U.S. OFFICE OF PERSONNEL MANAGEMENT 

OFFICE OF THE INSPECTOR GENERAL 

OFFICE OF AUDITS 

Final Audit Report 

Subject: 

Audit of the Federal Employees Health Benefits 

Program Operations of Humana Health Plan, Inc. 

South Florida 

Report No. 1C-EE-OO-09-057 

Date: May 6, 2010 

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UNITED STATES OFFICE OF PERSONNEL MANAGEMENT
 

Washington, DC 20415
 

Office [If the 

Inspector (Jeneral 

AUDIT REPORT
 

Federal Employees Health Benefits Program
 

Community-Rated Health Maintenance Organization
 

Humana Health Plan, Inc. - South Florida
 

Contract Number 2110 - Plan Code EE
 

Louisville, Kentucky
 

Report No. lC-EE-00-09w057 Date: May 6, 2010 

Michael R. Esser 

Assistant Inspector General 

for Audits 

www.usajobs.gov 
UNITED STATES OFFICE OF PERSONNEL MANAGEMENT
 

Washington, DC 20415
 

Office of the 

Inspector General 

EXECUTIVE SUMMARY
 

Federal Employees Health Benefits Program
 

Cornmunity~RatedHealth Maintenance Organization
 

Humana Health Plan, Inc. - South Florida
 

Contract Number 2110 - Plan Code EE
 

Louisville, Kentucky
 

Report No. lC-EE-OO-09-057 Date:May 6, 2010 

The Office ofthe Inspector General performed an audit ofthe Federal Employees Health Benefits 

Program (FEHBP) operations at Humana Health Plan, Inc. - South Florida (Plan). The audit 

covered contract years 2006 through 2009 and was conducted at the Plan's office in Louisville, 

Kentucky. This report details a procedural finding related to the Plan's claims data submission. 

We found that the Plan's ratings ofthe FEHBP were developed in accordance with applicable 

laws, regulations, and the Office ofPersonnel Management's rating instructions for the years 

audited. 

Www.ollm.gov www.usajobs.gov 
CONTENTS
 

EXECUTIVE SUMMARy i
 

I. INTRODUCTION AND BACKGROUND 1
 

II. OBJECTIVES, SCOPE, AND METHODOLOGY. 3
 

III. AUDIT FINDINGS AND RECOMMENDATION 5
 

Premium Rate Review 5
 

Claims Review 5
 

BundlingfUnbundling Claims 5
 

IV. MAJOR CONTRIBUTORS TO THIS REPORT 7
 

Appendix (Humana Health Plan, Inc. - South Florida's April 6, 201 0, response 

to the draft report) 
I. INTRODUCTION AND BACKGROUND
 

Introduction 

We completed an audit of the Federal Employees Health Benefits Program (FEHBP) operations 

at Humana Health Plan, Inc. - South Florida (Plan) in Louisville, Kentucky. The audit covered 

contract years 2006 through 2008. The audit was conducted pursuant to the provisions of 

Contract CS 2110; 5 U.S.C. Chapter 89; and 5 Code of Federal Regulations (CFR) Chapter 1, 

Part 890. The audit was perfonned 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. 

Background 

The FEHBP was established by the Federal Employees Health Benefits 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. The FEHBP is administered by OPM's 

Retirement and Benefits Office. The provisions ofthe Federal Employees Health Benefits Act 

are implemented by OPM tluough regulations codified in Chapter 1, Part 890 of Title 5, CFR. 

Health insurance coverage is provided through contracts with health insurance carriers who 

provide service benefits, indemnity benefits, or comprehensive medical services. 

Community-rated carriers participating in the FEHBP are subject to various federal, state and 

local laws, regulations, and ordinances. While most carriers are subject to state jurisdiction, 

many are further subject to the Health Maintenance Organization Act of 1973 (Public Law 93­

222), as amended (i.e., many community-rated carriers are federally qualified). In addition, 

participation in the FEHBP subjects the carriers to the Federal Employees Health Benefits Act 

and implementing regulations promulgated by OPM. 

The FEHBP should pay a market price rate, 

which is defined as the best rate offered to 

either of the two groups closest in size to 

the FEHBP. In contracting with 

community-rated carriers, OPM relies on 

carrier compliance with appropriate laws 

and regulations and, consequently, does not 

negotiate base rates. aPM negotiations 

relate primarily to the level of coverage and 

other unique features ofthe FEHBP. 

The chart to the right shows the number of 

FEHBP cont~acts and members reported by 

the Plan as of March 31 for each contract 

year audited. 

