U,S. OFFICE OF PERSONNEL MANAGEMENT 

OFFICE OF THE INSPECTOR GENERAL 

. OFFICEOF AUDITS 

FinalAllditReport 

.Subject: 

Audlt'oftheF~deraIErnpl()yees.Health .Benefits· 

·Pr()gr~J~l···Oper~ti()ns.QfJlealtbAD1erica:r((nQSYJvailia,· ..... '. '.. . ',Inc~ . ', ..".' .

Date: S~:IJb;U\her 8, . 2009
 

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This audit report ha.s been distributed to Federal officials whO are responsible fO,r the adminis.tration of thc audited program. This 

audil report may contain ptoprietarydala which is protected by Fedcrallaw (18 U.S.c. 1905). therefore, while tbis audit report is 

avaiiable undcr the Freedom of Information. Act arid made available to the p~blic on the OIG webpage, caution needs to be ~ereised

before releasing the report to the general public as itmay contain proprietary 'information thlitwas r'edacled from the publicly 

distril:luted copy.' . .. 
UNITED STATES OFFICE OF PERSONNEL MANAGEMENT
 

Washington, DC 20415
 

Office of t!u: 

Inspector (J,:nC:;;1 

AUDIT REPORT
 

Federal Employees Health Benefits Program
 

Community-Rated Health Maintenance Organization
 

HealthAmerica Pennsylvania, Inc.
 

Contract Number 2078-A - Plan Code 26
 

Pittsburgh, Pennsylvania
 

Report No. lC-26-00-09-022 Da~: September 8, 2009 

Mich ael R. Esser 

Assistant Inspector General 

for Audits 

www.opm.goY 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
 

HealthAmerica Pennsylvania, Inc.
 

Contract Number 2078-A - Plan Code 26
 

Pittsburgh, Pennsylvania
 

Report No. lC-26-00-09-022 Da~: September 8, 2009 

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

Program (FEHBP) operations at HealthAmerica Pennsylvania, Inc. (Plan). The audit covered 

contract years 2006 through 2008 and was conducted at the Plan's office in Pittsburgh, 

Pennsylvania. The audit showed that the Plan's rating ofthe FEHBP was in accordance with 

applicable laws, regulations, and the Office of Personnel Management's rating instructions for 

the years audited. 

www.opm.goY www.usajobs.goY 
CONTENTS
 

. Page 

EXECUtIVE SUMMARy i . 

I. INTRODUCTioN AND BACKGROUND ; 1
 

II. OBJECTIVES, SCOPE, AND METHODOLOGY 3
 

·m. RESlJLTS OF.AUDIT 5
 

IV. MAJOR CONTRIBUTORS TO THIS REPORT 6
 
I. INTRODUCTION AND BACKGROUND
 

Introduction 

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

at HealthAmerica Pelll1sylvania, fuc. (plan). The audit covered contract years 2006 through 

2008. The audit was conducted pursuant to the provisions of Contract CS 2078-A; 5 U.S.C.. 

Chapter 89; and 5 Code ofFederal Regulations(CFR) Chapter I, Part 890. The audit was 

performed by the Office ofPersonnel Management's (OPM) Office ofthe fuspector 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
 

Center for Retirement and Insurance Services. 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 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
 

byOPM.
 FEHBP Contracts/Members 

March 31 

The FEHBP should pay a market price rate, 

which is· defined as the best rate offered to 

either of the two groups dosest in size to the 

FEHBP. In contracting with communityrated carriers, OPM relies on carrier 

compliance with appropriate laws and 

regu~ations 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 ofMarch 31 for each contract 

year audited. 

14,000 

12,000 

10,000 

8,000 

6,000 

4,000 

2,000 

o 

_Contracts 

2006 

6,305 

12,407 

2007 

5,959 

11,320 

2008 

5,510 

10,066 

1
 
The Plan has participated in the FEHBP since 1986 and provides health benefits to FEHBP 

members throughout the greater Pittsburgh area. The last audit conducted by our office covered 

contract years 2000, 2001, and 2003 through 2005. The audit showed that the Plan 

inappropriately overcharged the FEHBP for health benefit charges in contract years 2001,2003, 

and 2004. The audit also showed that the Plan's rating of the FEHBP was in accordance. with the 

applicable. laws, regulations, and OPM's rating instructions for contract y~ars 2000 and 2005. 

All matters related to that audit have been resolved. 

. .. 

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

through subsequent correspondence. Since the audit showed that the Plan's rating ofthe FEHBP 

was in accordance with the applicable laws, regulations, and instructions, we did not issue a draft 

report. 

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 testswere peifonned todetennine whether the PI~ was in compliance with the 

provisions ofthe lawsand regulations governingt1u~ FEHBP. 

We conducted this perfonnance audit in accordance with 

generally accepted government auditing standards. 

Those standards require that we plan and perfonn the 

audit to obtain sufficient, appropriate evidence to 

provide a reasonable basis for our findings and 

conclusions based on our audit objectives. We believe 

thatthe evidence obtained provides a reasonable basis 

for our findings and conclusions based on our audit 

.objectives. 

This perfonnance audit covered contract years 2006 

FEHBP Premiums Paid to Plan 

$60 

$59 

$58 

$57 

$56 

:E $55 

$54 

$53 

$52 

$51 

through 2008. For these years, the FEHBP paid
 

approximately $169.8 million in premiums to the Plan.
 

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 of our audit procedures. However, the
 

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

considered necessary under the circumstances. Our review ofinternal 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 the SSSGs); and 

•	 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 of the data generated by 

3 
the various information systems involved. However, nothing came to our attention during our 

audit testing utilizing the computer-generated data to cause usto 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 performed at the Plan's office in Pittsburgh, Pennsylvania, during 

March 2009. Additional audit work was completed at our field office.in Cranberry Township, 

PeImsylvania. 

Methodology 

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

themarket price rates. 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 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. RESULTS OF AUDIT
 

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

laws, regulations, and OPM's rating instructions for contractyears 2006 through 2008. 

Consequently, we did not identify any questioned costs and no corrective action is necessary. 

5
 
IV. MAJOR CONTRIBUTORS TO THIS REPORT 

Com!Dunity-RatedAudits Group 

Auditor-ill-Charge 

Lead Auditor 

Auditor 

Chief 

Senior Team Leader 

6