oversight

Audit of the Federal Employees Health Benefits Program Operations at Aetna Open Access - Austin and San Antonio

Published by the Office of Personnel Management, Office of Inspector General on 2013-05-17.

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 – Austin
                    and San Antonio


                                          Report No. 1C-P1-00-13-013

                                          Date: May 17, 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
                                   Aetna Open Access – Austin and San Antonio
                                      Contract Number 2867 - Plan Code P1
                                            Blue Bell, Pennsylvania



                 Report No. 1C-P1-00-13-013                                             Date: May 17, 2013




                                                                                      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
                      Aetna Open Access – Austin and San Antonio
                         Contract Number 2867 - Plan Code P1
                               Blue Bell, Pennsylvania


         Report No. 1C-P1-00-13-013                     Date: May 17, 2013


The Office of the Inspector General performed an audit of the Federal Employees Health
Benefits Program (FEHBP) operations at Aetna Open Access – Austin and San Antonio (Plan).
The audit covered contract years 2010 and 2011, 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 Rate Instructions to
Community-Rated Carriers 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 comp leted an audi t of the Federal Employees Health Benefits Program (FE HB P) operations
at Aetna Open Acc ess - Austin and San Antoni o (Plan) . The audi t covere d contract years 20 10
and 20 11, and wa s co nducted at the Plan ' s office in Blue Bell , Pennsylvani a. Th e audit wa s
conducted pursuant to the provisions of Contrac t CS 2867; 5 U S c. Cha pter 89; and 5 Co de of
Federal Regulations (CFR) Chapter 1, Part 890 . TIle audit was performed by the Offic e of
Personnel Ma nagement 's (OPM) Office of the Inspector Gene ral (DIG), as established by the
Inspector Ge neral Act of 1978, as amended.

Background

The FE HEP wa s established by the Federal Employees Health Ben efi ts Ac t (Public Law 86 ­
382), enac ted a ll September 28 , 1959. The FEHBP wa s crea ted to provide health insuran ce
benefits for federal employees, annuitants, and dependents . The FEHBP is administered by
OPM ' s Healthcare and Insur an ce Office . Th e provisions of the Federal Employees He alth
Benefits Ac t are implemented by O PM through regulations co dified in Chapter I , Part 890 of
Title 5, CFR . Health insurance co verage is provided thr ough co ntracts with health insurance
carriers who provide servi ce benefits, indemnity ben efi ts, or comprehensive medical serv ices .

Community-rated ca rrie rs parti c ipating in the FEHBP are subject to various federal, state and
local laws, regul ations, and ordina nce s. While most carriers are subject to state j uri sdic tion,
many are further subj ect to the Health Ma intena nce Orga niza tion Ac t of 1973 (Public Law 93­
222), as amended (i.e., many co mm unity-rated carriers are federa lly qualified ). In addition,
parti cipation in the FE HB P subjects the carriers to the Fede ral Employees Health Benefits Ac t
and implementing regula tions promulgated by OPM.

The FE HB P should pay a market pri ce                             FEHBP Contr acts/ Members
                                                                          March 31
rate , which is de fined as the best rate
offered to either of the two groups closest             6,000
in size to the FEHBP. In co ntrac ting with
community-rated carriers, OPM re lies on                5,000

carrie r co mpliance with appro pria te laws            4,000
and regulations and, consequently, does
                                                        3,000
not negotiate base rates. OPM
negoti ations relate primaril y to the level            2,000
of coverage and othe r uni que features of
                                                        1,000
the FEHBP.
                                                             o
The cha rt to the right shows the number           . COfIt racts
of FEHBP co ntrac ts and members                   IJ Members
reporte d by the Plan as of March 3 1 for
eac h co ntract year audited .


                                                   I

The Plan has participated in the FEHBP since 2004 and provides health benefits to FEHBP
members in Atacosa, Bell, Bexar, Caldwell, Comal, Guadalupe, Kendall, Medina, Travis, and
Wilson counties, as well as parts of Hays, Bastrop, and Williamson counties in Texas. The last
audit conducted by our office was a full scope audit and covered contract years 2005 through
2009. 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 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
                                                                   $30
accordance with generally accepted government
                                                                   $25
auditing standards. Those standards require that




                                                     Millions
we plan and perform the audit to obtain                            $20

sufficient, appropriate evidence to provide a                      $15
reasonable basis for our findings and conclusions                  $10
based on our audit objectives. We believe that                      $5
the evidence obtained provides a reasonable                         $0
basis for our findings and conclusions based on                               2010                 2011
                                                                Revenue       $27.9                $26.4
our audit objectives.

This performance audit covered contract years
2010 and 2011. For these years, the FEHBP paid approximately $54.3 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 to Community-Rated
Carriers. 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 performed at the Plan’s office in Blue Bell, Pennsylvania during
January and February 2013. Additional audit work was completed at our offices 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 Rate Instructions to Community-Rated 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