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 - Phoenix
and Tucson, Arizona
Report No. lC-WO-OO-ll-OS7
Date: December 22, 2011
-- CAUTION -
This audit report has been distributed to Federal officials who are responsible for the admini~tration of the audited program. This audit
report may contain proprietary data which is protected by Federal law (18 V.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 puhlic as it may contain proprietary information that was redacted from the publicly distributed copy.
UNITED STATES OFFICE OF PERSONNEL MANAGEMENT
Washington, DC 20415
Ofticc of the
In"'pec!or General
EXECUTIVE SUMMARY
Federal Employees Health Benefits Program
Community-Rated Health Maintenance Organization
Aetna Open Access - Phoenix and Tucson, Arizona
Contract Number CS 2867 - Plan Code WQ
Blue Bell, Pennsylvania
Report No. tC-WO-OO-lt-OS7 Date: 12/22/11
The Otlice of the Inspector General perfonned an audit of the Federal Employees Health
Benefits Program (FEHBP) operations at Aetna Open Access - Phoenix and Tucson. Arizona
(Plan). The audit covered contract years 2007 through 2011. We found that the FEHBP rates
were developed in accordance with appl icable laws. regulations, and the Oftice of Personnel
Management's rating instructions for the years audited.
www.opm.gov www.usajobs.gov
UNITED STATES OFFICE OF PERSONNEL MANAGEMENT
Washington. DC 20415
Office of lhe
In:-.peclOr General
AUDIT REPORT
Federal Employees Health Benefits Program
Community-Rated Health Maintenance Organization
Aetna Open Access - Phoenix and Tucson, Arizona
Contract Number CS 2867 - Plan Code WQ
Blue Bell, Pennsylvania
Report No. lC-WO-OO-11-OS7 Date: 1 2 /22/ 11
Michael R. Esser
Assistant Inspector General
for Audits
www.opm.go\l www.usajobs.go\l
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 – Phoenix and Tucson, Arizona (Plan). The audit covered contract years
2007 through 2011. 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 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 FEHBP Contracts/Members
March 31
rate, which is defined as the best rate
offered to either of the two groups closest 16,000
in size to the FEHBP. In contracting with 14,000
community-rated carriers, OPM relies on 12,000
carrier compliance with appropriate laws
10,000
and regulations and, consequently, does
8,000
not negotiate base rates. OPM negotiations
relate primarily to the level of coverage 6,000
and other unique features of the FEHBP. 4,000
2,000
The chart to the right shows the number of 0
FEHBP contracts and members reported by 2007 2008 2009 2010 2011
Contracts 5,886 5,909 5,859 6,080 5,697
the Plan as of March 31 for each contract Members 14,208 14,056 13,611 13,617 12,893
year audited.
1
The Plan has participated in the FEHBP since 2002 and provides health benefits to FEHBP
members in the Phoenix and Tucson, Arizona areas. The last audit of the Plan conducted by our
office was a full scope audit of contract years 2003 through 2006 and identified $207,308 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
accordance with generally accepted government $70
auditing standards. Those standards require that $60
Millions
$50
we plan and perform the audit to obtain
$40
sufficient, appropriate evidence to provide a
$30
reasonable basis for our findings and conclusions
$20
based on our audit objectives. We believe that $10
the evidence obtained provides a reasonable $0
basis for our findings and conclusions based on 2007 2008 2009 2010
Revenue $48.6 $55.1 $57.7 $63.7
our audit objectives.
This performance audit covered contract years
2007 through 2011. For contract years 2007 through 2010, the FEHBP paid approximately
$225.1 million in premiums to the Plan 1. 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.
1
The 2011 premiums were not available as of the date of this report.
3
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 and 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. 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 2007 through 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
, Lead Auditor
_______________________________________________________________________
., Chief
, Senior Team Leader
6
Audit of the Federal Employees Health Benefits Program Operations at Aetna Open Access - Phoenix and Tucson, Arizona
Published by the Office of Personnel Management, Office of Inspector General on 2011-12-22.
Below is a raw (and likely hideous) rendition of the original report. (PDF)