oversight

National Association of Letter Carriers (NALC) Pharmacy 2012-2014 Ops Administered by CaremarkPCS Health L.L.C.

Published by the Office of Personnel Management, Office of Inspector General on 2017-09-29.

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




   Audit of the National Association of Letter Carriers
      Health Benefit Plan’s Pharmacy Operations
      as Administered by CaremarkPCS, L.L.C.
         for Contract Years 2012 through 2014
               Report Number 1H-01-00-16-045
                     September 29, 2017
              EXECUTIVE SUMMARY
               Audit of the National Association of Letter Carriers Health Benefit Plan’s
                   Pharmacy Operations as Administered by CaremarkPCS, L.L.C.
Report No. 1H-01-00-16-045                                                                                        September 29, 2017


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

The objective of the audit was to                          We determined that the Plan and the PBM need to strengthen their
determine whether costs charged to the                     procedures and controls related to administrative fees, claim
Federal Employees Health Benefits                          payments, fraud and abuse reporting, and performance guarantees.
Program (FEHBP) and services
provided to its members were in                            Specifically, our audit identified the following deficiencies that
accordance with the terms of U.S.                          require corrective action:
Office of Personnel Management
contract number CS 1067 with the                            	 The Plan paid claims totaling $54,766 for drugs that were not
National Association of Letter Carriers                        covered.
Health Benefit Plan (Plan), the Plan’s                      	 The Plan paid $19,852 in claims for dependents that were not
agreement with CaremarkPCS Health,                             eligible for coverage at the date the prescription was filled
L.L.C. (PBM), and the applicable                               due to their age.
Federal regulations.                                        	 The Plan inappropriately included non-FEHBP costs in its
                                                               drawdowns related to the reimbursement of pharmacy costs.
What Did We Audit?                                             Additionally, the OIG was inadvertently provided with
                                                               pharmacy claims data containing personal health information
The Office of the Inspector General                            and other personally identifiable information related to Plan
(OIG) has completed a performance                              staff members.
audit of the Plan’s pharmacy benefits                        The PBM was unable to provide supporting documentation
operations as administered by the                              for all administrative fees charged to the Plan.
PBM. Our audit consisted of a review                         The Plan did not report all cases of suspected fraud, waste,
of administrative fees, claim payments,                        and abuse to the OIG.
fraud and abuse reporting,                                   The PBM did not submit its annual performance reports or
performance guarantees, and pharmacy                           pay associated penalties to the Plan in a timely manner.
rebates related to the FEHBP for
contract years 2012 through 2014.




 _____________________
 Michael R. Esser
 Assistant Inspector General
 for Audits
                                                                         i
        This report is non-public and should not be furt
                       information that may be pr
                                            ABBREVIATIONS

    5 CFR 890                      Title 5, United States Code of Federal Regulations, Part 890
    Agreement                      The Prescription Benefit Service Agreement between the Plan and
                                   the PBM
    Contract                       OPM Contract Number CS 1067
    CY                             Contract Years
    FEHB                           Federal Employees Health Benefits
    FEHBP                          Federal Employees Health Benefits Program
    FWA                            Fraud, Waste, and Abuse
    GPI                            Generic Product Identifier
    HIO                            Healthcare and Insurance Office
    LOCA                           Letter of Credit Account
    NALC                           National Association of Letter Carriers
    NDC                            National Drug Code
    OI                             Office of Investigations
    OIG                            Office of the Inspector General
    OPM                            U.S. Office of Personnel Management
    PBM                            CaremarkPCS Health, L.L.C.
    Plan                           National Association of Letter Carriers Health Benefit Plan




                                                                       ii
This report is non-public and should not be further released unless authorized by the OIG, because it may contain confidential and/or proprietary
               information that may be protected by the Trade Secrets Act, 18 U.S.C. § 1905, or the Privacy Act, 5 U.S.C . § 552a.
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.................................................9

         A. ADMINISTRATIVE FEES REVIEW ....................................................................9

              1. Unsupported Administrative Fees......................................................................9

              2. Inappropriate LOCA Drawdowns and Release of Information .......................10

         B. CLAIM PAYMENTS REVIEW............................................................................13

              1. Claims Paid for Non-Covered Drugs ...............................................................13

              2. Over-Age Dependents......................................................................................14

         C. FRAUD AND ABUSE REVIEW..........................................................................17

              1. Fraud and Abuse Cases Not Reported by the Plan ..........................................17

         D. PERFORMANCE GUARANTEES REVIEW ......................................................18

              1. Performance Guarantees ..................................................................................18

         E. PHARMACY REBATES REVIEW......................................................................20

         APPENDIX (The Plan’s Response to the Draft Report, dated June 23, 2017)


         REPORT FRAUD, WASTE, AND MISMANAGEMENT
IV. MAJOR CONTRIBUTORS
            I. BACKGROUND
                       TO THIS REPORT

This report details the results of our audit of the National Association of Letter Carriers Health
Benefit Plan’s (Plan) pharmacy operations as administered by CaremarkPCS L.L.C. (PBM) for
contract years (CY) 2012 through 2014. The audit was conducted pursuant to the provisions of
Contract CS 1067 (Contract) between the U.S. Office of Personnel Management (OPM) and the
Plan; the prescription benefit service agreement between the Plan and the PBM (Agreement);
Title 5, United States Code, Chapter 89; and Title 5, Code of Federal Regulations, Chapter 1,
Part 890 (5 CFR 890). The audit was performed by OPM’s Office of the Inspector General
(OIG), as established by the Inspector General Act of 1978, as amended.

The Federal Employees Health Benefits Program (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 (HIO) has overall responsibility for
administration of the FEHBP, including the publication of program regulations and agency
guidance. As part of its administrative responsibilities, the HIO contracts with various health
insurance carriers that provide service benefits, indemnity benefits, and/or comprehensive
medical services. The provisions of the FEHB Act are implemented by OPM through
regulations codified in 5 CFR 890.

Pharmacy Benefit Managers are primarily responsible for processing and paying prescription
drug claims. The services provided typically include retail pharmacy, mail order, and specialty
drug benefits. For drugs acquired through retail, the PBM contracts directly with the
approximately 50,000 retail pharmacies located throughout the United States. For maintenance
prescriptions that typically do not need to be filled immediately, the PBM offers the option of
mail order pharmacies. The PBM also provides specialty pharmacy services for members with
rare and/or chronic medical conditions. Pharmacy Benefit Managers are used to develop,
allocate, and control costs related to the pharmacy claims program.

