oversight

FEHBP 2012-15 Ops HMO Missouri, Inc., dba Anthem Inc. in Mason, OH

Published by the Office of Personnel Management, Office of Inspector General on 2017-12-13.

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
         HMO MISSOURI, INC.
           MASON, OHIO
         Report Number 1D-9G-00-16-008
                 March 13, 2017
             EXECUTIVE SUMMARY
                                          Audit of HMO Missouri, Inc.

Report No. 1D-9G-00-16-008                                                                           March 13, 2017



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

We conducted this limited scope audit       We questioned $442,760 in health benefit refunds and recoveries,
to obtain reasonable assurance that         administrative expenses, excess letter of credit account (LOCA)
HMO Missouri, Inc. (Plan), dba as           drawdowns, and lost investment income (LII). We also identified
Anthem Inc., is complying with the          a procedural finding regarding the Plan’s F&A Program. The Plan
provisions of the Federal Employees         agreed with all of the questioned amounts as well as the procedural
Health Benefits Act and regulations         finding regarding the Plan’s F&A Program.
that are included, by reference, in the
Federal Employees Health Benefits           Our audit results are summarized as follows:
Program (FEHBP) contract.
Specifically, the objectives of our         	 Health Benefit Refunds and Recoveries – We questioned
audit were to determine if the Plan            $360,340 for auto recoupment refunds that had not been
charged costs to the FEHBP and                 returned to the FEHBP. We verified that the Plan has returned
provided services to FEHBP members             this questioned amount to the FEHBP.
in accordance with the contract.
                                            	 Administrative Expenses – We questioned $19,332 for
What did we audit?                             unallowable and/or unallocable cost center expenses that were
                                               charged to the FEHBP and $1,378 for applicable LII. We
Our audit covered health benefit               verified that the Plan has returned these questioned amounts to
refunds and recoveries from 2012               the FEHBP.
through June 2015. We also reviewed
the Plan’s cash management activities       	 Cash Management – We questioned $58,098 for excess LOCA
and practices related to FEHBP funds           drawdowns and $3,612 for applicable LII. We verified that the
from 2012 through June 2015, as well           Plan has returned these questioned amounts to the FEHBP.
as the Plan’s Fraud and Abuse (F&A)
Program from January 2015 through           	 Fraud and Abuse Program – The Plan is not in compliance with
September 2015. In addition, we                the communication and reporting requirements for fraud and
expanded our audit scope to include            abuse cases that are set forth in FEHBP Carrier Letter 2014-29.
unallowable and/or unallocable cost
centers that were potentially charged
to the FEHBP from 2010 through
2015, as part of administrative
expenses.
 _______________________
 Michael R. Esser
 Assistant Inspector General
 for Audits
                                                      i
            ABBREVIATIONS

CFR     Code of Federal Regulations
CL      Carrier Letter
FAR     Federal Acquisition Regulations
FEHB    Federal Employees Health Benefits
FEHBP   Federal Employees Health Benefits Program
F&A     Fraud and Abuse
HMO     Health Maintenance Organization
LII     Lost Investment Income
LOCA    Letter of Credit Account
OIG     Office of the Inspector General
OPM     U.S. Office of Personnel Management
Plan    HMO Missouri, Inc.
SIU     Special Investigations Unit




                            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.   AUDIT FINDINGS AND RECOMMENDATIONS.................................................8


         A. HEALTH BENEFIT REFUNDS AND RECOVERIES..........................................8


              1. Auto Recoupments .............................................................................................8 


         B. ADMINISTRATIVE EXPENSES.........................................................................10 


              1. Unallowable and/or Unallocable Cost Centers ................................................10 


         C. CASH MANAGEMENT .......................................................................................12 


              1. Excess Letter of Credit Account Drawdowns..................................................12 


         D. FRAUD AND ABUSE PROGRAM .....................................................................14 


              1. Special Investigations Unit ..............................................................................14 


  IV.    SCHEDULE A – QUESTIONED CHARGES

         APPENDIX: HMO Missouri, Inc.’s Draft Report Response, dated December 5, 

         2016 


         REPORT FRAUD, WASTE, AND MISMANAGEMENT
IV. MAJOR CONTRIBUTORS
            I. BACKGROUND
                       TO THIS REPORT
This audit report details the findings, conclusions, and recommendations resulting from our
limited scope audit of the Federal Employees Health Benefits Program (FEHBP) operations at
HMO Missouri, Inc. (Plan), dba as Anthem Inc. The Plan’s operations are located in Mason,
Ohio.

