oversight

Audit of the Federal Employees Health Benefits Program Operations at Humana CoverageFirst - San Antonio

Published by the Office of Personnel Management, Office of Inspector General on 2016-06-08.

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

        AUDIT OF THE FEDERAL EMPLOYEES HEALTH
        BENEFITS PROGRAM OPERATIONS AT HUMANA
              COVERAGEFIRST – SAN ANTONIO

                                           Report Number 1C-TU-00-16-002
                                                    June 8, 2016




                                                             -- 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.
             EXECUTIVE SUMMARY 

         Audit of the Federal Employees Health Benefits Program Operations at Humana 

                                  CoverageFirst – San Antonio 

Report No. 1C-TU-00-16-002                                                                       June 8, 2016

Why Did We Conduct the Audit?             What Did We Find?

The primary objectives of the audit       We determined that the FEHBP rates were developed by the Plan
were to determine if Humana               in accordance with applicable laws, regulations, and the U.S.
CoverageFirst – San Antonio (Plan)        Office of Personnel Management’s Rate Instructions to
developed the Federal Employees           Community-Rated Carriers for the years audited. Therefore, we
Health Benefits Program (FEHBP)           did not issue a draft report and are not making any
premium rates using complete,             recommendations.
accurate, and current data, and that
the rates were equivalent to the Plan’s
Similarly-Sized Subscriber Groups, as
provided in the Federal Employees
Health Benefits Acquisition
Regulation 1652.215-70(a).
Additional tests were performed to
determine whether the Plan was in
compliance with the provisions of the
laws and regulations governing the
FEHBP.

What Did We Audit?

Under contract 2887, the Office of the
Inspector General completed a
performance audit of the FEHBP’s
rates offered for contract years 2009
through 2012. This audit was
conducted from November 30, 2015,
through January 15, 2016, at the
Plan’s headquarters in Louisville,
Kentucky, and at our offices in
Washington, D.C., and Cranberry
Township, Pennsylvania.

 _______________________
 Michael R. Esser
 Assistant Inspector General
 for Audits
                                                      i
             ABBREVIATIONS


FEHBAR   Federal Employees Health Benefits Program Acquisition Regulations
FEHBP    Federal Employees Health Benefits Program
OIG      Office of the Inspector General
OPM      U.S. Office of Personnel Management
Plan     Humana CoverageFirst – San Antonio
SSSG     Similarly-Sized Subscriber Group
U.S.C.   United States Code




                              ii
IV. MAJOR CONTRIBUTORS TO THIS REPORT
          TABLE OF CONTENTS

                                                                                                                         Page 

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


          ABBREVIATIONS ..................................................................................................... ii 


  I.	     BACKGROUND ..........................................................................................................1 


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


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


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


          REPORT FRAUD, WASTE, AND MISMANAGEMENT

IV. MAJOR CONTRIBUTORS
            I. BACKGROUND
                       TO THIS REPORT

This final report details the audit results of the Federal Employees Health Benefits Program
(FEHBP) operations at Humana CoverageFirst – San Antonio (Plan). The audit covered contract
years 2009 through 2012 and was conducted at the Plan’s headquarters in Louisville, Kentucky,
and at our offices in Washington, D.C., and Cranberry Township, Pennsylvania.

The audit was conducted pursuant to FEHBP contract CS 2887, 5 United States Code (U.S.C.)
Chapter 89; and 5 Code of Federal Regulations Chapter 1, Part 890. The audit was performed 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.

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, and is administered by OPM’s
Healthcare and Insurance Office. Health insurance coverage is provided through contracts with
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. In addition, participation in the FEHBP subjects the
carriers to the Federal Employees Health Benefits Act and implementing regulations
promulgated by OPM.
                                                                  FEHBP Contracts/Members
                                                                         March 31
The FEHBP should pay a premium rate
that is equivalent to the best rate given
                                                   700
to either of the two groups closest in
subscriber size to the FEHBP. In                   600
contracting with community-rated
                                                   500
carriers, OPM relies on carrier
compliance with appropriate laws and               400

regulations and, consequently, does not
                                                   300
negotiate base rates. OPM negotiations
relate primarily to the level of coverage          200

and other unique features of the FEHBP.            100


The chart to the right shows the number              0
                                                           2009        2010       2011      2012
of FEHBP contracts and members                 Contracts    278        283        309       300
                                               Members     573         596         625      624
reported by the Plan as of March 31 for
each contract year audited.


                                               1                    Report No. 1C-TU-00-16-002
The Plan has participated in the FEHBP since 2004 and provides health benefits to FEHBP
members in the San Antonio, Texas area. This was our first audit of the Plan.

The preliminary results of this audit were discussed with Plan officials at an exit conference.
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                  Report No. 1C-TU-00-16-002
IV. OBJECTIVES,
II.  MAJOR CONTRIBUTORS
                SCOPE, ANDTO THIS REPORT
                          METHODOLOGY

 Objectives
 The primary objectives of the audit were to determine if the FEHBP premium rates were
 developed using complete, accurate, and current data, and were equivalent to the Plan’s
 Similarly-Sized Subscriber Groups (SSSGs), as provided in Federal Employees Health Benefits
 Acquisition Regulation (FEHBAR) 1652.215-70(a). Additional tests were performed to
 determine whether the Plan was in compliance with the provisions of the laws and regulations
 governing the FEHBP.

 Scope
 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
                                                              FEHBP Premiums Paid to Plan
 reasonable basis for our findings and
 conclusions based on our audit objectives. We
 believe that the evidence obtained provides a           $3.0

 reasonable basis for our conclusions based on           $2.5
                                                     Millions




 our audit objectives.                                   $2.0

                                                                  $1.5
 This performance audit covered contract years                    $1.0
 2009 through 2012. For these years, the
                                                                  $0.5
 FEHBP paid approximately $9.5 million in
                                                                  $0.0
 premiums to the Plan.                                                    2009    2010    2011    2012
                                                                Revenue   $1.8    $2.1    $2.9    $2.7

 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 had in place to ensure that:

         The appropriate SSSGs were selected;




                                                 3                           Report No. 1C-TU-00-16-002
        the rates charged to the FEHBP were developed using complete, accurate and current
         data, and were equivalent to the best rate given 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 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 from November 30, 2015, through January 15, 2016, at the
Plan’s headquarters in Louisville, Kentucky, and at our offices in Washington, D.C., and
Cranberry Township, Pennsylvania.

Methodology
We examined the Plan’s Federal rate submission and related documents as a basis for validating
its Certificates of Accurate Pricing. In addition, we examined the rate development
documentation and billings to other groups, such as the SSSGs, to determine if the FEHBP rates
were reasonable and equitable. Finally, we used the contract, the FEHBAR, 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                   Report No. 1C-TU-00-16-002
IV. MAJOR
        III.CONTRIBUTORS  TO
             RESULTS OF THE  THIS REPORT
                            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 2009 through 2012. Consequently, the
 audit did not identify any questioned costs and no corrective action is necessary.




                                             5                     Report No. 1C-TU-00-16-002
IV. MAJOR CONTRIBUTORS TO THIS REPORT

COMMUNITY-RATED AUDITS GROUP

         , Auditor-in-Charge


            , Senior Team Leader

             , Group Chief




                                   6   Report No. 1C-TU-00-16-002
                                                                                                                         



                                       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-TU-00-16-002