The National Association of Letter Carriers (NALC) has entered into a Contract with OPM to
provide health benefit plans, including prescription drug coverage, as authorized by the FEHB
Act to Federal employees and retirees. The Plan’s pharmacy administrative operations and
responsibilities under the Contract are carried out by the PBM, which is located in Scottsdale,
Arizona.

Section 1.11 of the Contract includes a provision which allows for audits of the Plan’s
operations. Additionally, section 1.26(a) of the Contract outlines transparency standards related
to Pharmacy Benefit Manager arrangements (effective January 2012) that require Pharmacy

                                                 1                   Report No. 1H-01-00-16-045
Benefit Managers to provide pass-through pricing based on their cost. Our responsibility is to
review the performance of the PBM to determine if the Plan charged costs to the FEHBP and
provided services to its members in accordance with the Contract, the Agreement, and the
Federal regulations.

Compliance with the 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.

The last OIG audit of the Plan (Report No. 1H-01-00-07-014) was issued on March 17, 2009.
The previous audit report did not identify any findings.

The results of our audit were discussed with officials of the Plan and the PBM at an exit
conference on April 27, 2017. In addition, a draft report, dated May 24, 2017, was provided to
the Plan and PBM for review and comment. The Plan’s response to the draft report was
considered in preparing the final report and is included as an appendix in this report.




                                                2                   Report No. 1H-01-00-16-045
II. OBJECTIVES, SCOPE, AND METHODOLOGY

Objective
The main objective of the audit was to determine whether the costs charged to the FEHBP and
services provided to FEHBP subscribers were in accordance with the terms of the Contract, the
Agreement, and applicable Federal regulations.

Specifically, our audit objectives were to determine if:

   Administrative Fees Review
   	 The administrative expenses charged to the FEHBP were in support of pharmacy
      programs, in compliance with the contract and supported by verifiable documentation,
      and

   	 The Plan’s letter of credit account (LOCA) withdrawals related to pharmacy benefits are
      in accordance with the terms of the Contract.

   Claim Payments Review
   	 Overage dependents were eligible for coverage at the time of service and that their claims
      were paid in accordance with the Contract;

   	 Claims were paid for deceased members;

   	 Claims were paid for non-FEHBP members or members enrolled in an alternate plan
      code under the Plan;

   	 Mail order prescriptions are being filled within the allowable day supply as stated in the
      benefits brochure;

   	 Claims were paid to pharmacies debarred by OPM’s OIG;

   	 Claims were paid for any excluded drugs; and

   	 The retail pharmacy, mail order pharmacy, and specialty pharmacy claim pricing
      elements were transparent and if the claims reviewed were priced accurately and in
      accordance with the Agreement.




                                                 3	                 Report No. 1H-01-00-16-045
   Fraud and Abuse Review
   	 The Plan complied with all standards for fraud and abuse listed in Carrier Letter 2003-23,
      and

   	 The Plan reported all suspected cases of fraud and abuse to the OPM OIG that were
      reported by the PBM.

   Performance Guarantees Review
   	 The reported performance guarantees and any associated penalty were reported
      accurately and that any penalties due were paid to the Plan.


   Pharmacy Rebates Review
   	 The pharmacy rebates were properly supported, accurately calculated, and remitted to the
      Plan.

Scope and Methodology
We conducted this performance audit in accordance with generally accepted government
auditing standards. Those standards require that we plan and perform the audit to obtain
sufficient and appropriate evidence to provide a reasonable basis for our findings and
conclusions based on the audit objectives. We believe that the evidence obtained provides a
reasonable basis for our findings and conclusions based on the audit objectives.

This performance audit included reviews of administrative fees, claim payments, fraud and abuse
reporting, performance guarantees, and rebates related to the FEHBP for CYs 2012 through
2014. A site visit was conducted from August 8 through 11, 2016, at the PBM’s office in
Scottsdale, Arizona. Additional audit work was completed at our Cranberry Township,
Pennsylvania and Washington, D.C. offices.

The Plan is responsible for providing FEHBP members with medical and prescription drug
benefits. To meet this responsibility, the Plan collected premium payments of approximately
$3.8 billion in CYs 2012 through 2014, of which approximately two-thirds was paid by the
government on behalf of Federal employees. In addition to the premium payments, program
income was also generated from the investment of program funds. From the premiums collected
and investment income earned during this time period, the following claims were paid related to
prescription drug benefits:




                                               4                   Report No. 1H-01-00-16-045
                                        Paid Drug Claims
                    Contract Year         Total Claims          Amount Paid
                         2012
                         2013
                         2014
                         Total

In planning and conducting the audit, we obtained an understanding of the PBM’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.
Additionally, 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 of accounting records and other auditing procedures as we considered
necessary to determine compliance with the Contract, the Agreement, and the applicable Federal
regulations. Exceptions noted in the areas reviewed are set forth in the “Audit Findings and
Recommendations” section of this 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 the 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.

To determine whether the costs charged to the FEHBP and services provided to FEHBP
subscribers were in accordance with the terms of the Contract, the Agreement, and applicable
Federal regulations, we performed the following audit steps:

   Administrative Fees Review
   	 From each CY, we selected the administrative fee invoice with the largest amount due
      from the Plan. Specifically, we selected 3 invoices, totaling $30,305,079, from a
      universe of     invoices, totaling                , to determine if the fees were properly
      calculated and supported in accordance with the terms of the Agreement.



                                                 5                    Report No. 1H-01-00-16-045
	 From each CY, we selected LOCA drawdown information from the month with the
   largest pharmacy expenditures for review. Specifically, we selected 3 months of
   pharmacy expenditures, totaling $110,537,393, from a universe of 36 months of
   expenditures, totaling                , to determine if the Plan’s LOCA withdrawals
   related to pharmacy benefits were in accordance with the terms of the Contract.

Claim Payments Reviews
Unless stated otherwise, the claim samples below were selected from the complete claims
universe of           claims, totaling              , for CYs 2012 through 2014.

	 We identified and reviewed all non-disabled dependents 26 years of age or older (
   dependents, with claims totaling          ) to determine if the dependents were eligible for
   coverage at the time of service in accordance with the Contract.

	 We identified and reviewed all claims paid for patients aged 100 or older in CY 2014 (
   subscribers with claims totaling         ), to determine if any claims were paid for
   deceased members.

	 We reviewed all claims to determine if any claims were paid for non-FEHBP members or
   members enrolled in an alternate plan code.