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. 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 in the Plan’s service area, which includes St. Louis, Missouri; Central and Southwest
Missouri; and St. Clair and Madison counties in Illinois.

The Plan’s contract (CS 2838) with OPM is experience-rated. Thus, the costs of providing
benefits in the prior year, including underwritten gains and losses that 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 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.




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

                                                       1                     Report No. 1D-9G-00-16-008
All findings from our previous audit of the Plan (Report No. 1D-9G-00-06-088, dated
November 20, 2007) for contract years 2001 through 2005 have been satisfactorily resolved.

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 September 20, 2016; and were
presented in detail in a draft report, dated November 3, 2016. 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 report. Also, additional documentation provided by the Plan was considered in
preparing our final report.




                                                 2                   Report No. 1D-9G-00-16-008
IV.
II. OBJECTIVES,
     MAJOR CONTRIBUTORS
                SCOPE, AND TO
                           METHODOLOGY
                              THIS REPORT
 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:

        Health Benefit Refunds and Recoveries

        	 To determine whether health benefit refunds and recoveries, including pharmacy and
           medical drug rebates, 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. Specifically, to determine whether the
           Plan potentially charged the FEHBP for unallowable and/or unallocable cost centers
           that were identified while concurrently conducting a multi-plan audit of Anthem Inc.
           (covering 14 BlueCross and BlueShield plans).

        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 2838 and FEHBP Carrier
           Letter 2014-29.

 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



                                                3	                 Report No. 1D-9G-00-16-008
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.

We reviewed the Plan’s Annual Accounting Statements for contract years 2012 through 2014.
During this period, the Plan processed approximately $197 million in FEHBP health benefit
payments and charged the FEHBP $7 million in administrative expenses.


                                               HMO Missouri, Inc.
                                                Contract Charges

                                 $100

                                  $75
                    $ Millions




                                  $50

                                  $25

                                   $0
                                             2012           2013           2014
                                                        Contract Years
                                        Health Benefit Payments    Administrative Expenses


Specifically, we reviewed health benefit refunds and recoveries (e.g., cash and auto recoupment
refunds, subrogation recoveries, and pharmacy and medical drug rebates) and the Plan’s cash
management activities and practices from 2012 through June 30, 2015. Also, we reviewed the
Plan’s Fraud and Abuse (F&A) Program activities and practices from January 1, 2015 through
September 30, 2015. In addition, we expanded our audit scope to include 13 unallowable and/or
unallocable cost centers that were potentially charged to the FEHBP by the Plan from 2010
through 2015, as part of administrative expenses. We identified these 13 questionable cost
centers while concurrently conducting a multi-plan audit of Anthem Inc. (covering 14 BlueCross
and BlueShield plans).

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.

                                                            4                     Report No. 1D-9G-00-16-008
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, 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
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 information 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 was sufficient to achieve our audit objectives.

The audit was performed at the Plan’s office in Mason, Ohio on various dates from March 1,
2016 through June 30, 2016. Audit fieldwork was also performed at our office in Cranberry
Township, Pennsylvania through September 20, 2016.

METHODOLOGY

We obtained an understanding of the internal controls over the Plan’s financial 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 health benefit refunds and recoveries. For the period 2012 through
June 30, 2015, we also judgmentally and/or statistically selected and reviewed the following
FEHBP items:

   Health Benefit Refunds

   	 A high dollar sample of 50 health benefit refund cash receipts, totaling $1,133,016 (from
      a universe of 10,619 refund receipt amounts, totaling $2,615,879). Our high dollar
      sample included the 50 highest refund receipt amounts for the audit scope.

   	 A statistical sample of 65 health benefit refunds returned via auto recoupments, totaling
      $913,528 (from a universe of 4,044 refunds returned via auto recoupments, totaling
      $2,714,502). Our statistical sample included auto recoupments that were selected from a
      stratification of $1,000 or more.

