U.S. OFFICE OF PERSONNEL MANAGEMENT 

OFFICE OF THE INSPECTOR GENERAL 

OFFICE OF AUDITS 

Final Audit Report 

Subject: 

AUDIT OF TIlE FEDERAL EMPLOYEES DENTAL 

AND VISION INSURANCE PROGRAM 

OPERA . TIONS AS ADMINISTEREI) BY
 

METROPOLITAN LIFE INSURANCE COMPANY
 

BRIDGEWATER, NE'V JERSEY
 

Report No. 2A-II-OO-09-019 

Date: January 12 r 2010 

-CAUTION-­

This audit report has beell distributed 10 Federal oHici~ls who arc responsible for lhe administration of thr audited progmm, This audil 

report may contain propriellll"y data which is protected b}' Federal law (IS U.S.c. 1905), Therefere, while Ibis audit report is available 

under the Freedom of Information Act aild made ayailablc 10 the public on tbe OIG weblJagc, cau lioll needs to be exercised before 

~deasing the report to Ihe general public as it may contain proprietary information lhal was redacted from the publid}' distrthured copy. 
· ; 

UNITED STATES OFFICE OF PERSONNEL MANAGEMENT 

Washington, DC 20415 

Officeof the 

InspectorGeneral 

AUDIT REPORT
 

Audit of the Federal Employees Dental and Vision Insurance Program
 

OPM-06-00060-6
 

Metropolitan Life Insurance Company As Administrator
 

Bridgewater, New Jersey
 

REPORT NO. 2A-II-OO-09-019 DATE: January 12, 2010 

;Zt2c~ Michael R. Esser 

Assistant Inspector General 

for Audits 

www.opm.gov www.usa)obs.goY 
UNITED STATES OFFICE OF PERSONNEL MANAGEMENT
 

Washington, DC 20415
 

Office of the 

Inspector General 

EXECUTIVE SUMMARY
 

Audit of the Federal Employees Dental and Vision Insurance Program
 

OPM-06-00060-6
 

Metropolitan Life Insurance Company As Administrator
 

Bridgewater, New Jersey
 

REPORT NO. 2A-II-OO-09-019 DATE: January 12, 2010 

This report details the results of our audit of the Federal Employees Dental and Vision Insurance 

Program (FEDVIP) operations at Metropolitan Life Insurance Company (Metl.ife) in 

Bridgewater, New Jersey. MetLife provides dental insurance benefits under the FEDVIP 

program. The audit covered the testing of application controls over claim benefit payments, 

premiums, and cash management activities for contract years 2007 and 2008. We identified one 

procedural finding related to Metlife's Explanation of Benefits (EOB) statement. Except for this 

finding, we determined that the dental benefits were administered in accordance with Contract 

OPM-06-00060-6 and the FEDVIP regulations, 5 CFR Part 894. Our audit issue is summarized 

below. 

CLAIM BENEFIT PAYMENTS 

• Lack of Clarity in the Explanation of Benefits Statement Procedural 

MetLife's EOB statements are not as detail-oriented/user-friendly as they could be. 

Consequently, members may have difficulty determining amounts allowed and paid by the 

health carriers for services provided, as well as their payment responsibility for covered 

services. 

PREMIUMS 

The premium costs charged by MetLife were in compliance with the terms of Contract 

OPM-06-00060-6, as well as the applicable Federal regulations. 

www.opm.gov www.usajobs.gov 
CASH MANAGEMENT ACTIVITIES 

MetLife's handling ofFEDVIP funds was in accordance with the terms of Contract 

OPM-06-00060-6, as well as the applicable Federal regulations. 
CONTENTS
 

PAGE 

EXECUTIVE SUMMARY i
 

L INTRODUCTION AND BACKGROUND 1
 

II.	 OBJECTIVES, SCOPE, AND METHODOLOGY 3
 

III.	 AUDIT FINDING AND RECOMMENDATIONS 6
 

A. CLAIM BENEFIT PAYMENTS	 6
 

1. Lack of Clarity in the Explanation of Benefits Statement..	 6
 

B. PREMIUMS 7
 

C CASH MANAGEMENT ACTIVITIES 7
 

IV.	 MAJOR CONTRIBUTORS TO THIS REPORT 8
 

SCHEDULE A - Summary ofProgram Operations
 

APPENDIX: (MetLife's response, dated September 23,2009, to the draft audit report)
 
