oversight

Audit of Group Health Incorporated New York, New York

Published by the Office of Personnel Management, Office of Inspector General on 2016-06-13.

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
                            GROUP HEALTH INCORPORATED
                               NEW YORK, NEW YORK
                                            Report Number 1D-80-00-15-044
                                                    June 13, 2016




                                                             -- 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 that 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 Group Health Incorporated

Report No. 1D-80-00-15-044                                                                        June 13, 2016



 Why did we conduct the audit?            What did we find?

 We conducted this limited scope audit    We questioned $4,077,394 in health benefit charges, administrative
 to obtain reasonable assurance that      expenses, cash management activities, and lost investment income
 Group Health Incorporated (Plan) is      (LII). We also identified a procedural finding regarding the Plan’s
 complying with the provisions of the     F&A Program. The Plan agreed with the questioned amounts and
 Federal Employees Health Benefits        disagreed with the procedural finding regarding the F&A Program.
 Act and regulations that are included,
                                          We verified that the Plan has returned all of the questioned
 by reference, in the Federal
                                          amounts to the FEHBP.
 Employees Health Benefits Program
 (FEHBP) contract. Specifically, the
                                          Our audit results are summarized as follows:
 objectives of our audit were to
 determine if the Plan charged costs to
 the FEHBP and provided services to       	 Miscellaneous Health Benefit Payments and Credits – We
 FEHBP members in accordance with            questioned $230,025 (net) for pharmacy and medical drug
 the terms of the contract.                  rebates and program integrity recoveries that had not been
                                             returned to the FEHBP and $107,847 for LII on health benefit
 What did we audit?                          refunds and recoveries, pharmacy and medical drug rebates,
                                             and program integrity recoveries that were returned untimely to
 Our audit covered miscellaneous             the FEHBP.
 health benefit payments and credits,
 administrative expenses, and cash        	 Administrative Expenses – We questioned $249,133 for letter
 management activities from 2010
                                             of credit account drawdowns in excess of the actual transitional
 through 2014. In addition, we
                                             reinsurance and health insurance provider fee amounts and
 reviewed the Plan’s Fraud and Abuse
 (F&A) Program for 2014 through              $3,349 for applicable LII on these excess drawdown amounts.
 March 31, 2015. Due to concerns
 with the Plan’s medical drug rebates     	 Cash Management – We determined that the Plan held an
 and working capital funds, we               excess working capital deposit of $3,487,040 in the dedicated
 expanded our audit scope for these          FEHBP investment account as of September 30, 2015.
 items to also include January 1, 2015
 through September 30, 2015.              	 Fraud and Abuse Program – The Plan is not in compliance with
                                             the communication and reporting requirements for fraud and
                                             abuse cases that are set forth in FEHBP Carrier Letters 2011-13
                                             and 2014-29.
  _______________________
  Michael R. Esser
  Assistant Inspector General
  for Audits

                                                       i
                    ABBREVIATIONS


ACA           Affordable Care Act
BMP           Behavioral Management Program
CL            Carrier Letter
CFR           Code of Federal Regulations
Contract      CS 1056
EFTs          Electronic Funds Transfers
FAR           Federal Acquisition Regulations
FEHB          Federal Employees Health Benefits
FEHBAR        Federal Employees Health Benefits Acquisition Regulations
FEHBP         Federal Employees Health Benefits Program
F&A           Fraud and Abuse
FWA           Fraud, Waste, and Abuse
GHI or Plan   Group Health Incorporated
Guidelines    Letter of Credit System Guidelines
HHS           Department of Health and Human Services
HIP           Health Insurance Provider
HMO           Health Maintenance Organization
ICD-10        International Classification of Diseases 10
LOCA          Letter of Credit Account
LII           Lost Investment Income
OIG           Office of the Inspector General
OPM           U.S. Office of Personnel Management
TR            Transitional Reinsurance
WC            Working Capital




                                     ii
                         TABLE OF CONTENTS

                                                                                                                        Page
        EXECUTIVE SUMMARY ........................................................................................... i 


        ABBREVIATIONS ...................................................................................................... ii 


I.      BACKGROUND ...........................................................................................................1 


II.     OBJECTIVES, SCOPE, AND METHODOLOGY .......................................................3 


III.	   AUDIT FINDINGS AND RECOMMENDATIONS ....................................................7 


        A. MISCELLANEOUS HEALTH BENEFIT PAYMENTS AND CREDITS ...........7 


             1.   Medical Drug Rebates........................................................................................7 

             2.   Program Integrity Recoveries ............................................................................9 

             3.   Health Benefit Refunds and Recoveries ..........................................................10 

             4.   Pharmacy Drug Rebates...................................................................................12 


        B. ADMINISTRATIVE EXPENSES ........................................................................14 


             1. Affordable Care Act Fees - Excess Drawdowns .............................................14 


        C. CASH MANAGEMENT.......................................................................................16 


             1. Excess Working Capital Deposit .....................................................................16 


        D. FRAUD AND ABUSE PROGRAM .....................................................................18 


             1. Special Investigations Unit ..............................................................................18 


IV.	    MAJOR CONTRIBUTORS TO THIS REPORT........................................................22 


V.	     SCHEDULE A - QUESTIONED CHARGES

        APPENDIX (Group Health Incorporated’s Draft Report Response, dated February 1,
        2016)

        REPORT FRAUD, WASTE, AND MISMANAGEMENT
                                 I. BACKGROUND

This final audit report details the findings, conclusions, and recommendations resulting from our
limited scope audit of the Federal Employees Health Benefits Program (FEHBP) operations at
Group Health Incorporated (GHI or Plan). The Plan is located in New York, New York.

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 (FEHB) 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. OPM’s Healthcare and Insurance
Office has overall responsibility for administration of the FEHBP. The provisions of the FEHB
Act are implemented by OPM through regulations, which are codified in Title 5, Chapter 1, Part
890 of the Code of Federal Regulations (CFR). Health insurance coverage is made available
through contracts with various health insurance carriers.

The Plan is an experience-rated health maintenance organization (HMO) that provides health
benefits to federal enrollees and their families.1 Enrollment is open to all federal employees and
annuitants that live or work in the Plan’s service area, which includes New York and the
surrounding counties in Northern New Jersey.

The Plan’s contract (CS 1056) with OPM is experience-rated. Therefore, the costs of providing
benefits in the prior year, including underwritten gains and losses which have been carried
forward, are reflected in current and future years’ premium rates. In addition, the contract
provides that in the event of termination, unexpended program funds revert to the FEHBP Trust
Fund. In recognition of these provisions, the contract requires an accounting of program funds to
be submitted at the end of each contract year. The accounting is made on a statement of
operations known as the Annual Accounting Statement.

