oversight

Audit of the Federal Employees Health Benefits Program Operations at UPMC Health Plan

Published by the Office of Personnel Management, Office of Inspector General on 2015-06-18.

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 UPMC
                             HEALTH PLAN

                                          Report Number 1C-UW-00-15-023
                                                   June 18, 2015


                                                             -- 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 UPMC
                                         Health Plan
Report No. 1C-UW-00-15-023                                                                        June 18, 2015

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

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

What Did We Audit?

Under contract 2856-B, the Office of
the Inspector General completed a
performance audit of the FEHBP’s
rates offered for contract year 2011.
Our desk audit was conducted from
February 17, 2015 through
February 25, 2015 at our offices in
Jacksonville, Florida and Cranberry
Township, Pennsylvania.




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

CFR      Code of Federal Regulations
FEHBAR   Federal Employees Health Benefits Acquisition Regulations
FEHBP    Federal Employees Health Benefit Program
FY       Fiscal Year
OIG      Office of the Inspector General
OPM      U.S. Office of Personnel Management
Plan     UPMC Health Plan
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 UPMC Health Plan (Plan). The desk audit covered contract year 2011,
and was conducted at our offices in Jacksonville, Florida, and Cranberry Township,
Pennsylvania.

The audit was conducted pursuant to FEHBP contract CS 2856-B; 5 United States Code (U.S.C.)
Chapter 89; and 5 Code of Federal Regulations (CFR) 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. 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 chart to the right shows the number of FEHBP
contracts and members reported by the Plan as of           FEHBP Members/Subscribers
March 31, 2011.                                                   March 31
                                                            800       681
The FEHBP should pay a premium rate that is
                                                           600
equivalent to the best rate given to either of the
                                                                    376
two groups closest in size to the FEHBP. In                400                          Subscribers
contracting with community-rated carriers, OPM                                          Members
relies on carrier compliance with appropriate laws         200
and regulations and, consequently, does not                  0
negotiate base rates. OPM negotiations relate                      Year 2011
primarily to the level of coverage and other unique
features of the FEHBP.

The Plan has participated in the FEHBP since 2000 and provides health benefits to FEHBP
members in the Pennsylvania counties of Allegheny, Armstrong, Beaver, Bedford, Blair, Butler,
Cambria, Cameron, Clarion, Clearfield, Crawford, Elk, Erie, Fayette, Forest, Greene,
Huntingdon, Indiana, Jefferson, Lawrence, McKean, Mercer, Potter, Somerset, Venango,
Warren, Washington, and Westmoreland. This is the first audit for this plan code.



                                                1                         Report No. 1C-UW-00-15-023
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                          Report No. 1C-UW-00-15-023
 IV. MAJOR CONTRIBUTORS
 II. OBJECTIVES, SCOPE, AND TO 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 (SSSG), 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 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 $4.6 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 SSSGs were selected;

   	 the rates charged to the FEHBP were developed using complete, accurate and current
      data, and 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



                                               3	                        Report No. 1C-UW-00-15-023
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 desk audit work was performed from February 17, 2015 through February 25, 2015 at our
offices in Jacksonville, Florida and Cranberry Township, Pennsylvania.

Methodology
We examined the Plan’s Federal rate submission and related documents as a basis for validating
its Certificate 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-UW-00-15-023
 IV. MAJOR
        III. CONTRIBUTORS
              RESULTS OF THETO 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 year 2011. Consequently, the audit did not
identify any questioned costs and no corrective action is necessary.




                                            5                            Report No. 1C-UW-00-15-023
 IV. MAJOR CONTRIBUTORS TO THIS REPORT

COMMUNITY-RATED AUDITS GROUP

           , Auditor-in-Charge

        , Lead Auditor


          , Senior Team Leader

        , Jr., Chief




                                 6   Report No. 1C-UW-00-15-023
                                                                                                                         



                                       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-UW-00-15-023