oversight

Multi-State Plan Program Operations at Premera BlueCross BlueShield of Alaska

Published by the Office of Personnel Management, Office of Inspector General on 2015-09-21.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

               U.S. OFFICE OF PERSONNEL
                     MANAGEMENT
           OFFICE OF THE INSPECTOR GENERAL
                    OFFICE OF AUDITS




                Final Audit Report

                      MULTI-STATE PLAN PROGRAM
                   OPERATIONS AT PREMERA BLUE CROSS
                        BLUE SHIELD OF ALASKA
                                           Report Number 1M-GA-00-15-005
                                                  September 21, 2015


                                                             -- 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 

                                Multi-State Plan Program Operations at 

                               Premera Blue Cross Blue Shield of Alaska 

Report No. 1M-GA-00-15-005                                                                    Septenber 21, 2015


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

The primary objective of our audit     During our review of the MSP Program operations at Premera
was to obtain reasonable assurance     Alaska, we identified three findings relating to the following areas:
that Premera Blue Cross Blue Shield    1) internal controls; 2) rates and benefits; and, 3) segregation of
of Alaska (Premera Alaska) complied    funds.
with the provisions of Contract
MSPP-14 and applicable Federal         1.	 Non-Excepted Abortion Claims Error
regulations for contract year 2014.
                                          	 Premera Alaska’s incorrect benefit configuration allowed
What Did We Audit?                           the processing and payment of non-excepted abortion
                                             claims on an MSP option that did not cover these services.
The Office of the Inspector General
has completed a performance audit of   2.	 Summary of Benefits and Coverage (SBC) Errors and
the Multi-State Plan (MSP) Program         Exclusions
operations at Premera Alaska. Our
audit covered contract year 2014 and      	 Premera Alaska erroneously excluded the coverage of
was conducted in October 2014 at             mental health and substance abuse services from its 2014
Premera Alaska’s offices in                  MSP SBC documents.
Mountlake Terrace, Washington.
                                       3.	 Segregation of Funds for Non-Excepted Abortion Services

                                          	 Premera Alaska did not collect separate premium payments
                                             on funds associated with non-excepted abortion services,
                                             nor did it allocate and segregate the premiums for the non-
                                             excepted abortion services from the premiums for all other
                                             general medical services.




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

Affordable Care Act   The Patient Protection and Affordable Care Act
Association           Blue Cross Blue Shield Association
BCBS                  Blue Cross Blue Shield
CFR                   Code of Federal Regulations
FFM                   Federally-Facilitated Marketplace
MSP                   Multi-State Plan
OIG                   Office of the Inspector General
OPM                   U.S. Office of Personnel Management
Premera Alaska        Premera Blue Cross Blue Shield of Alaska
SBC                   Summary of Benefits and Coverage
SLI                   State-Level Issuer




                                      ii
IV. MAJOR CONTRIBUTORS TO THIS REPORT
          TABLE OF CONTENTS

                                                                                                                           Page 

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


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


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


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


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


          A. Internal Control Review...........................................................................................5 


               1. Non-Excepted Abortion Claims Error ...............................................................5 


          B. Enrollment Review ..................................................................................................7 


          C. Rates and Benefits Review ......................................................................................7 


               1. Summary of Benefits and Coverage Errors and Exclusions ..............................7 


          D. Segregation of Funds Review ..................................................................................9 


               1. Segregation of Funds for Non-Excepted Abortion Services..............................9 


          E. Data and Information Security Review..................................................................12 


  IV.	    MAJOR CONTRIBUTORS TO THIS REPORT ..................................................13 


          APPENDIX (Blue Cross Blue Shield Association’s May 8, 2015 response to the 

          draft report) 


          REPORT FRAUD, WASTE, AND MISMANAGEMENT

IV. MAJOR CONTRIBUTORS
            I. BACKGROUND
                       TO THIS REPORT

This final audit report details the findings, conclusions, and recommendations resulting from our
performance audit of the Multi-State Plan (MSP) Program operations at Premera Blue Cross
Blue Shield of Alaska (Premera Alaska). The audit covered contract year 2014 and was
conducted at Premera Alaska’s offices in Mountlake Terrace, Washington. It was performed by
the Office of Personnel Management's (OPM) Office of the Inspector General (OIG), as
established by the Inspector General Act of 1978, as amended.