Compliance with laws and regulations applicable to the FEHBP is the responsibility of the Plan’s
management. Also, management of the Plan is responsible for establishing and maintaining a
system of internal controls.

All findings from our prior audit of the Plan (Report No. 1D-80-00-10-046, dated July 27, 2011)
for contract years 2004 through 2009 have been satisfactorily resolved.

1
 Members of an experience-rated HMO have the option of using a designated network of providers or using non-
network providers. A member’s choice in selecting one healthcare provider over another has monetary and medical
implications. For example, if a member chooses a non-network provider, the member will pay a substantial portion
of the charges and benefits available may be less comprehensive.

                                                        1                     Report No. 1D-80-00-15-044
The results of this audit were provided to the Plan in written audit inquiries; were discussed with
Plan officials throughout the audit and at an exit conference on December 10, 2015; and were
presented in a draft report, dated December 22, 2015. The Plan’s comments offered in response
to the draft report were considered in preparing our final report and are included as an Appendix
to this final report. Also, additional documentation provided by the Plan through February 2,
2016 was considered in preparing our final report.




                                                 2                   Report No. 1D-80-00-15-044
II. OBJECTIVES, SCOPE, AND METHODOLOGY

 OBJECTIVES

 The objectives of our audit were to determine whether the Plan charged costs to the FEHBP and
 provided services to FEHBP members in accordance with the terms of the contract. Specifically,
 our objectives were as follows:

        Miscellaneous Health Benefit Payments and Credits

        	 To determine whether miscellaneous payments charged to the FEHBP were in
           compliance with the terms of the contract.

        	 To determine whether credits and miscellaneous income relating to FEHBP benefit
           payments were returned timely to the FEHBP.

        Administrative Expenses

        	 To determine whether administrative expenses charged to the contract were actual,
           allowable, necessary, and reasonable expenses incurred in accordance with the terms
           of the contract and applicable regulations.

        Cash Management

        	 To determine whether the Plan handled FEHBP funds in accordance with applicable
           laws and regulations concerning cash management in the FEHBP.

        Fraud and Abuse Program

        	 To determine whether the Plan's communication and reporting of fraud and abuse
           cases were in compliance with the terms of Contract CS 1056 and the applicable
           FEHBP Carrier Letters.

 SCOPE

 We conducted our limited scope performance audit in accordance with generally accepted
 government auditing standards. Those standards require that we plan and perform the audit to
 obtain sufficient and 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.

                                                 3	                 Report No. 1D-80-00-15-044
We reviewed GHI’s Annual Accounting Statements pertaining to Plan code 80 for contract years
2010 through 2014. During this period, GHI processed approximately $1.1 billion in FEHBP
health benefit payments and charged the FEHBP $97 million in administrative expenses for this
Plan code.


                                    Group Health Incorporated
                                    Contract Charges by Year

                            300
               $ Millions




                            200

                            100

                              0
                                  2010      2011      2012       2013     2014
                                                   Contract Years
                                  Health Benefit Payments        Administrative Expenses


Specifically, we reviewed miscellaneous health benefit payments and credits (e.g., refunds,
subrogation recoveries, pharmacy and medical drug rebates, and program integrity recoveries),
administrative expenses, and cash management activities from 2010 through 2014. We also
reviewed the Plan’s Fraud and Abuse (F&A) Program activities and practices for 2014 through
March 31, 2015. Due to concerns with the Plan’s medical drug rebates and working capital
funds, we expanded our audit scope for these items to also include the period January 1, 2015
through September 30, 2015.

In planning and conducting our audit, we obtained an understanding of the Plan’s internal control
structure to help determine the nature, timing, and extent of our auditing procedures. This was
determined to be the most effective approach to select areas of audit. For those areas selected,
we primarily relied on substantive tests of transactions and not tests of controls. Based on our
testing, we did not identify any significant matters involving the Plan’s internal control structure
and its operations. However, since our audit would not necessarily disclose all significant
matters in the internal control structure, we do not express an opinion on the Plan’s system of
internal controls taken as a whole.

We also conducted tests to determine whether the Plan had complied with the contract, the
applicable procurement regulations (i.e., Federal Acquisition Regulations (FAR) and Federal
Employees Health Benefits Acquisition Regulations (FEHBAR), as appropriate), and the laws
and regulations governing the FEHBP. The results of our tests indicate that, with respect to the
items tested, the Plan did not comply with all provisions of the contract and federal procurement


                                                             4                   Report No. 1D-80-00-15-044
regulations. Exceptions noted in the areas reviewed are set forth in detail in the "Audit Findings
and Recommendations" section of this audit report. With respect to the items not tested, nothing
came to our attention that caused us to believe that the Plan had not complied, in all material
respects, with those provisions.

In conducting our audit, we relied to varying degrees on computer-generated data provided by
the Plan. Due to time constraints, we did not verify the reliability of the data generated by the
various systems involved. However, while utilizing the computer-generated data during our
audit, nothing came to our attention to cause us to doubt its reliability. We believe that the data
available was sufficient to achieve our audit objectives.

The audit was performed at the Plan’s office in New York, New York on various dates from
August 3, 2015 through October 22, 2015. Audit fieldwork was also performed at our office in
Jacksonville, Florida through December 2015.

METHODOLOGY

We obtained an understanding of the internal controls over the Plan’s financial, cost accounting,
and cash management systems by inquiry of Plan officials.

We interviewed Plan personnel and reviewed the Plan’s policies, procedures, and accounting
records during our audit of miscellaneous health benefit payments and credits. For the period
2010 through 2014, we also judgmentally selected and reviewed the following FEHBP items:

   	 All     pharmacy drug rebate amounts, totaling $               .

   	 50 high dollar provider offsets, totaling $2,101,530, and 41 high dollar health benefit
      refund cash receipts, totaling $1,436,358. We selected these 91 sample items, totaling
      $3,537,888, from a universe of          refund cash receipts and provider offsets, totaling
      $          . We judgmentally selected all refund cash receipt and provider offset
      amounts of $15,000 or more.

   	 All       program integrity recovery amounts, totaling $             .

   	 32 subrogation recoveries, totaling $174,568, from a universe of         subrogation
      recoveries, totaling $        . We selected a statistical sample of subrogation recoveries
      from a stratification of $500 or more.

