oversight

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)

                                                     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