The audit was conducted pursuant to the provisions of Contract MSPP-14; The Patient Protection
and Affordable Care Act (Affordable Care Act); Title 45 Code of Federal Regulations (CFR)
Chapter VIII, Part 800; and other applicable Federal regulations. Compliance with the contract
as well as laws and regulations applicable to the MSP Program is the responsibility of the Blue
Cross Blue Shield Association (Association) and Premera Alaska management. Additionally,
Premera Alaska management is responsible for establishing and maintaining a system of internal
controls and procedures. Due to inherent limitations in any system of internal controls, errors or
irregularities may nevertheless occur and not be detected.

The MSP Program was established by Section 1334 of the Affordable Care Act. Under the
Affordable Care Act, OPM was directed to contract with private health insurers to offer MSP
products in each state and the District of Columbia. MSP product offerings may be phased in
over four years, with MSP products in at least 31 states in the first year; at least 36 states the
second year; at least 44 states the third year; and all 50 states and the District of Columbia in the
fourth year. OPM negotiates contracts with MSP Program Issuers, including rates and benefits,
in consultation with states and marketplaces. In addition, OPM will monitor the performance of
MSP Program Issuers and oversee compliance with legal requirements and contractual terms.
OPM’s office of National Healthcare Operations has overall responsibility for program
administration.

The Association, on behalf of participating Blue Cross Blue Shield (BCBS) plans, has entered
into a contract with OPM to engage in the MSP Program. In accordance with requirements for
the first year of the MSP Program contract, participating plans offer 154 MSP options in 30
states and the District of Columbia. Premera Alaska is one of 35 BCBS plans, or State-level
issuers (SLI), participating in the MSP Program in 2014.

The Association is a national federation of 37 independent, community-based and locally
operated BCBS companies. The Association grants licenses to independent companies to use the
trademarks and names in exclusive geographic areas. It operates and offers health care coverage
in all 50 states, the District of Columbia and Puerto Rico, covering nearly 105 million



                                                  1                          Report No. 1M-GA-00-15-005
Americans, and nationally it contracts directly with more than 96% of hospitals and 92% of
professional providers.

Premera Blue Cross is a not-for-profit independent licensee of the Association, which operates in
Alaska as Premera Alaska. It provides health care services to 1.8 million people in Washington
and Alaska. In addition to offering the MSP options on the Federally Facilitated Marketplace
(FFM), Premera Alaska offers employer health plans, wellness programs, and Medicare
supplement plans.

This is our first audit of Premera Alaska’s MSP Program. The audit resulted from an MSP
Program risk assessment of Premera Alaska that we conducted from July 1 through September 9,
2014. Our selection of Premera Alaska was based on factors such as the offering of a large
number of MSP options (24 individual MSP options), being the only SLI to offer MSP options
that covered non-excepted abortion services, and the fact that Premera Alaska only offered MSP
options on the FFM and not any qualified health plans.

The preliminary results of this audit were discussed with Premera Alaska and the Association
officials at an exit conference and in subsequent correspondence. A draft report was also
provided to the Association for review and comment. The Association’s comments were
considered in preparation of this report and are included, as appropriate, as the Appendix to the
report.

We would like to convey our appreciation to Premera Alaska and the Association for
accommodating us and cooperating throughout the entire audit process.




                                                 2                         Report No. 1M-GA-00-15-005
IV. OBJECTIVES,
II.  MAJOR CONTRIBUTORS
                SCOPE, ANDTO THIS REPORT
                          METHODOLOGY

 Objectives
 The primary objective of this performance audit was to obtain reasonable assurance that Premera
 Alaska was in compliance with the provisions of its contract with OPM and applicable laws and
 regulations governing the MSP Program for contract year 2014. Specifically, we reviewed
 internal controls, enrollment, rates and benefits, segregation of funds, and data and information
 security.

