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 Aetna Open Access – Memphis Report No. 1C-UB-00-14-020 Date: May 14, 2014 -- 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, 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. AUDIT REPORT Federal Employees Health Benefits Program Community-Rated Health Maintenance Organization Aetna Open Access – Memphis Contract Number 2867 - Plan Code UB Blue Bell, Pennsylvania Report No. 1C-UB-00-14-020 Date: May 14, 2014 Michael R. Esser 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 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, 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 Federal Employees Health Benefits Program Community-Rated Health Maintenance Organization Aetna Open Access – Memphis Contract Number 2867 - Plan Code UB Blue Bell, Pennsylvania Report No. 1C-UB-00-14-020 Date: May 14, 2014 The Office of the Inspector General performed an audit of the Federal Employees Health Benefits Program (FEHBP) operations at Aetna Open Access – Memphis (Plan). The audit covered contract year 2011, and was conducted at our office in Jacksonville, Florida. 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 year audited. i 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 (Plan). The audit covered contract year 2011 , and was conducted at om office in Jacksonville, Florida. The audit was conducted pmsuant to the provisions of Contract CS 2867; 5 U.S.C. Chapter 89; and 5 Code of Federal Regulations (CFR) Chapter 1, Pru1890. The audit was perf01med 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 insm ance benefits for federal employees, annuitants, and dependents. The FEHBP is administered by OPM's Healthcare and Insmance Office. The provisions of the Federal Employees Health Benefits Act ru·e implemented by OPM through regulations codified in Chapter 1, Prui 890 of Title 5, CFR. Health insm ance coverage is provided through contracts with health insmance caniers who provide service benefits, indemnity benefits, or comprehensive medical services. Community-rated cruTiers pati icipating in the FEHBP ru·e subject to vru·ious federal, state and local laws, regulations, and ordinances. While most caniers are subject to state jmisdiction, many ru·e fiuiher subject to the Health Maintenance Organization Act of 1973 (Public Law 93 222), as amended (i.e., many cormmmity-rated cruTiers ru·e federally qualified). In addition, pruiicipation in the FEHBP subjects the cruTiers to the Federal Employees Health Benefits Act and implementing regulations promulgated by OPM. The FEHBP should pay a mru·ket price FEHBP Contracts/Members March 31 rate, which is defined as the best rate 6,000 . - - - - - - - - - - - - - offered to either of the two groups closest in size to the FEHBP. In contracting with s,ooo +------r ...... -:-:-:-::....... ~-:-:-:'1 .. ~-- cormnunity-rated caniers, OPM relies on 4,000 + - - - - - - - t.-: -:-:.:-: -:-: ·1---- canier compliance with appropriate laws and regulations and, consequently, does 3,000 + - - - - - - - - - t.-: -:-:.:-: -:-: · J - - - not negotiate base rates. OPM negotiations relate primarily to the level 2,000 +--- of coverage and other lmique features of 1,000 + - - theFEHBP. 0 +-- The chati to the right shows the number of FEHBP contracts and members reported by the Plan as ofMru·ch 31 for the contract yeru· audited. 1 The Plan has participated in the FEHBP since 1982 and provides health benefits to FEHBP members in the Tennessee counties of Crockett, Dyer, Fayette, Haywood, Lauderdale, Shelby, and Tipton. The last audit conducted by our office was a full scope audit and covered contract years 2006 through 2010. There were no issues identified during that audit. 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. 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 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 year 2011. For this year, the FEHBP paid approximately $26.2 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 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 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 our office in Jacksonville, Florida in February 2014. 3 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 year 2011. 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 ., Chief , Senior Team Leader 6
Audit of the Federal Employee Health Benefits Program Operations at Aetna Open Access - Memphis
Published by the Office of Personnel Management, Office of Inspector General on 2014-05-14.
Below is a raw (and likely hideous) rendition of the original report. (PDF)