Federal Employees Health Benefits Program: Oversight of Carriers' Fraud and Abuse Programs
Published: 2013-11-14T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: The FEHBP provides health care coverage to millions of federal employees, retirees, and their dependents through health insurance carriers that contract with OPM. Carriers offer plans in which eligible individuals may enroll to receive health care benefits. OPM negotiates these contracts; requires that each carrier establish a program to prevent, detect, and eliminate fraud and abuse; and oversees carriers' fraud and abuse programs. Although the extent of fraud and abuse in the FEHBP is unknown, any fraud or abuse that does occur contributes to health care costs and may be reflected in the premiums for FEHBP enrollees.
GAO was asked to review OPM's oversight of FEHBP fraud and abuse programs. This report describes (1) oversight of fraud and abuse programs by OPM's contracting office and (2) the OPM contracting office's approach to measuring the effectiveness of FEHBP carriers' fraud and abuse programs. To do so, GAO reviewed documents that specify program requirements and guidance, such as carrier contracts and letters from OPM to carriers; documents that assist oversight of fraud and abuse programs, such as annual reports that OPM requires from carriers; and documents demonstrating oversight of carriers, such as memos to carriers from OPM contracting office staff regarding carriers' compliance. GAO also reviewed published work about measuring the effectiveness of antifraud programs. GAO interviewed OPM officials and officials from entities with expertise related to antifraud programs and measurement.
section_title: What GAO Found
paragraphs: The Office of Personnel Management (OPM) Healthcare & Insurance--Federal Employee Insurance Operations office, which we refer to as OPM's contracting office, monitors Federal Employees Health Benefits Program (FEHBP) carriers' compliance with requirements and other guidance for preventing, detecting, and eliminating fraud and abuse. These requirements include establishing a program to assess vulnerability to fraud and abuse, reporting annually on program outcomes, reporting potential fraud to OPM's Office of Inspector General (OIG), and implementing corrective actions to address deficiencies in fraud prevention programs. OPM's guidance encourages carriers to implement certain program standards, such as formal fraud awareness training for all employees. To monitor carriers' compliance with these requirements and other guidance, OPM's contracting office staff conducts the following activities.
Review carriers' annual reports: Staff review information contained in annual reports from carriers that describe the carriers' fraud and abuse programs and their outcomes. Officials told us that they assess information in carriers' annual reports against program requirements and guidance and follow up with carriers whose reports suggest possible noncompliance.
Conduct site visits: Staff also inspect and follow up on carriers' fraud and abuse programs during periodic site visits. Using a risk based site selection strategy, OPM contracting office staff conducted site visits of 27 carriers whose plans covered about 70 percent of FEHBP enrollees in 2012.
Review and resolve OIG audit findings: Staff review and resolve OIG audit findings that identified areas of carriers' noncompliance.
Review disputed claims and enrollee complaints: Staff review disputed claims and enrollee complaints to identify indicators of potential fraud or abuse, such as suspicious patterns of drug utilization.
OPM contracting office staff review certain outcomes of carriers' fraud and abuse programs, but several factors contribute to the challenge of assessing program effectiveness. Program outcomes in 2011 included 29 criminal convictions and more than $23 million in recoveries to the FEHBP, but program outcomes do not provide complete information about program effectiveness because they do not measure the success of efforts to prevent or minimize fraud and abuse. OPM contracting office staff reported that they have not adopted specific measures of program effectiveness for FEHBP fraud and abuse programs because they have not identified an appropriate way to measure the effectiveness of antifraud programs. Several factors contribute to difficulties in assessing the effectiveness of health care antifraud programs. These factors include lack of information about the baseline amount of fraud and abuse, difficulty establishing a causal link between antifraud activities and the amount of fraud and abuse, and difficulty measuring the effect of efforts to prevent or deter fraud and abuse.
OPM and the OPM OIG provided technical comments, which we incorporated as appropriate.

section_title: Letter
paragraphs: The Federal Employees Health Benefits Program (FEHBP) provided  health care coverage to about 8 million federal employees, retirees, and  their dependents in 2012 through health insurance carriers that  contracted with the federal government. Carriers offer plans through the  program in which eligible individuals may enroll to receive health care  benefits. The Office of Personnel Management (OPM) negotiates these  contracts and requires that each carrier establish a program to prevent,  detect, and eliminate fraud and abuse. Specifically, OPM’s Healthcare &  Insurance—Federal Employee Insurance Operations office, which we  refer to as the contracting office, oversees carriers’ performance,  including their fraud and abuse programs. Although the extent of fraud  and abuse in the FEHBP is unknown, any fraud or abuse that does occur  contributes to health care costs and may be reflected in the premiums for  FEHBP enrollees.harm to patients.