I. INTRODUCTION AND BACKGROUND
 

INTRODUCTION
 

This report details the results 'of our audit of the Federal Employees Dental and Vision Insurance 

Program (FEDVIP) as administered by Metropolitan Life Insurance Company (MetLife). 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 

FEDERAL EMPLOYEES DENTAL AND VISION PROGRAM 

The Federal Employee Dental and Vision Benefits Enhancement Act of2004, Public Law 108­

496, 118 Statute 4001, was signed into law on December 23, 2004. This law established a dental 

benefits and vision benefits program for Federal employees, annuitants, and their eligible family 

members. The following 10 FEDVIP carriers all signed contracts with aPM to provide dental 

and vision insurance services for a term of 7 years: 

Dental 

•	 Aetna Life Insurance Company; 

•	 Government Employees Hospital Association, Inc.; 

•	 Metropolitan Life Insurance Company; 

•	 United Concordia Companies, Inc.; 

•	 Group Health, Inc.; 

•	 CompBenefits; and 

•	 Triple-S, Inc. 

Vision 

•	 BlueCross BlueShield Association; 

•	 United HealthCare (formerly Spectera, Inc.); and 

•	 Vision Service Plan 

The duties and responsibilities of insurance carriers participating in the FEDVIP program include 

the following: 

1.	 To provide payments or benefits to an eligible individual ifsuch individual is entitled 

thereto under the terms of the contract; 

2.	 With respect to disputes regarding claims for payments or benefits under the terms of the 

contracta.	 to establish internal procedures designed to expeditiously resolve such disputes; 

b.	 to establish, for disputes not resolved through procedures mentioned above, 

procedures for one or more alternative means of dispute resolution involving 

independent third-party review under appropriate circumstances by entities 

mutually acceptable to aPM and the carrier; 
3.	 To make available to each individual eligible to em-all in a dental benefits plan,
 

information on services and benefits to enable the individual to make an informed
 

decision about electing coverage;
 

4.	 To maintain accounting records that contain such information and reports as OPM may 

require; 

5.	 To furnish such reasonable reports as aPM determines to be" necessary to enable it to 

carry out its functions; and 

6.	 To permit OPM and representatives ofthe Govenunent Accountability Office to examine 

such records ofthe carrier as may be necessary to carry out the purposes of the contract. 

METLIFE 

Metl.ife administers dental benefits under the FEDVIP. The contract number OPM-06-00060-6 

between aPM and Metlife was awarded on August 29, 2006. Incorporated by reference into this 

contract are Solicitation OPM-RFP-06-00060 and Amendments 001, 002 and 003. 

MetLife provides dental insurance benefits to Federal employees, annuitants, and their eligible 

family members. The contract between OPM and MetLife is for a seven year period, starting 

December 31,2006 and ending December 31, 2013, with the option to renew the contract. 

This was our first audit of MetLife's program operations as it relates to the FEDVIP. 

2
 
, . , 

II. OBJECTIVES, SCOPE, AND METHODOLOGY 

OBJECTIVES 

The objectives ofour audit ofMetLife relating to the FEDVIP was to determine compliance with 

Contract OPM-06-00060-6 and the FEDVIP regulations, 5 CFR Part 894. 

Our specific audit objectives for this audit were as follows: 

Benefit Payments/Application Controls 

•	 To obtain an understanding ofthe carrier's claims processing system. 

•	 To determine whether the carrier has appropriate controls/edits in place to prevent the 

payment of unaUowable claims. 

•	 To determine whether the carrier has a program in place to protect enrollees and the 

carrier's claims system from instances of fraud and abuse. 

•	 To determine whether MetLife has proper application controls in place over its claim 

processing and check-writing systems to help ensure that FEDVIP-related 

transactions are valid, properly authorized, and completely and accurately processed. 

Premiums 

•	 To determine whether the FEDVIP premium costs and its relative components are 

derived from amounts that are allowable, allocable, and reasonable to the program. 

Cash Management 

•	 To determine whether the FEDVIP funds were properly received and accurately 

transferred into MetLife accounts in a timely manner. 

•	 To determine ifthe FEDVIP funds are held ill an interest bearing bank account 

separate from Metl.ifes other lines of business. 

