U.S. OFFICE OF PERSONNEL MANAGEMENT OFFICE OF THE INSPECTOR GENERAL OFFICE OF AUDITS AUDIT OF THE FEDERAL EMPLOYEES HEALTH BENEFITS PROGRAM OPERATIONS AT SELECTHEALTH Re p ort Number 1C-SF-00-14-060 Janua ry 29, 2015 -- CAUTION - This audit •·eport has been distributed to Federal officials who are responsible fo1· the administr ation of the audited program. T his audit report may contain proprieta1-y data which is protected by Federal law (18 U.S.C. 1905) . T herefore, while this audit rep011 is available under the Freedom of Information Act and made available to the public on the OI G webpage (http://wn~v.opm.go•>lour-inspector-geueral), caution needs to be exercised before releasing the •·eport to the general public as it may contain propdeta1-y information that was redacted from the publicly distributed copy. EXECUTIVE SUMMARY Audit ofthe F ederal Employees Health Benefits Program Operations at SelectH ealth Repot·t ~o. 1C-SF-00-14-060 Januat·y 29, 2015 Why Did We Conduct the Audit? What Did We Find? The primaty obj ective of this We detennined that the Plan's 2012 FEHBP MLR submission was perf01mance audit was to detetmine accurate, complete, and cunent, and was developed in accordance whether the SelectHealth (Plan) was with th e laws and regulations goveming the FEHBP. in compliance with the provisions of Consequently, a draft rep01i was not issued because the audit did its contract and the laws and not identify any questioned costs. N o con ective action is regulations goveming the Federal necessary . Employees Health Benefits Program (FEHBP) . Specifically, we verified if the Plan met the Medical Loss Ratio (MLR) requirements established by OPM. Additional tests were perf01med to detetmine whether the Plan was in compliance with the provisions of the laws and regulations goveming the FEHBP. What Did We Audit? Under contact CS 2925, the Office of the Inspector General completed a perf01mance audit of the FEHBP operations at the Plan. The audit covered the Plan's 2012 MLR submission, and was conducted at the Plan's office in Munay, Utah during June 2014. Additional audit work was completed at our offices in Washington, D .C. and Jacksonville, Florida . Michael R. Esser Assistant Inspector General for Audits ABBREVIATIONS ACA Affordable Care Act ASB Administrative Sanctions Board CFR Code of Federal Regulations COB Coordination of Benefits CPT Current Procedural Terminology FEHBP Federal Employees Health Benefits Program MLR Medical Loss Ratio NPI National Provider Identifier OIG Office of the Inspector General OPM U.S. Office of Personnel Management PLAN SelectHealth SSSG Similarly Sized Subscriber Group TCR Traditional Community Rating U.S.C. United States Code ii TABLE OF CONTENTS Page EXECUTIVE SUMMARY ......................................................................................... i ABBREVIATIONS ................................................................................................ ..... ii I. I NTRODUCTION AND BACK GROUND ............................................................... ! II. OBJECTIVES, SCOPE, AND METHODOLOGY ................................ ................. .3 III. RESULT OF THE AUDIT..........................................................................................8 IV. MAJOR C ONTRIBUTORS TO T HIS REPORT ................................ .................... 9 REPORT FRAUD, WAST E, AND MI SMANAGEMENT I. INTRODUCTION AND BACKGROUND Introduction We completed an audit of the Federal Employees Health Benefits Program (FEHBP) operations at SelectHealth (Plan). The audit covered conu·act year 2012, and was conducted at th e Plan's office in MmTay, Utah. The audit was conducted pursuant to the provisions of Conu·act CS 2925; 5 U.S .C. Chapter 89; and 5 Code of Federal Regulations (CFR) Chapter 1, Prui 890. The audit was perf01med by the U.S . 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 benefits for federal employees, annuitants, and dependents. The FEHBP is administered by OPM's Healthcare and Insurance Office. The provisions of the Federal Employees Health Benefits Act ru·e implemented by OPM through regulations codified in Chapter 1, Pati 890 of Title 5, CFR. Health insurance coverage is provided through conu·acts with health insurance cruTiers who provide service benefits, indemnity benefits, or comprehensive medical services. In April 2012, OPM issued a finalmle establishing an FEHBP-specific Medical Loss Ratio (MLR) requirement to replace the similru·ly sized subscriber group (SSSG) compru·ison requirement for most community-rated FEHBP caniers (77 FR 19522). MLR is th e prop01iion of FEHBP premiums collected by a catTier that is spent on clinical services and quality