	 We identified and reviewed all non-aspirin mail order claims with a day’s supply less
   than 21 days or greater than 90 days, ( claims, totaling          ), to determine if mail
   order prescriptions were filled in accordance with the days’ supply allowed per the Plan’s
   benefits brochures.

	 We reviewed all claims to determine if any payments were made to a pharmacy debarred
   by the OIG’s Administrative Sanctions Office.

	 We reviewed all pharmacy claims for drugs identified by the PBM as non-covered to
   determine if any claims were paid for drugs excluded by the Plan.

	 We separately identified the universe of brand and generic claims paid to the top five
   retail pharmacy chains (as identified by the PBM). Specifically, we identified
   brand claims, totaling              , and         6 generic claims, totaling             .
   From those universes, we randomly selected 5 brand and 5 generic claims from each of
   the pharmacies for each CY (75 brand claims, totaling $8,202, and 75 generic claims,
   totaling $2,209) to determine if the pricing elements were transparent and that the claims
   were paid correctly.

                                            6	                   Report No. 1H-01-00-16-045
	 We separately identified the universe of mail order brand and generic claims paid.
   Specifically, we identified           brand claims, totaling              , and
   generic claims, totaling               . From those universes, we randomly selected 15
   brand and 15 generic claims from each CY (45 brand claims, totaling $18,260, and 45
   generic claims, totaling $1,641) to determine if the pricing elements were transparent and
   that the claims were paid correctly.

	 We separately identified a universe of         specialty pharmacy claims, totaling
                  . From that universe, we randomly selected 25 claims from each CY (75
   claims, totaling $375,100) to determine if the pricing elements were transparent and that
   the claims were paid correctly.

Fraud and Abuse Review
	 We reviewed the completed fraud and abuse questionnaires provided by both the Plan
   and the PBM to determine if they complied with all standards for fraud and abuse listed
   in Carrier Letter 2003-23.

	 We compared the listing of fraud, waste, and abuse (FWA) cases that was provided to
   OPM’s OIG by the Plan to the information received by OPM’s OIG on the FWA Annual
   Reports to determine if the Plan reported all suspected cases of FWA, as required by
   Carrier Letter 2011-13.

Performance Guarantees Review
	 We judgmentally selected 5 performance guarantees (out of a universe of 18) based on
   prior audit experience or the performance guarantee having an associated penalty to
   determine if the reported performance guarantees were accurate and that any associated
   penalties were paid to the Plan.

Pharmacy Rebates Review
	 We judgmentally selected CY 2012, with rebates received totaling                 , for
   review because that CY reported over 99 percent of anticipated rebates received. The
   total universe of rebates received (as of the date of our audit) was             .
       o	 From CY 2012, we selected and reviewed the pharmacy rebate report related to
           the fourth quarter, which had the highest amount of rebates received
           (             ). From that quarter, we then judgmentally selected the top 5
           manufacturers with the largest rebate invoice amount ($4,147,298), from a
           universe of 78 manufacturers with rebate invoice amounts of $8,161,908. We
           then judgmentally selected the top two drugs with the largest rebate amount from
           each of the sampled manufacturers (10 drugs with rebates of $3,502,933, out of a


                                            7	                  Report No. 1H-01-00-16-045
              universe of 54 drugs with total rebates of $4,147,298), to determine if the rebates
              were properly supported, accurately calculated, and remitted to the Plan.

The samples mentioned above, that were selected and reviewed in performing the audit, were not
statistically based. Consequently, the results could not be projected to the universe since it is
unlikely that the results are representative of the universe taken as a whole.




                                                8                   Report No. 1H-01-00-16-045
III. AUDIT FINDINGS AND RECOMMENDATIONS

A. ADMINISTRATIVE FEES REVIEW

   1. Unsupported Administrative Fees                                                      Procedural

      The PBM was unable to support all administrative fees, totaling                , billed to the
      Plan for CYs 2012 through 2014.

    The PBM did not       The Agreement states that the Plan will pay the PBM for administrative
    provide sufficient    products and services provided in accordance with the administrative fee
    documentation to      provisions set forth in Schedule A of the Agreement.
       support the
     administrative         To determine if the administrative fees paid by the Plan were in
     fees charged to        accordance with the terms of the Agreement, we reviewed a sample of
        the Plan.           120 administrative fee line items (quantities, rates/unit prices, and total
                            charged) from three administrative fee invoices (one each from CY’s
      2012 through 2014). During our review, the PBM was unable to provide accurate support
      (quantities, unit prices, and/or total amount charged) for 105 of the 120 administrative fee
      line items reviewed. Those unsupported administrative fee line items represent
      in costs charged to the FEHBP. A listing of these items was provided to the PBM; however,
      it was unable to provide sufficient supporting documentation for the line items in question.

      Due to the lack of documentation, we were unable to determine if the administrative fees
      billed to the FEHBP were accurate and in accordance with the Agreement.

      Recommendation 1

      We recommend that the Plan review recent invoices (new claims system) from the PBM to
      ensure that all line items are supported by sufficient and verifiable documentation.
      Additionally, the Plan should ensure that all invoice line item rates are traceable to the
      Agreement or other documentation.

      Plan Response:

      The Plan agrees that not all supporting documentation requested was provided and stated
      that the claims adjudication system in place during the scope of the audit did not include
      the archiving of source documentation for ancillary and administrative fees. However,


                                                    9                    Report No. 1H-01-00-16-045
   beginning in 2015, a new claims system began to be utilized for the Plan's claims that does
   provide for the archiving of all source documentation for administrative fees.

   OIG’s Response:

   The OIG understands that the information provided does not match the totals reported on the
   invoices because of the passage of time and normal changes within the claims data itself, and
   therefore will not question the unverified amount. However, going forward we expect the
   PBM to maintain archived supporting documentation for all fees charged to the FEHBP at
   the time of invoicing, regardless of the carrier. Any fees that are not supported in the future
   will be questioned as unallowable costs to the Program.

2. Inappropriate LOCA Drawdowns and Release of Information                            Procedural

   The Plan inappropriately included non-FEHBP costs in its drawdowns related to
   reimbursement of pharmacy costs. Additionally, the OIG was inadvertently provided claims
   data containing personal health information and other personally identifiable information
   related to pharmacy claims for Plan staff members.

