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 M.D. Individual Practice
 

Association, Inc.
 

Report No. lC-JP-OO-09-051 

Date: February 19, 2010 

-- CAUTION -­

<This audit reporl has been distributed to Fede.-al orticials who are responsible for the administration of the audited program. This 

"·audit report may contain p("oprictar}' data which is 11I'olecied by Federal law (18 U.S.c. 1905). The("efore, while Ihis audit report is 

available under the Freedom of Infornlalion Act and made available 10 the public on the OIG webpage, eaulion needs to be exercised 

before releasing the repo("t to the general public as it may contain proprie~ry information Ihat was redacted from the publicly 

distributed copy. 
UNITED STATES OFFICE OF PERSONNEL MANAGEMENT
 

Washington, DC 20415
 

Office of the 

Inspector General 

AUDIT REPORT 

Federal Employees Health Benefits Program
 

Community-Rated Health Maintenance Organization
 

M.D. Individual Practice Association, Inc.
 

Contract Number CS 1935 - Plan Code JP
 

Hartford, Connecticut
 

Report No. lC-JP-OO-09~051 Date: February 1 9, 201 0 

Michael R. Esser 

Assistant Inspector General 

for Audits 

www.opm.gov www.usaJobs.gov
UNITED STATES OFFICE OF PERSONNEL MANAGEMENT
 

Washington, DC 20415
 

Office of the 

Inspector General 

EXECUTIVE SUMMARY
 

Federal Employees Health Benefits Program
 

Community-Rated Health Maintenance Organization
 

M.D. Individual Practice Association, Inc.
 

Contract Number CS 1935 - Plan Code JP
 

Hartford, Connecticut
 

Report No. lC-JP-OO-09-051 Date:February 1 9« 2 0 1 0 

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

Program (FEHBP) operations at M.D. Individual Practice Association, Inc. (Plan). The audit 

covered contract years 2005 and 2007 through 2009 and was conducted at the Plan's office in 

Hartford, Connecticut. This report details procedural findings related to the Plan's claims data 

submission. We found that the FEHBP rates were developed in accordance with the Office of 

Personnel Management's rules and regulations in contract years 2005 and 2007 through 2009. 

www.opm.goY WWW.U521Jobs.goy 
CONTENTS
 

EXECUTIVE SUMMARy	 , i
 

I. INTRODUCTION AND BACKGROUND ,	 1
 

II. OBJECTIVES, SCOPE, AND METHODOLOGY 	 3
 

III.	 AUDIT FINDINGS AND RECOMMENDAnON 5
 

Premium Rate Review 5
 

Claims Review 5
 

1. Payment for Non-Covered Services	 5
 

2. Incorrect Unbundling of Claims	 5
 

IV.	 MAJOR CONTRIBUTORS TO THIS REPORT 7
 

Appendix (M.D. Individual Practice Association, Inc.'s January 13,2010, response 

to the draft report) 
I. INTRODUCTION AND BACKGROUND
 

Introduction 

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

at M.D. Individual Practice Association, Inc. (Plan) in Hartford, Connecticut. The audit covered 

contract years 2005 and 2007 through 2009. The audit was conducted pursuant to the provisions 

ofContract CS 1935; 5 U.S.C. Chapter 89; and 5 Code ofFederal Regulations (CFR) Chapter I, 

Part 890. The audit 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. 

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 of the Federal Employees Health Benefits Act 

are implemented by OPM through regulations codified in Chapter I, 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, FEHBP Contracts/Members 

which March 31 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. OPM negotiations 

relate primarily to the level of coverage and 

other unique features of the FEHBP. 

The chart to the right shows the number of 

FEHBP contracts and members reported by 

the Plan as of March 31 for each contract 

year audited (the number of members for 

2008 was not available). 

200,000 

175,000 

150,000 

125,000 

100,000 

75,000 

50,000 

25,000 

o 

2006 

• Contracts 77,498 

ClMembers 183,068 

2007 

69,221 

164,442 

. 2008 

62,228 

NlA 

2009 

57,632 

136,154 

I
 
The Plan has participated in the FEHBP since 1983 and provides health benefits to FEHBP 

members throughout the Washington, D.C., Maryland, Northern Virginia, Roanoke, Richmond, 

and Tidewater areas. The last audit conducted by our office covered contract year 2006. As a 

result of that audit, we found that the Plan's rating of the FEHBP in contract year 2006 was in 

accordance with the applicable laws, regulations, and aPM rating instructions. 

The preliminary results of this 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 of this final report and are 

included, as appropriate, as the Appendix. 

2
 
II. OBJECTIVES, SCOPE, AND METHODOLOGY
 

Objectives 

The primary objectives ofthe 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 incompliance 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 areasonable basis for our findings and 

conclusions based on our audit objectives. 

This performance audit covered contract years 2005 

and 2007 through 2009. For contract years 2005, 

2007, and 2008, the FEHBP paid approximately $1.8 

billion 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 ofthe Plan's internal control structure, but we did not use this 

information to detennine 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 

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

3 

FEHBP Premiums Paid to Plan 

$630 

$620 

$610 r1I 

$600 

i $590 

$580 

$570 

$560 

$550 

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

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 ofthe 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. 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 of the United States. 

