oversight

Audit of the Federal Employees Health Benefits Program Operations at the Health Plan of Nevada, Inc.

Published by the Office of Personnel Management, Office of Inspector General on 2015-01-14.

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 THE 

                     HEALTH PLAN OF NEVADA, INC. 


                                           Report Number 1C-NM-00-14-056 

                                                   January 14, 2015 





                                                              -- CAUTION -­
This audit •·eport has been distributed to Federal officials who are responsible fo1· the administration of the audited program. This audit report may
contain proprieta1-y data which is protected by Federal law (18 U.S.C. 1905). Therefore, while this audit rep011 is available under the Freedom of
Information Act and made available to the public on the OIG webpage (http://wn~v.opm.go•>lour-inspector-geuernl), caution needs to be exercised
before releasing the •·eport to the general public as it may contain p1·oprietary information that was redacted from the publicly distributed copy.
           EXECUTIVE SUMMARY 

             Audit ofthe F ederal Employees Health Benefits Program Operations at
                                 the Health Plan           Inc.


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

The objectives of our audit were to      We detennined that the FEHBP rates were developed by the Plan
detennine if the Health Plan of          in accordance with applicable laws, regulations, and the U.S .
Nevada, Inc. (Plan) offered the          Office of Personnel Management's Rate Instm ctions to
Federal Employees Health Benefits        Community-Rated Caniers for the year audited. We therefore did
Program (FEHBP) market price rates       not issue a draft report and are not making any recommendations.
and that the loadings applied 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.

What Did We Audit?

Under contract 1942, the Office of the
Inspector General completed a
perf01mance audit of the FEHBP's
rates offered for contract year 201 2.
Our audit was conducted from July 7,
2014 through July 11, 2014 at the
Plan's office in Las Vegas, Nevada .




 Michael R. Esser
Assistant Inspector General
for Audits
                ABBREVIATIONS

CFR      Code of Federal Regulations
FEHBP    Federal Employees Health Benefits Program
FY       Fiscal Year
OIG      Office of the Inspector General
OPM      U.S. Office of Personnel Management
PLAN     The Health Plan of Nevada, Inc.
SSSG     Similarly Sized Subscriber Group
U.S.C.   United States Code




                              ii
                               TABLE OF CONTENTS 


                                                                                                                           Page 

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


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


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


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


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


IV. 	    MAJOR C ONTRIBUTORS TO THE AUDIT .........................................................6 


         REPORT FRAUD, WAST E, AND MI SMANAGEMENT 

                              I. BACKGROUND 



The Federal Employees Health Benefits Program (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 the U.S . Office of Personnel Management's (OPM)
Healthcare and Insmance Office. The provisions of the Federal Employees Health Benefits Act
ar e implemented by OPM through regulations codified in Chapter 1, Pali 890 of Title 5, Code of
Federal Regulations (CFR). Health insmance coverage is provided through contracts with he alth
insmance carriers who provide service benefits, indemnity benefits, or comprehensive medical
services.

Community-rated carriers patticipating in the FEHBP are subject to various federal, state and
local laws, regulations, and ordinances. While most carriers are subject to state jmisdiction,
many are fmther subject to the Health Maintenance Organization Act of 1973 (Public Law 93­
222), as amended (i.e., many commlmity-rated carriers are federally qualified). In addition,
pruticipation in the FEHBP subjects the cruTiers to the Federal Employees Health Benefits Act
and implementing regulations promulgated by OPM.

The FEHBP should pay a market price rate, which is defmed as the best rate offered to either of
the two groups closest in size to the FEHBP. In contracting with community-rated carriers,
OPM relies on catTier compliance with appropriate laws and regulations and, consequently, does
not negotiate base rates. OPM negotiations relate primarily to the level of coverage and other
unique features of the FEHBP.
                                                            FEHBP Contracts/Members
                                                                   March 31
The chatt to the right shows that the Health
Plan ofNevada, Inc. (Plan) rep01ted 2,912
contracts and 5,725 members for the FEHBP
as ofMru·ch 31 for contract yeru· 2012.

The Plan has pruticipated in the FEHBP
since 1984 and provides health benefits to
FEHBP members in the Clru·k, Esmeralda
and Nye Cmmties ofNevada. The last audit
conducted by om office was a full scope
audit and covered contract yeru·s 2009
through 2011 . There were no issues
identified dming that audit.




                                                1                         Rep01t No. 1C-NM-00-14-056
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-NM-00-14-056
 II. OBJECTIVES, SCOPE, AND METHODOLOGY 



Objective
The primary objectives of the audit were to determine if the Plan offered the FEHBP market
price rates and that the loadings to the FEHBP rates were reasonable and equitable. Additional
tests were perf01m ed to dete1mine whether the Plan was in compliance with the provisions of the
laws and regulations goveming the FEHBP.

Scope and Methodology
We conducted this perfonnance audit in accordance with generally accepted govemment
auditing stan dards. Those stan dards 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 perf01mance audit covered contract year 2012 . For that year, the FEHBP paid
approximately $24 .5 million in premiums to the Plan.

OIG audits of community-rated caniers are designed to test cruTier compliance with the FEHBP
contract, applicable laws and regulations, and the rate instmctions. These audits are also
designed to provide reasonable assmance of detecting en ors, inegulru·ities, and illegal acts.

We obtained an understanding of the Plan's intem al control structure, but we did not use this
inf01m ation to dete1mine th e natme, timing, and extent of om audit procedm es. However, the
audit included such tests of the Plan's rating system and such other auditing procedm es
considered necessa1y under the circumstan ces. Om review of intem al conti·ols was limited to the
procedmes the Plan has in place to ensme that:

       • 	 The appropriate Similarly Sized Subscriber Groups (SSSG) were selected;

       • 	 the rates chru·ged to the FEHBP were the m ru·ket price rates (i.e., equivalent to the best
           rate offered to the SSSGs); an d

       • 	 the loadings to the FEHBP rates were reasonable and equitable.

In conducting the audit, we relied to vruying degrees on computer-generated billing, emolhnent,
and claims data provided by the Plan. We did not verify the reliability of the data generated by
th e vru·ious infonnation systems involved. However, nothing came to om attention dming om
audit testing utilizing the computer-generated data to cause us to doubt its reliability. We believe
that the available data was sufficient to achieve om audit objectives. Except as noted above, the


                                                  3	                          Rep01i N o. 1C-NM-00-14-056
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 at the Plan’s office in Las Vegas, Nevada in July 2014.

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-NM-00-14-056
                   III. RESULTS OF THE 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 contract year 2012. Consequently, the audit did not
identify any questioned costs and no conective action is necessary.




                                            5                            Rep01i No. 1C-NM-00-14-056
  IV. MAJOR CONTRIBUTORS TO THE AUDIT

COMMUNITY-RATED AUDITS GROUP



          , Auditor-in-Charge


           , Chief

          , Senior Team Leader




                                 Report No. 1C-NM-00-14-056
                                        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-NM-00-14-056