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 6
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)