oversight

Audit of the Federal Employees Dental and Vision Insurance Program Operations as Administered by Aetna Dental for Contract Years 2010 through 2013

Published by the Office of Personnel Management, Office of Inspector General on 2016-02-16.

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 Federal Employees
                Dental and Vision Insurance Program Operations
                        As Administered by Aetna Dental
                    For Contract Years 2010 through 2013
                                           Report Number 1J-0D-00-15-037
                                                  February 16, 2016




                                                              -- CAUTION --
This audit report has been distributed to Federal officials who are responsible for the administration of the audited program. This audit report may
contain proprietary data which is protected by Federal law (18 U.S.C. 1905). Therefore, while this audit report is available under the Freedom of
Information Act and made available to the public on the OIG webpage (http://www.opm.gov/our-inspector-general), caution needs to be exercised
before releasing the report to the general public as it may contain proprietary information that was redacted from the publicly distributed copy.
             EXECUTIVE SUMMARY 

                      Audit of the Federal Employees Dental and Vision Insurance 

                        Program Operations as Administered by Aetna Dental 

Report No. 1J-0D-00-15-037                                                                     February 16, 2016




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

The main objective of the audit was to   We determined that the Plan needs to strengthen its procedures and
determine if the costs charged and       controls related to the coordination of benefits and preparing the
services provided to the Federal         annual rate proposals.
Employees Dental and Vision
Insurance Program members were in        Specifically, our audit identified two areas requiring improvement.
accordance with the terms of Contract
Number OPM-06-00060-1 and Federal         1.	 The Plan did not properly coordinate the payment of benefits
regulations.                                  for 4 out of 102 claims that we reviewed from contract year
                                              2013.
What Did We Audit?
                                          2.	 The Plan misreported numerous pricing assumptions in its
The Office of the Inspector General           2010 through 2013 premium rate proposals.
has completed a performance audit
that included a review of Aetna
Dental’s (Plan) annual accounting
statements, claims processing, fraud
and abuse program, and rate proposals
for contract years 2010 through 2013.
Our audit was conducted from May 4
through 8, 2015, at the Plan’s offices
in Blue Bell, Pennsylvania. Additional
audit work was completed at our
offices in Washington, D.C. and
Cranberry Township, Pennsylvania.




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

ACT 	       Federal Employee Dental and Vision Benefits Enhancement Act of
            2004
CBS 	       Claim Benefit Specialist
COB 	       Coordination of Benefits
Contract    C
            	 ontract OPM-06-00060-1
CY         	Contract Year
EOB 	       Explanation of Benefits
FEDVIP 	    Federal Employees Dental and Vision Insurance Program
FEHBP 	    Federal Employees Health Benefits Program
FOIA 	      Freedom of Information Act
OIG 	       Office of the Inspector General
OPM 	       U.S. Office of Personnel Management
Plan        A
            	 etna Dental




                                 ii
IV. MAJOR CONTRIBUTORS TO THIS REPORT
          TABLE OF CONTENTS

                                                                                                                         Page 

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


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


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


  II.	    OBJECTIVES, SCOPE, AND METHODOLOGY ..................................................2 


  III.	   AUDIT FINDINGS AND RECOMMENDATIONS.................................................5


          A. ANNUAL ACCOUNTING STATEMENT REVIEW ............................................5 


          B. CLAIMS PROCESSING REVIEW ........................................................................5 

             1. Coordination of Benefits (COB) Errors.............................................................5 


          C. FRAUD AND ABUSE REVIEW............................................................................7 


          D. RATE PROPOSAL REVIEW .................................................................................8 

             1. Misreported Premium Rates ..............................................................................8 


  IV.	    MAJOR CONTRIBUTORS TO THIS REPORT ..................................................11 


          APPENDIX (Aetna Dental’s Response to the Draft Report, dated October 6, 2015)


          REPORT FRAUD, WASTE, AND MISMANAGEMENT

IV. MAJOR CONTRIBUTORS
            I. BACKGROUND
                       TO THIS REPORT

This report details the results of our audit of the Federal Employees Dental and Vision Insurance
Program (FEDVIP) operations as administered by Aetna Dental (Plan) for contract years (CY)
2010 through 2013. The audit was performed by the U.S. Office of Personnel Management’s
(OPM) Office of the Inspector General (OIG), as authorized by the Inspector General Act of
1978, as amended.