   	 All        medical drug rebate amounts, totaling $         .



                                                  5	                     Report No. 1D-80-00-15-044
    	 All          medical drug settlement amounts, totaling $                   in net credits.

    	 All     hospital settlement amounts, totaling $                         in payments (charges to the
       FEHBP).

We reviewed these samples to determine if health benefit refunds and recoveries and pharmacy
and medical drug rebates were timely returned to the FEHBP and if miscellaneous payments
were properly charged to the FEHBP. The results of these samples were not projected to the
universe of miscellaneous health benefit payments and credits. Due to concerns with medical
drug rebates, we expanded our audit scope and also reviewed all FEHBP medical drug rebate
amounts, totaling $       , that were received by the Plan during the period January 2015
through September 2015.

We judgmentally reviewed administrative expenses charged to the FEHBP for contract years
2010 through 2014. Specifically, we reviewed administrative expenses relating to pension, the
Behavioral Management Program (BMP), and the Plan’s International Classification of Diseases
10 (ICD-10) implementation phase.2 We also reviewed administrative expenses relating to
patient protection and the Affordable Care Act that were allocated and charged to the FEHBP
(i.e., health insurance provider, transitional reinsurance, and “Patient-Centered Outcomes
Research Institute” fees). We used the FEHBP contract, the FAR, the FEHBAR, and the
Affordable Care Act (Public Law 111-148) to determine the allowability, allocability, and
reasonableness of charges.

We reviewed the Plan’s cash management activities and practices to determine whether the Plan
handled FEHBP funds in accordance with Contract CS 1056 and applicable laws and regulations.
Specifically, we reviewed the Plan’s letter of credit account (LOCA) drawdowns and interest
income transactions from 2010 through 2014, the Plan’s working capital calculations,
adjustments and/or balances from 2010 through September 30, 2015, as well as the Plan’s
dedicated FEHBP investment account activity from 2010 through 2014 and balance as of
December 31, 2014.

We also interviewed the Plan’s Special Investigations Unit regarding the effectiveness of the
F&A Program, as well as reviewed the Plan’s communication and reporting of fraud and abuse
cases to test compliance with Contract CS 1056 and the applicable FEHBP Carrier Letters.


2
  We judgmentally selected and reviewed 10 months of BMP fees, totaling $1,202,312 in charges to the FEHBP
(from a universe of 60 months of BMP fees, totaling $              in charges to the FEHBP, from 2010 through
2014). For ICD-10 implementation, we judgmentally selected and reviewed a sample of 7 high dollar project cost
amounts, totaling $19,448,485 (from a universe of       project cost amounts, totaling $         , in 2013 and 2014),
that were allocated and charged to all applicable participating groups, including the FEHBP. The results of these
samples were not projected to the applicable universes of BMP and ICD-10 charges.

                                                          6	                     Report No. 1D-80-00-15-044
III.
  IV. AUDIT
       MAJORFINDINGS AND RECOMMENDATIONS
             CONTRIBUTORS  TO THIS REPORT
 A. MISCELLANEOUS HEALTH BENEFIT PAYMENTS AND CREDITS

   1. Medical Drug Rebates                                                              $164,697

      Our audit determined that the Plan had not returned medical drug rebates, totaling
      $161,176, to the FEHBP. As a result of this audit finding, the Plan returned $164,697 to
      the FEHBP, consisting of $161,176 for the questioned medical drug rebates and $3,521
      for applicable lost investment income (LII).

      48 CFR 31.201-5 states, “The applicable portion of any income, rebate, allowance, or
      other credit relating to any allowable cost and received by or accruing to the contractor
      shall be credited to the Government either as a cost reduction or by cash refund.”

      Contract CS 1056, Part II, Section 2.3 (i) states, “All health benefit refunds and
      recoveries . . . must be deposited into the working capital or investment account within 30
      days and returned to or accounted for in the FEHBP letter of credit account within 60
      days after receipt by the Carrier.”

      FAR 52.232-17(a) states, “all amounts that become payable by the Contractor … shall
      bear simple interest from the date due . . . The interest rate shall be the interest rate
      established by the Secretary of the Treasury as provided in 41 U.S.C. 7109, which is
      applicable to the period in which the amount becomes due, as provided in paragraph (e)
      of this clause, and then at the rate applicable for each six-month period as fixed by the
      Secretary until the amount is paid.”

      The Plan participates in medical drug rebate programs with various drug manufacturers.
      The drug rebates are determined based on medical claims for the applicable drugs, which
      are primarily administered in a physician’s office. These medical drug rebates are
      received multiple times a year (usually on a monthly basis) by the Plan and credited to
      the participating groups, including the FEHBP. Prior to November 2013, the medical
      drug rebates were combined with the pharmacy drug rebates and then allocated and
      returned to the FEHBP. Starting in November 2013, the Plan separated the invoicing of
      pharmacy and medical drug rebates. However, the invoices did not include a specific
      category code for the FEHBP’s share of the medical drug rebates. As a result, we
      determined that the Plan inadvertently had not allocated medical drug rebates to the
      FEHBP for the period November 2013 through December 2014.




                                                7                   Report No. 1D-80-00-15-044
For this period, the Plan received       medical drug rebate amounts, totaling $            ,
for all participating groups. As a result of our audit, the Plan determined that $90,709 of
these medical drug rebate amounts should have been allocated and returned to the
FEHBP, but inadvertently had not been. We reviewed and accepted the Plan’s analysis
for these medical drug rebate amounts for November 2013 through December 2014.

Due to this oversight by the Plan, we expanded our audit scope to also include the
medical drug rebates that were received by the Plan during the period January 2015
through September 2015. For this period, the Plan identified      additional medical drug
rebate amounts, totaling $       , that should have been allocated and returned to the
FEHBP, but inadvertently had not been (as of November 30, 2015).

                                      In total, we are questioning $161,176 ($90,709 plus
     Our audit identified
                                      $70,467) for medical drug rebates that had not been
   unreturned medical drug
                                      returned to the FEHBP for the period November
  rebates, totaling $161,176,
                                      2013 through September 2015. We are also
 which the Plan then returned,
                                      questioning $3,521 for applicable LII calculated on
  along with LII of $3,521, to
                                      these medical drug rebates that were returned
         the FEHBP.
                                      untimely to the FEHBP.

Plan Response:

The Plan agrees with this finding.