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

 The audit fieldwork was performed from October 20, 2014 through October 31, 2014 at
 Premera Alaska’s offices in Mountlake Terrace, Washington. Additional fieldwork was
 conducted at our Cranberry Township, Pennsylvania field office.

 We obtained an understanding of Premera Alaska’s internal control structure, but we did not use
 this information to determine the nature, timing, and extent of our audit procedures. Our review
 of internal controls was limited to the procedures Premera Alaska had in place for processing
 changes in circumstance, additions, and terminations related to enrollment; benefit configuration
 for non-excepted abortion claims; segregating funds for abortion services; developing rates;
 reconciling pharmacy pricing; and preparing and posting the Summary of Benefits and Coverage
 (SBC).

 Specifically, we interviewed Premera Alaska personnel and reviewed policies and procedures
 over its enrollment functions. We judgmentally selected a sample and reviewed enrollment form
 834s for additions and terminations to determine if they were processed timely and accurately.
 Our judgmental sample included 30 form 834s, out of a universe of 1,556, from the 2014 second
 quarter additions and terminations. We selected 15 addition transactions by choosing 5 additions
 from each month of the second quarter of 2014 (April, May, June) starting with the first addition
 for the first day of the month. We then selected the first addition on every sixth day. We
 selected 15 termination transactions by choosing 5 terminations from each month of the second
 quarter of 2014 (April, May, June) starting with the first termination for the first day of the
 month. We then selected the first termination on every eighth day. The results from our sample
 were not projected to the sample universe.




                                                 3                         Report No. 1M-GA-00-15-005
We reviewed Premera Alaska’s process of recording insurance premiums, including portions of
the premium associated with abortion services, to determine if it properly segregated funds for
non-excepted abortion services. We interviewed personnel to clarify how potential enrollees
were able to identify which plans offered non-excepted abortion services on the FFM. We also
interviewed Premera Alaska personnel and reviewed rate development information used in
assessing rates for non-excepted abortion services to determine compliance with rating
regulations.

To gain an understanding of the internal controls of Premera Alaska’s rating system, we
reviewed its rating policies and procedures and interviewed personnel regarding the controls in
place to ensure that the appropriate rates were charged. We reviewed the reconciliations
performed between Premera Alaska and the pharmacy benefit manager and the pricing reports
received from the pharmacy benefit manager. We also reviewed procedures and processes
related to preparing and posting the SBCs to the FFM.

To determine if Premera Alaska’s system configurations allowed non-elective abortion claims to
be processed for any of the MSP options that did not cover elective abortion services, we used
auditor assessment to judgmentally select 15 abortion procedure codes from Premera Alaska’s
December 2014 Pend Criteria List, including both elective and non-elective procedure codes.
There was a universe of 100 unique procedure codes within the December 2014 Pend Criteria
List. Specifically, we judgmentally selected 5 abortion procedure codes from Premera Alaska’s
original configuration list and 10 abortion procedure codes from its updated configuration list.
We then provided the procedure codes to Premera Alaska and requested that it perform and
support testing of its abortion claim system configurations. The results from our sample were
not projected to the sample universe.

We reviewed Premera Alaska’s internal control policies and procedures to verify the controls
met the requirements stated within the OPM contract. Those requirements included compliance
with applicable regulatory laws, safeguarding assets against waste, loss, and unauthorized use,
and accurate and fair disclosure of all data included in submitted reports.

We reviewed any corrective actions taken by Premera Alaska in response to the OPM OIG
Information System Audits Group report (Report #1A-10-70-14-007, issued 11/28/2014) to
ensure corrective action has or is being taken to address the OIG’s recommendations.

In conducting the audit, we relied to varying degrees on computer-generated data provided by
Premera Alaska and the Association. We did not verify the reliability of the data generated by
the various information systems involved. However, nothing came to our attention during our
audit testing utilizing the computer-generated data to cause us to doubt its reliability.