The FEDVIP was created on December 23, 2004 by the Federal Employee Dental and Vision
Benefits Enhancement Act of 2004 (Act). The Act provided for the establishment of programs
under which supplemental dental and vision benefits are made available to Federal employees,
retirees, and their dependents.

OPM has overall responsibility to maintain the FEDVIP website, act as a liaison and facilitate
the promotion of the FEDVIP through Federal agencies, be responsive on a timely basis to the
carriers’ requests for information and assistance, and perform functions typically associated with
insurance commissions such as the review and approval of rates, forms, and education materials.

OPM’s Contracting Office contracts with Aetna Life Insurance Company to provide dental
coverage to Federal beneficiaries enrolled in the Aetna Plan under the FEDVIP. The Plan’s
responsibilities under Contract Number OPM-06-00060-1 (Contract) are carried out at its offices
located in Blue Bell, Pennsylvania. Section I.11 of the Contract includes a provision, Inspection
of Services – Fixed Price, which allows for audits of the program’s operations. It is the
responsibility of the Plan’s management to establish and maintain a system of internal controls
and comply with applicable FEDVIP laws and regulations.

This was the OIG’s first audit of the Plan. The initial results of this audit were discussed with
Plan officials during an exit conference on June 24, 2015. A draft report was provided to the
Plan on August 28, 2015 for its review and comment. The Plan’s response to the draft report
was considered in preparation of this final report and is included as an Appendix.




                                                 1                            Report No. 1J-0D-00-15-037
IV. OBJECTIVES,
II.  MAJOR CONTRIBUTORS
                SCOPE, ANDTO THIS REPORT
                          METHODOLOGY

 Objective
 The main objective of the audit was to determine if the costs charged and services provided to
 the FEDVIP members were in accordance with the terms of the Contract and Federal regulations.

 Specifically, our audit objectives were:

    Annual Accounting Statement Review
    	 To determine if the Plan’s 2010 through 2013 Annual Accounting Statements were
       accurately reported to OPM.

    Claims Processing Review
     To determine if the Plan paid claims in accordance with the terms of the Contract, its
       annual benefit brochures, and its internal policies and procedures.
     To determine if the Plan recovered claim overpayments in accordance with the terms of
       the Contract, its annual benefit brochures, and its internal policies and procedures.

    Fraud and Abuse Review
    	 To determine if the Plan’s fraud and abuse program is sufficient and if potential fraud
       cases are being reported to OPM.

    Rate Proposal Review
    	 To determine if the Plan accurately developed its 2010 through 2013 premium rates.

 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 the Plan’s annual accounting statements, claims
 processing, fraud and abuse program, and rate proposals for CYs 2010 through 2013. The audit
 fieldwork was conducted at the Plan’s office in Blue Bell, Pennsylvania, from May 4 through 8,
 2015. Additional audit work was completed at our Cranberry Township, Pennsylvania and
 Washington, D.C. offices.




                                                2	                          Report No. 1J-0D-00-15-037
The Plan reported the following premium income earned, claims incurred, expenses paid, and
profit received for CYs 2010 through 2013:

                         Earned              Claims
   Contract Year                                               Expenses            Profit
                        Premiums            Incurred
         2010
        2011
        2012
        2013
        Total

In planning and conducting the 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. 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 and 5 CFR 894. 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 the 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 and services provided to the FEDVIP members were in
accordance with the terms of the Contract and Federal regulations, we performed the following
audit steps:

   Annual Accounting Statement Review
   	 We traced the data reported by the Plan in its 2010 through 2013 Annual Accounting
      Statements back to supporting documentation and identified any material variances.