OIG Comment:

We verified that the Plan returned $164,697 to the FEHBP (via multiple LOCA
drawdown adjustments in November and December 2015), consisting of $161,176 for the
questioned medical drug rebates and $3,521 for applicable LII. In additional comments
provided by the Plan on February 2, 2016 (via email), the Plan informed us that
corrective actions have also been implemented to ensure that medical drug rebates are
timely allocated and returned to the FEHBP.

Recommendation 1

We recommend that the contracting officer require the Plan to return $161,176 to the
FEHBP for the questioned medical drug rebates. However, since we verified that the
Plan returned $161,176 to the FEHBP for these questioned medical drug rebates, no
further action is required for this amount.



                                          8                  Report No. 1D-80-00-15-044
   Recommendation 2

   We recommend that the contracting officer require the Plan to return $3,521 to the
   FEHBP for LII on the questioned medical drug rebates. However, since we verified that
   the Plan returned the questioned LII to the FEHBP, no further action is required for this
   LII amount.

2. Program Integrity Recoveries                                                      $76,502

   Our audit determined the Plan had not returned program integrity recoveries, totaling
   $73,613, to the FEHBP as of December 31, 2014. As a result of this audit finding, the
   Plan returned $76,502 to the FEHBP on November 30, 2015, consisting of $73,613 for
   the questioned program integrity recoveries and $2,889 for applicable LII on these
   recoveries.

   As previously cited from Contract CS 1056, all health benefit refunds and recoveries
   must be deposited into the FEHBP investment account within 30 days and returned to the
   FEHBP within 60 days after receipt by the Carrier.

   As previously cited from FAR 52.232-17(a), all amounts that become payable by the
   Carrier should include simple interest from the date due.

   The Plan allocates and returns program integrity recoveries (fraud recoveries) to the
   FEHBP on a yearly basis. From 2010 through 2014, the Plan received             program
   integrity recovery amounts, totaling $           , for all participating groups, including
   the FEHBP. The Plan allocated $193,662 of these program integrity recoveries to the
   FEHBP. We reviewed all of these program integrity recovery amounts for the purpose of
   determining if the Plan properly allocated and timely returned the applicable recovery
   amounts to the FEHBP. We verified the Plan returned program integrity recoveries,
   totaling $120,049, to the FEHBP for 2010 through 2012. However, as a result of our
   audit, the Plan self-disclosed that $73,613 of the program integrity recoveries for 2013
   and 2014 had not been returned to the FEHBP.

   In total, we are questioning $73,613 for program integrity recoveries that had not been
   returned to the FEHBP as of December 31, 2014, as well as $2,889 for LII calculated on
   these recoveries that were subsequently returned untimely to the FEHBP.

   Plan Response:

   The Plan agrees with this finding.


                                            9                 Report No. 1D-80-00-15-044
   OIG Comment:

   We verified that the Plan returned $76,502 to the FEHBP on November 30, 2015,
   consisting of $73,613 for the questioned program integrity recoveries and $2,889 for
   applicable LII.

   Recommendation 3

   We recommend that the contracting officer require the Plan to return $73,613 to the
   FEHBP for the questioned program integrity recoveries. However, since we verified that
   the Plan returned $73,613 to the FEHBP for these questioned program integrity
   recoveries, no further action is required for this amount.

   Recommendation 4

   We recommend that the contracting officer require the Plan to return $2,889 to the
   FEHBP for LII on the questioned program integrity recoveries. However, since we
   verified that the Plan returned the questioned LII to the FEHBP, no further action is
   required for this LII amount.

3. Health Benefit Refunds and Recoveries                                              $61,610

   During the audit scope, the Plan untimely returned provider offsets of $2,166,774, health
   benefit refunds of $312,539, and subrogation recoveries of $110,318 to the FEHBP.
   Since the Plan returned these funds to the FEHBP during the audit scope and prior to
   receiving our audit notification letter, we did not question these amounts as a monetary
   finding. However, we are questioning LII of $61,610 since these funds were returned
   untimely to the FEHBP. As a result of this finding, the Plan returned this questioned LII
   to the FEHBP on December 29, 2015.

   As previously cited from Contract CS 1056, all health benefit refunds and recoveries
   must be deposited into the FEHBP investment account within 30 days and returned to the
   FEHBP within 60 days after receipt by the Carrier.

   As previously cited from FAR 52.232-17(a), all amounts that become payable by the
   Carrier should include simple interest from the date due.

   The following summarizes our reviews for health benefit refunds, provider offsets, and
   subrogation recoveries:



                                            10                  Report No. 1D-80-00-15-044
Health Benefit Refunds and Provider Offsets

For the period 2010 through 2014, there were          health benefit refund receipts and
provider offsets, totaling $         , for the FEHBP. From this universe, we selected
and reviewed a judgmental sample of 41 health benefit refunds, totaling $1,436,358, and
50 provider offsets, totaling $2,101,530, for the purpose of determining if the Plan timely
returned or credited these refunds and provider offsets to the FEHBP. Our sample
included all health benefit refunds and provider offsets of $15,000 or more.

Our review determined the following:

	 The Plan self-disclosed that $2,166,774 in provider offsets for 2010 through 2012
   were returned untimely to the FEHBP. Since the Plan returned these funds to the
   FEHBP during the audit scope and prior to receiving our audit notification letter, we
   did not question this principal amount as a monetary finding. However, the FEHBP
   is due LII of $58,574 on these provider offsets since the funds were returned untimely
   to the FEHBP. As a result of this finding, the Plan returned the questioned LII of
   $58,574 to the FEHBP on December 29, 2015.

	 The Plan returned health benefit refunds, totaling $312,539, untimely to the FEHBP
   during the audit scope. Specifically, we noted that the Plan deposited these refunds
   into the dedicated FEHBP investment account from 6 to 164 days late. Since the Plan
   returned these funds to the FEHBP during the audit scope and prior to receiving our
   audit notification letter, we did not question this principal amount as a monetary
   finding. However, the FEHBP is due LII of $2,245 on these refunds since the funds
   were returned untimely to the FEHBP. As a result of this finding, the Plan returned
   the questioned LII of $2,245 to the FEHBP on December 29, 2015.

Subrogation Recoveries

For the period 2010 through 2014, there were         subrogation recoveries, totaling
$         , for the FEHBP. We selected a statistical sample of 32 subrogation recoveries,
totaling $174,568, for the purpose of determining if the Plan timely returned these
recoveries to the FEHBP. Our statistical sample included subrogation recoveries from a
recovery stratification of $500 or more.