FEHBP Contracts/Members 

March 31 

10,000 

9,000 

8,000 

7,000 

6,000 

5,000 

4,000 

3,000 

2,000 

1,000 

o 

• Contracts 

CMembers 

2006 

3,594 

9,132 

2007 

3,251 

8,173 

2008 

3,051 

7,493 

2009 

2,903 

7,024 

1
 
The Plan has participated in the FEHBP since 1989 and provides health benefits to FEHBP 

members in South Florida. The last full-scope audit conducted by our office covered contract 

years 2001 through 2005. All noted exceptions were resolved and amounts disallowed were 

returned to the FEHBP. 

The preliminary results ofthis audit were discussed with Plan officials at an exit conference and 

through subsequent correspondence. A draft report was also provided to the Plan for review and 

comment. The Plan's comments were considered in the preparation ofthis final report and are 

included, as appropriate, as the Appendix. 

2
 
II. OBJECTIVES, SCOPE, AND METHODOLOGY
 

Objectives 

The primary objectives of the audit were to verify that the Plan offered market price rates to the 

FEHBP and to verify that the loadings to the FEHBP rates were reasonable and equitable. 

Additional tests were performed to determine whether the Plan was in compliance with the 

provisions ofthe laws and regulations governing the FEHBP. 

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,appropriate 

evidence to provide a reasonable basis for our 

findings and conclusions based on our audit 

objectives. We believe that the evidence obtained 

provides a reasonable basis for our findings and 

conclusions based on our audit objectives. 

This performance audit covered contract years 2006 

through 2009. For contract years 2006 through 

2008, the FEHBP paid approximately $77.5 million 

in premiums to the Plan. I The premiums paid for each contract year audited are shown on the 

chart to the right. 

OIG audits of community-rated carriers are designed to test carrier compliance with the FEHBP 

contract, applicable laws and regulations, and OPM rate instructions. These audits are also 

designed to provide reasonable assurance of detecting errors, irregularities, and illegal acts. 

We obtained an understanding of the Plan's internal control structure, but we did not use this 

information to determine the nature, timing, and extent ofour audit procedures. However, the 

audit included such tests of the Plan's rating system and such other auditing procedures 

considered necessary under the circumstances. Our review of internal controls was limited to the 

procedures the Plan has in place to ensure that: 

• The appropriate similarly sized subscriber groups (SSSG) were selected; 

•	 the rates charged to the FEHBP were the market price rates (i.e., equivalent to the best 

rate offered to SSSGs)~ and 

•	 the loadings to the FEHBP rates were reasonable and equitable. 

I The Subscription Income Report for 2009 was not available at the time this report was completed. 

3 

FEHBP Premiums Paid to Plan 

$30 

$20 

• Revenue 
In conducting the audit, we relied to varying degrees on computer-generated billing, enrollment, 

and claims data provided by the Plan. We did not verify the reliability of the data generated by 

the various information systems involved. However, nothing carne to our attention during our 

audit testing utilizing the computer-generated data to cause us to doubt its reliability. We believe 

that the available data was sufficient to achieve our audit objectives. Except as noted above, the 

audit was conducted in accordance with generally accepted government auditing standards issued 

by the Comptroller General ofthe United States. 

The audit fieldwork was perfonned at the Plan's office in Louisville, Kentucky during August 

2009. Additional audit work was completed at our office in Jacksonville, Florida. 

Methodology 

We examined the Plan's federal rate submissions and related documents as a basis for validating 

the market price rates. Further, we examined claim payments to verify that the cost data used to 

develop the FEHBP rates was accurate, complete, and valid. In addition, we examined the rate 

development documentation and billings to other groups, such as the SSSGs, to determine if the 

market price was actually charged to the FEHBP. Finally, we used the contract, the Federal 

Employees Health Benefits Acquisition Regulations, and OPM's Rate Instructions to 

Community-Rated Carriers to detennine the propriety of the FEHBP premiums and the 

reasonableness and acceptability ofthe Plan'.s rating system. 

To gain an understanding of the internal controls in the Plan's rating system, we reviewed the 

Plan's rating system's policies and procedures, interviewed appropriate Plan officials, and 

performed other auditing procedures necessary to meet our audit objectives. 

4
 
III. AUDIT FINDINGS AND RECOMMENDATION
 

Premium Rate Review 

Our audit showed that the Plan's rating of the FEHBP was in accordance with the applicable 

laws, regulations, and OPM's rating instructions to carriers for contract years 2006 through 2009. 

Consequently, the audit did not identify any questioned costs. 

Claims Review 

According to annual FEHBP Program Carrier Letters, OPM requires all carriers to keep on file 

all data necessary to justify its Adjusted Community Rating rate development and save back-up 

copies of its claims databases for audit purposes. As part of verifying the FEHBP's rate 

development, we reviewed FEHBP claims data for contract years 2007 through 2009. We ran 

queries on the claims data that relate to hospital services, physician services, out-of-area services, 

prescription and injectible drugs, large claims, coordination of benefits, bundling of claims, and 

non-covered benefits according to the FEHBP benefit brochures. 