                                                3	                          Report No. 1J-0D-00-15-037
    Claims Processing Review
    	 For CY 2013, we reviewed all 52 paid dental claims over $2,000 and selected an
       additional random sample of 50 claims (totaling 102 claims for $117,619 out of a
       universe of 694,839 claims totaling $96,251,9341) to ensure that they were properly
       supported and accurately processed.
    	 From the same universe of CY 2013 claims, we selected all negative claim amounts over
       $700 (for a total of 25 claim recoveries in the amount of $22,815) to determine if the
       overpayments were accurately identified and credited back to the FEDVIP.

    Fraud and Abuse Review
    	 We met with the Plan’s Special Investigations Unit to gain an understanding of its fraud
       and abuse program, and we traced the information reported in the Plan’s 2013 Fraud and
       Abuse Savings Data Report back to supporting documentation to identify any material
       variances and ensure that potential fraud cases were being reported to OPM.

    Rate Proposal Review
    	 We traced the data used to develop the Plan’s 2010 through 2013 annual rate proposals
       back to supporting documentation and identified any material variances.

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.




1
 Actual paid claims differ from what was reported in the annual accounting statement due to retroactive claim
adjustments.


                                                        4	                               Report No. 1J-0D-00-15-037
  IV. AUDIT
III.   MAJORFINDINGS
             CONTRIBUTORS  TO THIS REPORT
                     AND RECOMMENDATIONS

A. ANNUAL ACCOUNTING STATEMENT REVIEW

    The results of our review showed that the Plan had sufficient policies and procedures in place to
    ensure that its annual accounting statements reported to OPM were accurate.

B. CLAIMS PROCESSING REVIEW

    1.	 Coordination of Benefits (COB) Errors                                             Procedural

        The Plan did not properly coordinate the payment of benefits for 4 out of 102 claims that we
        reviewed from CY 2013.

        Section C(II) of the Contract states, “Carriers under the new dental and vision program will
        be secondary payors and will be responsible for coordination of benefits with Federal
        Employees Health Benefits Program [FEHBP] plans, which will provide primary benefits.”

        Additionally, section C(III)(M) of the Contract states, “OPM expects plans that are chosen to
        participate in the Federal Employees Dental and Vision Insurance Program [FEDVIP] to
        provide coverage at the point of service. The plans, not the enrollees, should be responsible
        for coordinating benefits with the primary payor.”

       For CY 2013, we reviewed a sample of 102 dental claims to determine if the Plan paid the
       claims in accordance with the terms of the Contract, its annual benefit brochures, and its
                       policies and procedures. As part of our review, we tested the effectiveness
We identified a four
                       of the Plan’s internal controls related to the COB to determine whether
percent error rate
                       claims requiring COB were processed in compliance with the terms of the
 among the claims
                       Contract.
  tested for COB 

     accuracy.

                       Our review identified four claims with the following COB errors:

           	 Two claims were not processed for COB because the Plan did not coordinate benefits
              with the affected members’ FEHBP plans, specifically the Foreign Service Benefit
              Plan and the Compass Rose Health Plan. The Plan stated that it only coordinates
              benefits with Blue Cross and Blue Shield, Rural Carriers, and Mail Handlers. COB
              for all other FEHBP plans are bypassed unless there is a valid explanation of benefits
              (EOB) attached to the claim.




                                                    5	                          Report No. 1J-0D-00-15-037
   	 One claim requiring COB was not recognized by the claims system or forwarded to a
      claims specialist due to a system error. The Plan reported that the error came from
      BENEFEDS not identifying the member’s primary FEHBP plan, but our records from
      BENEFEDS did show the member’s primary FEHBP plan as Blue Cross and Blue
      Shield.

   	 One claim’s COB was miscalculated by a claims specialist. The Plan stated that the
      error was due to a delay by the member’s primary FEHBP plan in updating to a new
      procedure code and allowable benefit. An adjustment to this claim was made after
      we identified the error during our audit.