Based on our review, we determined that the Plan returned 12 subrogation recoveries,
totaling $110,318, untimely to the FEHBP during the audit scope. Specifically, we noted
that the Plan deposited these subrogation recoveries into the dedicated FEHBP
investment account from 1 to 144 days late. Since the Plan returned these funds to the

                                         11 	                Report No. 1D-80-00-15-044
   FEHBP during the audit scope and prior to receiving our audit notification letter, we did
   not question this principal amount as a monetary finding. However, the FEHBP is due
   LII of $791 on these recoveries since the funds were returned untimely to the FEHBP.
   As a result of this finding, the Plan returned the questioned LII of $791 to the FEHBP on
   December 29, 2015. (Note: Due to the immateriality of the questioned LII for the
   sample and since there were no questioned principal amounts, we did not project the
   results and/or potential LII to the universe of subrogation recoveries.)

   Summary of Questioned Amounts

   In total, we are questioning $61,610 ($58,574 plus $2,245 plus $791) for applicable LII
   on the provider offsets, health benefit refunds, and subrogation recoveries that were
   returned untimely to the FEHBP.

   Plan Response:

   The Plan agrees with this finding.

   OIG Comment:

   We verified that the Plan returned $61,610 to the FEHBP on December 29, 2015 for the
   questioned LII.

   Recommendation 5

   We recommend that the contracting officer require the Plan to return $61,610 to the
   FEHBP for the questioned LII on provider offsets, health benefit refunds, and
   subrogation recoveries that were returned untimely to the FEHBP during the audit scope.
   However, since we verified that the Plan returned the questioned LII to the FEHBP, no
   further action is required for this LII amount.

4. Pharmacy Drug Rebates                                                             $35,063

   Our audit determined that the Plan returned 54 pharmacy drug rebate amounts, totaling
   $18,477,391, untimely to the FEHBP during the audit scope. Since the Plan returned
   these pharmacy drug rebates to the FEHBP during the audit scope and prior to receiving
   our audit notification letter, we did not question this amount as a monetary finding.
   However, we are questioning LII of $39,827 on these pharmacy drug rebates since the
   funds were returned untimely to the FEHBP. We also determined that the Plan returned
   an excess amount of pharmacy drug rebates, totaling $4,764, to the FEHBP during the


                                            12                 Report No. 1D-80-00-15-044
audit scope. As a result of this audit finding, the Plan returned the net questioned amount
of $35,063 to the FEHBP on December 29, 2015.

As previously cited from Contract CS 1056, all health benefit refunds and recoveries
must be deposited into the FEHBP investment account within 30 days and returned to the
FEHBP within 60 days after receipt by the Carrier.

As previously cited from FAR 52.232-17(a), all amounts that become payable by the
Carrier should include simple interest from the date due.

The Plan participates in pharmacy drug rebate programs with various drug manufacturers.
These drug rebates are usually received on a monthly basis by the Plan and credited to the
participating groups, including the FEHBP. From 2010 through 2014, the Plan received
   pharmacy drug rebate amounts, totaling $              , for all participating groups. The
Plan allocated $22,190,826 of these pharmacy drug rebate amounts to the FEHBP. We
selected and reviewed all of the FEHBP pharmacy drug rebate amounts to specifically
determine if the Plan properly allocated and timely returned these rebate amounts to the
FEHBP.

We determined that the Plan untimely deposited 54 pharmacy drug rebate amounts,
totaling $18,477,391, into the FEHBP investment account (i.e., from 2 to 329 days late)
during the audit scope. Since the Plan returned these pharmacy drug rebates to the
FEHBP during the audit scope and prior to receiving our audit notification letter, we did
not question this amount as a monetary finding. However, we calculated that the FEHBP
is due LII of $39,827 on these pharmacy drug rebate amounts that were returned untimely
to the FEHBP.

For the period 2010 through 2014, we also determined that the Plan inadvertently
returned $22,195,590 to the FEHBP for pharmacy drug rebates instead of $22,190,826,
resulting in an excess amount of $4,764 ($22,195,590 minus $22,190,826) returned to the
FEHBP. In total, we are questioning $35,063 (net) for this audit finding, consisting of
$39,827 for LII on pharmacy drug rebates returned untimely to the FEHBP minus $4,764
for the excess pharmacy drug rebate amount returned to the FEHBP.

Plan Response:

The Plan agrees with this finding.




                                          13                 Report No. 1D-80-00-15-044
     OIG Comment:

     We verified that the Plan returned $35,063 (net) to the FEHBP on December 29, 2015,
     consisting of $39,827 for the questioned LII on pharmacy drug rebates returned untimely
     to the FEHBP minus $4,764 for the excess pharmacy drug rebate amount inadvertently
     returned to the FEHBP.

     Recommendation 6

     We recommend that the contracting officer require the Plan to return $39,827 to the
     FEHBP for the questioned LII on pharmacy drug rebates that were returned untimely to
     the FEHBP during the audit scope. However, since we verified that the Plan returned the
     questioned LII to the FEHBP, no further action is required for this LII amount.

     Recommendation 7

     We recommend that the contracting officer allow the Plan to recover $4,764 from the
     LOCA for an excess pharmacy drug rebate amount inadvertently returned to the FEHBP.
     However, since we verified that the Plan already recovered this excess amount from the
     LOCA, no further action is required for this amount.

B. ADMINISTRATIVE EXPENSES

  1. Affordable Care Act Fees - Excess Drawdowns                                       $252,482

     Our audit determined the Plan withdrew $249,133 from LOCA in excess of the FEHBP’s
     actual amounts for the transitional reinsurance (TR) and health insurance provider (HIP)
     fees in 2014. As a result of this finding, the Plan returned $252,482 to the FEHBP,
     consisting of $249,133 for the excess drawdown amounts and $3,349 for applicable LII.

     Contract CS 1056, Part III, section 3.2 (b)(1) states, “The Carrier may charge a cost to the
     contract for a contract term if the cost is actual, allowable, allocable, and reasonable.”

     As previously cited from FAR 52.232-17(a), all amounts that become payable by the
     Carrier should include simple interest from the date due.

     Transitional Reinsurance Fee

     Section 1341 of the Affordable Care Act (ACA) provides for a transitional reinsurance
     program in each State from 2014 through 2016. The reinsurance program imposes an


                                               14                  Report No. 1D-80-00-15-044
annual fee on health insurers designed to reduce the costs of high-risk enrollees and
reduce premiums for enrollees in the individual market. This yearly fee is based on each
health insurer’s enrollment count. Starting in 2014, the Department of Health and
Human Services (HHS) collects these contributions annually from all health insurance
issuers and self-insured group health plans. The ACA required a collection of
reinsurance contributions of $12 billion for 2014. Emblem Health’s (GHI’s parent
company) share of this TR fee totaled $28,624,575 for 2014. Of this TR fee amount, the
Plan allocated $1,974,910 to the FEHBP.

