U.S. OFFICE OF PERSONNEL MANAGEMENT OFFICE OF THE fNSPECTOR GENERAL OFFICE OF AUDITS Final Audit Report SUbject: Audit of the Federal Employees Health Benefits Program Operations at Aetna Open Access Memphis, Tennessee Report No. IC-UB-OO-II-032 Date: September 28 , 2011 -- CAUTION -- T hiJ lIullil repnrl hn bern i.li.~lrib\lt('tllo ,,'tdtrMI offidMIii whll IIrc responsihle rOt the .dm ini.~ trll,j clll of Ih ~ lIudilttl\lrogram. Thb II lIclil rt port may conlain proptitlllr,. data which is I,r!lltrlrd by Ftduallaw (18 U.S.C. 1905). Thlrdorr, while IlIi! a udit nporl is avai lab le un ckr tile Frutlom or InfornulliOIl Act II l1d made aui lable Iolhe public on Ih~ OIG wt'bpagt, CILl li (l1l ntc d~ to bt: urre;led before rrlu5ing Ihe fl'porllo Iht general publi c as il mill' contain proprietary inforrn al iol1 Ihlll wu tClbClcd from th e publi cly dl~'rlbultd copy. UN ITED STATES OFFICE OF PERSONNEL MANAGEMENT Washington . DC 204 15 Office of the Inspector Gener:al AUDIT REPORT Federal Employees Health Benefits Program Community-Rated Health Maintenance Organization Aetna Open Access - Memphis, Tennessee Contract Number CS 2867 - Plan Code UB Blue Bell, Pennsylvania Report No. IC-UB-OO-II-032 Date: Sept embe r 28 , 2011 Michael R. Esser Assistant Inspector General for Audits IoIww.opm.'Ov "'''''''.lIuJobi .&oy UN ITED STATES OFFICE OF PERSONNEL MANAGEMENT Washinglon. DC 20415 Office or tke: ln~tlN GCIICr.II EXECUTIVE SUMMARY Federal Emp loyees Health Benefits Progr am Community.Ratcd Health Maintenance Organization Aetna Open Access - Memphis, Tennessee Contract Number CS 2867 - Plan Code UB Blue Bell, Pennsylvania Report No. IC-UB-OO-II-032 Date: September 28 , 2011 The Office of the Inspector General perfonned an audit of the Federal Employees Health Benefits Program (FEJ-lBP) operations at Aetna Open Access - Memphi s, Tennessee (Plan). The audit covered contract yc,ars 2006 through 2010 and was conducted at the Pl an's o ffice in Blue Bell, Pennsylvania. We found that the FEHBP rates were developed in accordance with app licable laws. regu lations, and the Office of Personnel Management ' s rating instructions for the years audited . www.Ojlm.,ov www.... uJob •. 'ov CONTENTS Page EXECUTIVE SUMMARY............................................................................................... i I. INTRODUCTION AND BACKGROUND ..................................................................... 1 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 Aetna Open Access – Memphis, Tennessee (Plan). The audit covered contract years 2006 through 2010 and was conducted at the Plan’s office in Blue Bell, Pennsylvania. The audit was conducted pursuant to the provisions of Contract CS 2867; 5 U.S.C. Chapter 89; and 5 Code of Federal 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 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 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 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 FEHBP should pay a market price rate, FEHBP Contracts/Members which is defined as the best rate offered to March 31 either of the two groups closest in size to 6,000 the FEHBP. In contracting with 5,000 community-rated carriers, OPM relies on carrier compliance with appropriate laws 4,000 and regulations and, consequently, does not 3,000 negotiate base rates. OPM negotiations relate primarily to the level of coverage and 2,000 other unique features of the FEHBP. 1,000 The chart to the right shows the number of 0 2006 2007 2008 2009 2010 FEHBP contracts and members reported by 2,570 2,538 2,516 2,642 2,635 Contracts the Plan as of March 31 for each contract Members 5,796 5,640 5,472 5,603 5,439 year audited. 1 The Plan has participated in the FEHBP since 2002 and provides health benefits to FEHBP members in Crockett, Dyer, Fayette, Haywood, Lauderdale, Shelby, and Tipton counties in the Memphis, Tennessee area. The last audit of the Plan conducted by our office was a full scope audit of contract years 2002 through 2005 and identified $1,119,981 in defective pricing. All issues identified in the previous 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 instructions, a draft report was not issued. 2 II. OBJECTIVES, SCOPE, AND METHODOLOGY Objectives The primary objectives of the audit were to verify that the Plan offered market price rates to the FEHBP and to verify 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. Scope FEHBP Premiums Paid to Plan We conducted this performance audit in $30 accordance with generally accepted government $25 auditing standards. Those standards require that Millions we plan and perform the audit to obtain $20 sufficient, appropriate evidence to provide a $15 reasonable basis for our findings and conclusions $10 based on our audit objectives. We believe that $5 the evidence obtained provides a reasonable basis $0 for our findings and conclusions based on our 2006 2007 2008 2009 2010 audit objectives. Revenue $19.3 $19.8 $22.0 $22.3 $26.4 This performance audit covered contract years 2006 through 2010. For these years, the FEHBP paid approximately $110 million in premiums to the Plan. The premiums paid for each contract year audited are shown on the chart above. OIG audits of community-rated carriers are designed to test carrier compliance with the FEHBP contract, applicable laws and regulations, and OPM 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 similarly sized subscriber groups (SSSG) 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 3 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 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 at the Plan’s office in Blue Bell, Pennsylvania, during May 2011. Additional audit work was completed at our offices located in Washington, D.C., Cranberry Township, Pennsylvania, and Jacksonville, Florida. Methodology We examined the Plan’s federal rate submissions and related documents as a basis for validating the market price rates. Further, we examined claim payments to verify that the cost data used to develop the FEHBP rates were accurate, complete, and valid. 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 OPM’s Rate Instructions to Community-Rated Carriers 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’s 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 OPM’s rating instructions to carriers for contract years 2006 through 2010. Consequently, the audit did not identify any questioned costs and no corrective action is necessary. 5 IV. MAJOR CONTRIBUTORS TO THIS REPORT Community-Rated Audits Group , Auditor-in-Charge , Lead Auditor , Lead Auditor _______________________________________________________________________ , Deputy Assistant Inspector General for Audits ., Chief , Senior Team Leader 6
Audit of the Federal Employees Health Benefits Program Operations at Aetna Open Access Memphis, Tennessee
Published by the Office of Personnel Management, Office of Inspector General on 2011-09-28.
Below is a raw (and likely hideous) rendition of the original report. (PDF)