health improvements. The MLR for each canier is calculated by dividing the amount of dollars spent for FEHBP members on clinical services and health cru·e quality improvements by the total am mmt of FEHBP premiums collected in a calendru· year. The FEHBP-specific MLR mles ru·e based on the MLR stan dru·ds established by the Affordable Care Act (ACA, P.L. 111-148) and defined by the U.S. Deprui ment of Health and Human Services in 45 CFR Pati 158. In 2012, community-rated FEHBP caniers could elect to follow th e FEHBP-specific MLR requirements, instead of th e SSSG requirements. Beginning in 201 3, th e MLR methodology is required for all community-rated cruTiers, except those that ru·e state mandated to use u·aditional community rating (TCR). State mandated TCR cmTiers continue to be subject to the SSSG compru·ison rating methodology. Strui ing with the pilot program in 2012 and for all non-TCR FEHBP caniers in 2013, OPM required the caniers to submit an FEHBP-specific MLR. OPM required that the FEHBP-specific MLR threshold calculation take place after the ACA-required MLR calculation and any rebate am mmts due to the FEHBP as a result of the ACA-required calculation be excluded from the FEHBP-specific MLR threshold calculation. Can'iers were required to rep01i inf01m ation related to erun ed premiums and expenditures in various categories, including reimbursement for clinical services provided to em ollees, activities that improve health care quality, and all oth er non claims costs. 1 Rep01i N o. 1C-SF-00-1 4-060 If a carrier fails to meet the FEHBP-specific MLR threshold, it must make a subsidization penalty payment to OPM within 60 days of notification of amounts due. This payment would take place via wire transfer. 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 Plan reported 568 contracts and 1,794 members as of March 31, 2012, as shown in the chart below. FEHBP Contracts/Members March 31 2,000 1,500 1,000 500 0 2012 Contracts 568 Members 1,794 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 Plan has participated in the FEHBP since 2011 and provides health benefits to FEHBP members in the state of Utah. A prior audit of the Plan covered the premium rate buildup for contract year 2012. In that audit, we determined that the FEHBP premiums were developed in accordance with applicable laws, regulations and OPM’s Rate Instructions to Community Rated Carriers (rate instructions) for contract year 2012. The preliminary results of this audit were discussed with the Plan officials at an exit conference and in subsequent correspondence. Since this audit concluded that the Plan’s FEHBP MLR submission was developed in accordance with applicable laws, regulations, and the rate instructions, a draft report was not issued. 2 Report No. 1C-SF-00-14-060 II. OBJECTIVES, SCOPE, AND METHODOLOGY Objective The primary objective of this peifonnance audit was to detennine whether the Plan was in compliance with the provisions of its contract and the laws and regulations goveming the FEHBP. Specifically, we verified that th e Plan met th e MLR requirements established by OPM and paid the correct ammmt to the Subsidization Penalty Account, if applicable. Additional tests were perfonned to detennine whether the Plan was in compliance with the provisions of the laws and regulations goveming the FEHBP. Scope We conducted this perfon nance audit in accordance with generally accepted govemment auditing stan dards. Those stan dards require that we plan and perf01m the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for om findings and conclusions based on om audit objectives. We believe that the evidence obtained provides a reasonable basis for om findings and conclusions based on om audit objectives. This perf01mance audit covered contract year 2012 . For this year, the FEHBP paid approximately $7.9 million in premiums to the Plan. OIG audits of community-rated carriers ar e designed to test cruTier compliance with the FEHBP contract, applicable laws and regulations, and the rate instructions. These audits ru·e also designed to provide reasonable assmance of detecting errors, irregularities, and illegal acts. We obtained an understanding of the Plan's intem al conu·ol stmcture, but we did not use this inf01m ation to dete1mine the nature, timing, and extent of om auditing procedm es. However, the audit included tests of the Plan's FEHBP claims data, quality health expenses, and all other applicable costs considered in the calculation of its MLR. Om review of intemal conu·ols is limited to the procedm es the Plan has in place to ensm e that the FEHBP MLR calculation is accm ate, complete, and valid, FEHBP claims ru·e processed accmately, appropriate