                                                  5	                 Report No. 1D-9G-00-16-008
   Other Health Benefit Credits and Recoveries

   	 40 high dollar pharmacy drug rebate amounts, totaling $3,884,697, from a universe of
      881 pharmacy drug rebate amounts, totaling $6,692,912. For this sample, we
      judgmentally selected the 10 highest drug pharmacy rebate amounts from each year in the
      audit scope.

   	 20 high dollar subrogation recoveries, totaling $369,195, from a universe of 170
      recoveries, totaling $485,349. For this sample, we selected all subrogation recoveries of
      $5,000 or more.

   	 All 11 medical drug rebate amounts, totaling $123,643.

   	 10 overpayment write-offs, totaling $18,640, from a universe of 67 write-offs, totaling
      $21,760. These write-offs were for potential refunds related to erroneous health benefit
      payments that the Plan considered uncollectable. For this sample, we selected the 10
      highest dollar write-offs for the audit scope. 

   	 7 high dollar hospital bill audit recoveries, totaling $182,636, from a universe of 216
      recoveries, totaling $332,921. For this sample, we selected all hospital bill audit
      recoveries of $10,000 or more.

We reviewed these samples to determine if health benefit refunds and recoveries were timely
returned to the FEHBP. The results of these samples were not projected to the applicable
universes of health benefit refunds and recoveries.

Due to concerns that the Plan may have charged the FEHBP for 13 unallowable and/or
unallocable cost centers, we expanded our audit scope to include administrative expenses for
2010 through 2015, relating to these cost centers. We initially identified these questionable cost
centers while concurrently conducting a multi-plan audit of Anthem Inc. (covering 14 BlueCross
and BlueShield plans). Accordingly, we reviewed the Plan’s 2010 through 2015 cost center
reports to determine if the Plan also charged these unallowable and/or unallocable cost center
expenses to the FEHBP.

We reviewed the Plan’s cash management activities and practices to determine whether the Plan
handled FEHBP funds in accordance with Contract CS 2838 and applicable laws and regulations.
Specifically, we reviewed letter of credit account (LOCA) drawdowns, working capital
calculations, adjustments and/or balances, and interest income transactions from 2012 through
June 30, 2015, as well as the Plan’s dedicated FEHBP investment account balance as of June 30,
2015.

                                                 6	                 Report No. 1D-9G-00-16-008
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 2838 and FEHBP Carrier Letter 2014-29.




                                               7                  Report No. 1D-9G-00-16-008
III. AUDIT FINDINGS AND RECOMMENDATIONS
 A. HEALTH BENEFIT REFUNDS AND RECOVERIES

   1.	 Auto Recoupments                                                                   $360,340

      The Plan had not returned $360,340 to the FEHBP for refund amounts recovered through
      auto recoupments. As a result of our audit, the Plan returned $360,340 to the FEHBP.

      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 refunds.”

      Contract CS 2838, Part II, Section 2.3 (i) states, “All health benefit refunds and
      recoveries, including erroneous payment 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.”

      Regarding reportable monetary findings, Contract CS 2838, Part III, section 3.16 (a),
      states, “Audit findings . . . in the scope of an OIG audit are reportable as questioned
      charges unless the Carrier provides documentation supporting that the findings were
      already identified and corrected (i.e., . . . untimely health benefit refunds were already
      processed and returned to the FEHBP) prior to audit notification.”

      For the period 2012 through June 30, 2015, we identified 4,044 health benefit refunds,
      totaling $2,714,502, which were returned to the FEHBP through auto recoupments. From
      this universe, we selected and reviewed a statistical sample of 65 auto recoupments,
      totaling $913,528, for the purpose of determining if the Plan properly offset (or reduced)
      FEHBP claim payments to providers in order to recover overpayment amounts.