   According to FEHBAR 1632.170 (b) (2), withdrawals from the LOCA will be made on a
   checks-presented basis for FEHBP disbursements.
                                                                  The Plan included non-
   Additionally, section 1.31 (a) (2) of the Contract states         FEHBP claims and
   that the Plan will preserve access and disclosure of           administrative fees in its
   information to protect personal privacy.                       LOCA drawdowns, and
                                                                personal health information
   Our review of the PBM’s invoices found costs related to       and personally identifiable
   both FEHBP and Plan staff members. The PBM issues            information from claims for
   invoices four times a month (on the 7th, 15th, 23rd and last  Plan staff was provided to
   day of the month). Additionally, we found that for all                 the OIG.
   invoices issued, claim charges were segregated by group (FEHBP and non-FEHBP).
   However, a portion of the administrative fees charged on the last invoice of the month are not
   segregated by group, and according to discussion with the PBM, include administration fees
   for both groups.

   The commingling of FEHBP and non-FEHBP cost on the PBM’s invoices led us to review
   the Plan’s drawdowns related to pharmacy expenses. We determined that non-FEHBP claim
   expenses were withdrawn from the Plan’s LOCA. Discussions with the Plan determined that
   it permitted this to occur because the pharmacy expenses of the Plan’s staff members are
   ultimately administrative expenses chargeable to the FEHBP and would eventually be drawn

                                               10                   Report No. 1H-01-00-16-045
down from the LOCA as such. Because only a small portion of the staff plan costs (the
actual administration of the staff plan’s claims) are non-FEHBP administrative expenses, the
Plan performs a monthly process to remove non-FEHBP costs from its service charge. We
determined that the process appears to properly remove the non-FEHBP costs. However, we
were unable to determine if the unsegregated administrative fees were accounted for in the
process.

Additionally, when claim files were provided to the OIG by the PBM, those files included
claims for both FEHBP and Plan staff members. These claim files included personal health
information and other personally identifiable information. This occurred because the PBM
provided the claim files for all groups billed on its invoices including both FEHBP and the
Plan’s staff members.

As a result, the FEHBP was initially overcharged for amounts not related to the FEHBP and
the OIG was inadvertently provided private and confidential health information of Plan staff
members.

Recommendation 2

We recommend that the Plan determine the actual FEHBP cost of its staff members prior to
drawing down that amount as an administrative expense cost to the Contract.

Plan Response:

The Plan disagrees with the finding and states that it exercised due diligence to ensure the
appropriateness of its daily drawdowns.

The Plan stated that during the scope of the audit non-pharmacy claims were adjudicated
on three separate claim platforms (one for each of its health plans; FEHBP, Conversion
(former FEHB enrollees) and its NALC staff plan) and each claim payment was
made/disbursed against each plan’s specific bank account.

Pharmaceutical costs are not paid in the same manner, but are paid in aggregate to the
PBM four times monthly. The Pharmacy costs are paid out of the Plan’s only
administrative expense checking account that is funded by the LOCA. However, the Plan
states that all costs that run through this account are allocated to individual plans at
disbursement and that once a month it performs a reconciliation to make each plan whole.




                                           11                   Report No. 1H-01-00-16-045
The Plan stated that it works methodically to ensure allocations to the plans are correct
and it has been conservative when allocating costs to the FEHBP. During the audit scope
employee indirect costs were allocated to the FEHB at 98.95 percent (on average). It also
states that an OIG audit conducted in 2013 did not include findings related to its
management of FEHBP funds.

Lastly, the Plan states that it would agree with the recommendation if it were not for the
fact that the drawdowns represent funds remitted to the staff plan in significant amounts.

OIG’s Response:

As was stated in the finding, we do not feel that the Plan’s actions in regards to its LOCA
drawdowns related to pharmacy costs ultimately have a negative effect on the FEHBP.
However, its actions violate the LOCA regulations which state that the LOCA withdrawals
are only to be made for FEHBP disbursements. Therefore, non-FEHBP costs should not be
included in any drawdowns from the LOCA, even if a true-up is later performed.

We see two options in regards to this recommendation for the Plan.
	 First, that it draw down all allocated administrative cost (staff plan and other allocated
   expenses) based on an estimated allocation percentage and not in full at the time of bank
   clearance. Following that, either monthly or quarterly, the Plan may perform a true-up to
   determine what the actual allocation percentage should have been and make the parties
   whole at that point.

	 Second, that it work with the OPM contracting office to obtain a waiver of the LOCA
   requirement in regards to allocated administrative costs only.

Recommendation 3

We recommend that the Plan direct the PBM to establish safeguards to ensure that only
FEHBP member claims are released to the OIG for future audits.

Plan Response:

The Plan agrees with the recommendation and states that it will have the PBM begin
transmitting only the FEHBP claims data to the OIG in the future.




                                           12                   Report No. 1H-01-00-16-045
B. CLAIM PAYMENTS REVIEW

  1. Claims Paid for Non-Covered Drugs                                                     $54,766

     The Plan erroneously paid 1,651 pharmacy claims, totaling $54,766, for drugs that were not a
     covered benefit.

     The PBM         The Agreement defines covered drugs as “a drug which, under applicable
    paid claims      law, requires a prescription and which is covered under the formulary
     for non-
       adopted by the Plan.”
      covered 

       drugs. 
      Additionally, Section 5 (f) of the Plan’s benefit brochure provides a general
                     listing of the types of drugs that are not covered.

     Utilizing the listing of non-covered drugs provided by the PBM, we performed a query of the
     Plan’s claims universe to identify all claims for non-covered drugs paid during the scope of
     the audit. We then reviewed the documentation provided by the PBM to determine if there
     were legitimate reasons for the claims to be paid (for example, members receiving prior
     authorizations for their prescriptions). Our review determined that 1,651 claims, totaling
     $54,766, were erroneously paid for non-covered drugs.

     The PBM stated that the errors were due to the fact that the prior claims system, used during
     the scope of our audit, rejected non-covered drugs based on the National Drug Code (NDC).
     As new NDCs entered the market, the system did not identify the new codes as non-covered
     and unallowable. The current claims system that was implemented after the scope of our
     audit rejects non-covered drugs based on the Generic Product Identifier (GPI). The GPI
     encompasses multiple NDCs related to the same drug (based on dosage and drug strength).
     If and when different dosages and/or drug strengths are added to the market, the current
     claims system will reject those claims because the NDC is automatically associated with the
     GPI of the non-covered drug.

     As a result of the PBM’s prior claims system not properly identifying new non-covered drugs
     as they entered the market, the FEHBP was overcharged $54,766.

