oversight

Audit of the Federal Employees Health Benefits Program Operations at Aetna Open Access -Plan Code P1

Published by the Office of Personnel Management, Office of Inspector General on 2010-10-19.

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
Subject:



      Audit of the Federal Employees Health Benefits

     Program Operations at Aetna Open Access - Plan

                         Code PI




                                  Report No. lC-PI-OO·10-045


                                  Date: October 19. 2010




                                              -- CAUTION -­

This audit report has been distributed to Federal officials wbo are respons.ible for the administration of the
audited program. This audit report may contain proprietary data whicb is protected by Federal law (18
U.S.C. 1905). Therefore, while tbis 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 tbat was redacted from tbe publicly distributed
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

                                             Aetna Open Access

                                    Contract Number 2867 - Plan Code PI

                                           Blue Bell, Pennsylvania




                      Report No. IC-PI-OO-IO-045                 Date:     October J   9i   201   0




                                                                     MichaelR~
                                                                     Assistant Inspector General
                                                                       for Audits




        www.opm.gov                                                                         www,usajobs.gov
                          UNITED STATES OFFICE OF PERSONNEL MANAGEMENT
                                             Washington, DC 20415


  Office of the
lnspcetor General




                                      EXECUTIVE SUMMARY





                               Federal Employees Healtb Benefits Program

                            Community-Rated Healtb Maintenance Organization

                                          Aetna Open Access

                                 Contract Number 2867 - Plan Code PI

                                        Blue Bell, Pennsylvania




                    Report No. IC-PI-00-I0-045                 Date: October 19, 2010


       The Oflice of the Inspector General perfonned an audit of the Federal Employees Heallh Benefits
       Program (FEHBP) operations at Aetna Open Access - Plan Code P1 (Plan). The audit covered
       CODll-aCt years 2005 through 2009 and was conducted at the Plan's office in Blue Bell,
       Pennsylvania. We found that the FEHBP rates were developed in accordance with applicable
       laws, regulations. and the Office of Personnel Management's raling instructions for the years
       audited.




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                            CONTENTS



                                         Page

   EXECUTIVE SUMMARY                       i


 I. INTRODUCTION AND BACKGROUND           1


IT. OBJECTIVES, SCOPE, AND METHODOLOGY    3


III. RESULTS OF THE AUDIT                 5


IV. MAJOR CONTRIBUTORS TO THIS REPORT     6

                     T. INTRODUCTION AND BACKGROUND

Introduction

We completed an audit of the Federal Employees Health Benefits Program (FEHBP) operations
at Aetna Open Access - Plan Code P I (Plan). The audit covered contract years 2005 through
2009 and was conducted at the Plan's office in Blue Bell, Pennsylvania. The audit was
conducted pursuant to the provisions of Contract CS 2867; 5 U.S.C. Chapter 89; and 5 Code of
Federal Regulations (CFR) Chapter I, Part 890. The audit was performed by the Office of
Personnel Management's (OPM) Office of the Inspector General (orG), 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, annuitants, 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 I, Part 890 of Title 5, CFR.
Health insurance coverage is provided through cOntracts with various health insurance carriers
that provide service benefits, indemnity benefits, or comprehensive medical services.

Community-rated carriers participating in the FEHEP are subject to various federal, state and
local laws, regulations, and ordinances. While most carriers 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 ConlractsiMembers
which is defined as the best rate offered to                         March 31

either of the two groups closest in size to          10,000
the FEHBP. In contracting with
community-rated carriers, OPM relies On              8,000
carrier compliance with appropriate laws
                                                      6,000
and regulations and, consequently, does not
negotiate base rates. OPM negotiations               4,000
relate primarily to the level of coverage and
other unique features of the FEHBP.                   2,000


The chart to the right shows the number of                o
                                                              2005    2006    2007    2008    2009
FEHBP contracts and members reported by                               3,700   3,849   3,615   3,188
                                                • Contracts   2.958
the Plan as of March 31 for each contract       o Members     6,893   8,594   8,829   7,735   6,376
year audited.

                                                1

The Plan has participated in the FEHBP since 2004 and provides health benefits to FEHBP
members throughout Austin and San Antonio, Texas. This was the first audit of the Plan
conducted by our office.

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 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.



                                                                         FEHBP Premiums Paid to Plan
We conducted this performance audit in accordance with
generally accepted government auditing standards. Those                $40
standards require that we plan and perform the audit to
obtain sufficient, appropriate evidence to provide a
reasonable basis for our findings and conclusions based on
our audit objectives. We believe that the evidence obtained
provides a reasonable basis for our findings and conclusions
based on our audit objectives.

This performance audit covered contract years 2005 through
2009. For these years, the FEHBP paid approximately
$148.1 million in premiums to the Plan. The premiums paid        • Revenue
for each contract year audited are shown on the chart to the
right.

OlG audits of commwlity-rated carriers are designed to test carrier compliance with the FEHEP
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 thai:

       •	 The appropriate sinlilarly sized subscriber groups (SSSG) were selected;

       •	 the rates charged to the FEHBP were the market price rates (i.e., equivalent to the best
          mte offered 10 SSSGs); and

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



                                                 3
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 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 objecti.ves. Except as noted above, the
audit was performed 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 Blue Bell, Pennsylvani.a, during May
20 JO. Additional audit work was completed at our offices in Jacksonville, Florida, and
Washington, D.C.

Methodology

We examined the Plan's federal rate submissions and related documents as a basis for validating
the market price rates. Further, we examined claim payments to verifY that the cost data used to
develop the FEHBP rates was accurate, complete, and valid. 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's policies and procedures, interviewed appropriate Plan officials, and
performed other auditing procedures necessary to meet our audit objectives.




                                                 4

                            III. RESULTS OF mE AUDIT


Our audit showed that the Plan's rating of the FEHBP was in accordance with applicable Jaws,
regulations, and OPM's rating instructions io carriers for contract years 2005 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

    ~uditor

                     Auditor


                   Chief

                 Senior Team Leader




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