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 at Aetna HealthFund
 

Report No. lC-22-00-10-010 

Date: July 27, 2010 

-- CAUTION -­

This audit report has been distributed to Federal and non-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 report is available under the Freedom of Information Act 

and made available to the public on the OIG webpage, 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. 
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
 

Aetna HealthFund
 

Contract Number 2900 - Plan Code 22
 

Blue Bell, Pennsylvania
 

Report No. lC-22-00-10-01O Date: July 27, 2010 

Michael R. Esser 

Assistant Inspector General 

for Audits 

www.opm.goY www.usajobs.goY 
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
 

Aetna HealthFund
 

Contract Number 2900 - Plan Code 22
 

Blue Bell, Pennsylvania
 

Report No. lC-22-00-10-010 Date: July 27, 2010 

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

Program (FEHBP) operations at Aetna Healthfund (Plan). The audit covered contract years 2005 

through 2009 and was conducted at the Plan's office in Blue Bell, Pennsylvania. We found that 

the FEHBP rates were developed in accordance with the applicable laws, regulations, and the 

Office of Personnel Management's rating instructions for the years audited. However, we did 

find issues with the Plan paying 18 non-covered abortion-related claims for FEHBP members. 

These claims were either paid inappropriately or the supporting documentation was not adequate 

to justify the claim payment. 

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CONTENTS 

Page 

EXECUTIVE SUMMARY	 i
 

I. INTRODUCTION AND BACKGROUND	 1
 

II.	 OBJECTIVES, SCOPE, AND METHODOLOGY 3
 

III.	 AUDIT FINDINGS AND RECOMMENDATION 5
 

1. Premium Rate Review	 5
 

2. Claims Review	 5
 

Non-Covered Abortion-Related Claims 5
 

IV.	 MAJOR CONTRIBUTORS TO THIS REPORT 7
 

Appendix (Aetna's June 18,2010, response to the draft report)
 
I. INTRODUCTION AND BACKGROUND
 

Introduction 

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

at Aetna HealthFund (Plan). The audit covered contract years 2005 through 2009 and was 

conducted at the Plan's office in Blue Bell, Pennsylvania. The audit was conducted pursuant to 

the provisions ofContract CS 2900; 5 U.S.C. Chapter 89; and 5 Code of Federal Regulations 

(CFR) Chapter 1, Part 890. The audit was performed by the Office ofPersonnel 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 through regulations codified in Chapter 1, Part 890 of Title 5, CFR. 

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

that 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 is defined as the best rate offered to 

either ofthe 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. 

March 31 

2006 2007 2008 2009 

7,654 12,114 18,466 32,631 

15,571 24,489 37,826 67,802 
The Plan has participated in the FEHBP since 2005, and provides health benefits to FEHBP 

members throughout the entire United States, except Hawaii. This is the first full-scope audit of 

the Plan. 

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 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 of the laws and regulations governing the FEHBP. 

FEHBP Premiums Paid to Plan 

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 j 

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. 

$225 

$200 

$175 

$150 

$125 

$100 

$75 

$50 

$25 

$0 

This performance audit covered contract years 2005
 

through 2009. For these years, the FEHBP paid
 

approximately $462.8 million in premiums to the Plan.
 

The premiums paid for each contract year audited are shown on the chart to the right.
 

DIG 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 of our 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. 

3 
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 performed in accordance with generally accepted governrnent auditing standards, 

issued by the Comptroller General ofthe United States. 

The audit fieldwork was performed at the Plan's office in Blue Bell, Pennsylvania, during 

November 2009. Additional audit work was completed at our offices in Cranberry Township, 

Pennsylvania and 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 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
 

1. 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 through 

2009. Consequently, the audit did not identify any questioned costs. 

2. Claims Review 

According to FEHBP Carrier Letters 2007-09 and 2008-09, 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. We reviewed FEHBP claims data 

used to develop rates for contract years 2008 and 2009. We ran queries on the claims data 

that relate to hospital, physician, out-of-area, prescription and injectible drugs, large claims, 

coordination of benefits, bundling of claims, and non-covered benefits according to the 

FEHBP benefit brochures. 

