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 Humana Employers Health 

Plan of Georgia, Inc. 

Report No. 1C-DG-00-14-013 

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. 
-- 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 

Federal Employees Health Benefits Program 

Community-Rated Health Maintenance Organization 

Employers Health Plan of Georgia, Inc. 

 Contract Number CS 2923 - Plan Code DG 

Louisville, Kentucky 

 Report No. 1C-DG-00-14-013 Date: _________________ 

 Michael R. Esser 

 Assistant Inspector General 

 for Audits 
i 

 

 EXECUTIVE SUMMARY

 

 

 

 Report No. 1C-DG-00-14-013 Date:

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

Benefits Program (FEHBP) operations at Humana Employers Health Plan of Georgia, Inc. 

(Plan). The audit covered contract years 2010 through 2012. The audit was conducted at the 

Plan’s office in Louisville, Kentucky. We found that the FEHBP rates were developed in 

accordance with applicable laws, regulations, and the Office of Personnel Management’s Rate 

Instructions to Community-Rated Carriers for the years audited. 

Federal Employees Health Benefits Program 

Community-Rated Health Maintenance Organization 

Humana Employers Health Plan of Georgia, Inc. 

Contract Number CS 2923 - Plan Code DG 

Louisville, Kentucky 
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 

 
I. INTRODUCTION AND BACKGROUND 


Introduction 

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

at Humana Employers Health Plan ofGeorgia, Inc. (Plan). The audit covered contract years 

2010 through 2012, an d was conducted at the Plan's office in Louisville, Kentucky. The audit 

was conducted pursuant to the provisions ofContract CS 2923; 5 U.S .C. Chapter 89; an d 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 insurance 

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 ar 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 patiicipating 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 caniers to the Federal Employees Health Benefits Act 

and implem enting regulations promulgated by OPM. 

The FEHBP should pay a market price rate, 

which is defined as the best rate offered to 

either ofthe two groups closest in size to 

the FEHBP. In contracting with 

commlmity-rated can iers, OPM relies on 

can ier 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 featmes 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. 

FEHBP Cont racts/Members 

March 31 

1 

2

The Plan has participated in the FEHBP since 2010 and provides health benefits to FEHBP 

members in the Atlanta, Georgia area. This is the first audit of the Plan conducted by our office. 

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 contract years 

2010 through 2012. For these contract years, the FEHBP paid approximately $26 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 the 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 

$0

$2

$4

$6

$8

$10

$12

$14

$16

$18

$20

2010 2011 2012

Revenue $6.2 $8.9 $11.0

Millions

FEHBP Premiums Paid to Plan
4

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 Louisville, Kentucky during November 

2013. 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. 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 the 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 the 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