                           We determined that the Plan calculated the FEHBP’s share of
   In 2014, the Plan
                           this fee correctly by multiplying the FEHB plan’s annualized
   overcharged the
                           average enrollment from January 2014 through September
 FEHBP $130,643 for
                           2014 by the national contribution rate of $63 (as established
 the ACA transitional
                           by HHS). However, we also determined that the Plan
    reinsurance fee.
                           inadvertently withdrew $2,105,553 from the LOCA for the
TR fee amount, instead of the FEHBP’s actual allocation amount of $1,974,910, resulting
in an overcharge of $130,643 ($2,105,553 minus $1,974,910) to the FEHBP.

Health Insurance Provider Fee

Section 9010 of the ACA imposes an annual fee on health insurers for the purpose of
funding the health insurance exchange subsidies. This yearly fee is based on each health
insurer’s share of net premiums written. The Internal Revenue Service calculates the
health insurer fee based on a ratio of the health insurer’s net premiums written to the total
net premiums written by all health insurance providers (i.e., industry premiums). The
ACA required all health insurance providers to collectively contribute $8 billion in HIP
fees for 2014. Emblem Health’s share of these HIP fees totaled $                 for 2014.
The Plan allocated $4,736,468 of this amount to the FEHBP.

                              We determined that the Plan calculated the FEHBP’s share
    In 2014, the Plan
                              of this fee correctly by multiplying the FEHB plan’s net
    overcharged the
                              premium income by the Plan’s gross fee percentage.
  FEHBP $118,490 for
                              However, we also determined that the Plan inadvertently
     the ACA health
                              withdrew $4,854,958 from the LOCA for the HIP fee
 insurance provider fee.
                              amount, instead of the FEHBP’s actual allocation amount of
$4,736,648, resulting in an overcharge of $118,490 ($4,854,958 minus $4,736,468) to the
FEHBP.




                                          15                  Report No. 1D-80-00-15-044
     Summary of Questioned Amounts

     In total, we are questioning $252,482, consisting of $249,133 for excess LOCA
     drawdowns (overcharges of $130,643 for the TR fee and $118,490 for the HIP fee) and
     $3,349 for applicable LII calculated on these excess drawdowns.

     Plan Response:

     The Plan agrees with this finding.

     OIG Comment:

     We verified that the Plan returned $252,482 to the FEHBP on November 30, 2015,
     consisting of $249,133 ($130,643 plus $118,490) for the TR and HIP fee overcharges and
     $3,349 for applicable LII.

     Recommendation 8

     We recommend that the contracting officer require the Plan to return $249,133 to the
     FEHBP for the questioned TR and HIP fee overcharges. However, since we verified that
     the Plan returned $249,133 to the FEHBP for these overcharges, no further action is
     required for this questioned amount.

     Recommendation 9

     We recommend that the contracting officer require the Plan to return $3,349 to the
     FEHBP for LII on the questioned TR and HIP fee overcharges. However, since we
     verified that the Plan returned the questioned LII to the FEHBP, no further action is
     required for this LII amount.

C. CASH MANAGEMENT

  1. Excess Working Capital Deposit                                                 $3,487,040

     As of September 30, 2015, the Plan held a working capital (WC) deposit of $3,487,040
     over the amount needed to meet the Plan’s daily cash needs for FEHBP claim payments.
     As a result of our audit, the Plan returned $3,487,040 to the FEHBP for the excess WC
     deposit.




                                              16                  Report No. 1D-80-00-15-044
        OPM’s “Letter of Credit System Guidelines” (Guidelines), dated May 2009, state:
        “Carriers should maintain a working capital balance equivalent to an average of 2 days of
        paid claims. The working capital fund should be established using federal funds.
        Carriers are required to monitor their working capital funds on a monthly basis and adjust
        if necessary on a quarterly basis. The interest earned on the working capital funds must
        be credited to the FEHBP at least on a monthly basis. The working capital is not required
        but strongly recommended.” Also, based on the Guidelines, the Carrier’s WC calculation
        must exclude electronic fund transfers (EFTs).

        The regulations governing the financing of Federal programs by the letter of credit
        method, as established in 31 CFR 205 (Treasury Department Circular No. 10750), also
        state that EFTs should not be included in the WC calculation. These instructions are
        established under the provisions of Treasury Department Circular No. 1083 (Regulations
        Governing the Utilization of the U.S. TFCS), 5 CFR Part 890, and 48 CFR Chapter 16.

        Based on industry practice (e.g., other FEHBP experience-rated Carriers), the WC
        deposit should be recalculated on a regular basis to determine if the amount currently
        maintained is adequate to meet the Plan’s daily cash needs for FEHBP claim payments.
        If the WC deposit is not adequate (either over or underfunded), the Plan should make an
        appropriate adjustment.

        The Plan reviewed the WC deposit on a regular basis (usually monthly) during the period
        January 2010 through September 2015.3 We noted that the Plan increased the WC
        deposit amount in March 2011 after receiving approval from OPM’s contracting officer.
        When reviewing the Plan’s WC calculation, we determined that the Plan inappropriately
        included EFTs in the calculation. As of September 30, 2015, the Plan held a WC deposit
        amount of $           in the dedicated FEHBP investment account.


            The Plan held an         To determine if the Plan maintained an appropriate WC
          excess WC deposit of       deposit amount, we recalculated what the Plan’s WC deposit
            $3,487,040 in the        should be and determined that, as of September 30, 2015,
            dedicated FEHBP          the Plan should have only maintained a WC deposit of
         investment account as       $         . Our calculation excluded EFTs. Therefore, we
         of September 30, 2015.      determined that, as of September 30, 2015, the Plan held a
                                     WC deposit with $3,487,040 ($             minus $         )
        over the amount actually needed to meet the Plan’s daily cash needs for FEHBP claim
        payments. Since the Plan maintained these excess WC funds in the dedicated FEHBP
        investment account, LII is not applicable for this finding.

3
 Although the scope for the Plan’s cash management activities and practices initially only included 2010 through
2014, we expanded the scope for the WC deposit to also include the period January 2015 through September 2015.

                                                        17                     Report No. 1D-80-00-15-044
     Plan Response:

     The Plan agrees with this finding.