While the claim overpayments in our sample were immaterial, the errors show that there are
weaknesses in the claims system related to COB that need to be corrected to help reduce
improper claim payments.

Recommendation 1

We recommend that the contracting officer require the Plan to amend its existing policies and
procedures to ensure that it processes COB for all FEHBP plans. Dental benefits provided
by FEHBP plans are published in annual plan brochures found on OPM’s website. The Plan
should review these brochures on an annual basis to identify which plans and benefits require
COB and program its claims system accordingly.

Recommendation 2

We recommend that the contracting officer require the Plan to review its claims system to
determine the cause of the system error that failed to identify a claim requiring manual COB
processing, and take corrective action to resolve this issue.

Recommendation 3

We recommend that the contracting officer direct the Plan to perform a review of its paid
claims on a routine basis (i.e., monthly, quarterly, and/or annually) to verify the accuracy of
its COB processing. The Plan’s methodology for selecting claims to review should include
consideration of those claims most likely to require COB (e.g., basic Class A services that
include oral examinations, prophylaxis, diagnostic evaluations, sealants and x-rays.). The
results of these reviews should be shared with OPM to identify error rates, causes of errors,
performance improvements, and agreed-upon solutions to resolve problems.




                                             6	                           Report No. 1J-0D-00-15-037
     Plan’s Response:

     The Plan agrees with the errors identified in this finding and will have its claim benefit
     specialists complete refresher training. Its current COB process relies on the provider or
     BENEFEDS to identify the member’s primary insurance carrier. Its claim benefit specialists
     also attempt two calls to the provider to identify the member’s primary insurance. If primary
     coverage is not identified then it pays the claim as the primary carrier.

     Although Aetna did not provide justification for why it’s not coordinating benefits with the
     Foreign Service Benefit Plan and the Compass Rose Health Plan, it did insist that
     BENEFEDS failed to identify the member’s primary insurance coverage, which we
     considered a system error as listed in the second bullet above. It also stated that it has a
     Stratified Quality Audit Program that reviews a sample of claims every quarter.

     OIG Comments:

     As shown in this finding, the Plan’s current COB workflow falls short of identifying all
     FEHBP plans that offer dental benefits. Relying on BENEFEDS or the provider to identify
     the member’s primary insurance coverage is only one small component of coordinating
     benefits with other carriers. The Plan should establish policies and procedures that ensure all
     COB is pursued by identifying all FEHBP plans that have dental benefits and coordinating
     each member’s claim according to their FEHBP dental benefit.

     For the claims system error that failed to identify the member’s primary coverage, we again
     point out that the file we received from BENEFEDS showed that member’s primary
     coverage, which lead us to the finding. The Plan’s claim that BENEFEDS did not identify
     the member’s primary coverage is insufficient, and it should continue to review its claims
     system to identify the error that failed to process COB for this member.

     Regarding the Plan’s Stratified Quality Audit Program, we did not test or verify this program,
     but our own limited review showed a four percent error rate for COB. Based on our results,
     the Plan needs to perform additional reviews that focus on the accuracy of COB as stated in
     recommendation 3.

C. FRAUD AND ABUSE REVIEW

  The results of our review showed that the Plan had sufficient policies and procedures in place to
  ensure that its fraud and abuse oversight activities and results reported to OPM were accurate.




                                                  7                           Report No. 1J-0D-00-15-037
D. RATE PROPOSAL REVIEW

  1. Misreported Premium Rates                                                           Procedural

     The Plan misreported numerous pricing assumptions in its 2010 through 2013 premium rate
     proposals.

     Section I.6(d)(1) of the Contract states, “The Carrier shall submit … proposed premiums for
     the next succeeding period, and … An estimate and breakdown of the costs for dental and
     vision coverage in a format on which the parties may agree; … Sufficient data to support the
     accuracy and reliability of this estimate; [and] … An explanation of the differences between
     this estimate and the original (or last preceding) estimate for the same insurance coverage …
     .”

