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
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)