                                                4                         Report No. 1M-GA-00-15-005
III. AUDIT FINDINGS AND RECOMMENDATIONS

 A. Internal Control Review

    1. Non-Excepted Abortion Claims Error

                                  Premera Alaska’s incorrect benefit configuration allowed the
            Non-excepted          processing and payment of non-excepted abortion claims
        abortion claims were      on an MSP option that should not have covered these
        processed for an MSP      services.
         option that did not
          cover the services.         The 2012 Consolidated Appropriations Act, Division F, Title
                                      V, Section 507(a)(1)(2), defines non-excepted abortion
       services as abortion services performed except where the pregnancy is the result of an act
       of rape or incest, or the life of the pregnant woman would be endangered unless an
       abortion is performed.

       Contract MSPP-2014, Sections 2.4(b)(4) and (c)(4) require the Issuer to “Perform the
       MSPP contract in accordance with prudent business practices,” including the “Timely
       and accurate adjudication of claims or rendering of medical services ….”

       Contract MSPP-2014 Section 2.4(c)(8)(i) requires the Issuer to establish and maintain “a
       system of internal controls that provides reasonable assurance that … The provision and
       payments of benefits and other expenses comply with statutory, regulatory, and
       contractual requirements.”

       As part of our segregation of funds review, we reviewed journal entries that included
       non-excepted abortion claims. During the course of this review, Premera Alaska
       explained that these claims had been erroneously adjudicated and paid on an MSP option
       that did not cover non-excepted abortion services. Based on our review, we determined
       that the error resulted in two claims, totaling $719, being adjudicated and paid on
       one MSP option that did not cover non-excepted abortion services. Although the errors
       did not have a material impact, by incorrectly adjudicating these claims Premera Alaska
       is not in compliance with Contract MSPP-2014, Sections 2.4(b)(4) and (c)(4), which
       requires accurate adjudication of MSP option claims.

       According to Premera Alaska, the claims were paid incorrectly as a result of a benefit
       system configuration error. Specifically, rules had been configured to stop non-excepted
       abortion claims that met certain criteria; however, Premera Alaska had failed to activate



                                               5                          Report No. 1M-GA-00-15-005
the rules, allowing the claims to be paid. Premera Alaska identified the issue in October
2014 as part of routine work and immediately activated the rules. As a result of our
audit, Premera Alaska subsequently determined that the rules activated in October were
overly inclusive, which could cause allowable excepted abortions to be denied. In
addition, the system was not configured to identify situations in which drugs were
administered in an office for non-excepted abortion services. Premera Alaska made
the system configuration updates to address these issues in December 2014. We
confirmed that no additional non-excepted abortion claims were adjudicated by any other
MSP option as of December 17, 2014. Premera Alaska has planned further corrective
action related to the two claims that were adjudicated in error, including removing these
two claims from the MSP experience and reprocessing them appropriately. Premera
Alaska also intends to assume financial responsibility for the full amount paid for these
claims rather than pursuing reimbursement from the members.

Although Premera Alaska was taking corrective actions to address the issue, they noted
that they had not performed testing of the initial configurations or subsequent
configuration updates. The errors may not have occurred if the configurations had been
tested. The fact that Premera Alaska did not conduct testing on the system configuration
raises concerns about the adequacy of its system of internal controls required by Contract
MSPP-2014 Section 2.4(c)(8).

In order to verify that Premera Alaska’s configuration updates were functioning as
intended, we conducted a review of 15 abortion test procedure code claims. As a result,
we determined that the system configuration updates that Premera Alaska put in place at
the end of 2014 are properly denying non-excepted abortion claims on MSP options that
do not cover these services.

Recommendation 1

We recommend that the Contracting Officer verify that Premera Alaska is performing
testing of its MSP product benefit system configurations and the effectiveness of its
updated Information Technology Quality Assurance Testing document.

Issuer’s Response:

Premera Alaska stated that it has implemented additional testing of MSP product benefit
system configurations as of April 10, 2015 and has provided its updated Information
Technology Quality Assurance Testing document.




