U.S. OFFICE OF PERSONNEL MANAGEMENT 

OFFICE OF THE INSPECTOR GENERAL 

OFFICE OF AUDITS 

Final Audit Report 

Subject: 

AUDIT OF COVENTRY HEALTH CARE
 

AS UNDERWRITER AND ADMINISTRATOR FOR THE
 

MAIL HANDLERS BENEFIT PLAN
 

ROCKVILLE, MARYLAND
 

Report No. 1B-45-00-09-062 

Date: April 14, 2010 

--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 lJ.S.c. 1905). Therefore, while this audit report is available 

under the )<'reedom of Information Aet and made available to the public on the DIG webpage, caution needs to be exercised hefore 

releasing the report to the general public as it may contain proprietary information that was redacted from the publidy distribnted copy. 
UNITED STATES OFFICE OF PERSONNEL MANAGEMENT 

Washington, DC 20415 

Office of the 

Inspector Gcneral 

AUDIT REPORT
 

Federal Employees Health Benefits Program
 

Employee Organization Plan
 

Coventry Health Care
 

as Underwriter and Administrator for the
 

Mail Handlers Benefit Plan
 

Contract CS 1146 Plan Codes 45 and 48
 

Rockville, Maryland
 

REPORT NO. IB-45-00-09-062 DATE: April 14, 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
 

Employee Organization Plan
 

Coventry Health Care
 

as Underwriter and Administrator for the
 

Mail Handlers Benefit Plan
 

Contract CS 1146 Plan Codes 45 and 48
 

Rockville, Maryland
 

REPORT NO. IB-45-00-09-062 DATE: April 14, 2010 

This audit report on the Federal Employees Health Benefits Program (FEHBP) operations at 

Coventry Health Care (Plan), as underwriter and administrator for the Mail Handlers Benefit Plan, 

questions $2,300,076 in health benefit charges. The Plan agreed (A) with the questioned charges. 

Our limited scope audit was conducted in accordance with Government Auditing Standards. The 

audit covered claim payments from October 1, 2007 through August 31, 2008. 

Questioned health benefit charges are summarized as follows: 

• Coordination of Benefits with Medicare (A) $1,614,575 

The Plan incorrectly paid 2,237 claim lines, resulting in overcharges of $1,614,575 to the 

FEHBP. Specifically, the Plan did not properly coordinate 2,195 claim line payments with 

Medicare as required by the FEHBP contract. As a result, the FEHBP paid as the primary 

insurer for these claims when Medicare was the primary insurer. Therefore, we estimate that 

the FEHBP was overcharged by $1,594,882 for these 2,195 claim lines. The remaining 42 

claim line payments were not coordination of benefit errors but contained other Plan payment 

errors, resulting in overcharges of $19,693 to the FEHBP. 

www.opm.goY www.usajobs.goY 
• Claims Paid for Ineligible Patients rA) $509,559 

The Plan paid 770 claims that were incurred during gaps in patient coverage or after 

termination of patient coverage with the Mail Handlers Benefit Plan, resulting in overcharges 

of $469,782 to the FEHBP. In addition, the Plan paid 165 claims for patients with no 

enrollment identification numbers, resulting in overcharges of$39,777 to the FEHBP. In 

total, the FEHBP is due $509,559 for these claim overcharges. 

• Duplicate Claim Payments rA) $175,942 

During our review of potential duplicate claim payments, we found that the Plan incorrectly 

paid 174 claims, resulting in net overcharges of$175,942 to the FEHBP. Specifically, we 

determined that the Plan improperly charged the FEHBP $169,305 for 164 duplicate claim 

payments. Also, we identified 10 claims that were not duplicate claim payments but contained 

other Plan payment errors, resulting in net overcharges of$6,637 to the FEHBP. In total, the 

Plan overpaid 173 claims by $176,917 and underpaid 1 claim by $975. 

11 
CONTENTS
 

PAGE 

EXECUTIVE SUMMARY	 i
 

I. INTRODUCTION AND BACKGROUND	 1
 

II. OBJECTIVES, SCOPE, AND METHODOLOGy	 3
 

III. AUDIT FINDINGS AND RECOMMENDAnONS	 5
 

A. HEALTH BENEFIT CHARGES	 5
 

1. Coordination of Benefits with Medicare	 5
 

2. Claims Paid for Ineligible Patients	 9
 

3. Duplicate Claim Payments	 11
 

IV. MAJOR CONTRIBUTORS TO THIS REPORT.	 13
 

V. SCHEDULE A HEALTH BENEFIT CHARGES AND AMOUNTS QUESTIONED 

APPENDIX A	 (Coventry Health Care's reply, dated February 17,2010, to Audit 

Inquiry 1 - Duplicate Claim Payments) 

APPENDIX B (Coventry Health Care's reply, dated February 17,2010, to Audit 

Inquiry 2 - Claims Paid for Ineligible Patients) 

APPENDIX C	 (Coventry Health Care's reply, dated February 17,2010, to Audit 

Inquiry 3 - Coordination of Benefits with Medicare) 
I. INTRODUCTION AND BACKGROUND
 

INTRODUCTION 

This final audit report details the findings, conclusions, and recommendations resulting from our 

limited scope audit of the Federal Employees Health Benefits Program (FEHBP) operations at 

Coventry Health Care (Plan) as underwriter and administrator for the Mail Handlers Benefit Plan 

(MHBP). The Plan is located in Rockville, Maryland. 