The audit fieldwork was performed at the Plan's office in Hartford, Connecticut, during July 

2009. Additional audit work was completed at our office in Washington, D.C. 

Methodology 

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

the market price rates. In addition, we examined the rate development documentation and 

billings to other groups, such as the SSSGs, to determine ifthe 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 determine the 

propriety ofthe FEHBP premiums and the reasonableness and acceptability of the 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 ofthe FEHBP was in accordance with the applicable 

laws, regulations, and OPM's rating instructions to carriers for contract years 2005 and 2007 

through 2009. Consequently, the audit did not identifY any questioned costs. 

Claims Review 

In FEHBP Program Carrier Letters 2006-14, 2007-09, and 2008-09, the Office of Personnel 

Management requires all carriers to keep on file all data necessary to justify its Adjusted 

Community Rating CACR) rate and save back-up copies oftheir claims databases for audit 

purposes. We reviewed FEHBP claims data for contract years 2007 through 2009. We ran 

queries on the claims data that relate to hospital, physician, out-of-area, prescription drugs and 

injectible drugs, large claims, coordination of benefits, bundlingofclaims, and non-covered 

benefits according to the FEHBP benefit brochures. We found that in 2007 through 2009, the 

Plan paid for non-covered benefits. 

1. Payment for Non-Covered Services 

The elective abortion claims review produced several claims that were questionable. Based on 

our review, there were non-covered abortion claims paid for 2007 through 2009. The claims 

totals were not significant enough to affect the 2007 through 2009 premiums; however, the 

Plan should not cover claims for elective abortions. 

2. Incorrect Unbundling of Claims 

There were claims that were incorrectly unbundled for contract years 2007 through 2009. The 

claims that should have been bundled are Current Procedural Tenninology codes 80048 (Basic 

Metabolic Panel) and 80051 (Electrolyte Panel). The claims that had these codes 

were questioned because the primary code should have been applied for a one-time charge. 

The Plan agrees that several claims in 2008 should have been bundled. Additionally, we 

understand that there are certain types of claims that are exempt from medical edit software 

based on the plan's medical policy for 2007 through 2009. However, we still questioned these 

claims because it is a best practice for all claims to go through the medical edit software. 

Claims that are exempt from medical edits software because they are from a non-participating 

provider have a greater risk of being processed inaccurately and generating erroneous 

payments, increasing the costs to the FEHBP. The claims totals were not large enough to have 

an effect on the premiums for 2007 through 2009. However, the Plan should take the 

necessary precautions to verify that the claims are being bundled appropriately. 

5 
Plan's Comments (See Appendix) 

The Plan concurs. 

Recommendation 1 

We recommend that the Plan take the necessary precautions to remove elective abortion 

claims and bundle claims appropriately in the future. 

6
 
IV. MAJOR CONTRIBUTORS TO THIS REPORT 

Community-Rated Audits Group 

Auditor 

Auditor 

Auditor-In-Charge 

enior Team Leader 

Chief 

7
 
Appendix
 

.. . . ZOle.Jr;~J !tl Pr1 3= 28 

Locke Lord Blsscll& LJdclelt,p 

Attorneys & Counselors 

January 13, 2010 

Chief. Community-Rated Audits Group 

Office of lhe Inspector General 

US, Office of Personnel Management 

1900 E Street. NW, Room 6400 

Washington, DC 20415-1100 

Re:	 COlllrncnls..!9. the Draft Audit R~Q.!LQ~ M.D. Individual Practic:c Association, Inc., Plan Code 

~_ReQQ.f~~_lC-JPQ9-09-Q~J.

Dear •••• 

We represent M.D. Individual Practice Association, Inc, a UnitedHealthcare Company 

{"UniledHealthcare") in connection witll tile above referenced malter. UnitedHeallhcare IS responding 

to this audil on behalf 01 M.D. IndIVidual Practice Associalion, lllc. ("MDIPI\" or "Ihe Plan"). 

011 November 24, 2009, {he Urllted Stales Office 01 Personnel Management, Office of the 

Inspector General ("OPMfO IG") sublnilled 10 the Plan a "Draft Report" (1 C -JP-OO-09-051 ) ("DIan 

Report"), detailing the results of its audit of Ihe Federal Employee HeaHh Benefits Program ("FEHBP") 

operallons of M01PA for contract yc,us 2005 and 2007 through 2009 Upon submiSSion, OPM/OIG 

requested that the Plan provide commenls to nle Dran Report The Plan appreclales the 0PPorlunily 10 

fCspond to Ihis Oraf! Report. 

At the time of the audll. the Plan discussed with Ihe QIG auditors the erroneous payment of 

claims for non-covered elechve abortions. fhe Plan agrees that ilshould not pay for non~covered

eleclive abortions. 

The Plan agrees with the OIG auditors lhat some 2008 claims should have been bundled 

differently. The Plan is not aware of any 20070r 2009 claims lhat were not properly bundled. We do 

agree, however. that some claims for 2007 and 2009 were not subject to the medical edit software. 

because they were claims for services provided by free-standing racihties. 

The OIG has concluded lhatthe above erroneous payments were not significant enough to 

affect the FEHBP Premiums for 2007 lhrougrl 2009. aild that no amounts are due OPM. 

DELETED BY TIlE OlG 

NOT RELEVANT TO TilE }'INAL 
January 13. 2010 

Page 2 

DELETED BY THE OIG 

NOT RELEVANT TO THE FINAL 

Please contact me at the address, phone number or e-mail on this letlerhead if you have any 

queslions or require additional Information. We appreciate your ongoing cooperation. 

Very truly yours, 

LOCKE. LORD. BISSEll & LIDDEll LLP 

cc: 

Director, Underwriling
 

UnlledHealthcare