allocation methods for quality health expenses ru·e used, and that any other costs associated with its MLR calculation are appropriate. In conducting the audit, we relied to vruy ing degrees on computer-generated data provided by the Plan. We did not verify the reliability of the data generated by the vru·ious inf01m ation systems involved. However, nothing crune to om attention dming om audit testing utilizing the computer-generated data to cause us to doubt its reliability. We believe that the available data was sufficient to achieve om audit objectives. Except as noted above, th e audit was conducted in accordance with generally accepted government auditing stan dru·ds, issued by the Compu·oller General of the United States. Based on the survey work perf01m ed, we identified a totallmiverse of 44,073 medical claim lines and 22,788 phrumacy claim lines incmTed from Januruy 1, 2012 through December 31, 2012, and paid through Mru·ch 31, 2013. The audit universe atu·ibutes ru·e the mandatory medical 3 Rep01i N o. 1C-SF-00-1 4-060 and pharmacy claim field requirements included in FEHB Carrier Letter 2014-01, Audit Requirements for 2012 MLR Pilot Program Carriers. The audit fieldwork was performed at the Plan’s office in Murray, Utah during June 2014. Additional audit work was completed at our offices in Washington, D.C. and Jacksonville, Florida. Methodology We examined the Plan’s MLR calculation and related documents as a basis for validating the MLR. Further, we examined claim payments and quality health expenses to verify that the cost data used to develop the MLR was accurate, complete and valid. We also examined the methodology used by the Plan in determining the premium in the MLR calculation. Finally, we used the contract, the Federal Employees Health Benefits Acquisition Regulations, and the rate instructions to determine the propriety of the Plan’s MLR calculation. To gain an understanding of the internal controls in the Plan’s claims processing system, we reviewed the Plan’s claims processing policies and procedures and interviewed Plan officials regarding the controls in place to ensure that claims are processed accurately. Other auditing procedures were performed as necessary to meet our audit objectives. To test whether the Plan accurately processed and paid FEHBP claims for contract year 2012 and complied with its contract, we tested for potential claim errors within the full claims universes of 44,073 medical claim lines and 22,788 pharmacy claim lines, totaling $6,979,439 and $1,423,265, respectively. During our claim reviews, the samples were not statistically based. Consequently, the results could not be projected to the universe since it is unlikely that the results are representative of the universe as a whole. However, we did use statistical sampling software to select a discovery sample for the coordination of benefits (COB) review. A discovery sample is the smallest sample size capable of providing a specified confidence level of detecting a misstatement in the population or tolerable rate of deviation in the population. Additionally, the discovery sample was selected randomly from a universe using random numbers, in which each item has an equal chance of being selected. The use of statistical sampling also requires the selection of confidence levels and precision rates. For the sample selected, we used a confidence level of 90 percent and a maximum precision rate of 5 percent. This means we are 90 percent confident that the difference between the projected questioned claims and the actual questioned claims is no more than 5 percent. The results from the discovery sample would determine if a larger sample would be required. Results of a larger sample could be projected over the entire universe, since it is likely that the results would be representative of the universe as a whole. 4 Report No. 1C-SF-00-14-060 The following audit steps were performed: Claims Review Medical Claims We identified a potential COB error universe of 3,303 claim lines totaling $510,160 for contract year 2012. The universe contained all claim lines for members over age 64. We selected a statistical sample of 46 claim lines totaling $2,868, and pulled the highest 5 claim lines from the COB universe totaling $185,080 for review in determining if the claims were coordinated with Medicare properly and accurately processed. We identified a potential member enrollment error universe of 295 claim lines totaling $2,379,910 for contract year 2012. Our sample contained all claim lines over $2,500. We judgmentally selected a sample of 13 claim lines for 7 members, totaling $240,064, to determine if the claims were accurately processed. We