oversight

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

Published by the Office of Personnel Management, Office of Inspector General on 2017-02-22.

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
        HEALTH PLAN, INC. – LOUISVILLE, KENTUCKY

                                           Report Number 1C-MH-00-16-052
                                                  February 22, 2017




                                                              -- CAUTION --

This audit report has been distributed to Federal officials who are responsible for the administration of the subject program. This non-public version
may contain confidential and/or proprietary information, including information protected by the Trade Secrets Act, 18 U.S.C. § 1905, and the Privacy
Act, 5 U.S.C. § 552a. Therefore, while a redacted version of this report is available under the Freedom of Information Act and made publicly available
on the OIG webpage (http://www.opm.gov/our-inspector-general), this non-public version should not be further released unless authorized by the OIG.
               EXECUTIVE SUMMARY
         Audit of the Federal Employees Health Benefits Program Operations at Humana
                             Health Plan, Inc. – Louisville, Kentucky 

Report No. 1C-MH-00-16-052                                                                                                                   February 22, 2017

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 Health                         in accordance with applicable laws, regulations, and the U.S.
Plan, Inc. – Louisville, Kentucky                          Office of Personnel Management’s Rate Instructions to
(Plan), developed the Federal                              Community-Rated Carriers for the years audited. Therefore, we
Employees Health Benefits Program                          did not issue a draft report and are not making any
(FEHBP) premium rates using                                recommendations in this report document.
complete, accurate, and current data,
and that the rates were equivalent to
the Plan’s Similarly-Sized Subscriber
Groups, as provided in the 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 1773, the Office of the
Inspector General (OIG) completed a
performance audit of the FEHBP’s
rates offered for contract years 2011
and 2012. Our audit fieldwork was
conducted from June 6, 2016, through
December 28, 2016, at the Plan’s
offices in Louisville, Kentucky and in
our OIG offices.



 _______________________
 Michael R. Esser
 Assistant Inspector General
 for Audits
                                                                                i
    This report is non-public and should not be further released unless authorized by the OIG, because it may contain confidential and/or proprietary
                    information that may be protected by the Trade Secrets Act, 18 U.S.C. § 1905, or the Privacy Act, 5 U.S.C. § 552a.
                                            ABBREVIATIONS


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




                                                                       ii
This report is non-public and should not be further released unless authorized by the OIG, because it may contain confidential and/or proprietary
                information that may be protected by the Trade Secrets Act, 18 U.S.C. § 1905, or the Privacy Act, 5 U.S.C. § 552a.
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 


                 REPORT FRAUD, WASTE, AND MISMANAGEMENT





 This report is non-public and should not be further released unless authorized by the OIG, because it may contain confidential and/or proprietary
                 information that may be protected by the Trade Secrets Act, 18 U.S.C. § 1905, or the Privacy Act, 5 U.S.C. § 552a.
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 Health Plan, Inc. – Louisville, Kentucky (Plan). The audit was
conducted pursuant to FEHBP contract CS 1773, 5 United States Code (U.S.C.) Chapter 89; and
5 Code of Federal Regulations 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. 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
                                                                                         800
two groups closest in subscriber size to the
                                                                                         700
FEHBP. In contracting with community-rated
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
FEHBP.                                                                                   200

                                                                                         100

The chart to the right shows the number of                0
                                                                  2011                2012
FEHBP contracts and members reported by the         Contracts      290                 313
Plan as of March 31 for each contract year          Members        679                 713
audited. The Plan has participated in the
FEHBP since 2010 and provides health benefits to FEHBP members in the Louisville, Kentucky
area. This was our first audit of the Plan.

                                                                        1                           Report No. 1C-MH-00-16-052
 This report is non-public and should not be further released unless authorized by the OIG, because it may contain confidential and/or proprietary
                 information that may be protected by the Trade Secrets Act, 18 U.S.C. § 1905, or the Privacy Act, 5 U.S.C. § 552.a
The preliminary results of this audit were discussed with Plan officials at an exit conference.
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-MH-00-16-052
This report is non-public and should not be further released unless authorized by the OIG, because it may contain confidential and/or proprietary
                information that may be protected by the Trade Secrets Act, 18 U.S.C. § 1905, or the Privacy Act, 5 U.S.C. § 552a.
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 Plan
 reasonable basis for our findings and 

 conclusions based on our audit objectives. We

                                                         $3.5
 believe that the evidence obtained provides a 
         $3.0
 reasonable basis for our conclusions based on 
         $2.5
                                                                            Millions




 our audit objectives. 
                                 $2.0
                                                                                         $1.5
 This performance audit covered contract years 
                                         $1.0
 2011 and 2012. For these years, the FEHBP 
                                             $0.5
 paid approximately $6.4 million in premiums
                                            $0.0
                                                                                                       2011                       2012
 to the Plan.
                                                                         Revenue         $2.9                       $3.5


 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: 


                                                                        3                           Report No. 1C-MH-00-16-052
 This report is non-public and should not be further released unless authorized by the OIG, because it may contain confidential and/or proprietary
                 information that may be protected by the Trade Secrets Act, 18 U.S.C. § 1905, or the Privacy Act, 5 U.S.C. § 552a.
           The appropriate SSSGs were selected;

           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 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 from June 6, 2016, through December 28, 2016, at the Plan’s
office in Louisville, Kentucky, and at our offices in Jacksonville, Florida; Washington, D.C.; and
Cranberry Township, Pennsylvania.

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-MH-00-16-052
This report is non-public and should not be further released unless authorized by the OIG, because it may contain confidential and/or proprietary
                information that may be protected by the Trade Secrets Act, 18 U.S.C. § 1905, or the Privacy Act, 5 U.S.C. § 552a.
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 2011 and 2012. Consequently, the audit
 did not identify any questioned costs and no corrective action is necessary.




                                                                  5                                 Report No. 1C-MH-00-16-052
 This report is non-public and should not be further released unless authorized by the OIG, because it may contain confidential and/or proprietary
                 information that may be protected by the Trade Secrets Act, 18 U.S.C. § 1905, or the Privacy Act, 5 U.S.C. § 552a.
                                                                                                                          



                                        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 subject program. This non-public version
may contain confidential and/or proprietary information, including information protected by the Trade Secrets Act, 18 U.S.C. § 1905, and the Privacy
Act, 5 U.S.C. § 552a. Therefore, while a redacted version of this report is available under the Freedom of Information Act and made publicly available
on the OIG webpage (http://www.opm.gov/our-inspector-general), this non-public version should not be further released unless authorized by the OIG.

                                                                                                                Report No. 1C-MH-00-16-052