Non-Covered Abortion Related Claims 

The Plan used FEHBP claims experience from calendar years 2006, 2007, and 2008 to 

develop premium rates for contract years 2008 and 2009. Our audit disclosed that from 

May 1,2006 through April 30, 2008, the Plan paid 18 non-covered abortion-related claims 

for FEHBP members. These claims were either paid inappropriately or the supporting 

documentation was not adequate to justify the claim payment. 

Beginning January 1, 1996, Public Law 104-52 requires that FEHBP plans not be permitted 

to payor provide benefits for an abortion except, "where the life ofthe mother would be 

endangered ifthe fetus were carried to term, or that the pregnancy is the result of an act of 

rape or incest." 

The Plan's claim processing and information systems did not have adequate controls in place 

to detect, document, and deny payment for non-covered abortion-related claims. Failure to 

adjudicate abortion-related claims correctly increases the risk that the Plan will pay for noncovered services and inflate the FEHBP premiums. 

Recommendation 

We recommend that the contracting officer require the Plan to implement claim processing 

policies and procedures that will reasonably assure the prevention of inappropriate payment 

of abortion-related claims and document the reasons for claim payments or denials. 

5 
Plan's Comments (See Appendix): 

Upon further review ofthese claims, the Plan agrees with the findings pertaining to 

overpayment of elective abortion claims. The Plan has identified that these claims were 

processed incorrectly because it appears that not all abortion-related claims were 

automatically pended to medical review for approval. This issue is due to lack of specific 

coding for abortion-related claims versus any other standard medical claim. The Plan has 

established procedures to correct the issues of incorrectly paying abortion-related claims. 

OIG's Response to the Plan's Comments: 

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

actions during our next audit ofthe Plan. 

6
 
IV. MAJOR CONTRIBUTORS TO THIS REPORT 

Community-Rated Audits Group 

Auditor-In-Charge 

Auditor 

Chief 

Senior Team Leader 

7
 
Appendix .tna Health Inc 

930 Harvest Drive 

Blue Bell, PA 19422 

)~ Aetna 

2010 JUN 23 PM t: 21 

FEHBP Underwriting Manager 

Government & Specialty Products 

June 18,2010 

Chief, Community Rated Audits Group 

U.S. Office of Personnel Management 

U.S. Office of Inspector General 

1900 E Street, NW - Room 6400 

Washington, D.C. 20415-1100 

RE: Aetna's response to Draft Report NO.1C-22-00-1 0-010 

Aetna submits the following comments to the above mentioned draft audit report issued by the Office of Personnel 

Management (OPM) under the Federal Employees Health Benefits Program (FEHBP). The audit covered the FEHBP 

contract for the Aetna Health Fund plans (Plan Code 22) for the contract years 2005 through 2009. 

During the Claims Review portion of the audit, the Draft Report questioned 18 abortion-related claims for FEHBP 

members that were paid from May 1, 2006 through April 30, 2008. Upon further review of these claims, Aetna agrees 

some elective abortion-related claims were processed incorrectly. Aetna has identified that these claims were processed 

incorrectly because it appears that not all abortion-related claims were automatically pending to medical review for 

approval. This issue is due to a lack of specific coding for abortion-related claims versus any other standard medical 

claim. 

Aetna has established the following procedures to correct the issues surrounding abortion-related claims. 

1.	 Elective abortion-related service claim codes will be pended to a medical claim examiner (MCE). 

2.	 The MCE will evaluate both the procedural and diagnostic codes to determine if the claim should be denied or 

approved based on the language in the FEHBP brochure.' 

3.	 If the MCE does not have enough information to process the claim correctly, the claim will be turned over to 

Aetna's Clinical Claim Reviewer (CCR) to determine the proper course of action. 

4.	 If needed, the CCR will contact the provider to determine the specifics surrounding the elective abortion-related 

claim in question. 

5.	 Aetna will have ongoing training with the MCEs on the handling of elective abortion-related claims. 

In conclusion, Aetna agrees with the OIG's Draft Report findings pertaining to overpayment of elective abortion claims. In 

response to the findings in the Draft Report, Aetna has implemented a course of action to correct this problem. Aetna 

believes that the above outlined procedures will help to eliminate future overpayments of elective abortion-related claims 

If you have any questions or concerns about the above response, please feel to contact me at or 

1 The FEHBP brochure states "that FEHBP plans not be permitted to payor provide benefits for an abortion except. 'where the life of the mother would 

be endangered if the fetus were carried to term, or when the pregnancy is the result of an act of rape or incest."