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 

The FEHBP was established by the Federal Employees Health Benefits (FEHB) 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. OPM's Retirement and Benefits 

Office has overall responsibility for administration of the FEHBP. The provisions of the FEHB 

Act are implemented by OPM through regulations, which are codified in Title 5, Chapter 1, Part 

890 of the Code of Federal Regulations (CFR). Health insurance coverage is made available 

through contracts with various health insurance carriers. 

MHBP is an experience-rated employee organization plan offering health care benefits to its 

subscribers. MHBP is open to all Federal employees and annuitants who are eligible to enroll in 

the FEHBP and who are, or become, members or associate members of the National Postal Mail 

Handlers Union (Union). The Union is the sponsor of the MHBP, operating under Contract CS 

1146 to provide a health benefits plan authorized by the FEHB Act. During 2007, the Union had 

the following contractual arrangement with affiliates of Coventry Health Care: 

•	 First Health Life and Health Insurance Company and Cambridge Life Insurance Company 

to underwrite the MHBP; 

•	 Claims Administration Corp to perform the administrative functions; and 

•	 First Health Group Corporation to provide pharmacy benefit management and health 

benefit services. 

During 2008, these contractual arrangements remained the same, except for Coventry Health 

Care National Accounts assuming the responsibility of providing the health benefit services. 

The MHBP's contract (CS 1146) with OPM is experience-rated. Thus, the costs of providing 

service benefits in the prior years are reflected in current and future year's premium rates. In 

addition, the contract provides that in the event of termination, unexpended program funds revert 

to the Federal Government (FEHBP Trust Fund). In recognition of these provisions, the contract 

requires an accounting of program funds to be submitted at the end of each contract year. The 

accounting is made on a statement of operations known as the Annual Accounting Statement. 

1
 
Compliance with laws and regulations applicable to the FEHBP is the responsibility of the Plan 

management Also, management of the Plan is responsible for establishing and maintaining a 

system of internal controls. 

Findings from our previous audit of the Plan (Report No. IB-45-00-08-016, dated March 26, 

2009) for contract years 2002 through 2006 (2005 though September 30,2007 for claim 

payments) are in the process of being resolved. 

The results of this audit were provided to the Plan in written audit inquiries and were discussed 

with Plan officials throughout the audit and at an exit conference. The Plan's comments offered 

in response to our audit inquiries were considered in preparing our final report and are included 

as Appendices to this report. Since the Plan agreed with our audit inquiries, we bypassed the 

draft report and only issued a final report. The Plan agreed with this decision. 

2
 
II. OBJECTIVES, SCOPE, AND METHODOLOGY
 

OBJECTIVES 

The objectives of this audit were to determine whether the Plan complied with contract 

provisions relative to coordination of benefits, duplicate payments, and patient enrollment 

eligibility. 

SCOPE 

We conducted our limited scope performance audit in accordance with generally accepted 

government auditing standards. Those standards require that we plan and perform the audit to 

obtain sufficient and 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. 

We reviewed the MHBP's FEHBP Annual Accounting Statements for contract years 2007 and 

2008. During this period, the Plan paid approximately $3.5 billion in health benefit charges (See 

Schedule A). Specifically, we reviewed approximately $16 million in claim payments made from 

October 1, 2007 through August 31, 2008 for coordination of benefits, duplicate payments and 

patient enrollment eligibility. I 

In planning and conducting our audit, we obtained an understanding of the Plan's internal control 

structure to help determine the nature, timing, and extent of our auditing procedures. This was 

determined to be the most effective approach to select areas of audit. For those areas selected, 

we primarily relied on substantive tests of transactions and not tests of controls. Based on our 

testing, we did not identify any significant matters involving the Plan'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 the Plan's system of internal 

controls taken as a whole. 

We also conducted tests to determine whether the Plan had complied with the contract, the 

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

Employees Health Bene1its Acquisition Regulations (FEHBAR), as appropriate), and the laws 

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

items tested, the Plan did not comply with all provisions of the contract and federal procurement 

regulations. Exceptions noted in the areas reviewed are set forth in detail in the "Audit Findings 

and Recommendations" section of this audit report. With respect to the items not tested, nothing 

came to our attention that caused us to believe that the Plan had not complied, in all material 

respects, with those provisions. 

-_..._-------­

Effective September 1,2008, the Plan started processing the claims for the Mail Handlers Benefit Plan on a 

different claims system (Coventry Health Care's lOX claims system). This audit is a close-out of the claims that 

were processed on Coventry Health Care's previous claims system. 

3
 

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

Plan. 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 our audit testing, nothing came to our attention to cause us to doubt its reliability. We 

believe that the data was sufficient to achieve our audit objectives. 

The audit was performed at our office in Cranberry Township, Pennsylvania from September 1, 

2009 through February 17,2010. 

The Plan did a great job supporting our audit and promptly responded to our questions, samples, 

information requests, and audit inquiries. Also, the Plan was very cooperative and well prepared 

for our audit. 