     Section I.6(e) of the Contract states, “Upon the Contracting Officer’s receipt of the data
     required by … [the] above, the Contracting Officer and the carrier will promptly negotiate to
     redetermine fair and reasonable premiums for insurance coverage to be provided in the
     period following the effective date of price redetermination.”

     Additionally, Section L.14.3.1 of the Contract states, “The proposed premium shall include
     all costs associated with providing dental and or vision insurance services, including
     adjudicating claims and reimbursing providers or enrollees. The premium shall include all
     associated administrative costs, including but not limited to beneficiary and enrollee services,
     communications and education, network building and provider services, appeals, program
     integrity, OPM administrative fee, and all other costs.”

     Finally, Section L.14.3.2 of the Contract states, “The proposed biweekly premium shall be
     based on the required benefit … and the offeror’s actuarial assumptions underlying its
     development … .”

     As part of the FEDVIP, OPM invites dental carriers to renegotiate their premium rates
     annually by submitting rate proposals to justify changes in costs and benefits. These rate
     proposals are used by OPM as the basis for negotiation and for collecting data to assist in its
     oversight of the FEDVIP.

     For each year of our scope, we redeveloped the Plan’s premium rates to determine if accurate
     pricing assumptions were used based on supporting documentation. During our review, we
     identified six errors in the rate development process and two instances in which the Plan
     lacked documentation to support actuarial assumptions.




                                                  8                            Report No. 1J-0D-00-15-037
    Rate Development Errors

        The Plan used the wrong annual trend in its 2010 through 2013 rate proposals;
        The Plan did not use a consistent methodology to calculate additional administrative fees
         in its 2010 through 2013 rate proposals;
        The Plan used the wrong benefit adjustment factor in its 2013 rate proposal;
        The Plan used the wrong standard administrative fee2 in its 2013 rate proposal;
        The Plan did not apply a six percent credit for unallowable expenses in its 2010 rate
         proposal; and 

        The Plan applied the wrong 2009 benefit change factor in its 2010 rate proposal. 


    These rate development errors had both positive and negative effects on the rates. The Plan
    stated that the first three bulleted items were strategic changes implemented to maintain
    competitive rates by using lower pricing assumptions and the last three bulleted items were
    errors as a result of oversight.

                                                                                           The Plan proposed
    Lack of Documentation to Support Pricing Assumptions
                                                                                             premium rates
                                                                                            using inaccurate
    	 The Plan did not provide sufficient and appropriate                                  and unsupported
       documentation to support its decision to provide a six percent                     pricing information.
       credit for unallowable expenses in its 2010 through 2013 rate 

       proposals; and 

    	 The Plan did not provide sufficient and appropriate documentation to support its decision
       to load three percent to its standard administrative expenses in its 2010 through 2012 rate
       proposals.

    The Plan stated that the six percent credit for unallowable expenses was the result of a study
    it performed on its FEHBP operations in 2004, which we considered outdated and irrelevant
    to FEDVIP operations. The Plan also stated that it was unsure why it applied a three percent
    loading to standard administrative expenses as this assumption was not supported by any
    internal documentation.

    While completing our review, we determined that the net effect of the rating errors and
    unsupported pricing assumptions did not amount to an overcharge of premium for 2010
    through 2013 since the Plan provided a greater competitive discount each year.


2
 The Plan incorporates two administrative expense loadings in developing its premium rates: 1) A standard
administrative fee charged to all of its commercial dental insurance lines of business based on enrollment and 2) An
additional administrative fee for FEDVIP specific charges.


                                                         9	                                Report No. 1J-0D-00-15-037
Regardless, we determined that there is a risk that enrollees may be overcharged in future
years by the Plan as it changes its pricing strategies and assumptions over time without
correcting rate development errors and unsupported pricing assumptions. Additionally, there
is a risk that OPM is relying on the Plan’s misreported pricing assumptions during its annual
negotiations with the Plan, and it’s likely incorporating erroneous data provided by the Plan
in its administration of the FEDVIP.

