community-rated carriers participating in the FE HBP are subj ect to various federal, state and local laws, regul ations, and ordinances . While most carr iers are subject to state jurisd iction , man y are furth er subject to the He alth Ma intena nce Organization Ac t of 1973 (Public Law 93 222), as amended (i.e ., man y comm unity- rated carriers are fede rally qua lified). In addition, parti cipation in the FEHBP subjects the carriers to the Fed eral Emp loyee s Health B enefits Ac t and implementing regulations promulgated by OP1.1. The FEHBP should pay a marke t pr ice FEHBP Contracts/Members March 31 rate, which is defined as the best rate offered to eithe r of the two gro ups closest in size to the FEHBP. In co ntrac ting with 25,000 community-ra ted carriers, OPM relies on 20,000 carrier comp liance with appropriate laws and regulations and, consequently, does 15,000 not negotiate base rates. OPM negotiations relate primaril y to the level of cove rage 10,000 and other unique fea tur es of the FEHBP. 5,000 The cha rt to the right shows the number of o FEHBP co ntrac ts and members report ed by . Con/racts the Plan as of Ma rch 3 1 for eac h contract c Members year audited . I The Plan has participated in the FEHBP since 1984 and provides health benefits to FEHBP members in the East, Southeast, and West Michigan areas. The last audit of the Plan conducted by our office was a full scope audit of contract years 2006 through 2009. During that audit, we found the FEHBP rates were developed in accordance with applicable laws, regulations, and the Office of Personnel Management’s rate instructions. 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 instructions, a draft report was not issued. 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 determine whether the Plan was in compliance with the provisions of the laws and regulations governing the FEHBP. Scope FEHBP Premiums Paid to Plan We conducted this performance audit in accordance with generally accepted government $100 auditing standards. Those standards require that Millions we plan and perform the audit to obtain $80 sufficient, appropriate evidence to provide a $60 reasonable basis for our findings and conclusions $40 based on our audit objectives. We believe that $20 the evidence obtained provides a reasonable $0 basis for our findings and conclusions based on 2010 2011 Revenue $78.6 $96.3 our audit objectives. This performance audit covered contract years 2010 and 2011. For these contract years, the FEHBP paid approximately $174.9 million in premiums to the Plan. The premiums paid for each contract year audited are shown on the chart above. OIG 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 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 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 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 3 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 conducted during the month of October 2012, and additional audit work was completed at our offices located in Jacksonville, Florida, and Cranberry Township, Pennsylvania. 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 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 III. RESULTS OF THE AUDIT Our audit showed that the Plan’s rating of the FEHBP was in accordance with applicable laws, regulations, and OPM’s rating instructions to carriers for contract years 2010 and 2011. 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 , Auditor ., Chief , Senior Team Leader 6
Audit of the Federal Employees Health Benefits Program Operations at Blue Care Network of Michigan, Inc.
Published by the Office of Personnel Management, Office of Inspector General on 2013-02-21.
Below is a raw (and likely hideous) rendition of the original report. (PDF)