METHODOLOGY 

We obtained an understanding of the internal controls over the Plan's claims processing system 

by inquiry of Plan officials. 

To test the Plan's compliance with the FEHBP health benefit provisions, we selected and 

reviewed samples of25,279 claims.2 We used the FEHBP contract, the benefit plan brochure, 

and the Plan's provider agreements to determine the allowability of benefit payments. The 

results of these samples were not projected to the universe of claims. 

2 See the audit findings for "Coordination of Benefits with Medicare" (A I), "Claims Paid for Ineligible Patients" (A2), 

and "Duplicate Claim Payments" (A3) on pages 5 through 13 for specific details of our sample selection 

methodologies. 

4
 
III. AUDIT FINDINGS AND RECOMMENDATIONS
 

A. HEALTH BENEFIT CHARGES
 

1. Coordination of Benefits with Medicare $1,614,575 

The Plan incorrectly paid 2,237 claim lines, resulting in overcharges of $1 ,614,575 to the 

FEHBP. Specifically, the Plan did not properly coordinate 2,195 claim line payments 

with Medicare as required by the FEHBP contract. As a result, the FEHBP paid as the 

primary insurer for these claims when Medicare was the primary insurer. Therefore, we 

estimate that the FEHBP was overcharged by $1,594,882 for these 2,195 claim lines. The 

remaining 42 claim line payments were not coordination of benefit errors but contained 

other Plan payment errors, resulting in overcharges of $19,693 to the FEHBP. 

The 2008 Mail Handlers Benefit Plan brochure, page 127, Primary Payer Chart, illustrates 

when Medicare is the primary payer. In addition, page 21 of that brochure states, "We 

limit our payment to an amount that supplements the benefits that Medicare would pay 

under Medicare Part A (Hospital Insurance) and Medicare Part B (Medical Insurance), 

regardless of whether Medicare pays." 

Contract CS 1146, Part II, section 2.6 states, "(a) The Carrier shall coordinate the payment 

of benefits under this contract with the payment of benefits under Medicare, ... (b) The 

Carrier shall not pay benefits under this contract until it has determined whether it is the 

primary carrier ...." Also, Part III, section 3.2 (b)(1) states, "The Carrier may charge a 

cost to the contract for a contract term if the cost is actual, allowable, allocable, and 

reasonable ...." 

In addition, Contract CS 1146, Part II, section 2.3(g) states, "If the Carrier or OPM 

determines that a Member's claim has been paid in error for any reason the Carrier 

shall make a prompt and diligent effort to recover the erroneous payment " 

For claims incurred and paid from October 1, 2007 through August 31, 2008, we 

performed a computer search and identified 103,145 claim lines, totaling $8,223,759 in 

payments that potentially were not coordinated with Medicare. From this universe, we 

selected for review a sample of25,783 claim lines, totaling $5,061,941 in payments, to 

determine whether the Plan complied with the contract provisions relative to coordination 

of benefits (COB) with Medicare. When we submitted our sample of potential COB 

errors to the Plan on June 15, 2009, the claims were within the Medicare timely filing 

requirement and could be filed with Medicare for coordination of benefits. 