identified a potential dependent eligibility error universe of 13 claim lines for one member totaling $435 for contract year 2012. The universe contained all claims for members over age 26 and excluded all patients identified as a subscriber or spouse. We sent the entire universe of 13 claim lines to the Plan for review to determine if the claims were accurately processed. We identified a potential bundling/unbundling error universe of 331 claim lines totaling $3,911. The universe contained all claims lines associated with the current procedural terminology (CPT) codes related to the primary panel code 80048, Basic Metabolic Panel (Calcium, total). We identified 4 possible claims line errors totaling $53. We sent the claim lines to the Plan for review to determine if the claims were accurately processed for contract year 2012. Pharmacy Claims We identified a potential member enrollment error universe of 17 claim lines totaling $108,467 for contract year 2012. The universe contained all claim lines over $5,000. We sent the entire universe of 17 claim lines to the Plan for review to determine if the claims were accurately processed. We identified a potential dependent eligibility error universe of 23 claim lines for one member totaling $11 for contract year 2012. The universe contained all claims for members over age 26 and excluded all patients identified as a subscriber or spouse. We sent the entire universe of 23 claim lines to the Plan for review to determine if the claims were accurately processed. We identified a potential high dollar drug script error universe of 45 claim lines for 26 members totaling $82,926 for contract year 2012. The universe contained all claim lines 5 Report No. 1C-SF-00-14-060 over $1,000. We sent the entire universe of 45 claim lines to the Plan for review to determine if the claims were accurately processed. We identified a potential high quantity dispensed error universe of 19,759 claim lines totaling $1,085,399 for contract year 2012. The universe contained all claim lines with a drug unit measure as EA (for each). We then identified and reviewed the claims with high quantities that appeared unusual. We also included several claims that had a large quantity, but no descriptive information such as drug name, drug strength, and drug unit of measure. We judgmentally selected a sample of 14 claim lines totaling $8,761, to determine if the claims were accurately processed. We also completed the following reviews which produced no results: We completed a duplicate claims review of the medical and pharmacy claim universes (using “best match” criteria) to identify claims that have all the same fields or duplicate claims where only the claim number is different. We chose which fields to match against and the order of precedence. We selected the following fields for medical claims: patient ID number, patient (first and last) name, incurred date, covered charges, provider ID, procedure code, diagnosis code, type of service, and provider specialty. For the pharmacy claims, we selected all of the provided fields. We used the sort data function in our statistical software and selected the “keep only one entire duplicate if entirely duplicated” option. This would generate the possible duplicates as a separate run. We then reviewed the results for duplicate claims or any claims that have the same selected fields, but different claim numbers. We completed a duplicate claims review of the medical and pharmacy claim universes (using “near match” criteria) to identify claims for which some of the fields are the same or are duplicates but do not exactly match within the medical and pharmacy claim universe. We chose which fields to match against and the order of precedence. We selected the following fields for medical claims: patient ID number, patient (first and last) name, incurred date, covered charges, provider ID, procedure code, and procedure modifier code. However, for the pharmacy claims, we selected the member number, subscriber number, and drug code, and the prescription fill date had to be within five days of each other. We used the sort data function in our statistical software and selected the “keep only one entire duplicate if entirely duplicated” option. This would generate the possible duplicates as a separate run. We then reviewed the results for duplicate claims or any claims that have the same selected fields, but different claim numbers. We completed a debarred pharmacist and pharmacies review to determine if the Plan paid any pharmacy claims to debarred pharmacists or pharmacies. We requested a list of debarred pharmacists and pharmacies in the Plan’s service area from the OIG Administrative Sanctions