oversight

Audit of the Federal Employees Health Benefits Program Operations at MVP Health Plan, Inc. - Mid-Hudson Region

Published by the Office of Personnel Management, Office of Inspector General on 2015-03-23.

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 





           AUDIT OF THE FEDERAL EMPLOYEES HEALTH 

         BENEFITS PROGRAM OPERATIONS AT MVP HEALTH 

                PLAN, INC.- MID-HUDSO N REGION 


                                           Re p o rt Numbe r 1C- MX-00-15-004 

                                                      M a r c h 23,2015 





                                                              -- CAUTION-­
This audit r epot·t has been distributed to Federal officials who are n sponsible for the administration of the audited program. T his audit report may
contain pt·opl'ietat·y data which is protected by Federal law (18 U.S.C. 1905). Therefot·e, while this audit report is available undet· the Freedom of
Information Act and made available to the public on the OIG webpage (http:lhmmv.opm.govl our-iuspector-geuernl), caution needs to be exer cised
before releasing the t·epot·t to the general public as it may contain proprietary information that was redacted from the publicly distributed copy.
           EXECUTIVE SUMMARY 

          Audit ofthe Federal Employees Health Benefits Program Operations at MVP
                           Health       Inc. - Mid-Hudson


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

The objectives of om audit were to       We detennined th at th e FEHBP rates were developed by the Plan
detennine if MVP Health Plan, Inc. ­     in accordan ce with applicable laws, regulations, an d the U.S .
Mid-Hudson Region (Plan) offered         Office of Personnel Management's Rate Instructions to
the Federal Employees Health             Commlmity-Rated Caniers for the year audited. We therefore did
Benefits Program (FEHBP) market          not issue a draft rep01t and are not making any recommendations.
price rates and that the loadings
applied to the FEHBP rates were
reasonable and equitable. Additional
tests were perf01med to dete1mine if
the Plan was in compliance with the
provisions of the laws and regulations
goveming the FEHBP.

What Did We Audit?

Under contract 2362, the Office of the
Inspector General completed a
perf01mance audit of the FEHBP's
rates offered for contract year 2014.
Om audit fieldwork was conducted
from November 10, 2014 tluough
November 14, 2014 at the Plan's
office in Schenectady, New York.




Michael R. Esser
Assistant Inspector General
for Audits
               ABBREVIATIONS

CFR      Code of Federal Regulations
FEHBP    Federal Employees Health Benefit Program
FY       Fiscal Year
OIG      Office of the Inspector General
OPM      U.S. Office of Personnel Management
Plan     MVP Health Plan, Inc. – Mid-Hudson Region
SSSG     Similarly Sized Subscriber Group
U.S.C.   United States Code




                               ii
                               TABLE OF CONTENTS 


                                                                                                                          Page 

         EXECUT IVE SUMMARY ......................................................................................... i 


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


I. 	     BACK GROUND .......................................................................................................... ! 


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


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


IV. 	    MAJOR C ONTRIBUTORS TO TillS REPORT ....................................................6 


         REPORT FRAUD, WAST E, AND MI SMANAGEMENT ...................................... ? 

                               I. BACKGROUND 



This final report details the audit results of the Federal Employees Health Benefits Program
(FEHBP) operations at MVP Health Plan, Inc. -Mid-Hudson Region (Plan) . The audit covered
contract year 2014, and was conducted at the Plan's office in Schenectady, New York.

The audit was conducted pursuant to FEHBP contract CS 2362; 5 U.S .C. Chapter 89; and 5 Code
of Federal Regulations (CFR) Chapter 1, Patt 890. The audit was perf01med 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. The FEHBP is administered by
OPM's Healthcare and Insurance Office. Health insurance coverage is provided through
contracts with health insurance caniers that provide service benefits, indenmity benefits, or
comprehensive medical services.

Commlmity-rated catTiers patticipating in the FEHBP are subj ect to various Federal, state and
local laws, regulations, and ordinances. While most catTiers are subj ect to state j urisdiction,
many are further subject to the Health Maintenance Organization Act of 1973 (Public Law 93­
222), as amended (i.e. , many community-rated catTiers are federally qualified) . In addition,
patticipation in the FEHBP subjects the catTiers to the Federal Employees Health Benefits Act
and implementing regulations promulgated by OPM.