5
 
Claim Type Claim I~ounts Sample Selection 

Lines! Paid Methodology 

Medicare Part A Primary for 267 I $1,690,730 Patients with cumulative 

Inpatient (liP) Facility claims of $1 ,000 or more 

Medicare Part A Primary for 318 I $455,367 Patients with cumulative 

Skilled Nursing, Home Health i claims of $1 ,000 or more 

~~~i~:::~~~d::i:~ef~:re 48 1 $362,169 Patients with cumula(i~~ Certain liP Facility Char-,,~gLle_s_-+ +- -+_c_la_im_s_o_f-,$_2-,-,5_0_0,---0_r_m__o_r_e_--{! 

Medicare Part B Primary for 0 $0 The potential COB errors 

Skilled Nursing, HHC, and were immaterial. Therefore, 

! Hospic~e_C_a_r_e i--__i-­ '---r-n_o_c_la_im_l_in_e_s_\_v~er_e_s_e_Ie_c_te_d_'--I

IMedicare Part B Primary for I $542,652 Patients with cumulative 

k?utpatient Charges. claims of $1 ,000 or more 

! Medicare Part B Primary for $2,011,023 Patients with cumulative 

Professional 

Total 

The following table is a summary of the claim lines that were selected for review: 

Generally, Medicare Part A covers 100 percent of inpatient care in hospitals, skilled 

nursing facilities, hospice care, and home health care. For each Medicare Benefit Period, 

there is a one-time deductible, followed by a daily copayment beginning with the 61 51 day. 

Beginning with the 91 51 day ofthe Medicare Benefit Period, Medicare Part A benefits 

may be exhausted, depending on whether the patient elects to use their Lifetime Reserve 

Days. For the uncoordinated Medicare Part A claims, we estimate that the FEHBP was 

overcharged for the total claim payment amounts. 

Medicare Part B pays 80 percent ofmost outpatient charges and professional claims after 

the calendar year deductible has been met. Also, Medicare Part B covers a portion of 

inpatient facility charges for ancillary services such as durable medical equipment, 

medical supplies, diagnostic tests, and clinical laboratory services. Based on our 

experience, ancillary items account for approximately 30 percent of the total inpatient 

claim payment. Therefore, we estimate that the FEHBP was overcharged 25 percent for 

these inpatient claim lines (0.30 x 0.80 0.24 25 percent). 

Based on our review of the potential COB errors in our sample, we identified 2,237 claim 

lines that were paid incorrectly, resulting in overcharges of$I,614,575 to the FEHBP. 3 

3 In addition, there were 234 claim lines, totaling $167,237 in payments, with COB errors that were identified and 

adjusted by the Plan prior to receiving our sample of potential COB errors. Since these COB errors were 

identified and adjusted by the Plan prior to receiving our sample, we did not question these COB errors in the final 

report. 

6
 
The following table details the questioned payments by claim type: 

Claim Type Claim Amounts Amounts 

Lines Paid Questioned 

Medicare Part A Primary for 83 $912,232 $905,454 

I/P Facility 

Medicare Part A Primary for 26 $19,344 $19,344 

Skilled Nursing, HHC, and 

Hospice Care 

Medicare Part B Primary for 4 $23,379 $5,845 

Certain liP Facility Charges 

Medicare Part B Primary for 0 $0 $0 

Skilled Nursing, HHC, and 

Hospice Care 

Medicare Part B Primary for 439 $375,647 $300,969 

Outpatient Charges 

Medicare Part B Primary for 1,685 $475,250 $382,963 

Professional Charges ! 

Total 2,~?I~ $1,614,575 

Our audit disclosed the following for the claim payment errors: 

•	 For 2,046 (91.5 percent) of the claim lines questioned, there was incorrect or no 

Medicare COB information on the Plan's claims system to identify Medicare as the 

primary payer when the claims were paid. However, when the correct Medicare COB 

information was subsequently added to the claims system, the Plan did not review 

and/or adjust the patient's prior claims back to the Medicare effective dates. As a 

result, we estimate that the FEHBP was overcharged $1,534,326 for these claim lines 

that were not coordinated with Medicare. 

•	 For 140 (6.3 percent) ofthe claim lines questioned, human processor errors caused 

improper coordination of the claim lines. As a result, we estimate that the FEHBP 

was overcharged $56,202 for these claim lines that were not coordinated with 

Medicare. 

•	 For 42 (l.8 percent) of the claim lines questioned, we found that these claim lines 

were not actually COB errors but contained other Plan payment errors. As a result, 

we determined that the FEHBP was overcharged $19,693 for these claim payment 

errors. 

•	 For nine (0.4 percent) of the claim lines questioned, various other errors caused the 

claim lines to be processed incorrectly. As a result, we estimate that the FEHBP was 

overcharged $4,354 for these claim lines that were not coordinated with Medicare. 

7 
Ofthe $1.614,575 in questioned charges, $47,908, or 3 percent, were identified by the 

Plan prior to receiving our sample of potential COB errors on June 15, 2009. However, 

since the Plan had not completed the recovery process and/or adjusted these claims by 

June 15, 2009, we are continuing to question these COB errors. The remaining 

questioned charges of $1,566,667 (97 percent) were identified as a result of our audit. 

Plan's Response: 

The Plan agrees with this finding and states that these payments were good faith erroneous 

benefit payments. The Plan promptly initiated efforts to recover these overpayments after 

determining that an error had occurred. Also, the recovery efforts are ongoing and comply 

with procedures outlined in the Plan's OPM-approved Overpayment Recovery Guidelines. 

The Plan states that "the January 1, 2007-August 31,2008 time period encompassed by this 

audit coincides with the time period in which the OIG conducted its audit of the MHBP 

resulting in its March 26,2009, issuance of Final Audit Report No. IB-45-00-08-16. That 

Report, in addition to containing a similar finding regarding Medicare COB, recommended 

that the MHBP 'ha[ve] procedures in place to review all claims incurred back to the 