                                        6                          Report No. 1M-GA-00-15-005
      OIG’s Comments:

      We accept Premera Alaska's corrective action plan. It has implemented additional testing
      of MSP product benefit system configurations and has updated its Information
      Technology Quality Assurance Testing document. We are unable to comment to the
      effectiveness and results of the policy implementation and will test the MSP product
      benefit configurations and updated Information Technology Quality Assurance Testing
      document during future audits.

      Recommendation 2

      We recommend that the Contracting Officer ensure that the two claims identified for the
      non-excepted abortion services are excluded from any future MSP product claims
      experience submissions.

      Issuer’s Response:

      Premera Alaska provided support to demonstrate the removal of the claims from the MSP
      product claims experience.

      OIG’s Comments:

      We acknowledge and accept the support provided by Premera Alaska to show the
      adjustment of the non-excepted abortion claims from the MSP option members.
      Although the support shows screen prints of the removal of the claims from the member’s
      coverage, the Contracting Officer should still verify that these claims are not included in
      future claims experience submissions.

B. Enrollment Review

   The results of our review showed that Premera Alaska accepted electronic enrollment data
   and performed enrollment reconciliations on a regular basis, which complied with Contract
   MSPP-14.

C. Rates and Benefits Review

   1. Summary of Benefits and Coverage Errors and Exclusions

      Premera Alaska erroneously excluded the coverage of mental health and substance abuse
      services from its 2014 MSP SBC documents.


                                               7                         Report No. 1M-GA-00-15-005
Contract MSPP-14, Section 5.1(a), states that the Issuer must have
a uniform benefits package, including the essential health benefits
                                                                         Essential health
described within §1302 of the Affordable Care Act for each
                                                                          benefits were
marketplace on which the MSP is certified.
                                                                           erroneously
                                                                        excluded from the
Furthermore, the Affordable Care Act, specifically §1302(b)(1),
                                                                           2014 SBCs.
states that mental health and substance abuse disorder services,
including behavioral health treatment, is considered to be an
essential health benefit and is required to be covered.

As part of our rates and benefits review, we examined the SBCs of Premera Alaska’s
2014 MSP options that were posted on the FFM via www.healthcare.gov. We
determined that mental health and substance abuse services were erroneously excluded
from the SBC, which is one of the essential health benefits that is required to be covered
per the Contract MSPP-14 and the Affordable Care Act.

This exclusion was an error by Premera Alaska and the services were always covered per
the benefit booklets. Premera Alaska stated that the error may have been the result of a
change made to an input in another section of the SBC during its preparation, which
inadvertently resulted in the accidental removal of the mental health and substance abuse
services coverage prior to the SBCs being posted to the FFM.

Premera Alaska took measures to correct the errors on the 2014 SBCs in August 2014,
five months after the conclusion of the 2014 open enrollment period. Enrollees shopping
for health care on the FFM during the open enrollment period may have been dissuaded
from choosing a Premera Alaska MSP option on the basis that the MSP options did not
appear to cover mental health and substance abuse services. This may have caused a
negative impact on enrollment in the MSP options. Although the benefit booklets
provided to enrollees did show these services were covered, the benefit booklets are
provided after enrollment into a plan through the FFM.

During the audit, we verified that Premera Alaska subsequently corrected the SBC error
during August 2014 and that the 2015 SBCs that were posted to the FFM properly
included the coverage of mental health and substance abuse services. During our review,
we also confirmed that Premera Alaska made improvements to its SBC preparation and
approval processes as a result of the 2014 error. These improvements included the
development of a formal, written procedure, the use of a checks and balances process
during the SBC internal review, and the implementation of an electronic document
comparison tool that highlights differences for further review.



                                         8                            Report No. 1M-GA-00-15-005
      Recommendation 3

      We recommend that the Contracting Officer review Premera Alaska's SBCs after the
      posting of the SBCs to the FFM to ensure that benefits are shown to accurately reflect the
      benefits within the approved MSP Program application.