BundlinglUnbundiing Claims 

During the review ofthe FEHBP claims for contract years 2007 through 2009, we identified 

several unbundled claims. A claim is considered bundled when multiple procedures use a 

designated panel primary code, based on currently professional terminology (CPT) 

instructions, to charge for all laboratory tests performed on the same date. However, 

sometimes a laboratory will intentionally divide and charge for each procedure 

independently, instead of using the designated panel primary code for the bundled services 

and in effect un-bundle the claim. Therefore, the laboratory, in this case, can overcharge for 

these services if not monitored. 

For our review, the audit team rall queries on the laboratory services claims for contract year 

2007 (March 1, 2005-February 28,2006),2008 (March 1, 2006-February 28,2007), and 2009 

(March 1, 2008-February 29, 2008). The sample of queries was based on frequently used 

CPT codes. The specific CPT codes queried were for the basic metabolic panels (CPT code 

80048) and electrolyte panels (CPT code 80051). We isolated any claims that contained 

charges for all of the individual procedures included within each panel. We found claims that 

charged for procedures independently instead of by one CPT code. We sent the claims in 

question to the Plan for further explanation. 

The Plan responded that its system was not set up to check claims with place of treatment 

(POT) 1, 2, or R with CPT code range of 70000 tlrrough 90000, which are the designated 

codes for all radiology, pathology, laboratory, and other medical related services. The POT 

1,2, and R are used to identify where the service was performed; Inpatient Hospital (I), 

Outpatient Hospital (2), or Hospital-Emergency Room (R). The Plan stated that POT claims 

are not reviewed. The Plan further stated that a project work request (PWR) was being 

prioritized to correct these deficiencies. 

5
 
The removal ofthe questioned claims from the rate development for contract years 2007 

through 2009 did not have a monetary impact on the total rates. However, not monitoring 

this within the system affects aU claims processed by Humana in all its regions. Therefore, 

this is considered a procedural finding. 

Recommendation 

We recommend that the contracting officer require the Plan to ensure that claims are not 

inappropriately unbundled. 

Plan's Comments (See Appendix): 

The Plan agrees with the OIG's opinion that its claims system was lacking internal controls to 

prevent claims unbundling in certain circumstances. A claims system enhancement was 

activated on March 19, 2010 from a PWR designed to address unbundling for POT code 1. 

"Claims logic to prevent unbundling is already in place for POT codes 2 and R, although 

apparently this edit was implemented between the effective dates ofthe claims review and the 

time of the onsite audit visit." 

OIG Reply to the Plan's Comments: 

We acknowledge the Plan's agreement and we will verify the effectiveness ofthe corrective 

actions during the next audit. 

6
 
IV. MAJOR CONTRIBUTORS TO THIS REPORT 

Community~RatedAudits Group 

Staff 

Staff 

Auditor-In-Charge 

Senior Team Leader 

CRAG Group Chief 

7
 
Appendix 

"UMANA RESPONSE TO DRAYf AUDIT REPORT NO. lC-EE-OO-09-0S7 

2010 APR -6 PH 12: 13 . 

This document is submiued by Humana Inc_ and responds to the Draft Audit Report 

dated February 2, 2010 (the "Audit Rer0rt") issued by the Office ofInspector General of 

the Office of Personnel Management ("OPM") regarding the Humana Inc. - South 

Florida Area FEHBP Contract Number CS 2110 for contract years 2006-2009. 

The Draft Audit Report discusses Claims Unbundling issues uncovered by the auditors in 

the course of a detailed claims review, specifically for CPT codes 80048 and 80051 and 

recommends Humana display a corrective action plan to address such lack of internal 

controls, specifically for Places ofTreatment (POT) codes I, 2, and R. 

Humana's IT Claims area was engaged on this matter and the feedback received was 

addressed separately for a) POT code I, and b) POT codes 2 and R. 

A claims system enhancement was activated on 3/1912010 from a Project Work Request 

(PWR) designed to address unbundling for POT code I. The project description of this 

PWR was as follows, but the attached file "ClaimCheck POT I.doc" provides further 

detail. 

Project Descriplion 

..claims billed on a HCFA form, wilh a place oftreatment (POT) one (Inpatient), with 

laboratory services ranging between 79999 and 90000 are excludedfrom Ihe 

ClaimCheck Auditing logic. This enhancement will allow this exclusion to be included in 

the C/aimCheck Auditing logic_ The implementation ofthis PWR will allow Humana to 

save dollars lost on claims nol adJudicating against the auditing logic today. " 

Claims logic to prevent unbundling is already in place for POT codes 2 and R, although 

apparently this edit was implemented between the effective dates of the claims review 

and the time of the onsite audit visit. The attached file "ClaimCheck Interface Document 

(MCI8GMIS) (Last Updated - 07/25/2006) outlines the process already in place for 

codes 2 and R.