Medicare effective dates when updated ... and determine if already paid claims are 

affected.' The MHBP addressed that recommendation in detail with OPM's contracting 

office shortly after the OIG issued that Report, summarizing both the efforts it had taken to 

date and those it planned to implement in response to that recommendation. Please further 

be advised that in addition to those efforts outlined in that correspondence, the Plan (i) 

conducted intensive one-on-one training of claims examiners identified as having qualityrelated errors pertaining to Medicare COB and (ii) provided formal classroom training 

on Medicare COB to all claims examiners In sum, the Plan already has taken substantial 

steps towards reducing the frequency with which Medicare COB errors occur on a 

prospective basis." 

Recommendation 1 

We recommend that the contracting officer disallow $1,594,882 for uncoordinated claim 

payments and verifY that the Plan returns all amounts recovered to the FEHBP. 

Recommendation 2 

We recommend that the contracting officer disallow $19,693 in claim overcharges 

resulting from other Plan payment errors and verifY that the Plan returns all amounts 

recovered to the FEHBP. 

8
 
2.	 Claims Paid for Ineligible Patients $509,559 

The Plan paid 770 claims that were incurred during gaps in patient coverage or after 

termination of patient coverage with the Mail Handlers Benefit Plan, resulting in 

overcharges of $469,782 to the FEHBP. In addition, the Plan paid 165 claims for patients 

with no enrollment identification (ID) numbers, resulting in overcharges of $39,777 to the 

FEHBP. In total, the FEHBP is due $509,559 for these claim overcharges. 

As previously cited from Contract CS 1146, costs charged to the FEHBP must be actual, 

allowable, allocable, and reasonable. If errors are identified, the Plan is required to make a 

diligent effort to recover the overpayments. 

Enrollees with No Coverage during Dates of Service 

We performed a computer search to identifY claims that were incurred and paid during 

gaps in patient coverage or after termination of patient coverage with the Mail Handlers 

Benefit Plan. For the period October 1, 2007 through August 31, 2008, we identified 

claim payments, totaling $10,733,291, for 3,075 patients that met this search criteria. 

From this universe of 3,075 patients, we selected for review all patients with cumulative 

claims of$5,000 or more. This sample included 7,917 claims, totaling $9,113,744 in 

payments, for 261 patients. Our review of this sample identified 770 claims, totaling 

$469,782 in payments, that were incurred and paid during gaps in patient coverage or 

after termination of coverage. As a result, the FEHBP is due $469,782 for these improper 

payments. 

Patients with No Enrollment Record 

We performed a computer search to identifY claims incurred and paid for patients with no 

enrollment ID numbers. For the period October 1, 2007 through August 31, 2008, our 

search identified 5,049 claim payments, totaling $1,449,750, for 518 patients with no 

enrollment ID numbers. We reviewed all claims for patients in this universe. Our review 

identified 165 claims, totaling $39,777 in payments, that were made for patients with no 

enrollment ID number. As a result, the FEHBP is due $39,777 for these payments. 

Summary of Claims Paid to Ineligible Patients 

In total, the Plan charged the FEHBP $509,559 for 935 claim payments madc for
 

ineligible patients. Our audit disclosed the following reasons for the errors:
 

•	 For 732 ofthe claims questioned, the Plan received retroactive termination of patient 

coverage from the Federal agency's payroll office. However, when the termination 

dates were subsequently received, the Plan did not review and/or adjust the patient's 

prior claims back to the termination date. As a result, the FEHBP was overcharged 

$431,644 in claim payments for patients not eligible for benefits. 

9 
•	 For 201 of the claims questioned, there were various eligibility errors. For example, 

we identified multiple cases where the patient was not eligible for coverage due to 

loss in coverage from a divorce and the Plan erroneously paid these claims. As a 

result, the FEHBP was overcharged $77,408 in claim payments for patients not 

eligible for benefits. 

•	 For two of the claims questioned, the claim processors entered incorrect data. As a 

result, the FEHBP was overcharged $507 in claim payments for patients not eligible 

for benefits. 

Plan's Response: 

The Plan agrees wi th this tinding and states that these payments were good faith 

erroneous benefit payments made during gaps in member coverage or after termination of 

member coverage. The Plan initiated efforts to recover these overpayments in accordance 

with the procedures outlined in the Plan's OPM-approved Overpayment Recovery 

Guidelines. 

The Plan states, "As with the OIG's prior inquiry, the MHBP observes that the January 1, 

2007-August 31, 2008, time period encompassed by this audit coincides with the time 

period during which the OIG conducted its prior audit of the MHBP, the results of which 

are memorialized in the OIG's March 26, 2009, Final Audit Report No. IB-45-00-08-16. 

That Report contains a finding similar in nature to the one proposed in this inquiry, 

together with a recommendation that the OPM Contracting Officer verity that the MHBP 

has procedures in place to identify and initiate efforts to recover post-termination benefit 

payments attributable to the aforementioned types of reporting delays. A comparison of 

the OIG's finding in that Report and its proposed finding here illustrates the existence and 

operation of those procedures: in that earlier Report, the OIG correctly identified 65% of 

the claim lines sampled as having been paid during a gap in the enrollee's coverage 

(l 0,275 out of 15,864 claim lines sampled), and 8% of the claim lines sampled as having 