      Issuer’s Response:

      Premera Alaska agrees with our recommendation that the Contracting Officer should
      review its SBCs after the posting of the SBCs on the FFM.

D. Segregation of Funds Review

   1. Segregation of Funds for Non-Excepted Abortion Services

      Premera Alaska did not collect separate payments for premium funds associated with
      non-excepted abortion services, nor did it allocate and separate the premium funds for the
      non-excepted abortion services from the premium funds for all other general medical
      services, as required by Contract MSPP-14 and 45 CFR 156.280. The amount of
      premiums collected monthly from each enrollee for the non-excepted abortion services
      was also unclear.


        Premiums for non-         Contract MSPP-14, Section 8.5(a), requires Issuers to
         excepted abortion        comply with the provisions of 45 CFR §156.280 regarding
         services were not 
      the segregation of funds for abortion services.
        separated from the 

      premiums for all other      45 CFR §156.280(e)(1) disallows the use of Federal funds,
          medical services.       such as premium tax credits and any cost-sharing reduction,
                                  for non-excepted abortion services.

      45 CFR §156.280(e)(2)(i) states that from each enrollee within the plan, without regard to
      the enrollee’s age, sex, or family status, a separate payment must be collected for each of
      the following:

      (A)	 An amount equal to the portion of the premium to be paid directly by the enrollee
           for coverage of medical services other than non-excepted abortion services (after
           reductions for credits and cost-sharing reductions); and

      (B)	 An amount equal to the actuarial value of the coverage for non-excepted abortion
           services.


                                               9	                        Report No. 1M-GA-00-15-005
Furthermore, 45 CFR §156.280(e)(2)(ii) states that the Issuer must deposit all such
separate payments into separate allocation accounts.

45 CFR §156.280(e)(4)(iii) states that the estimated monthly cost per enrollee,
determined on an average actuarial basis, for non-excepted abortion services may not be
estimated at less than one dollar per enrollee, per month.

Lastly, Contract MSPP-14, Section 8.5(b), requires the Issuer to submit a plan detailing
its processes and methodology for its segregation plan to OPM prior to submission to
State health insurance commissioners as required by 45 C.F.R. § 156.280(e)(5)(ii).

As part of our segregation of funds review, we examined Premera Alaska’s premium
billing process, specifically for the two MSP options that offered non-excepted abortion
services, and its segregation of the premiums collected for the non-excepted abortion
services. We determined that Premera Alaska did not collect separate premiums for the
portion of the MSP options’ premiums that were directly associated with the non-
excepted abortion services. Premera Alaska invoiced enrollees for the total premiums,
including both general medical services and non-excepted abortion services, less any
premium tax credit. Once these premiums were collected from the enrollee, they were
deposited into one revenue account along with any premium tax credits. Because all of
the premiums were co-mingled within one revenue account, Federal funds may, in effect,
have been used to pay for non-excepted abortion services, which is prohibited by the
regulations.

Also, due to the fact that all premiums were invoiced together and deposited into one
revenue account, we were unable to determine if Premera Alaska was collecting at least
one dollar per enrollee, per month, for the non-excepted abortion services premium in
accordance with 45 CFR 156.280(e)(4)(iii).

Premera Alaska explained that the Centers for Medicare and Medicaid Services had not
issued guidance on premium invoicing and that the regulations do not specify that the
premium funds for non-excepted abortion services must be itemized or billed separately.
It also stated that 45 CFR §156.280(f)(2) requires plans to provide premium information
only with respect to the total premiums. However, this regulation is related in particular
to enrollment and advertising information and should not supersede the earlier guidance
within the regulations, 45 CFR 156.280(e)(2)(i)(A) and (B), which specifically states that
separate payments must be collected for the non-excepted abortion services premiums.

Premera Alaska reasoned that although it did deposit all revenues into one revenue
account, it also recorded the non-excepted abortion premium funds on a quarterly basis in


                                        10                         Report No. 1M-GA-00-15-005
a statistical account for tracking purposes. This practice does not comply with 45 CFR
§156.280(e), which requires that the premiums be deposited into separate allocated
accounts.