     Recommendation 4

     We recommend that the Plan return $54,766 to the FEHBP for erroneous payments of non-
     covered drugs.



                                                 13                   Report No. 1H-01-00-16-045
   Plan Response:

   The Plan agrees with our recommendation and will work with the PBM to return the funds
   to the FEHBP.

   Recommendation 5

   We recommend that the Plan review the PBM’s current claims system to ensure that non-
   covered drugs are properly denied.

   Plan Response:

   The Plan agrees with our recommendation and states that non-covered drugs fall into two
   categories. Those that are never covered and those that are covered under special
   circumstances following prior authorization. The Plan will conduct a review of claims
   from 01/01/15 to the present to ensure payment for non-covered drugs has not occurred.
   Should the Plan’s review find claim payments for non-covered drugs, it will work with the
   PBM to return any overpayments identified to the FEHBP and initiate any coding
   corrections.

   The Plan is taking steps to implement oversight controls to include using the PBM’s list of
   non-covered drugs to develop periodic subset lists of non-covered drug categories;
   periodically testing the PBM’s claims system using simulated claims to ensure these claims
   are denied at the point of sale; and conducting an analysis to determine the frequency of
   these reviews.

2. Over-Age Dependents                                                                     $19,852

   The Plan paid 88 claims, totaling $19,852, for 16 dependents that were ineligible for 

   coverage on the date the prescription was filled.

                                                                                     The Plan
   Public Law 111-148, section 2714, extended health insurance coverage
                                                                                    paid claims
   for unmarried dependent children until age 26.
                                                                                   for ineligible
                                                                                     over-age
   Additionally, section 2.3 (g) of the Contract states that “It is the Carrier’s
                                                                                   dependents.
   responsibility to proactively identify overpayments through 

   comprehensive, statistically valid reviews and a robust internal control program.”


   Finally, section 2.3 (g) (12) of the Contract states, “In compliance with the provisions of the
   Contracts Dispute Act, the Carrier shall return to the Program an amount equal to the

                                                14                   Report No. 1H-01-00-16-045
uncollected erroneous payment where the Contracting Officer determines that (a) the
Carrier’s failure to appropriately apply its operating procedure caused the erroneous payment
….”

To determine if claims were paid for dependent children age 26 and older, we queried the
Plan’s pharmacy claims database and identified claims paid for dependent children age 26
or older. Our review determined that 16 dependents were ineligible for coverage at the time
of service.

Specifically, we found that 15 dependents were correctly terminated upon turning age 26 in
the Plan’s eligibility system. However, the PBM was not provided with this information and
continued to pay claims for those individuals. In addition, one dependent had been granted
temporary disabled dependent status by the Plan in 2003, allowing for payment of claims
(not to exceed one year). The PBM continued to pay claims for this dependent but there was
no supporting documentation to show an extension of that status beyond one year.

The Plan stated that its system reflects the correct termination dates and believes that it sent
timely eligibility updates to the PBM, but the Plan can no longer document that the eligibility
files were sent to the PBM. According to the Plan and the PBM, eligibility update files
(changes only) are sent to the PBM daily. However, the Plan does not provide a full
eligibility file to the PBM for it to determine any potential enrollment discrepancies.

By not ensuring that the PBM had proper eligibility information for all individuals, the
FEHBP was overcharged $19,852.

Recommendation 6

We recommend that the Plan return $19,852 to the FEHBP for claim payments on ineligible
over-age dependents.

Plan Response:

The Plan disagrees with the amount due to the FEHBP and believes its liability is $4,393.
The Plan believes two of the questioned members are eligible for service based on
documentation provided during the audit. The Plan stated that some of the claims were
written off as not cost effective to pursue, some of the claims the Plan was able to offset
from other benefit payments, and some had been refunded.




                                            15                    Report No. 1H-01-00-16-045
OIG’s Response:

Upon further review, the OIG agrees that one of the questioned members is eligible because
it fell within the grace period after termination. The finding has been adjusted to reflect this.

As for the remaining questioned costs the Plan has not provided any documentation to
support its assertions that claims were offset and/or monies were received and returned.
Furthermore, amounts being written off as not cost effective to pursue is not an acceptable
method of handling claim overpayments. The Plan is required to make documented attempts
at recovering overpayments as outlined in section 2.3 of the Contract.

Recommendation 7

We recommend that the Plan provide the PBM periodically with a full eligibility file in
addition to the daily update file.

Plan Response:

The Plan agrees with our recommendation and has taken initial steps to create this
process.

Recommendation 8

We recommend that the Plan identify all claims paid to ineligible members and initiate
recoveries.

Plan Response:

The Plan agrees with our recommendation and believes the implementation of the prior
recommendation will improve the process.

OIG’s Response:

While we are encouraged that the Plan is implementing the changes from the
recommendation above, once the process is fully implemented we believe an eligibility
reconciliation should be performed to not only identify ineligible over-aged dependents, but
to identify all members who may no longer be eligible. Recoveries must be initiated on all
claims for members that are found to be ineligible on the date of service.



                                             16                    Report No. 1H-01-00-16-045
C. FRAUD AND ABUSE REVIEW

  1. Fraud and Abuse Cases Not Reported by the Plan                                       Procedural

     The Plan did not report all of the suspected FWA cases to OPM OIG for CYs 2012 through
     2014.

     All suspected        According to Carrier Letter 2011-13, the “FEHBP Carrier Special
   fraud, waste, and Investigative Units (“Carrier”) are required to submit a written
   abuse cases were       notification to the OPM OIG (“OIG”) within 30 working days of
    not reported to       becoming aware of a fraud, waste or abuse issue where there is a
    the OPM OIG.          reasonable suspicion that a fraud has occurred or is occurring against the
     [FEHBP]. Reportable fraud, waste or abuse issues include the identification of emerging
     fraud schemes; suspected internal fraud or abuse by Carrier employees, contractors, or
     subcontractors; suspected fraud by providers who supply goods or services to FEHBP
     members; suspected fraud by individual FEHBP members; issues of patient harm, and
     Carrier participation in class action lawsuits. There is no financial threshold for these initial
     case notifications.”

     We reconciled the number of FWA cases opened to those reported to the OIG in the annual
     FWA Recovery and Savings Data Reports and found a large variance of opened cases that
     were not reported to the OIG. Additionally, we reviewed the Plan’s detailed spreadsheet of
     cases that it reported to the OIG. (See table below.)