been paid after the enrollee's termination (2,617 out of 26,826 claim lines sample). Here, 

however, the incidence has been reduced considerably (770 claim lines out of 7,917 

sampled, or 10%, and 165 claim lines out of 5,049 sampled, or 3%). 

Furthermore, as the auditors know Coventry transitioned to a new claims processing 

system tor the MHBP effective September 1, 2008. Coventry is conducting an ongoing 

review ofthe reports that system generates to ensure that this notable improvement not 

only is maintained, but is enhanced." 

Recommendation 3 

We recommend that the contracting officer disallow $509,559 for claims paid for ineligible 

patients and verify that the Plan returns all amounts recovered to the FEHBP. 

10
 
3. Duplicate Claim Payments $175,942 

During our review of potential duplicate claim payments, we found that the Plan 

incorrectly paid 174 claims, resulting in net overcharges of$175,942 to the FEHBP. 

Specifically, we determined that the Plan improperly charged the FEHBP $169,305 for 

164 duplicate claim payments. Also, we identified 10 claims that were not duplicate 

claim payments but contained other Plan payment errors, resulting in net overcharges of 

$6,637 to the FEHBP. In total, the Plan overpaid 173 claims by $176,917 and underpaid 

1 claim by $975. 

As previously cited from Contract CS 1146, costs charged to the FEHBP must be actual, 

allowable, allocable, and reasonable. If errors are identified, the Plan is required to make a 

diligent effort to recover the overpayments. 

Section 6(h) of the FEHB Act provides that rates should reasonably and equitably reflect 

the costs of benefits provided. 

We performed a computer search for potential duplicate payments on claims paid during 

the period October 1, 2007 through August 31,2008. We selected and reviewed 435 

groups, totaling $412,902 (out of 7,427 groups, totaling $647,071) in potential duplicate 

payments, under our "best matches" criteria. We also selected and reviewed 402 groups, 

totaling $332,190 (out of 26,484 groups, totaling $1,090,739) in potential duplicate 

payments, under our "near matches" criteria. OUf samples included all groups with 

potential duplicate payments of$250 or more under the "best matches" criteria and $350 

or more under the "near matches" criteria. 

Based on our review, we determined that 117 claim payments in our "best matches" 

sample were duplicates, resulting in overcharges of$136,034 to the FEHBP. Also, we 

determined that 47 claim payments in our "near matches" sample were duplicates, 

resulting in overcharges of $33,271 to the FEHBP. In total, the Plan charged the FEHBP 

$169,305 for these 164 duplicate claim payments from October 1,2007 through 

August 31, 2008.4 These duplicate claim payments primarily occurred when the claims 

were deferred as potential duplicates on the claims system, but were overridden by the 

processors. 

During our review of these potential duplicate claim payments, we also identified 10 

claims that were not duplicate claim payments but contained other Plan payment errors, 

resulting in net overcharges of $6,637 to the FEHBP. Specifically, the Plan overpaid nine 

ofthese claims by $7,612 and underpaid one claim by $975. 

4 In addition, there were 90 duplicate claim payments, totaling $81,552, that were identified and adjusted or voided 

by the Plan prior to receiving our samples on June 15,2009. Since these duplicate claim payments were identified 

and adjusted or voided by the Plan prior to receiving our samples, we did not question these duplicate claim 

payments in the final report. 

11 
Plan's Response: 

The Plan agrees with this finding and states that these payments were good faith 

erroneous benefit payments. The Plan initiated efforts to recover these overpayments in 

accordance with the procedures outlined in the Plan's OPM-approved Overpayment 

Recovery Guidelines. 

The Plan states that "the time period encompassed by this audit ... coincides roughly 

with the time period during which the OIG conducted its prior audit ofthe MHBP, the 

results of which are memorialized in the OIG's Final Audit Report No. IB-45-00-08-16 

(March 26, 2009). That Report contains a similar finding regarding duplicate claim 

payments, along with a recommendation that the MHBP identitY their cause(s) 'and 

develop an action plan' to prevent their future occurrence. The duplicate payments 

identified in this inquiry occurred months (if not years) before that Report was issued; 

nevertheless, the MHBP would like to make the OIG aware ofthe substantial steps it has 

taken in 2009 to implement that Report's recommendation. 

For example ... the MHBP has conducted a pair of training initiatives directed at the 

duplicate claims payment issue. The first initiative, which commenced shortly after that 

Report's publication, was providing one-on-one, focused duplicate claim training to all 

claims examiners who demonstrated a need for it based on the MHBP's internal audits for 

claims processing quality control. The second initiative was provided to all MHBP 

claims examiners in October, 2009, and consisted of providing duplicate claims 

processing training using materials specially-prepared for that purpose, followed by live 

duplicate claims processing overseen by individuals with established expertise in that 

area.... While it is too soon to reach ay measurable conclusions about the efficacy of 

these training initiatives, the MHBP is optimistic that together they will have a favorable 

impact on reducing the frequency with which duplicate claims payments occur." 

Recommendation 4 

We recommend that the contracting officer disallow $169,305 for duplicate claim 

payments and veritY that the Plan returns all amounts recovered to the FEHBP. 

Recommendation 5 

We recommend that the contracting officer disallow $7,612 in claim overcharges 

resulting from other Plan payment errors and veritY that the Plan returns all amounts 