In its MSP Program application to OPM, Premera Alaska submitted a segregation of
funds plan. Based upon our review of the segregation of funds processes at Premera
Alaska, the plan does not adequately ensure that proper processes are in place to
segregate the funds for the non-excepted abortion services from the general medical
services.

Recommendation 4

We recommend that the Contracting Officer verify that Premera Alaska's January 2016
billing invoices for premium funds include separate line items for general medical
services and non-excepted abortion services in accordance with 45 CFR 156.280(e)(2)(i).

Issuer’s Response:

Premera Alaska stated that it has initiated the process of separating the general medical
services premium and non-excepted abortion services premium by adding an additional
line item to the billing invoice for non-excepted abortion services. It anticipates the
modified billing invoices to be available beginning with the January 2016 invoices.

OIG’s Comments:

We accept Premera Alaska's corrective action plan to update its billing invoices to
provide separate line items for the general medical services and non-excepted abortion
services. This will satisfy the requirements of 45 CFR 156.280(e)(2)(i).

Recommendation 5

We recommend that the Contracting Officer verify that Premera Alaska has established a
separate allocation account for at least one dollar per enrollee, per month, for non-
excepted abortion services premiums in compliance with 45 CFR 156.280(e)(2)(ii).

Issuer’s Response:

Premera Alaska believes that a member will pay for both the general medical service and
non-excepted abortion service premium in a single payment. Since Premera Alaska has



                                        11                         Report No. 1M-GA-00-15-005
      no practical way of manually intervening with each such premium payment, it will
      deposit all premium funds received into a general medical services allocation account,
      and then will move the one dollar premium per enrollee, per month, for non-excepted
      abortion services into a separate allocation account. It expects that this new process will
      be completed by December 31, 2015.

      OIG’s Comments:

      We accept Premera Alaska's corrective action plan to deposit all premiums received into
      the general medical services allocation account and then move at least one dollar per
      enrollee, per month, for non-excepted abortion services premiums into a separate
      allocation account.

      Recommendation 6

      We recommend that the Contracting Officer verify that Premera Alaska has submitted an
      updated Segregation of Funds Plan after the implementation of any corrective action
      plans, in compliance with Section 8.5(b) of contract MSPP-14.

      Issuer’s Response:

      Premera Alaska will submit an updated Segregation of Funds Plan after the corrective
      action plans have been implemented. It expects to submit the corrective action plans by
      December 31, 2015.

      OIG Comments:

      We accept Premera Alaska's response that it will submit an updated Segregation of Funds
      Plan after its corrective action plans have been implemented.

E. Data and Information Security Review

   The results of our review showed that Premera Alaska had responded to all of the
   recommendations within a prior OPM OIG audit report (Report #1A-10-70-14-007, issued
   11/28/2014) with corrective action plans to address the issues.




                                               12                         Report No. 1M-GA-00-15-005
IV. MAJOR CONTRIBUTORS TO THIS REPORT

COMMUNITY-RATED AUDITS GROUP

            , Auditor-in-Charge

            , Auditor




            , Senior Team Leader

        , Group Chief




                                   13   Report No. 1M-GA-00-15-005
                                 APPENDIX


                                                                             Federal Employee Program
                                                                             1310 G Street, N.W.
                                                                             Washington, D.C. 20005
                                                                             202.626.4800



May 8, 2015

                        , Senior Team Leader
Community-Rated Audits Group
U.S. Office of Personnel Management
Office of the Inspector General
800 Cranberry Woods Drive
Suite 270
Cranberry Township, Pennsylvania 16066

Reference: OPM Draft Audit Report of the Multi-State Plan Program Operations
           Premera Blue Cross Blue Shield of Alaska (Premera Alaska)
           Audit Report Number 1M-GA-00-15-005
           (Dated and received March 5, 2015)

Dear           :

This is the BCBSA response to the above referenced U.S. Office of Personnel
Management (OPM) Draft Audit Report covering the Multi-State Plan Program
Operations.