Recommendation 4

We recommend that the contracting officer require the Plan to implement policies and
procedures to ensure that its premium rate proposal development and reporting processes are
sufficiently and adequately documented. The Plan’s policies and procedures should clearly
document requirements for using accurate data, maintaining supporting documentation, and
supervisory review before submission to OPM.

Plan’s Response:

The Plan agrees with our finding and recommendation.




                                           10                           Report No. 1J-0D-00-15-037
IV. MAJOR CONTRIBUTORS TO THIS REPORT

Special Audits Group

                    , Auditor-In-Charge

                 , Auditor

                , Auditor




                  , Group Chief (former),            


            , Group Chief,                  


              , Senior Team Leader





                                                11       Report No. 1J-0D-00-15-037
                                                                                      APPENDIX



                                                                           980 Jolly Road

aetna                                                                      Blue Bell, PA 19422




                                                                           Executive Director
                                                                           FEHBP Underwriting
                                                                           Tel:
October 6, 2015                                                            Email:        @aetna.com


Group Chief, Special Audits Group
U.S. Office of Personnel Management
Office of the Inspector General
800 Cranberry Woods Drive, Suite 270
Cranberry Township, PA 16066

Re: FEDVIP Aetna Dental Audit
   Contract Number OPM-06-00060-1
   Report No.1J-0D-00-15-037

Dear          :

Thank you for the opportunity to respond to the draft audit report dated August 28, 2015. After
careful review of the draft report, we agree with all of the draft report’s findings pertaining to
Aetna’s Federal Employees Dental and Vision Insurance Program (FEDVIP). In the attached
response, we will address each finding and recommendation in more detail.

Please let me know if you have any questions.

Sincerely,




Executive Director




                                                                             Report No. 1J-0D-00-15-037
                                        Deleted by OIG 

                                  Not Relevant to Final Report 


Claims Processing Review

1. Coordination of Benefits Errors

Aetna agrees that 4 of the 102 claims that were reviewed from contract year 2013 were not
coordinated properly. We have responded to OIG’s recommendations using the specific claims
samples in question (samples 65, 80, 82 and 90).

Recommendation 1: We recommend that the contracting officer direct the Plan to amend its
existing policies and procedures to ensure that it processes COB for all FEHBP plans.

Samples 80 & 82: Aetna agrees to the COB procedural error. Aetna’s COB workflow instructs
the claim benefit specialists (CBS) first attempt two calls to the provider to inquire if a copy of
the primary carrier EOB can be sent to Aetna in order to coordinate benefits as the secondary
carrier. If after the second attempt Aetna is unable to obtain the copy of the primary carrier’s
EOB, then Aetna must act as the primary carrier when processing the claim. Aetna’s EOB
includes a remark stating we will reconsider the claim as the secondary carrier upon receipt of
the primary carrier’s explanation of benefits.

All FEDVIP claim benefit specialists will complete refresher training on the FEDVIP COB
workflow and procedures.

Recommendation 2: We recommend that the contracting officer direct the Plan to test its claims
system to determine the cause of the system error that failed to identify a claim requiring manual
COB processing and implement corrective action to resolve this issue.

Sample 65: Aetna agrees that this claim was not paid correctly due to a system error that did not
identify primary FEHBP coverage.

When primary FEHBP coverage is reported, the member’s file is updated accordingly, allowing
the claim system to identify claims that require manual COB processing and directs those claims
to a CBS for manual COB intervention. When BENEFEDS does not report that there is primary
coverage under an FEHBP plan, then the appropriate coding is not added under the FEDVIP
member’s plan that would indicate COB is required. Thus, the FEDVIP plan pays as the primary
carrier.




                                                                              Report No. 1J-0D-00-15-037
All FEDVIP claim benefit specialists will complete refresher training on the FEDVIP COB
workflow and procedures.