recovered to the FEHBP. 

Recommendation 6 

We recommend that the contracting officer allow the Plan to charge the FEHBP $975 if 

an additional payment is made to the provider to correct the underpayment error. 

12
 
IV. MAJOR CONTRIBUTORS TO THIS REPORT 

Experience-Rated Audits Group 

Lead Auditor 

•••••Auditor 

Auditor 

Senior Team Leader 

13
 
V. SCHEDULE A
 

COVENTRY HEALTH CARE AS UNDERWRITER AND ADMINISTRATOR
 

FOR THE MAIL HANDLERS BENEFIT PLAN
 

ROCKVILLE, MD
 

HEALTH BENEFIT CHARGES AND AMOUNTS QUESTIONED
 

HEALTH BENEFIT CHARGES 2007 2008 TOTAL 

HEALTH BENEFIT CHARGES* I $1,768,957,342 $1,741,915,608 $3,510,872,950 

AMOUNTS QUESTIONED 2007 2008 TOTAL 

1. COORDINATION OF BENEFITS WITH MEDICARE $275,760 $1,338,815 $1,614,575 

2. CLAIMS PAID FOR INELIGIBLE PATIENTS 123,009 386,550 509,559 

3. DUPLICATE CLAIM PAYMENTS 20,770 155,172 175,942 

TOTAL AMOUNTS QUESTIONED I $419,539 -- . $1,880,537 $2,300,076 

* The audit covered claim payments from October 1,2007 through August 31, 2008. 

I 
To: 

APPENDIX A
 

COVENTRY
 

T Hl'ultfl ['Off' 

Auditor-in-Charge 

Auditor 

Auditor 

From: Thomas R. Kirkpatrick 

Chief Financial Officer, Group Health Services 

Coventry Health Care 

Date:	 February 17, 2010 

Re:	 Mail Handlers Benefit Plan Response to OPM OIG Audit Inquiry #1 

- Duplicate Claim Payments 

(Deleted by the Office of the Inspector General - Not Relevant to the Final Report) 

MHBP Response: The MHBP concurs with the OIG auditors' proposed finding that it made 

$169,305 in duplicate payments erroneously but in good faith on 164 of the 837 claims 

contained in the auditors' "best matches" and "near matches" duplicate claims payment 

samples. The MHBP also concurs with the OIG auditors' proposed finding that $6,637 in net 

benefit overpayments were made erroneously but in good faith on an additional 10 claims 

identified in those samples. Finally, the MHBP agrees with the OIG's determination that 

virtually every such payment error occurred on a claim that the FirstClaim® claims processing 

system then in use for the MHBP had identified as a possible duplicate and routed for further 

investigation, and that the MHBP claims examiner thereafter mistakenly authorized for 

payment. In other words, the payment errors identified in this inquiry were attributable to 

human error. The MHBP initiated recovery efforts on each overpayment identified in this 

inquiry in accordance with the policies and procedures enumerated in its OPM-approved 

Overpayment Recovery Guidelines, including the ability to track and report back to OPM on its 

progress in recouping them. 

The MHBP observes that the time period encompassed by this audit (January 1, 2007-August 

31,2008) coincides roughly with the time period during which the OIG conducted its prior audit 

of the MHBP, the results of which are memorialized in the OIG's Final Audit Report NO.1 B-45­

00-08-16 (March 26, 2009). That Report contains a similar finding regarding duplicate claim 

payments, along with a recommendation that the MHBP identify their cause(s) "and develop an 

action plan" to prevent their future occurrence. The duplicate payments identified in this 

inquiry occurred months (if not years) before that Report was issued; nevertheless, the MHBP 

would like to make the OIG aware of the substantial steps it has taken in 2009 to implement 

that Report's recommendation. 
For example, since Report No. AB-45-00-08-16's March 26,2009, issuance date, the MHBP 

has conducted a pair of training initiatives directed at the duplicate claims payment issue. The 

first initiative, which commenced shortly after that Report's publication, was providing one-onone, focused duplicate claim training to all claims examiners who demonstrated a need for it 

based on the MHBP's internal audits for claims processing quality control. The second 

initiative was provided to all MHBP claims examiners in October, 2009, and consisted of 

providing duplicate claims processing training using materials specially-prepared for that 

purpose, followed by live duplicate claims processing overseen by individuals with established 

expertise in that area. A copy of the materials furnished during this second training initiative 

are attached for the OIG auditors' reference. While it is too soon to reach ay measurable 

conclusions about the efficacy of these training initiatives, the MHBP is optimistic that together 

they will have a favorable impact on reducing the frequency with which duplicate claims 

payments occur. 

The MHBP trusts the above reply adequately responds to the OIG auditors' Audit Inquiry No. 

1. Please do not hesitate to request further clarification or information, however. 

2
 
APPENDIXB
 

COVENTRY
 

T Hl'o/th tfl('f) 

To: Auditor-in-Charge 

Auditor 

Auditor 

From: Thomas R. Kirkpatrick 

Chief Financial Officer, Group Health Services 

Coventry Health Care 

Date:	 February 17,2010 

Re:	 Mail Handlers Benefit Plan Response to OPM OIG Audit Inquiry #2 

- Claims Paid for Ineligible Patients 

(Deleted by the Office of the Inspector General - Not Relevant to the Final Report) 

MHBP Response: The MHBP concurs with the OIG auditors' proposed finding that it made 

935 claims payments totaling $509,559 erroneously but in good faith during gaps in an MHBP 

member's coverage, or following their termination. These erroneous payments were out of 

12,966 claim lines totaling $10,563,494 in benefit payments that the 01G auditors sampled for 

review. The MHBP further concurs with the OIG auditors' determination that these erroneous 

claims payments were almost entirely attributable to delays by the responsible entities in 

reporting events affecting member eligibility that, had they been reported timely, would have 

resulted in the questioned claim line being adjudicated correctly. As indicated in your inquiry, 