      Our statistical sample included auto recoupments that were selected from a stratification
      of $1,000 or more. We determined that the Plan properly returned these refunds to the
      FEHBP through auto recoupments, except for the following:

      	 For sample item number 32, the Plan recovered our sample amount of $8,926 by
         making the appropriate auto recoupments against FEHBP claim payments. However,
         we found that the total related FEHBP claim overpayment amount of $63,550 was not
         fully returned to the FEHBP. The Plan made additional auto recoupments against
         non-FEHBP claim payments to recover the remaining $54,624 and timely transferred
         this recovered amount into the FEHBP investment account. However, the Plan

                                                8	                  Report No. 1D-9G-00-16-008
   processed the LOCA adjustment of $54,624 to complete the return of these funds to
   the FEHBP on March 1, 2016, which was after our audit notification (dated July 7,
   2015) and as a result of our audit.

	 For sample item number 59, the Plan only recovered $77 of our sample amount
   ($1,615) by making auto recoupments against FEHBP claim payments. The Plan also
   made auto recoupments against non-FEHBP claim payments to recover the remaining
   $1,538 and transferred this recovered amount into the FEHBP investment account.
   The transfer was not timely but only resulted in immaterial lost investment income
   (LII). However, the Plan processed a LOCA adjustment of $1,538 to complete the
   return of these funds to the FEHBP on May 10, 2016, which again was after our audit
   notification date and as a result of our audit.

We also found that the Plan had a negative balance of $358,802 (which included the
questioned amount of $54,624 for sample item number 32 above) as of June 30, 2015, for
FEHBP claim overpayments to be recovered by adjusting non-FEHBP claim payments.
Accordingly, we requested the Plan to provide us with a status of these auto recoupments.
Based on our review of supporting documentation, we found that the Plan timely
deposited the recovered audit recoupment funds into the FEHBP investment account, but
had not adjusted the LOCA for these additional recoveries of $304,178 ($358,802 less
$54,624) by the audit notification date.

                                   In total, we are questioning $360,340 ($54,624 plus
    The Plan returned the
                                   $1,538 plus $304,178) for recovered auto recoupments
       questioned auto
                                   that were returned to the LOCA late and after receiving
  recoupments of $360,340
                                   our audit notification letter. We did not assess LII since
   to the FEHBP after the
                                   substantially all of these questioned amounts were timely
   audit notification date.
                                   deposited into the FEHBP investment account. In
addition, since these exceptions were not directly related to the review objective (i.e.,
testing if the Plan properly offset FEHBP claim payments to providers in order to recover
overpayment amounts), we did not project our results. As a result of our audit, the Plan
returned the questioned audit recoupments of $360,340 to the FEHBP on various dates
from March 1, 2016 through September 30, 2016.

Plan Response:

The Plan agrees with this finding.




                                          9	                  Report No. 1D-9G-00-16-008
     OIG Comment:

     We verified that the Plan returned $360,340 to the FEHBP for the questioned auto
     recoupments.

     Recommendation 1

     We recommend that the contracting officer require the Plan to return $360,340 to the
     FEHBP for the questioned auto recoupments. However, since we verified that the Plan
     returned $360,340 to the FEHBP for these questioned auto recoupments, no further action
     is required for this amount.

B. ADMINISTRATIVE EXPENSES

  1. Unallowable and/or Unallocable Cost Centers                                           $20,710

     The Plan charged unallowable and/or unallocable cost center expenses of $19,332 to the
     FEHBP from 2010 through 2015. As a result of this finding, the Plan returned $20,710 to
     the FEHBP, consisting of $19,332 for the questioned cost center expenses and $1,378 for
     applicable LII.

     Contract CS 2838, 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.”

     48 CFR 31.201-4 states, “A cost is allocable if it is assignable or chargeable to one or
     more cost objectives on the basis of relative benefits received or other equitable
     relationship. Subject to the foregoing, a cost is allocable to a Government contract if it-

     (a) Is incurred specifically for the contract;
     (b) Benefits both the contract and other work, and can be distributed to them in
         reasonable proportion to the benefits received; or
     (c) Is necessary to the overall operation of the business, although a direct relationship to
         any particular cost objective cannot be shown.”

     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.”