. . 

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 the audit objectives. We believe that the evidence obtained provides a reasonable basis 

for our findings and conclusions based on the audit objectives. 

The audit covered application controls for benefit payments, premium costs, and cash 

management. activities for contract years 2007 and 2008. We performed our fieldwork from 

March 2 to March 13,2009, in Bridgewater, New Jersey, and from March 16 to March 20, 2009, 

in Oriskany, New York, where MetLife's claims system is located. Additional audit work was 

completed in our offices in Washington, D.C. after the on-site visits. 

We reviewed the MetLife/FEDVIP financial experience report for policy years 2007 and 2008. 

During this period, benefit charges totaled $332,] 08,278 and premiums earned totaled 

$361,234,705. 
In planning and conducting our audit, we obtained an understanding of MetLife/FEDVIP's 

internal control structure to help determine the nature, timing, and extent or our auditing 

procedures. This was determined to be the most effective approach to select areas for audit. For 

those areas selected, we primarily relied,on substantive tests oftransactions and not tests of 

controls. Based on our testing, we did not identify any significant matters involving 

MetLifeIFEDVIP's internal control structure and its operation. However, since our audit would 

not necessarily disclose all significant matters in the internal control structure, we do not express 

an opinion on MetLife/FEDVIP's system of internal controls taken as a whole. 

In conducting the audit we relied to varying degrees on computer-generated data provided by 

MetLife/FEDVIP. Due to time constraints, we did not verify the reliability of the data generated 

by the various information systems involved. However, while utilizing the computer-generated 

data during audit testing, nothing came to our attention to doubt its reliability. We believe that 

the data was sufficient to achieve the audit objectives. 

We also conducted tests to determine whether MetLife/FEDVIP had complied with the contract, 

the applicable procurement regulations (i.e., Federal Acquisition Regulations), and the laws and 

regulations governing the Program. The results of our tests indicate that, with respect to the 

items tested, MetLife/FEDVIP complied with all provisions of the contract and the federal 

procurement regulations, except for one procedural finding related to Metlife's Explanation of 

Benefits (EOB) statement. 

METHODOLOGY 

To achieve our objectives related to benefit payments/application controls we: 

•	 Interviewed personnel to obtain an understanding ofMetLife's claims processing system. 

•	 Documented and evaluated Metl.ife's policies and procedures currently in place to 

protect program enrollees and program systems from fraud and abuse. 

•	 Developed 24 dental claims case scenarios based on information provided by MetLife 

and on the best practices of health insurance carriers, Results from the test cases were 

reviewed to determine whether Metl.ife has proper application controls in place over its 

claim processing and check-writing systems to ensure that FEDVIP-related transactions 

were valid, properly authorized, and accurately processed. 

To achieve our objective related to premium costs we: 

•	 Reviewed the "Request for Proposal" agreements between aPM and MetLife/FEDVlP to 

determine the components of the premiums. 

•	 Reviewed the 2009 premium calculations to determine whether the premium costs and 

. relative components were derived from amounts that are allowable, allocable, and 

reasonable. 

4
 
To achieve our objectives related to cash management we: 

•	 Selected the three months from each calendar year with the highest FEDVIP premiums 

received for review. The. premiums received in these months amounted to $113,731,767 

from a universe of$361,234,705. In addition, we reviewed the associated bank 

statements to determine ifthe premiums were received and accurately transferred into 

MetLife accounts. 

•	 Reviewed MetLife procedures related to accounting for FEDVIP premiums to determine 

whether the FEDVIP funds were maintained separately from MetLife's other lines of 

business. 

Because the samples we selected and reviewed in performing the audit were not statistically 

based, the results could not be projected to the universe since it is unlikely that the results are 

representative of the universe taken as a whole. 

We used the FEDVIP contract, the Federal Acquisition Regulations, and the laws and regulations 

governing MetLife/FEDVIP to determine whether MetLife's administration ofthe application 

controls for benefit payments, the premium costs, and the cash management activities were in 

compliance with the terms of the contract and the applicable regulations. 

The results of the audit were discussed with MetLife officials throughout the audit and at the exit 

conference. In addition, a draft report, dated August 21, 2009, was provided to MetLife for 

review and comment. Metl.ife comments to the draft report were considered in preparing the 

final report and are included as an Appendix to this report. 