all but two of those 935 erroneous claims payments were due either to payroll office delays in 

reporting enrollment changes (732, or 78.3%), or to other delays such as enrollees failing to 

timely notify it of a divorce or other change in family status affecting eligibility (201, or 21.5%).1 

The MHBP has initiated recovery efforts on each one of the overpaid claim lines identified in 

this inquiry in accordance with the procedures enumerated in its OPM-approved MHBP 

Overpayment Recovery Guidelines, including the ability to track and report back to OPM on its 

progress in recouping them. 

As with the OIG's prior inquiry, the MHBP observes that the January 1, 2007-August 31,2008, 

time period encompassed by this audit coincides with the time period during which the OIG 

conducted its prior audit of the MHBP, the results of which are memorialized in the OIG's 

March 26, 2009, Final Audit Report NO.1 B-45-00-08-16. That Report contains a finding similar 

in nature to the one proposed in this inquiry, together with a recommendation that the OPM 

FEHBP enrollees oftentimes continue to list their spouse as a covered dependent after obtaining a divorce from them. It is 

common for the MHBP to learn ofthe divorce only in the event that the enrollee remarries and thereafter tries to add the new 

spouse to his/her enrollment. 

I 
Contracting Officer verify that the MHBP has procedures in place to identify and initiate efforts 

to recover post-termination benefit payments attributable to the aforementioned types of 

reporting delays. A comparison of the DIG's finding in that Report and its proposed finding 

here illustrates the existence and operation of those procedures: in that earlier Report, the 

DIG correctly identified 65% of the claim lines sampled as having been paid during a gap in 

the enrollee's coverage (10,275 out of 15,864 claim lines sampled), and 8% of the claim lines 

sampled as having been paid after the enrollee's termination (2,617 out of 26,826 claim lines 

sample). Here, however, the incidence has been reduced considerably (770 claim lines out of 

7,917 sampled, or 10%, and 165 claim lines out of 5,049 sampled, or 3%). 

Furthermore, as the auditors know Coventry transitioned to a new claims processing system 

for the MHBP effective September 1, 2008. Coventry is conducting an ongoing review of the 

reports that system generates to ensure that this notable improvement not only is maintained, 

but is enhanced. 

The MHBP trusts the above reply adequately responds to the DIG auditors' Audit Inquiry No. 

2. Please do not hesitate to request further clarification or information, however. 

2
 
To: 

APPENDIXC
 

COVENTRY
 

Hrall II farr 

Auditor-in-Charge 

, Auditor 

Auditor 

From: Thomas R. Kirkpatrick 

Chief Financial Officer, Group Health Services 

Coventry Health Care 

Date:	 February 17,2010 

Re:	 Mail Handlers Benefit Plan Response to OPM OIG Audit Inquiry #3 

- Coordination of Benefits with Medicare 

(Deleted by the Office of the Inspector General - Not Relevant to the Final Report) 

MHBP Response: The MHBP concurs that it paid $1,614,575 in charges questioned in this 

inquiry erroneously but in good faith as a result of errors made in coordinating the Plan's 

benefits with Medicare on 2,237 of the 25,873 claim lines (8.6%) that the OIG auditors selected 

for sampling. 1 The MHBP initiated recoupment efforts on each one of those claim lines 

promptly after determining that a Medicare coordination of benefits ("COB") error (or other 

error) had occurred contemporaneously with its Fall, 2009, response to the OIG auditors' 

Information Request ("IR") No.1. Those recovery efforts are ongoing, and comply with the 

procedures enumerated in the Plan's OPM-approved Overpayment Recovery Guidelines 

(including the ability to track and report to OPM its progress in recouping the payments). 

The MHBP also observes that the January 1, 2007-August 31,2008, time period 

encompassed by this audit coincides with the time period in which the OIG conducted its audit 

of the MHBP resulting in its March 26, 2009, issuance of Final Audit Report NO.1 B-45-00-08­

16. That Report, in addition to containing a similar finding regarding Medicare COB, 

recommended that the MHBP "ha[ve] procedures in place to review all claims incurred back to 

the Medicare effective dates when updated ... and determine if already paid claims are 

affected." The MHBP addressed that recommendation in detail with OPM's contracting office 

shortly after the OIG issued that Report, summarizing both the efforts it had taken to date and 

those it planned to implement in response to that recommendation. Please further be advised 

that in addition to those efforts outlined in that correspondence, the Plan (i) conducted 

In concurring with this proposed finding, the MHBP notes that based upon its showing, the OPM OIG auditors no longer 

question whether the MHBP coordinated 31 questioned claim lines totaling $6,269 improperly with Medicare due to a claims 

system error. Rather, the auditors concur that those incorrect claim payments were, like the remaining claim lines questioned 

in this inquiry, paid incorrectly as a result of human (i.e., claims examiner) error. 

I 
intensive one-on-one training of claims examiners identified as having quality-related errors 

pertaining to Medicare COB in June-July of 2009, and (ii) provided formal classroom training 

on Medicare COB to all claims examiners in November, 2009. This latter activity took the form 

of a 5-6 hour training session, to be supplemented a later, follow-up assessment and additional 

one-on-one training as required. In sum, the Plan already has taken substantial steps towards 

reducing the frequency with which Medicare COB errors occur on a prospective basis. 

The MHBP trusts the above reply adequately responds to the OIG auditors' Audit Inquiry No. 

3. Please let us know if you require further information, however. 

2