The chatt to the right shows the number of
FEHBP conu·acts and members rep01ted by the
Plan as ofMarch 31,2014.                                       FEHBP 

                                                          Contracts/Members 

The FEHBP should pay a mm·ket price rate,
                                                           March 31, 2014 

which is defmed as the best rate offered to
                                                             4,000
either of the two groups closest in size to the
                                                             3,000
FEHBP. In conu·acting with commlmity-rated                   2,000
caniers, OPM relies on canier compliance
                                                             1,00~ (:::::::~~~~~==
with appropriate laws and regulations and,
                                                                            2014
consequently, does not negotiate base rates.           • Conu·acts          1,647
OPM negotiations relate primarily to the level         • Members            3,083
of coverage and other unique features of the
FEHBP. 





                                                  1                         Report No. 1C-MX-00-1 5-004
The Plan has participated in the FEHBP since 1988 and provides health benefits to FEHBP
members throughout the Upstate New York area. The last audit conducted by our office was a
performance audit of the Plan’s rate reconciliation and covered contract year 2013. There were
no issues identified during that audit.

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-MX-00-15-004
 II. OBJECTIVES, SCOPE, AND METHODOLOGY 



Objectives
The primaty objectives of the audit were to detennine if the Plan offered the FEHBP market
price rates and that the loadings to the FEHBP rates were reasonable and equitable. Additional
tests were perf01med to detetmine whether the Plan was in compliance with the provisions of the
laws and regulations goveming the FEHBP.

Scope
We conducted this perfonnance audit in accordance with generally accepted govemment
auditing stan dards. Those standards require that we plan and perf01m the audit to obtain
sufficient, appropriate evidence to provide a reasonable basis for om findings and conclusions
based on om audit objectives. We believe that the evidence obtained provides a reasonable basis
for om findings and conclusions based on om audit objectives.

This perfonnance audit covered contract year 2014. For this year, the FEHBP paid
approximately $19.3 million in premimns to the Plan.

OIG audits of community-rated can1ers are designed to test catTier compliance with the FEHBP
contract, applicable laws and regulations, and the rate instmctions . These audits are also
designed to provide reasonable assmance of detecting enors, inegularities, and illegal acts.

We obtained an understanding of the Plan's intemal control structure, but we did not use this
inf01mation to detetmine the natm e, timing, and extent of om audit procedmes. However, the
audit included such tests of the Plan's rating system and such oth er auditing procedmes
considered necessaty lmder the circumstan ces. Om review of intemal conti·ols was limited to the
procedmes the Plan has in place to ensme that:

    • 	 The appropriate Similru·ly Sized Subscriber Groups (SSSG) were selected;

    • 	 the rates chru·ged 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 vruying 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 vru·ious inf01mation systems involved. However, nothing catne to om attention dming om
audit testing utilizing the computer-generated data. to cause us to doubt its reliability. We believe



                                                 3	                          Report No. 1C-MX-00-1 5-004
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 November 10, 2014 through November 14, 2014 at the
Plan's office in Schenectady, New York. Additional audit work was completed at our office in
Cranberry Township, Pennsylvania.

Methodology
We examined the Plan’s Federal rate submission 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 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-MX-00-15-004
                        III. RESULTS OF AUDIT 



Our audit showed that the Plan' s rating of the FEHBP was in accordance with applicable laws,
regulations, and the rate instm ctions for conu·act year 2014. Consequently, the audit did not
identify any questioned costs and no con ective action is necessruy.




                                            5                            Report No. 1C-MX-00-1 5-004
 IV. MAJOR CONTRIBUTORS TO THIS REPORT

COMMUNITY-RATED AUDITS GROUP

         , Auditor-in-Charge




          , Senior Team Leader

           , Group Chief




                                 6   Report No. 1C-MX-00-15-004
                                                                                                                         



                                       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.

                                                                       7                                      Report No. 1C-MX-00-15-004