Branch (ASB). We ran a query on the claims data to determine if any debarred pharmacists or pharmacies were included in the pharmacy data. We completed a review of debarred providers to determine if the Plan paid any medical claims to debarred providers. The review compared the list of debarred providers to the 6 Report No. 1C-SF-00-14-060 medical claims data. We requested a list of debarred providers in the Plan’s service area from the ASB. We identified the debarred providers and compared each one to the medical claims data. The debarred provider list included the provider names and the provider National Provider Identifier (NPI) numbers, when available. We used the NPI number to query against the medical claims, but used the provider name if the NPI number was unavailable. We completed a zero quantity review to determine if any pharmacy claims were paid that had a zero quantity amount. We attempted to identify all pharmacy claims that had zero in the quantity field and a dollar amount in the paid field. We completed an ineligible group number review on the medical and pharmacy universes to determine if any claims were paid for non-FEHBP members or for members enrolled in a different employer group. We requested a list of group numbers and group names for both the medical and pharmacy claims data and sorted this data by the group number to identify any exceptions. We used the statistical summary function within our statistical software to determine the universe of group numbers. We compared the universe to the list of group numbers provided by the Plan to determine if there were any results. We completed a non-covered benefits review on the medical claims universe. We reviewed the 2012 FEHBP benefit brochure to determine non-covered benefits. We tested the medical claims data to determine if any of the following non-covered benefits were paid in error: elective abortions, sex transformations, reversal of sterilization, radial keratotomy, eye exercises, hypnotherapy, and in-vitro fertilization. We completed a deceased member review on the medical and pharmacy universe. We selected a sample from the older population in the claims data. The claims were sorted by member age (over age 70). Claims were extracted from data for the oldest members. We removed any duplicate patient IDs. We obtained a sample of 20 members. The sample was sent to the OIG Office of Investigations to determine if a death record existed for the member. All samples selected (except for COB) during our audit were not statistically based. Consequently, the results could not be projected to the universe, since it is unlikely that the results are representative of the universe, as a whole. The COB sample was statistically based and the results could have been projected to the universe. However, we did not find errors in our COB sample. 7 Report No. 1C-SF-00-14-060 III. RESULTS OF THE AUDIT Our audit detennined that the Plan 's 2012 FEHBP MLR submission was accurate, complete, and valid, and was developed in accordance with th e applicable laws an d regulations goveming the FEHBP. For the claims testing described in the Methodology section, we found that all of the potential processing errors identified were in fact processed con ectly. Consequently, a draft rep01i was not issued because the audit did not identify any questioned costs. No con ective action is necessary. 8 Rep01i No. 1C-SF-00-14-060 IV. MAJOR CONTRIBUTORS TO THIS REPORT COMMUNITY-RATED AUDITS GROUP , Auditor-ill-Charge , Auditor - -, Auditor , Senior Team Leader , Group Chief 9 Rep01i No. 1C-SF-00-14-060 Report Fraud, Waste, and Mismanagement Fraud, waste, and mismanagement in Government concerns everyone: Office of the Inspector General staff, agency employees, and the general public. We actively solicit allegations of any inefficient and wasteful practices, fraud, and mismanagement related to OPM programs and operations. You can report allegations to us in several ways: By Internet: http://www.opm.gov/our-inspector-general/hotline-to- report-fraud-waste-or-abuse By Phone: Toll Free Number: (877) 499-7295 Washington Metro Area: (202) 606-2423 By Mail: Office of the Inspector General U.S. Office of Personnel Management 1900 E Street, NW Room 6400 Washington, DC 20415-1100 -- 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 (http://www.opm.gov/our-inspector-general), 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. Report No. 1C-SF-00-14-060
Audit of the Federal Employees Health Benefits Program Operations at SelectHealth
Published by the Office of Personnel Management, Office of Inspector General on 2015-01-29.
Below is a raw (and likely hideous) rendition of the original report. (PDF)