Our comments concerning the findings in the report are as follows:

A. INTERNAL CONTROL REVIEW

   1. Non-Excepted Abortion Claims Error                                    Procedural

   Recommendation 1

   We recommend that the Contracting Officer direct Premera Alaska to strengthen its
   internal control system by developing policies and procedures for testing all new
   MSP benefit system configurations.

   Plan Response:

   The Plan stated that it implemented additional testing of MSP benefit system

   configurations as of April 10, 2015. The Plan provided the updated ITQA Testing 

   document describing these additional steps. See Attachment 1. 


                                                                     Report No. 1M-GA-00-15-005
  Recommendation 2

  We recommend that the Contracting Officer confirm Premera Alaska appropriately
  removed the non-excepted abortion claims from the MSP claims experience.

  Plan Response

  The Plan has provided evidence showing the non-excepted abortion claims have
  been appropriately removed from the MSP claims experience. See Attachment 2.




  Deleted by the OIG ‐ Not Relevant to Final Report




C. RATES AND BENEFITS REVEIW

  1. Statement of Benefits and Coverage Errors and Exclusions


  Recommendation 4 


  We recommend that the Contracting Officer review Premera Alaska’s SBCs after the
  posting of the SBCs to the Federal Exchange to ensure that benefits are shown
  accurately to reflect the benefits within the approved MSPP application.

  BCBSA Response:

  BCBSA agrees with the recommendation that the Contracting Officer should review
  Premera Alaska’s CBC after the posting of the SBC.

                                                       Report No. 1M-GA-00-15-005
D. SEGRETATION OF FUNDS REVIEW

  1. Segregation of Funds for Abortion Services

  Recommendation 5

  We recommend that the Contracting Officer direct Premera Alaska to collect
  separate premium funds, general medical services and non-excepted abortion
  services, from enrollees in accordance with 45 CFR §156.280(e)(2)(i).

  Plan Response:
  The Plan stated that it has initiated the process of adding an additional line item to
  the billing invoice for non-excepted abortion services thereby separating the general
  medical service and non-excepted abortion services. The Plan anticipates modified
  billing invoices to be available beginning with the January 2016 invoices.

  Recommendation 6

  We recommend that the Contracting Officer direct Premera Alaska to establish
  separate allocation accounts and to deposit all premium funds received into the
  appropriate account in compliance with 45 CFR 156.280(e)(2)(ii).

  Plan Response

  The Plan believes that Recommendation 6 relates to Recommendation 5. Even
  though Recommendation 5 requires the Plan to separately invoice general medical
  services and non-excepted abortion services, the Plan believes that a member will
  pay for both the general medical service and non-excepted abortion service
  premium in a single payment. As the Plan has no practical way of manually
  intervening with each such premium payment, the Plan will deposit all premium
  funds received into the general medical services allocation account, and then will
  move the $1 premium per month for non-excepted abortion services into a separate
  allocation account. The Plan expects that this new process will be completed by
  December 31, 2015.

  Recommendation 7

  We recommend that the Contracting Officer direct Premera Alaska to submit an
  updated Segregation of Funds Plan, in compliance with Section 8.5(b) of contract
  MSPP- 14, after any corrective action plans have been implemented.

  Plan Response

  The Plan will submit an updated Segregation of Funds Plan after the corrective
  action plans have been implemented. The Plan expects to submit the corrective
  action plans by December 31, 2015.

                                                            Report No. 1M-GA-00-15-005
We appreciate the opportunity to provide our response to this Draft Audit Report and
request that our comments be included in their entirety as an amendment to the Final
Audit Report.

Sincerely,




                     

Managing Director, FEP Program Assurance 


Attachment 


cc: 	                   , OPM Contracting Officer
                           , Sr Regulatory Consultant – Privacy Program, Premera
        Jena L. Estes, V.P. Government Program Integrity




                                                           Report No. 1M-GA-00-15-005
                                                                                                                         



                                       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. 1M-GA-00-15-005