                                                10                  Report No. 1D-9G-00-16-008
Due to concerns that the Plan may have charged the FEHBP for 13 unallowable and/or
unallocable cost centers, we expanded our audit scope to include administrative expense
charges for 2010 through 2015, relating to these cost centers. We initially identified
these 13 questionable cost centers while concurrently conducting a multi-plan audit of
Anthem Inc. (covering 14 BlueCross and BlueShield plans). Accordingly, we reviewed
the Plan’s 2010 through 2015 cost center reports to determine if the Plan also charged
similar unallowable and/or unallocable cost center expenses to the FEHBP.

Based on our review of these cost center reports, we determined that the Plan allocated
and charged expenses to the FEHBP from eight cost centers that were expressly
unallowable and/or did not benefit the FEHBP (unallocable). The following schedule is a
summary of these questioned cost center expenses that were inappropriately charged to
the FEHBP from 2010 through 2015.

Cost Center                                          Reason for         Amount
 Number               Cost Center Name               Questioning       Questioned
                                                      Unallocable           $8,102

                                                       Unallocable            7,568

                                                       Unallocable            2,140
                                                       Unallocable              766
                                                       Unallocable              405

                                                       Unallocable              219
                                                       Unallocable               74
                                                       Unallowable               58
   Total                                                                    $19,332

In total, the Plan returned $20,710 to the FEHBP for this finding, consisting of $19,332
for the unallowable and/or unallocable cost center expenses and $1,378 for applicable
LII. We reviewed and accepted the Plan’s LII calculation.

Plan Response:

The Plan agrees with this finding.




                                         11                 Report No. 1D-9G-00-16-008
    OIG Comment:

    We verified that the Plan returned $20,710 to the FEHBP, consisting of $19,332 for the
    unallowable and/or unallocable cost center expenses and $1,378 for applicable LII.

    Recommendation 2

    We recommend that the contracting officer disallow $19,332 for the questioned
    unallowable and/or unallocable cost center expenses that were charged to the FEHBP.
    However, since we verified that the Plan returned $19,332 to the FEHBP for these
    questioned cost center expenses, no further action is required for this amount.

    Recommendation 3

    We recommend that the contracting officer require the Plan to return $1,378 to the
    FEHBP for LII on the questioned unallowable and/or unallocable cost center expenses.
    However, since we verified that the Plan returned $1,378 to the FEHBP for the
    questioned LII, no further action is required for this LII amount.

C. CASH MANAGEMENT

 1. Excess Letter of Credit Account Drawdowns                                         $61,710

    The Plan withdrew $45,638 from the LOCA in excess of the 2012 contractual service
    charge amount and $12,460 in excess of the amount needed to cover the 2014
    administrative expenses. As a result of this finding, the Plan returned $61,710 to the
    FEHBP, consisting of $58,098 for the excess drawdown amounts and $3,612 for
    applicable LII.

    As previously cited from Contract CS 2838, costs charged to the FEHBP must be actual,
    allowable, allocable, and reasonable. In addition, FAR 52.232-17(a) states that all
    amounts that become payable by the Carrier should include simple interest from the date
    due.

                                     For the period 2012 through 2014, we performed a
      The Plan withdrew excess
                                     reconciliation of the Plan’s monthly LOCA drawdowns
      funds from the LOCA for
                                     for service charges and administrative expenses to the
       the 2012 service charge
                                     actual amounts reported on the Annual Accounting
       and 2014 administrative
                                     Statements. We found that the Plan withdrew $45,638
              expenses.
                                     from the LOCA in excess of the contractual service

                                             12                 Report No. 1D-9G-00-16-008
charge amount for contract year 2012 and $12,460 in excess of the amount needed to
cover the administrative expenses for contract year 2014. In total, we determined that the
Plan overdrew $58,098 from the LOCA for the 2012 service charge and 2014
administrative expenses.

The Plan returned $61,710 to the FEHBP for this finding, consisting of $58,098 for the
excess drawdown amounts and $3,612 for applicable LII. We reviewed and accepted the
Plan’s LII calculation.

Plan Response:

The Plan agrees with this finding.

OIG Comment:

We verified that the Plan returned $61,710 to the FEHBP, consisting of $58,098 for the
excess LOCA drawdowns and $3,612 for applicable LII.