     OIG Comment:

     We verified that the Plan returned the excess WC deposit of $3,487,040 to the FEHBP in
     November 2015.

     Recommendation 10

     We recommend that the contracting officer require the Plan to return $3,487,040 to the
     FEHBP for the excess WC deposit. However, since we verified that the Plan returned
     $3,487,040 to the FEHBP for the excess WC deposit, no further action is required for this
     questioned amount.

     Recommendation 11

     We recommend that the Plan implement corrective actions to ensure that the WC deposit
     is properly calculated in accordance with the Guidelines and applicable regulations. The
     Plan should monitor and recalculate the WC deposit on a monthly basis and adjust at
     least on a quarterly basis (if necessary).

     Recommendation 12

     We recommend that the contracting officer update the Annual Accounting Statement for
     the experience-rated HMO’s and Employee Organization plans to include a specific
     worksheet for the WC balances and adjustments.

D. FRAUD AND ABUSE PROGRAM

  1. Special Investigations Unit                                                   Procedural

     The Plan is not in compliance with the communication and reporting requirements for
     fraud and abuse cases that are set forth in the FEHBP Carrier Letter (CL) 2011-13 and
     CL 2014-29. Specifically, the Plan did not report, or did not timely report, all fraud and
     abuse cases to the OIG. Without awareness of these existing potential fraud and abuse
     issues, the OIG cannot investigate the broader impact of these potential issues on the
     FEHBP as a whole.



                                               18                 Report No. 1D-80-00-15-044
        CL 2011-13 (Mandatory Information Sharing via Written Case Notifications to OPM’s
        Office of the Inspector General), dated June 17, 2011, states that all FEHBP Carriers “are
        required to submit a written notification to the OPM OIG … within 30 working days of
        becoming aware of a fraud, waste or abuse issue where there is a reasonable suspicion
        that a fraud has occurred or is occurring against the Federal Employees Health Benefits
        (FEHB) Program.” There is no dollar threshold for this requirement.

        CL 2014-29 (Federal Employees Health Benefits Fraud, Waste and Abuse), dated
        December 19, 2014, states that all FEHBP Carriers “are required to submit a written
        notification to OPM-OIG within 30 working days when there is a potential reportable
        FWA that has occurred against the FEHB Program. OPM-OIG considers a potential
        reportable FWA to have occurred when, after a preliminary review of the complaint, the
        carrier takes an affirmative step to investigate the complaint. . . . There is no financial
        threshold for these case notifications.” 4

        During the period January 1, 2014 through March 31, 2015, the Plan opened         fraud
        and abuse cases. Of these, the Plan identified 23 cases with potential FEHBP exposure.
        We reviewed these 23 cases with FEHBP exposure to determine if the cases were
        reported to the OIG as required by CLs 2011-13 and 2014-29. Based on our review, we
        determined that notifications for only 6 of these 23 fraud and abuse cases with FEHBP
        exposure were sent to the OIG. Because all of these cases have FEHBP exposure, and
        there is no financial threshold for reporting suspected fraud against the FEHBP, all of
        these 23 cases should have been reported to the OIG as required by CLs 2011-13 and
        2014-29.

        CLs 2011-13 and 2014-29 require the Plan to submit written notification to the OIG
          The Plan did not within 30 days of relevant FEHBP fraud activity. However, of the
           report, or did     23 cases with FEHBP exposure during the period January 1, 2014
                              through March 31, 2015, we determined that 2 cases (9 percent)
             not timely
          report, all fraud   were reported timely to the OIG, 4 cases (17 percent) were
                              reported untimely to the OIG, and 17 cases (74 percent) were not
          and abuse cases
            to the OIG.       reported to the OIG. We noted that the 17 cases not reported to
                              the OIG were all opened by the Plan in 2014; whereas, the 6 cases
        reported to the OIG were all opened by the Plan during the period January 1, 2015
        through March 31, 2015.



4
 CL 2014-29 consolidates and updates the information from CLs 2003-23, 2003-25, 2007-12, and 2011-13, which
are superseded by this guidance. CL 2014-29 also supplements guidance from the contract (Section 1.9 – Plan
Performance).

                                                      19                    Report No. 1D-80-00-15-044
            Cases Opened with FEHBP Exposure (as Identified by the Plan)


                                 17

                                                                  Not Reported
                        2                                         Reported Late
                                  4

                                                                  Reported Timely




Ultimately, the Plan’s untimely communicating or not reporting of potential FEHBP
cases to the OIG has resulted in a failure to meet the communication and reporting
requirements that are set forth in CLs 2011-13 and 2014-29. The lack of notifications
and/or untimely case notifications did not allow the OIG to investigate whether other
FEHBP Carriers are exposed to the identified provider committing fraud against the
FEHBP. This also does not allow the OIG’s Administrative Sanctions Group to be
notified timely. As a result, this non-compliance by the Plan may result in additional
improper payments being made by other FEHBP Carriers.

Plan Response:

In the draft report response, the Plan did not address this procedural finding
beyond stating their disagreement.

In additional comments provided by the Plan on February 2, 2016 (via email), the
Plan disagreed with this finding and stated that the SIU “did not fail the 2014
reporting requirements as per the guidance instructions that were in force at the
time the cases were opened. . . . Until December 19, 2014, we had determined that
none of the cases opened in 2014 met the reporting guidelines of CL 2011-13 . . .
Additionally, there were no instructions given to amend the prior reports in CL
2014-29. In 2015, the SIU has taken corrective measures to ensure that SIU is in
compliance with the requirements of CL 2014-29. We have educated the
investigative staff and amended our case set-up protocols.”




                                         20                 Report No. 1D-80-00-15-044
OIG Comment:

Of the 17 cases opened by the Plan in 2014 with potential FEHBP exposure, we noted
that none were reported to the OIG. Since there is no financial threshold for reporting
suspected fraud against the FEHBP, all of these cases should have been reported to the
OIG as required by CL 2011-13. Of the six cases opened by the Plan from January 2015
through March 2015 with potential FEHBP exposure, we noted that four of these cases
were not reported timely to the OIG as required by CL 2014-29. Therefore, the Plan did
not comply with the communication and reporting requirements for fraud and abuse cases
that are contained in CLs 2011-13 and 2014-29.

Recommendation 13

We recommend that the contracting officer require the Plan to provide evidence or
supporting documentation ensuring that the Plan has implemented the necessary
procedural changes to meet the communication and reporting requirements of fraud and
abuse cases that are contained in CL 2014-29.




