-- 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, 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. 

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 

MVP Health Plan, Inc. – Western Region 

Report No. 1C- GV-00-13-066 

Date: 
-- 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, 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. 

AUDIT REPORT 

 

 

 

 

 Report No. 1C-GV-00-13-066 Date: 

 

 Michael R. Esser 

 Assistant Inspector General 

 for Audits 

Federal Employees Health Benefits Program

Community-Rated Health Maintenance Organization

MVP Health Plan, Inc. – Western Region

Contract Number CS 2362 - Plan Code GV

Schenectady, New York
 

 EXECUTIVE SUMMARY

 

 

 

 Report No. 1C-GV-00-13-066 Date: 

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

Benefits Program (FEHBP) operations at MVP Health Plan, Inc. – Western Region (Plan). The 

audit covered contract years 2010 through 2012, and was conducted at the Plan’s office in 

Schenectady, New York. We found that the FEHBP rates were developed in accordance with 

applicable laws, regulations, and the Office of Personnel Management’s Rating Instructions to 

Community-Rated Carriers for the years audited. 

i 

Federal Employees Health Benefits Program

Community-Rated Health Maintenance Organization

MVP Health Plan, Inc. – Western Region

Contract Number CS 2362 - Plan Code GV

Schenectady, New York
CONTENTS 

 Page 

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

 I. INTRODUCTION AND BACKGROUND ..................................................................... 1 

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

III. RESULTS OF THE AUDIT ............................................................................................ 5

 

IV. MAJOR CONTRIBUTORS TO THIS REPORT ............................................................ 6 
FEHBP Contracts/Members 

March 31 ---­

I. INTRODUCTION AND BACKGROUND 


Introduction 

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

at MVP Health Plan, Inc. - Westem Region (Plan). The audit covered contract years 2010 

through 2012, an d was conducted at the Plan's office in Schenectady, New York. The audit was 

conducted pursuant to the provisions ofContract CS 2362; 5 U.S.C. Chapter 89; and 5 Code of 

Federal Regulations (CFR) Chapter 1, Pmi 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 am ended. 

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 insuran ce 

benefits for federal employees, annuitants, an d dependents. The FEHBP is administered by 

OPM 's Healthcare and Insurance Office. The provisions ofthe Federal Employees Health 

Benefits Act m·e implemented by OPM through regulations codified in Chapter 1, Pmi 890 of 

Title 5, CFR. Health insuran ce coverage is provided through contracts with health insurance 

can iers who provide service benefits, indemnity benefits, or comprehensive m edical services. 

Community-rated caniers pa1i icipating in the FEHBP are subject to various federal, state and 

local laws, regulations, and ordinances. While most can1ers are subject to state j urisdiction, 

many are fmi her subject to the Health Maintenan ce Organization Act of 1973 (Public Law 93­

222), as am ended (i.e., many community-rated cmTiers are federally qualified). In addition, 

pmiicipation in the FEHBP subjects the cmTiers to the Federal Employees Health Benefits Act 

and implementing regulations promulgated by 

OPM. 

The FEHBP should pay a mm·ket price rate, 

which is defined as the best rate offered to either 

ofthe two groups closest in size to the FEHBP. 

In contracting with community-rated can iers, 

OPM relies on cmTier compliance with 

appropriate laws and regulations and, 

consequently, does not negotiate base rates. 

OPM negotiations relate primm·ily to the level of 

coverage and other unique features ofthe 

FEHBP. 

The chmi to the right shows the number of 

FEHBP contracts and members rep01ied by the Plan as ofMarch 31 for each contract year 

audited .

1 

1 The Plan's reported figmes for contract year 2011 are inaccmate. We used OPM's reported contract figme for 

contract year 2011 , however the OPM member figme was not available. 

1 

2

The Plan has participated in the FEHBP since 1988 and provides health benefits to FEHBP 

members in the New York counties of Monroe, Genesee, Livingston, Ontario, Orleans, Seneca, 

Steuben, Wayne, Wyoming, and Yates. The last full audit of the Plan conducted by our office 

covered contract years 2006 through 2009. All issues from that audit have been resolved. 

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

in subsequent correspondence. Since the audit concluded that the Plan’s rating of the FEHBP 

was in accordance with applicable laws, regulations, and OPM’s Rate Instructions to 

Community-Rated Carriers (rate instructions), a draft report was not issued. 
3

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. 

Scope 

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 years 2010 through 

2012. For these contract years, the FEHBP paid 

approximately $105.8 million in premiums to the Plan, as shown on the chart above. 

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

contract, applicable laws and regulations, and 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 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 

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 

$0

$5

$10

$15

$20

$25

$30

$35

$40

2010 2011 2012

Revenue $32.6 $36.2 $37.0

Millions

FEHBP Premiums Paid to Plan
4

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 Schenectady, New York, during 

September 2013. Additional audit work was completed at our offices located in Jacksonville, 

Florida and Cranberry Township, Pennsylvania.

Methodology 

We examined the Plan’s Federal rate submission and related documents as a basis for validating 

the market price rate. 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 rate instructions to determine the propriety of the 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 policies and procedures, interviewed appropriate Plan officials, and 

performed other auditing procedures necessary to meet our audit objectives. 
5

III. RESULTS OF THE AUDIT

Our audit showed that the Plan’s rating of the FEHBP was in accordance with applicable laws, 

regulations, and rate instructions for contract years 2010 through 2012. Consequently, the audit 

did not identify any questioned costs and no corrective action is necessary. 
6

IV. MAJOR CONTRIBUTORS TO THIS REPORT 

Community-Rated Audits Group 

, Auditor-in-Charge 

, Lead Auditor 

 Chief 

, Senior Team Leader