                                                              2012            2013          2014
      FWA Annual Report – Cases Opened                         46             316           1,322
      FWA Annual Report – Cases Reported to OIG                 8              11             3
      Cases Reported to OIG per the Plan                        8              11             3

     The Plan stated that guidance previously received from the OPM OIG indicated that cases
     with nominal dollar amounts and low risk allegations were not required to be reported. The
     Plan is currently participating in the FEHBP FWA Task Force, which is working with the
     OPM OIG to address this area. The OIG Office of Investigations (OI) confirmed that there
     are ongoing discussions with FEHBP Carriers and that new guidance is forthcoming.

     Nevertheless, the FWA guidance in effect during the majority of the audit scope was Carrier
     Letter 2011-13. Carrier Letter 2014-29 was issued on December 19, 2014, and updated the
     standards for FWA reporting and are the current standards in place as of the date of this
     report.


                                                  17                    Report No. 1H-01-00-16-045
     By not reporting all potential FWA cases to the OPM OIG, the Plan adversely affected the
     OPM OIG’s ability to investigate these potential cases and increased the risks of overcharges
     to the FEHBP.

     Recommendation 9

     We recommend that the Plan comply with all official guidance for FWA in place at the time
     of reporting and continue to follow that guidance until such time an official update or
     replacement is issued.

     Plan Response:

     The Plan agrees that it did not report all open cases during the scope of the audit, but
     believes they are in compliance with all current guidance. The Plan states that complying
     with Carrier Letter 2011-13’s 30 day reporting requirement had challenges; as case
     notifications require a lengthy list of detailed information which was hard to compile in
     that time frame. The Plan had also not implemented software and methods of
     investigating and tracking cases of FWA.

     The Plan also indicates that with the issuing of new guidance in Carrier Letter 2014-29
     they have made a good faith effort to report cases that meet the “affirmative step”
     requirement that triggers a case notification. However, it wasn’t until November 2016 that
     the OIG OI defined “affirmative step”. Since the clarification, the Plan has been
     submitting quality case notifications after a preliminary review and an affirmative action
     has been taken to investigate the complaint. The Plan will continue to follow these
     directives until such time an update or replacement is issued.

D. PERFORMANCE GUARANTEES REVIEW

  1. Performance Guarantees                                                           Procedural

     The PBM did not submit the required annual performance reports to the Plan by the due date
     in the Agreement. Furthermore, the PBM did not timely credit the Plan for penalties related
     to a performance standard that it failed to meet in CY 2013 and 2014 by the due date in the
     Agreement.

     Exhibit D of the Agreement states that the PBM shall provide the performance guarantee
     report card no later than 90 days after the end of the CY (by March 31st of each CY). Any
     penalty amounts must be paid by the end of the month following issuance of the report card
     (no later than April 30th of each CY).

                                                18                   Report No. 1H-01-00-16-045
We reviewed a sample of the reported performance guarantees for CY’s 2012 through 2014
to determine if the results of the performance guarantees were calculated accurately, if the
standards were met, and whether any associated penalties were paid timely. Our review
determined that the results of the performance guarantees were accurately calculated and
reported. However, the performance guarantee report cards and associated penalties were not
reported or paid timely.
                                                                        The PBM did not
                                                                       submit performance
The performance guarantee report cards, which were due by the
                                                                         reports or credit
end of March, were submitted at the beginning of June for each
                                                                       penalty payments in
CY. The performance guarantee penalties, which are due no later
                                                                         a timely manner.
than the end of April, were credited at the end of June and
beginning of July, respectively, for CYs 2013 and 2014.

The PBM stated that for the CYs 2012 through 2014, the system was set-up to report and
measure the performance guarantees at the same time, which caused delays in payment to the
Plan for any performance guarantee penalties. In order to align the Plan with the contractual
agreement and prevent delays in penalty payments, beginning with CY 2016 quarterly
performance guarantee reporting was changed to report 60 days following the quarter end.

Due to the untimely reporting of performance guarantees by the PBM, there was a delay in
the Plan being made aware of any unmet performance standards. As a result of these delays,
the performance penalties were not paid to the FEHBP in a timely manner.

Recommendation 10

We recommend that the Plan review the PBM’s performance guarantee reporting changes
implemented in CY 2016 to ensure that the results and any potential penalties are reported
and remitted timely.

Plan Response:

The Plan agrees with our recommendation and confirms that for contract year 2016 all
quarterly performance guarantee reports were received within 60 days of the quarter’s
end. The Plan states that this change will allow for any penalties due to be paid within the
90 day requirement.




                                           19                   Report No. 1H-01-00-16-045
E. PHARMACY REBATES REVIEW

  The results of our review showed that rebates were properly supported, accurately calculated,
  and remitted to the Plan by the PBM in accordance with the Agreement.




                                                 20                  Report No. 1H-01-00-16-045
                                    APPENDIX

June 23, 2017



Group Chief
Special Audits Group


Senior Team Leader
Office of Inspector General
U.S. Office of Personnel Management


Re: 	   OPM Draft Audit Report Response
        National Association of Letter Carriers Health Benefit Plan’s Pharmacy
        Operations as Administered by CaremarkPCS Health, L.L.C. for Contract
        Years 2012 through 2014
        Audit Report Number 1H-01-00-16-045 (Dated and Received May 24, 2017)

Dear            and           :

We appreciate the opportunity to comment on the findings, conclusions and recommendations in
the above-referenced Draft Report of the audit of the National Association of Letter Carriers
Health Benefit Plan’s (Plan) pharmacy operations as administered by CaremarkPCS Health,
L.L.C. (PBM) for contract years 2012 through 2014. In the interest of clarity, we have made our
comments in response to the findings, conclusions and recommendations within the body of the
draft report, which follows.

We look forward to working with the OPM OIG and our Contract Specialist to address these
areas, and to receiving additional guidance on F&A as OIG has indicated is forthcoming.

Sincerely,




Administrator
NALC Health Benefit Plan

                                 Deleted by the OPM-OIG
                              Not Relevant to the Audit Report
                                                                  Report No. 1H-01-00-16-045
Unsupported Administrative Fees

                                  Deleted by the OPM-OIG 

                               Not Relevant to the Audit Report 


Recommendation 1

We recommend that the Plan direct the PBM to provide all source documentation to support the
quantities, unit prices, and/or total amount charged so that our review of administrative fees can
be completed.

