oversight

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

Published by the Office of Personnel Management, Office of Inspector General on 2014-12-03.

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 Grand Valley Health Plan, Inc.



                                            Report No. l C-RL-00-14-042

                                            Date:        December 3 ,               201 4




                                                         -- CAUTION -­
T his a udit report has been d.istributed to Federal officia ls who are responsible for the adm inistration of the audited program. T his au dit
r eport may conta in proprietary data which is protected by Federal la w (18 U.S.C. 1905). Therefore, while this audit report is available
under t he Freedom of Information Act and made availa ble to t he public on the OIG web page, caution needs to be exercised before
releasing the r eport to the general public as it may contai n prop rietary information that was r edacted fro m t he publicly distributed copy.
                          UNITED STATES OFFICE OF PERS ONNEL MANAGEMENT 

                                               Washington, DC 20415 



  Office of the
Inspector General




                                        EXECUTIVE SUMMARY 





                                Federal Employees Health Benefits Program 

                             Community-Rated Health Maintenance Organization 

                                      Grand Valley Health Plan, Inc. 

                                  Contract Number 2632 - Plan Code RL 

                                         Grand Rapids, Michigan 




                    Report No. lC-RL-00-14-042                      Date: December 3 • 2 0 14


        The Office of the Inspector General performed an audit of the Federal Employees Health
        Benefits Program (FEHBP) operations at Grand Valley Health Plan, Inc. (Plan). The audit
        covered contract years 201 1 and 20 12, and was conducted at the Plan ' s office in Grand Rapids,
        Michigan. 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.




        www.opm .gov                                                                          www.usajobs.gov
                                UNITED STATES OFFICE OF PERSONNEL MANAGEMENT 

                                                               Washingto n, DC 20 415 



  Office of the
Inspector General




                                                              AUDIT REPORT



                                           Federal Employees Health Benefits Program 

                                        Community-Rated Health Maintenance Organization 

                                                 Grand Valley Health Plan, Inc. 

                                             Contract Number 2632 - Plan Code RL 

                                                    Grand Rapids, Michigan 




                         Report No. lC-RL-00-14-042                                             Date: December 3 , 2014




                                                                                              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 contai n proprietary data which is protected by Federal law (18 U.S.C. 1905). Therefor e, 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 exer cised before
       releasing the r eport to the general public as it may contain proprietary information that was redacted from the publicly distributed copy.

        www.opm.gov                                                                                                             www. usajobs.gov
                                                        CONTENTS 



                                                                                                                             Page

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


  I. INTRODUCTION AND BACKGROUND ......... ........ ....................... .. ....... .... ... ..... ... ..... I 


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


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


IV. MAJOR CONTRIBUTORS TO THIS REPORT .................... ....... ........ ......................... 6 

                     I. INTRODUCTION AND BACKGROUND 


Introduction

We completed an audit of the Federal Employees Health Benefits Program (FEHBP) operations
at Grand Valley Health Plan, Inc. (Plan). The audit covered contract years 2011 and 2012, and
was conducted at the Plan's office in Grand Rapids, Michi gan. The audit was conducted
pursuant to the provisions of Contract CS 2632; 5 U.S.C. Chapter 89; and 5 Code ofFederal
Regulations (CFR) Chapter 1, Part 890. The audit was performed by the Office of Personnel
Management's (OPM) Office of the Inspector General (OIG), 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
benefi ts for fede ral employees, annuitants, and dependents. The FEHBP is administered by
OPM's Healthcare and Insurance Office. The provisions of the Federal Employees Health
Benefits Act are implemented by OPM through regulations codified in Chapter 1, Part 890 of
Title 5, CFR. Health insurance coverage is provided through contracts with health insurance
carriers who 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 jurisd iction,
many are further subj ect to the Health Maintenance Organization Act of 1973 (Public Law 93­
222), as amended (i.e., many community-rated carriers are fede rally qualified). In addition,
participation in the FEHBP subj ects 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 

                                                                      March 31 

which is defined 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 carrier
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.

The chart to the right shows the number of
FEHBP contracts and members reported by
the Plan as of March 31 for the contract years
audited.



                                                  1

The Plan has participated in the FEHBP since 1992 and provides health benefits to FEHBP
members in the Grand Rapids, Michigan area. The last audit conducted by our office was a full
scope audit and covered contract years 2006 through 2010. The audit found that the Plan gave
Similarly Sized Subscriber Groups (SSSGs) discounts; however, the same discounts were not
given to the FEHBP. Additionally, in deriving the FEHBP audited rates, there were numerous
errors in the calculation of the various benefit loadings charged to the FEHBP. All issues from
that audit have been resolved.

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

                II. OBJECTIVES. SCOPE, AND METHODOLOGY 


Objectives

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 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 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
2011 and 2012. For these years, the FEHBP paid approximately $13.9 million in premiums to
the Plan.

OIG audits of community-rated carriers are designed to test carrier compliance with the FEHBP
contract, applicable laws and regulations, and the 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 that:

       • The appropriate SSSGs 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
audit testing utilizing the computer-generated data to cause us to doubt its reliability. We believe
                                                 3

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 ofthe United States.

The audit fieldwork was performed at the Plan's office in Grand Rapids, Michigan during June
2014. Additional audit work was completed at our offices in Cranberry Township, Pennsylvania
and Jacksonville, Florida.

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

                             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 instructions for contract years 2011 and 2012. Consequently, the audit
did not identify any questioned costs and no corrective action is necessary.




                                                5

            IV. MAJOR CONTRIBUTORS TO THIS REPORT


Communitv-Rated Audits Group

                Auditor-in-Charge

                Auditor



                   Chief

                  Senior Team Leader




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