oversight

Audit of the Federal Employees Health Benefits Program Operations of Aetna Open Access

Published by the Office of Personnel Management, Office of Inspector General on 2009-02-03.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

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                                                              ·.·l1S OFFICE OF PERSONNEL MANAGEMENT
                                                                         QFFICEOFTHE INSPECTOR GENERAL··
                                                                                        OFFICE OF AUDItS



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                                                                       ...

                                                                   ~-CAUTION~-
         Thisllud.it reporlhas~bceildistfi"lJted io Federal Cifficiaiswhollre respDiisible (orthelld!JIinistratiDn olthe audited progra~. This audit
         report. may c:ontainproprietary da(a whic:hjsprCitec:tedbyFederalia~(18 U.S.C .i!iOs); therefore. while .Ihis audit report isavliilable·
         undertlie Freedom oflnfor!JIation Acl.cautionneed~ to be exerCised bdorereJeasingthereport 10 the general public.
                         UNITED STATES OFFICE OF PERSONNEL MANAGEMENT

                                            Washington, DC   2~415




   Office of the
Inspector General




                                          AUDIT REPORT




                             Federal Employees Health Benefits Program.

                          Community-Rated Health Maintenance Organization

                                        Aetna Open Access

                               Contract Number 2914 - Plan Code P3

                                      Blue Bell, Pennsylvania




                      Report No. lC-P3-00-09-013        Date: February 3, 2009




                                                               Michael R. Esser
                                                               Assistant Inspector General.
                                                                 for Audits




        www.opm.goY                                                                       www.usaJobs.goY
                         UNITED STATES OFFICE OF PERSONNEL MANAGEMENT

                                              Washington. DC 20415


   Office of the
Inspector General




                                       EXECUTIVE SUMMARY





                              Federal Employees Health Benefits Program

                           Community-Rated Health Maintenance Organization

                                         Aetna Open Access

                                Contract Number 2914 - Plan Code P3

                                       Blue Bell~ Pennsylvania




                      Report No. lC-P3-00-09-013           Date: February 3. 2009


        The Office of the Inspector General performed an audit of the Federal Employees Health
        Benefits Program (FEHBP) operations at Aetna Open Access - Plan Code P3. The audit covered
        contract years 2005 through 2008 and was conducted at our field office in Jacksonville, Florida.
        We found that the FEHBP rates were developed in accordance with the Office ofPersonne1
        Management's rules and regulations in 2005, 2006, 2007, and 2008.




        www.opm.gov                                                                         www.usa)obs.gov
                            CONTENTS


                                         Page

   EXECUTIVE SUMMARY                      i


 I. INTRODUCTION AND BACKGROUND           1


II. OBJECTIVES, SCOPE, AND METHODOLOGY    3


III. RESULTS OF AUDIT   ;                 5


IV. MAJOR CONTRIBUTORS TO THIS REPORT     6

                      I. INTRODUCTION AND BACKGROUND


Introduction

  We completed an audit ofthe Federal Employees Health Benefits Program (FEHBP) operations
  at Aetna Open Access - Plan Code P3 (Plan) in Blue Bell, Pennsylvania. The audit covered
  contract years 2005 through 2008. The audit was conducted pursuant to the provisions of
. Contract 2914; 5 U.S.C. Chapter 89; and 5 Code of Federal Regulations (CFR) Chapter 1, Part
  890. The audit was performed by the Office of Personnel Management's (OPM) Office of the

  Inspector General, as established by the Inspector General Act of ] 978, 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 Center for Retirement and Insurance Services. The provisions of the Federal Employees
Health Benefits Act are implemented by OPM through regulations codified in Chapter I, Part
890 ofTitIe 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 FEHBP 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 Contracts/Members

which is defined as the best rate offered to either                          March 31


of the two groups closest in size to the FEHBP.             46,000
In contracting with community-rated carriers,               41,000
OPM relies on carrier compliance with                       36,000
appropriate laws and regulations and,                       31,000
consequently, does not negotiate base rates.                26,000
                                                            21,000
OPM negotiations relate primarily to the level
                                                             16,000
of coverage and other unique features of the
                                                             11,000
FEHBP.                                                        6,000
                                                              1,000
The chart to the right shows the number of                            2005     2006     2007     2008

FEHBP contracts and members reported by the             • Contracts   24,602   15,968   11,590   12,655

Plan for March 31 of each contract year audited.        o Members     45,888   26,487   19,458   21,542




                                                   1

The Plan began participating in the FEHBP in 1982 and provides health benefits to FEHBP
members throughout New Jersey and Pennsylvania. The last audit of the Plan conducted by our
office was a full scope audit of contract years 2001,2003, and 2004. All issues related to that
audit have been resolved.

The preliminary results of this audit were discussed with Plan officials at an exit conference.
Since the audit showed that the Plan's rating of the FEHBP was in accordance with the
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.



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 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
                                                                          FEHBP Premiums Paid to Plan
This performance audit covered contract
years 2005 through 2008 1 . For contract
years 2005, 2006, and 2007, the FEHBP                              $300
paid approximately $457.8 million in                               $250
                                                             r/l
premiums to the Plan. The premiums paid                      c

for each contract year audited are shoMlon                  ~      $200
                                                            i      $150
the chart to the right.
                                                                   $100
01G audits of community-rated carriers are                $50
designed to test carrier compliance with the
FEHBP contract, applicable laws and                • Revenue     $193.2
regulations, and aPM 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 systems and such other auditing procedures as we

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 an SSSG); and

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


I   The Subscription Income Report for 2008 was not available at the time this report was written.

                                                            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 infonnation systems involved. However, nothing came to our attention during our
audit testing utilizing the computer generated data to cause us to doubt it;; reliability. We
detem1ined that the data available was sufficient to achieve our audit objectives. 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 conducted at our office in Jacksonville, Florida, during November and
December 2008.

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 SSSGs, to detennine 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
systems.

To gain an understanding ofthe 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 AUDIT


Our audit showed that the Plan's rating of the FEHBP was in accordance with the applicable
laws, regulations, and OPM's rating instructions for contract years 2005,2006,2007, and 2008.
Consequently, we did not identify any questioned costs and there are no corrective actions
necessary.




                                              5

             IV. MAJOR CONTRIBUTORS TO THIS REPORT


Community-Rated Audits Group

                    Auditor-In-Charge

                   Auditor



                     Chief

                             Senior Tearn Leader




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