                                 Deleted by the OPM-OIG 

                              Not Relevant to the Audit Report 


The migration from                          to         adjudication system is the reason why
some source documentation in no longer available to support the administrative fee samples
selected by the OIG as part of the audit review process. The      platform, the adjudication
system in effect for 2012-2014, did not include the archival of source documentation for
ancillary and administrative fees. Administrative invoices were generated from the        platform
during this time. In contrast, all source documentation for administrative fees is archived under
the Plan’s current adjudication system (         ) since administrative invoicing is generated
from the PBM’s         financial system.

                                 Deleted by the OPM-OIG 

                              Not Relevant to the Audit Report 


Inappropriate LOCA Drawdowns and Release of Information

                                 Deleted by the OPM-OIG 

                              Not Relevant to the Audit Report 


Recommendation 2

                                 Deleted by the OPM-OIG 

                              Not Relevant to the Audit Report 


In response to the OIG draft audit finding, that the Plan inappropriately included non-FEHBP
costs in its drawdowns related to reimbursement of pharmacy costs, the Plan respectfully
disagrees and asserts that it exercised due diligence to ensure the appropriateness of the daily
LOCA drawdown during the audit scope period, which we discuss below in greater detail.


                                                                     Report No. 1H-01-00-16-045
                                 Deleted by the OPM-OIG 

                              Not Relevant to the Audit Report

The National Association of Letter Carriers Health Benefit Plan’s existence is based on
participation as a Federal Employees Health Benefit Plan carrier. During the audit scope
timeframe of 2012 through 2014, NALC’s operations at the Ashburn, VA facility consisted of
three health plans: FEHB, Conversion (former FEHB enrollees) and a Staff Plan (NALC Health
Benefit Plan for Employees and Staff).

                                 Deleted by the OPM-OIG 

                              Not Relevant to the Audit Report

Pharmaceutical Rx costs are not paid at the individual claim level, but are paid in the aggregate
to CVS Caremark on four billings during a monthly cycle; the billing does segregate the
differing plans’ Rx costs. CVS Caremark invoices are paid by the Plan’s accounting department
using the Plan’s sole administrative checking account. The administrative checking account is a
FEHB account funded by the LOCA drawdowns and all administrative expenses are paid using
this account. However, all expenses are allocated to the individual plans at disbursement; and
once a month a reconciliation is performed that makes each plan whole during a cash transfer
process called “interplan” (due to/from).

Administrative costs are both direct (related to a specific plan) and indirect (shared and allocated
between the differing plans). NALC HBP has always methodically allocated expenditures
between the differing plans, and expenses defined by OPM as unallowable are charged to the
non-FEHB plans. Our methodology has always erred on the side of conservative when
allocating to FEHB. In 2013, OIG conducted an audit of the Plan for years 2007 through 2011
which included a review of the Plan’s cash management practices related to FEHB Program
funds. During that period, the same system for allocating expenses described above was used.
The audit disclosed no findings pertaining to cash management and overall concluded that the
Plan handled FEHBP funds in accordance with Contract CS 1067 and applicable laws and
regulations.

                                 Deleted by the OPM-OIG 

                              Not Relevant to the Audit Report

In regard to the OIG recommendation that the Plan ensure that the costs (claims and
administrative fees) related to its staff members are invoiced separately from the costs associated
with FEHBP members, as we have indicated above, this was the practice followed during the
audit period, and remains the practice followed by the Plan today. Furthermore, the issue

                                                                      Report No. 1H-01-00-16-045
identified by OIG regarding the segregated administrative fees, which are included in the invoice
on the last day of the month, has been corrected and currently these charges, which still appear
on the final invoice of the month are broken down into FEHBP and non-FEHBP charges.

Recommendation 3

We recommend that the Plan determine the actual FEHBP cost of its staff members prior to
drawing down that amount as an administrative expense cost to the FEHBP contract.

NALC Health Benefit Plan Response:

In regard to the OIG recommendation that the Plan determine the actual FEHBP cost of its staff
members prior to drawing down the amount as an administrative expense cost to the FEHBP
contract, we would agree with the OIG recommendation were it not for the fact that these draws
represent funds remitted to the Staff Plan in significant arrears.

See Recommendation 2 for additional detail.

Recommendation 4

We recommend that the Plan direct the PBM to establish safeguards to ensure that only FEHBP
member claims are released to the OIG for future audits.

NALC Health Benefit Plan Response:

In order to ensure only FEHBP member claims are released to the OIG for future audits, CVS
Health will begin transmitting claim files to the OIG based on Group Level versus Carrier level
claims activity. The current process, based on Carrier level claim activity, includes all claims
processed for both FEHBP members as well as NALC Staff and Non-group members. All NALC
Staff and Non-group members are assigned to a unique Group number as part of NALC’s
Carrier/Account/Group (CAG) structure. By excluding non-FEHBP member claims from the
monthly claim file sent to the OIG, the OIG will only receive a claim file of FEHBP member
claim activity.

The Plan will work with CVS Health to implement this change in compliance with
Recommendation 4 and will provide an effective date for the new claim file format once all
system updates have been completed.

See Recommendation 2 for additional detail.


                                                                    Report No. 1H-01-00-16-045
Claims Paid for Non-Covered Drugs

                                Deleted by the OPM-OIG 

                             Not Relevant to the Audit Report 


Recommendation 5

We recommend that the Plan return $66,316 to the FEHBP for erroneous payments of non-
covered drugs.

NALC Health Benefit Plan Response:

While the Plan and CVS Caremark both agree that erroneous payments for non-covered drugs
occurred,

                                Deleted by the OPM-OIG 

                             Not Relevant to the Audit Report 


The Plan will work with CVS Health to initiate a Service Warranty in the amount of $54,748.03,
the amount calculated to be the financial impact for this error. Once the Service Warranty has
been completed by the PBM, the erroneous payment for non-covered drugs will be returned to
the FEHBP.

Recommendation 6

We recommend that the Plan review the PBM’s current claims system to ensure that non-
covered drugs are properly denied.

NALC Health Benefit Plan Response:

In support of Recommendation 6, the Plan has requested a list of non-covered drugs with their
corresponding GPI numbers from CVS Caremark. Rx labeled non-covered by the Plan fall into
two (2) categories, those that are never covered by the Plan (e.g. weight loss) and those that are
only covered for specific conditions, such as drugs that could be used for cosmetic purposes. The
latter require prior authorization to support a coverage exception. Using this information, the
Plan will review claims data to determine if FEHBP members have obtained the appropriate
Prior Authorization for claims filled for non-covered drugs effective 1/1/2015 to the present.