5
 
III. AUDIT FINDING AND RECOMMENDATIONS
 

A. CLAIM BENEFIT PAYMENTS
 

1. Lack of Clarity in the Explanation of Benefits Statement Procedural 

MetLife's Explanation ofBenefits (EOB) statements are not as detail-oriented/userfriendly as they could be. Consequently, members may have difficulty determining 

amounts allowed and paid by the health carriers for services provided, as well as their 

payment responsibility for covered services. 

We tested the benefit payment's application controls for 24 claim cases and found that 

the standard EOB wording of benefits paid towards a member's annual maximum benefit 

amount is confusing. Specifically, the statement combines the benefit amount received 

from MetLife and the benefit amount received from other insurance the member may 

possess. Ideally, to assist a member in determining the amount applied toward his or her 

annual maximum benefit, the EOB should only show the amount of benefits paid by 

MetLife towards the annual maximum benefit related to the benefit option purchased by 

the member. 

We informed MetLife of our concern. In addition, we provided MetLife an example of a 

best-practice statement design that it could consider in revising its current EOB 

statement. 

MetLife Comments: 

MetLife agrees with this finding and stated that it would work to revise and improve 

annual maximum wording on the EOB and consider are-design ofthe EOB statement to 

improve member understanding of covered expenses, coordination of benefits if 

applicable, and out-of pocket responsibility. 

Recommendation 1 

We recommend that the contracting office and MetLife review the Eon statement and 

revise the language, where necessary, so that members can easily understand the amounts 

paid towards the annual maximum benefit amount allowed by Metl.ifes dental 

program. 

Recommendation 2 

We recommend that the contracting office and MetLife consider are-design of the EOB 

statement that is sent to members specifying the covered expense amount determined by 

MetLife, the covered expense amount determined by other insurance the member may 

possess, and the amount the member is responsible to pay. 

6 
B. PREMIUMS 

Our review of the premium costs charged by MetLife determined they were in compliance 

with the terms of Contract OPM-06-00060-6, as "veil as the applicable Federal regulations. 

C. CASH MANAGEMENT ACTIVITIES 

Our review of Metl.ife's handling ofFEDVIP funds determined it was in accordance with 

the terms of Contract OPM-06-00060-6, as well as the applicable Federal regulations. 

7
 
IV. MAJOR CONTRIBUTORS TO THIS REPORT 

Special Audits Group 

Auditor 

Auditor-In-Charge 

Auditor - Information Systems Audits Group 

Senior Team Leader 

Group Chief 

8
 
SCHEDULE A 

Federal Employees Dental and Vision Insurance Program (FEDVIP)
 

Bridgewater, New Jersey
 

Summary of Program Operations
 

Contract Years 2007-2008
 

2007 2008 Total 

Revenue
 

Premiums Received (Cash)
 $228,217,] 83 

Total Revenue 

$133,017,522 

$133,017,522 $228,217,183 $361,234,705 

Expenses
 

Claim Benefits Paid
 $132,567,417 $199,540,861 

Total Expenses $132,567,417 $199,540,861 $332,108,278 

.­
Appendix 

National Accounts MetLife® 

501 US Highway 22, PO Box 6891 

Bridgewater, NJOB807 

September 23,2009 Account Executive 

Registered Representative 

(908) 253·2222 

(866) 205-5786 FAX Group Chief, Special Audits Group tmcdurg@metlife.com U.S. Office of Personnel Management 

Office of the Inspector General 

1900 E Street, Room 6400 

Washington, DC 20415-1100 

Re:	 FEDVIP Draft Audit Report 

Report # 2A-II-OO-09-019 

Dear 

letter is to respond to the FEDVIP audit finding in _ 

_ draft report, # 2A-II-00-09-019, dated August 21,2009 on 

contract OPM-06-0060-6. 

Lack of Clarity in the Explanation of Benefits Statement ("EOB") 

We are in agreement with the two recommendations made in the audit findings 

document. MetLife will work to: (1) revise and improve annual maximum wording 

on the EOB so that members can more easily understand their benefit usage; 

and. (2) consider a re-design of the EGB statement to improve member 

understanding of covered expenses, coordination of benefits, if applicable, and 

out-of-pocket responsibility. 

Please "advise if you have any questions.