                                        Deleted by OIG 

                                  Not Relevant to Final Report


Recommendation 3: We recommend that the contracting officer direct the Plan to perform a
review of its paid claims on a routine basis (i.e. monthly, quarterly, and/or annually) to verify the
accuracy of its COB processing. The Plan’s methodology for selecting claims to review should
include consideration of those claims most likely to require COB (e.g. procedure codes for Class
A services). The results of these reviews should be shared with OPM to identify error rates,
causes of errors, performance improvements, and agreed-upon solutions to resolve problems.

Aetna Response: Aetna is open to discussion with FEDVIP regarding the accuracy of the COB
claim processing.

Aetna’s stratified quality audit program includes all claims processed, including COB claims.
Any claim considered is eligible for audit.

Stratified Quality Audit: Using an industry accepted, statistically valid stratified audit
methodology, populations of processed claims are segregated into dollar categories (strata) based
upon the amount paid. A sampling of 300 claims quarterly (100 claims monthly) is randomly
selected from within 7 strata (including a zero pay). Results are extrapolated over the respective
populations based upon the weight of each strata relative to the given populations. Sampling
levels are such that an industry acceptable typical precision level of + 1% is achieved.

                                        Deleted by OIG 

                                  Not Relevant to Final Report 


Rate Proposal Review

1. Misreported Premium Rates

Aetna agrees that there were misreported pricing assumptions in the 2010 through 2013 premium
rate proposals.

Recommendation 4: We recommend that OPM direct the Plan to implement policies and
procedures to ensure that its premium rate proposal development and reporting processes are
sufficiently and adequately documented. The Plan’s policies and procedures should clearly



                                                                              Report No. 1J-0D-00-15-037
document requirements for using accurate data, maintaining supporting documentation, and
supervisor review before submission to OPM.

Aetna Response: The Plan agrees to implement a more efficient system for documenting specific
pricing guidelines and to improve the supervisory review prior to submitting to OPM going
forward.

Specifically regarding the credit for unallowable expenses, the Plan will conduct a high level
analysis of Aetna Inc.’s corporate general and administrative expenses to determine what is
allowable in accordance with FAR -- Part 31 Contract Cost Principles and Procedures. An
appropriate unallowable expense percentage will be determined using this analysis.

                                       Deleted by OIG 

                                 Not Relevant to Final Report





                                                                            Report No. 1J-0D-00-15-037
                                                                                                                         



                                       Report Fraud, Waste, and 

                                           Mismanagement 

                                                  Fraud, waste, and mismanagement in
                                               Government concerns everyone: Office of
                                                   the Inspector General staff, agency
                                                employees, and the general public. We
                                              actively solicit allegations of any inefficient
                                                    and wasteful practices, fraud, and
                                               mismanagement related to OPM programs
                                              and operations. You can report allegations
                                                          to us in several ways:


                        By Internet:               http://www.opm.gov/our-inspector-general/hotline-to-
                                                   report-fraud-waste-or-abuse


                         By Phone:                 Toll Free Number:                              (877) 499-7295
                                                   Washington Metro Area:                         (202) 606-2423


                           By Mail:                Office of the Inspector General
                                                   U.S. Office of Personnel Management
                                                   1900 E Street, NW
                                                   Room 6400
                                                   Washington, DC 20415-1100
                     
                                                                                                                         
                                                                                                                         




                                                             -- CAUTION --
This audit report has been distributed to Federal officials who are responsible for the administration of the audited program. This audit report may
contain proprietary data which is protected by Federal law (18 U.S.C. 1905). Therefore, while this audit report is available under the Freedom of
Information Act and made available to the public on the OIG webpage (http://www.opm.gov/our-inspector-general), caution needs to be exercised
before releasing the report to the general public as it may contain proprietary information that was redacted from the publicly distributed copy.

                                                                                                                   Report No. 1J-0D-00-15-037