Recommendation 4

We recommend that the contracting officer require the Plan to return $58,098 to the
FEHBP for the questioned excess LOCA drawdown amounts. However, since we
verified that the Plan returned $58,098 to the FEHBP for these questioned excess LOCA
drawdowns, no further action is required for this amount.

Recommendation 5

We recommend that the contracting officer require the Plan to return $3,612 to the
FEHBP for LII on the questioned excess LOCA drawdowns. Since we verified that the
Plan returned $3,612 to the FEHBP for the questioned LII, no further action is required
for this LII amount.




                                         13                 Report No. 1D-9G-00-16-008
D. FRAUD AND ABUSE PROGRAM

  1. Special Investigations Unit                                                     Procedural

                                    The Plan is not in compliance with the communication and
       The Plan did not report
                                    reporting requirements for fraud and abuse cases set forth
        all fraud and abuse
                                    in the FEHBP Carrier Letter (CL) 2014-29. Specifically,
         cases to the OIG.
                                    the Plan did not 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.

     CL 2014-29 (Office of Personnel Management Federal Employees Health Benefits
     Fraud, Waste and Abuse), dated December 19, 2014, states that all 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 as, after a preliminary review of the complaint, the
     carrier takes an affirmative step to investigate the complaint.” There is no dollar
     threshold for this requirement.

     For the period January 1, 2015 through September 30, 2015, the Plan opened no FEHBP
     fraud and abuse cases, except for two pharmacy-related cases that were incorrectly
     reported under medical on the Plan’s 2015 Fraud, Waste, and Abuse Annual Report. The
     Plan did not directly report these cases to the OIG, but instead, the cases were reported to
     the OIG by the BlueCross BlueShield Association for CVS Caremark. Overall, we were
     very surprised that the Plan’s Special Investigations Unit (SIU) actually had no medical
     fraud and abuse cases involving the FEHBP for this period.

     In addition to the above cases, the Plan received 18 potential fraud and abuse cases from
     Express Scripts’ SIU, which is the Plan’s Pharmacy Benefit Manager (PBM). We
     reviewed these PBM cases to determine if the cases were reported to the OIG, as required
     by CL 2014-29. Based on our review, we determined that the Plan did not submit
     notifications to the OIG for these cases. Our understanding is that the Plan was not aware
     that the Plan’s SIU should be notifying the OIG of these PBM cases.

     Ultimately, the Plan’s 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 CL
     2014-29. The lack of notification did not allow the OIG to investigate whether other
     FEHBP Carriers are exposed to the identified fraudulent activity. As a result, this lack of
     OIG notification by the Plan may result in additional improper payments being made by
     other FEHBP Carriers.

                                               14                 Report No. 1D-9G-00-16-008
Plan Response:

The Plan agrees with this finding. The Plan states, “Special Investigations Unit (SIU)
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
(Federal Employees Health Benefits Fraud, Waste, and Abuse). The SIU investigator
will immediately notify FEP Audit & Compliance of any cases or referrals relating to
FEHBP HMO membership. The SIU investigator will complete the “. . . Case
Notification” and send to the Director, FEP Compliance/Internal Control. Once the
Director, FEP Compliance/Internal Control, receives the completed form, it is
forwarded to Office of Inspector General . . . as required by our FEHBP contract.”

Recommendation 6

We recommend that the contracting officer require the Plan to provide evidence or
supporting documentation ensuring that the SIU 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.




                                       15                 Report No. 1D-9G-00-16-008
                             IV. SCHEDULE A – QUESTIONED CHARGES
                                                                                   HMO MISSOURI, INC.
                                                                                     MASON, OHIO

                                                                                 QUESTIONED CHARGES


AUDIT FINDINGS                                                2010             2011             2012             2013             2014             2015               2016          TOTAL


A. HEALTH BENEFIT REFUNDS AND
   RECOVERIES

   1. Auto Recoupments                                           $1,128           $7,809          $10,285        $145,897          $169,207          $26,014                   $0     $360,340

   TOTAL HEALTH BENEFIT REFUNDS AND
   RECOVERIES                                                    $1,128           $7,809          $10,285        $145,897          $169,207          $26,014                   $0     $360,340