                                       21                 Report No. 1D-80-00-15-044
IV. MAJOR CONTRIBUTORS TO THIS REPORT
Experience-Rated Audits Group

          , Auditor-In-Charge

               , Auditor

               , Auditor

          , Auditor


                  , Chief

              , Senior Team Leader




                                     22   Report No. 1D-80-00-15-044
                                                                                                                                                                                                                                 

                                                                                               V. SCHEDULE A


                                                                                        GROUP HEALTH INCORPORATED
                                                                                               PLAN CODE 80
                                                                                           NEW YORK. NEW YORK

                                                                                           QUESTIONED CHARGES

                              AUDIT FINDINGS                                     2010                2011                2012                2013                  2014                  2015               TOTAL

    A. MISCELLANEOUS HEALTH BENEFIT PAYMENTS AND CREDITS

        1. Medical Drug Rebates"                                                          so                    so                 so           Sl.563                S91.965                S71.169                S164.697
        2. Program Integrity Recoveries"                                                  0                    0                     0          35.501                 41.001                      0                  76.502
        3. Health Benefit Refunds and Recoveries"                                    26.363             28.066                   7.181               0                      0                      0                   61.610
        4. Pharmacy Drug Rebates"                                                    14,204              13, 120                7,274            1.001                   (536)                     0                  35,063

       TOTAL MISCELLANEOUS HEALTH BENEFIT PAYMENTS
       AND CREDITS                                                        I         S40.567             S41.186               S14.455          S38.065               S132.430                S71.169                S337.872

    B. ADMINISTRATIVE EXPENSES

        1. Affordable Care Act Fees - Excess Drawdowns"                                  so                     so                 so                   so           S252,482                      so               S252.482

        TOTAL ADMINISTRATIVE EXPENSES                                     I              so                     so                 so                   so           S252.482                      so               S252.482

    C. CASH MANAGEMENT

        1. Excess Working Capital Deposit                                                 so                    so                 so                   so                  so           $3.487.040            $3.487.040

        TOTAL CASH MANAGEMENT                                             I               so                    so                 so                   so                  so           $3.487.040            $3.487.040

    D. FRAUD AND ABUSE PROGRAM

        1. S pecial Investigations Unit (Procedural)                                     so                     so                 so                   so                  so                     so                     so
        TOTAL FRAUD AND ABUSE PROGRAM                                     I               so                    so                 so                   so                  so                     so                     so
    TOTAL QUESTIONED CHARGES                                              I         $40.567            $41.186                S14.455          S38,065               S384.912            S3.558.209            $4.077.394

    " We included lost investment income (Lii) within audit findings Al (S3.521). A2 (S2.889). A3 (S61.610). A4 (S39.827). and Bl (S3.349). Therefore. no additional Lii is applicable for these findings.



                                                                                                                                                                                       Report No. 1D-80-00-15-044
                                                                                      APPENDIX




February 1, 2016


Group Chief, Experience-Rated Audit Group
Office of the Inspector General
U.S. Office of Personnel Management
1900 E Street, Room 6400
Washington, DC 20415-1100

Re: Response to Report 1D-80-00-15-044

Dear                  :

Enclosed is Group Health Incorporated’s (“The Plan”) response to the Draft Audit Report that
was released on December 22, 2015. The report contains eight findings and or recommendations
including one procedural finding. We have responded to each finding.

With respect to the $4,077,394 in charges to the Plan as identified in the audit report, the
following is a summary of the findings and our response.
       1.	 The Plan agrees with the finding that $161,176 of medical drug rebates were not
           returned to FEHBP as of September 30, 2015. The audit scope was expanded to
           September 30, 2015 to include medical drug rebates that were received by the Plan
           from January 2015 through September 2015. The Plan returned the $90,709 on
           November 30, 2015, including $3,002
           of lost investment income, and $70,467 including $519 of lost investment income on
           December 18, 2015. The total amount of the finding was $164,697.

       2.	 The Plan agrees with the finding that $73,512 of program integrity credits (fraud
           recoveries) were not returned to FEHBP as of December 31, 2014. The Plan returned
           the funds on November 30, 2015, including lost investment income of $2,889.

       3.	 The Plan agrees with the finding that $61,610 of lost investment income is due to
           FEHBP for years 2010-2014 relating to Health Benefit Refunds and Recoveries.
           Provider offsets of $2,166,774 for year 2010-2012 were not returned timely, and
           health benefit cash refunds totaling $312,539 and 12 subrogation recoveries totaling
           $110,318 were not deposited timely to the dedicated FEHBP investment account.
           The Plan returned the funds on December 28, 2015.




                                                                          Report No. 1D-80-00-15-044
        4.	 The Plan agrees with the finding that $39,827 of lost investment income is due to
            FEHBP for years 2010-2014. A total of $18,477,391 of pharmacy drug rebates were
            not deposited timely into the dedicated FEHBP investment account. Excess
            pharmacy rebate amounts totaling $4,764 previously returned to FEHBP were
            credited to the Plan resulting in a net balance due FEHBP. The Plan returned the
            funds on December 28, 2015.

        5.	 The Plan agrees with the finding that withdrawals of $130,643 from the LOCA were
            made in excess of the Transitional Reinsurance Fee amount for 2014. The Plan
            subsequently returned the funds plus lost investment income of $1,756, on November
            30, 2015.

        6.	 The Plan agrees with the finding that withdrawals of $118,490 from the LOCA were
            made in excess of the Health Insurance Providers Fee amount for 2014. The Plan
            subsequently returned the funds plus lost investment income of $1,593 on November
            30, 2015.

        7.	 The Plan agrees with the finding that there were $3,487,040 in excess funds deposited
            into the Working Capital Account. The excess funds were returned to FEHBP
            through several LOCA adjustments from November 10, 2015 through November 12,
            2015. Since the funds were held in an interest bearing account and the interest earned
            was returned to FEHBP, no lost investment income is due.

        8.	 The final item is a procedural finding relating to the Special Investigations Unit. The
            Plan disagrees with this finding.

As part of the attachments to this response you will find the backup to support the return of these
funds to the LOCA. In addition, we have enclosed the bank statements for the WC account to
confirm the money was moved to the LOCA.

It is our goal to be in compliance with the FEHBP contract at all times. Should you have any
questions regarding this response to your audit report, please feel free to contact me or
              .

Sincerely,


George Babitsch
Senior Vice President, Underwriting and Account Management

cc: 	



                                                                     Report No. 1D-80-00-15-044
                                                                               




               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
  
                                                                               




                                                                   Report No. 1D-80-00-15-044