Should it be determined that claims were not properly denied in accordance with Plan coverage
guidelines for non-covered drugs, the Plan will work with the PBM to initiate coding corrections

                                                                    Report No. 1H-01-00-16-045
to correct the error and ensure full compliance with Plan guidelines. Any applicable overpayment
for additional non-covered drug claim activity without proper documentation will be returned to
the FEHBP upon completion of a Service Warranty.

Going forward, the Plan is taking the following steps to implement proper oversight and
controls:
   o	 the Plan will use the above referenced list requested from CVS Caremark (regularly
       updated for changes) to develop periodic subset lists of non-covered drug categories to
       include:
        Drugs used for cosmetic purposes
        Nutrients and food supplements
        Drugs for infertility
        Weight loss drugs
   o	 the Plan will periodically test the CVS Caremark claims system using simulated
       prescription claims to ensure drugs falling within these categories are correctly denied at
       point of sale unless they have a prior authorization, and work with CVS Caremark (1) to
       correct any errors; and (2) identify instances where actual claims have been paid for non-
       covered drugs without appropriate documentation to support a coverage exception, and
       commence recovery steps.

   o	 the Plan will conduct an analysis to determine an appropriate frequency to perform this
      review based upon criteria to include the current number of non-covered drug GPIs and
      the volume of claims processed in these categories.

                                Deleted by the OPM-OIG 

                             Not Relevant to the Audit Report 


Over-Age Dependents

                                Deleted by the OPM-OIG 

                             Not Relevant to the Audit Report 


Recommendation 7

We recommend that the Plan return $19,999 to the FEHBP for claim payments on ineligible
over-age dependents.

NALC Health Benefit Plan Response:

                                Deleted by the OPM-OIG 

                             Not Relevant to the Audit Report 

                                                                     Report No. 1H-01-00-16-045
Due to the age and/or amount of the overpayment, some were written off over time or at the time
of set-up as not cost effective to pursue.

                                 Deleted by the OPM-OIG 

                              Not Relevant to the Audit Report 


The total amount billed to the Plan before credits is $10,857.53. The actual overpaid amount
was $6,506.47. Benefits totaling $1,607.60 (Samples 22 and 33) were recouped by offsetting
benefits due from other services. We received an additional $506.01 in refunds (Samples 5 and
17). The Plan believes our liability to the FEHB to be $4,392.86.

Recommendation 8

We recommend that the Plan provide the PBM periodically with a full eligibility file in addition
to the daily update file.

NALC Health Benefit Plan Response:

The Plan is in agreement with the OIG’s recommendation that it periodically provide CVS
Caremark with a full eligibility file in addition to the daily (aka/ add/change/delete) update file.
As an initial step to address the finding that was made during the OIG’s field work, in January
2017, the Plan created a process that is initiated on a request basis utilizing the same connectivity
channel as is used for the daily file.

                                 Deleted by the OPM-OIG 

                              Not Relevant to the Audit Report 


Recommendation 9

We recommend that the Plan identify all claims paid to ineligible members and initiate
recoveries.

NALC Health Benefit Plan Response:

The Plan agrees with the OIG recommendation that it identify all claims paid to ineligible
members and initiate recoveries.

                                 Deleted by the OPM-OIG 

                              Not Relevant to the Audit Report 




                                                                      Report No. 1H-01-00-16-045
Fraud and Abuse Cases Not Reported by the Plan

                                 Deleted by the OPM-OIG 

                              Not Relevant to the Audit Report 


Recommendation 10

We recommend that the Plan comply with all official guidance for FWA in place at the time of
reporting and continue to follow that guidance until such time an official update or replacement
is issued.

NALC Health Benefit Plan Response:

                                 Deleted by the OPM-OIG 

                              Not Relevant to the Audit Report 


The Plan agrees insofar as it did not report all cases that were opened.

While the Plan agrees on this point, the guidance in Carrier Letter 2011-13 indicates that to meet
the 30-day notification requirement, Carriers may provide notification on cases where their
investigation is still in the early stages without sufficient evidence to substantiate the allegation.
Notwithstanding CL 2011-13’s acknowledgement of the practical limits to developing a case
within such a compressed timeframe, notifications were expected to include a lengthy list of
detailed information, including some information which likely would have been difficult to
assemble within the 30-day reporting timeframe applicable during the majority of the audit
scope, insofar as the Plan had not yet implemented General Dynamic Health Solutions (GDHS)
software and methods of investigating and tracking FWA.

Regarding the required reporting following the issuance of Carrier Letter 2014-29 on December
19, 2014, the Plan made a good faith effort to report cases that met the as yet to be defined
“affirmative step” triggering notification to OIG. The Plan’s efforts to comply with CL 2014-
29’s reporting requirements must be placed within the context of the on-going dialog between
carriers participating in the FEHBP FWA Task Force and the OIG Office of Investigation. The
product of that dialog is evidenced in the November 2016 draft FEHB Fraud and Abuse
Definitions, distributed by the OIG Office of Investigations by email (see attachment Exhibit E),
which includes a new definition of “affirmative step”.

After receiving clarification at the Task Force Meetings in September and November of 2016,
the Plan has a clearer understanding of the case notification requirements. In 2017, the Plan’s
SIU began triaging FWA allegations to submit quality case notifications after a preliminary

                                                                       Report No. 1H-01-00-16-045
review of the complaint is completed and an affirmative action has been taken to investigate the
complaint.
                                Deleted by the OPM-OIG 

                             Not Relevant to the Audit Report

We believe that these measures sufficiently demonstrate the Plan’s compliance with all official
current guidance. In accordance with Recommendation 10, we will continue to follow these
measures until such time as an official update or replacement is issued.

                                Deleted by the OPM-OIG 

                             Not Relevant to the Audit Report

Performance Guarantees

                                Deleted by the OPM-OIG 

                             Not Relevant to the Audit Report

Recommendation 12

We recommend that the Plan review the PBM’s performance guarantee reporting changes
implemented in CY 2016 to ensure that the results and any potential penalties are reported and
remitted timely.

NALC Health Benefit Plan Response:

The Plan has reviewed the PBM performance guarantee reporting changes effective 01/01/2016
and can confirm reports are processed 60 days following the end of each quarter.

                                Deleted by the OPM-OIG 

                             Not Relevant to the Audit Report




                                                                    Report No. 1H-01-00-16-045
                                                                             

               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. 1H-01-00-16-045