B. ADMINISTRATIVE EXPENSES

   1. Unallowable and/or Unallocable Cost Centers*               $4,173           $4,331           $3,291           $2,372           $2,457           $3,795                 $291      $20,710

    TOTAL ADMINISTRATIVE EXPENSES                                $4,173           $4,331           $3,291           $2,372           $2,457           $3,795             $291          $20,710

C. CASH MANAGEMENT

   1. Excess Letter of Credit Account Drawdowns*                     $0               $0          $45,904               $703        $13,401           $1,205                 $497      $61,710

    TOTAL CASH MANAGEMENT                                            $0               $0          $45,904             $703          $13,401           $1,205                 $497      $61,710

D. FRAUD AND ABUSE PROGRAM

    1. Special Inve stigations Unit (Procedural)                     $0               $0               $0                $0              $0               $0                   $0           $0

    TOTAL FRAUD AND ABUSE PROGRAM                                    $0               $0               $0                $0              $0               $0                   $0           $0

TOTAL QUESTIONED CHARGES                                         $5,301          $12,140          $59,480        $148,972          $185,065          $31,014                 $788     $442,760


* We included los t investment income (LII) within audit findings B1 ($1,378) and C1 ($3,612). Therefore, no additional LII is applicable for these audit findings.




                                                                                                                                                     Report No. 1D-9G-00-16-008
APPENDIX



                                                      4361 Irwin Simpson Road
                                                      Mason, Ohio 45040




United States Office of Personnel Management
Office of the Inspector General
Experience Rated Audit Group
1900 E. Street, Room 6400
Washington, DC 20415

Reference:                2016 OPM DRAFT AUDIT REPORT
Plan Audited:             2015 HMO Blue Preferred Missouri
Report Number:            1D-9G-00-16-008
Date:                     December 5, 2016


Dear           :

This letter is the Federal Employees Program (FEP) Audit response to the above
referenced U.S. Office of Personnel Management (OPM) Draft Audit Report covering
the 2015 HMO Blue Preferred Missouri Audit. The Plan’s responses to the audit findings
are as follows:

A. HEALTH BENEFIT REFUNDS AND RECOVERIES

   1. Auto Recoupments                                                      $370,021

Plan’s Response to the Draft:

The Plan is providing adequate documentation to support the disagreed amount of
$9,681.




                                                           Report No. 1D-9G-00-16-008
B. ADMINISTRATIVE EXPENSES

  1. Unallowable and/or Unallocable Cost Centers                              $20,710

Plan’s Response to the Draft:

The Plan agrees with the $19,332 cost center expenses charged to the FEHBP from
2010 through 2015. The Plan returned $20,710 to the FEHBP consisting of $19,332 for
the questioned cost centers and $1,378 for applicable LII.

C. CASH MANAGEMENT

  1. Excess Letter of Credit Account Drawdowns                               $61,710

Plan’s Response to the Draft:

The Plan agrees with the $45,638 withdrawn from the LOCA in excess of the 2012
contractual service charge amount and $12,460 in excess of the amount needed to
cover 2014 administrative expenses. The Plan returned $61,710 to the FEHBP
consisting of $58,098 for the excess drawdown amounts and $3,612 for applicable LII.

D. FRAUD AND ABUSE PROGRAM

  1. Special Investigations Unit                                          Procedural


Plan’s Response to the Draft:

Special Investigations Unit (SIU) 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 (Federal Employees Health Benefits Fraud, Waste, and
Abuse). The SIU investigator will immediately notify FEP Audit & Compliance of any
cases or referrals relating to FEHBP HMO membership. The SIU investigator will
complete the “Attachment 3 Case Notification” and send to the Director, FEP
Compliance/Internal Control. Once the Director, FEP Compliance/Internal Control,
receives the completed form, it is forwarded to Office of Inspector General
(OIGCaseNotifications@opm.gov), as required by our FEHBP contract.




                                                           Report No. 1D-9G-00-16-008
We appreciate the opportunity to provide our response to your Draft Audit Report and
request that our comments be included in its entirety as an amendment to the Final
Audit Report.


Sincerely,



Director, FEP Compliance/Internal Control




                                                            Report No. 1D-9G-00-16-008
                                                                           


               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-9G-00-16-008