Certain types of fraud and abuse may also result in  In March 2012, OPM’s Office of the Inspector General (OIG) issued a  report that included a summary of its reviews of the fraud and abuse  programs of the three largest FEHBP carriers and questioned their   The results of the OIG’s review of fraud and abuse  effectiveness. programs raised concerns about carriers’ compliance with fraud and  abuse program requirements and OPM’s oversight of these programs.  You asked us to review OPM’s oversight of FEHBP fraud and abuse  programs. This report describes:  1.  Oversight of fraud and abuse programs by OPM’s contracting office,  2.  The OPM contracting office’s approach to measuring the  effectiveness of FEHBP carriers’ fraud and abuse programs.
Office of Personnel Management, Office of the Inspector General, Semiannual Report to  Congress, October 1, 2011 through March 31, 2012 (Washington, D.C.: March 2012). The  audits of the three largest FEHBP carriers summarized in this report were conducted in  fiscal years 2010 and 2011. Between fiscal years 2010 and 2013, the OIG told us that  they conducted a total of 8 audits that reviewed the fraud and abuse programs of carriers. audit resolution guidelines that OPM contracting office staff use when  resolving audits of carriers conducted by the OIG; and demonstrate OPM’s oversight of carriers, such as correspondence  among OPM contracting office staff, carriers, and the OIG regarding  fraud and abuse program issues, and memos to carriers from OPM  contracting office staff describing how OPM contracting office staff  used information from oversight activities to reward or penalize  carriers’ compliance or noncompliance with fraud and abuse program  requirements.
We also reviewed standards for internal control to identify effective  management practices for providing oversight, and we compared the  standards with OPM’s management practices for overseeing carriers’  fraud and abuse programs.
To describe the OPM contracting office’s approach to measuring the  effectiveness of FEHBP carriers’ fraud and abuse programs, we reviewed  fraud and abuse program information and data that OPM collects from  carriers and interviewed officials from OPM’s contracting office and its  OIG. We also interviewed officials from the Department of Health and  Human Services who are involved with the Health Care Fraud and Abuse  Control Program, a federal program to enhance coordination among  federal, state, and local programs related to health care fraud and abuse.To obtain further background information on the issues involved in  measuring the effectiveness of antifraud efforts, we conducted interviews  with three entities we selected judgmentally on the basis of relevant  expertise: the Blue Cross and Blue Shield Association, the National  Health Care Anti-Fraud Association (NHCAA), and the National  Association of Insurance Commissioners. In addition, we reviewed  published and unpublished work, including ongoing GAO work on  measures of the effectiveness of health care antifraud efforts, the  strengths and weaknesses of measures related to antifraud efforts, and  challenges to assessing the effectiveness of antifraud efforts.
We conducted this performance audit from February 2013 to November  2013 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.
subsections: section_title: Background
subsections: section_title: The FEHBP
paragraphs: The FEHBP is the largest employer-sponsored health insurance program  in the country. In 2012, it provided $42.6 billion in health care benefits to  about 8 million individuals. OPM contracts with carriers to provide this  coverage. Carriers offer plans in which eligible individuals may enroll to  receive health care coverage. For the 2012 plan year, FEHBP options  included 10 fee-for-service plans that were available nationwide, 4 plans  available only to employees of certain federal agencies (e.g., the Foreign  Service), 164 plans offered by health maintenance organizations that  were available in certain regions (but not the entire country), 15 high-  Most enrollees could  deductible plans, and 13 consumer-driven plans.choose from about 6 to 15 plans. The majority of FEHBP policyholders— more than 60 percent—were in plans offered by the Blue Cross and Blue  Shield Association. The next largest carriers or groups of carriers in  terms of FEHBP enrollment were GEHA and Kaiser Permanente, each  with between 5 percent and 10 percent of FEHBP policyholders.
section_title: Premiums and Financing
paragraphs: Through their contributions toward premiums, the federal government and  enrollees bear a portion of the cost of FEHBP fraud and abuse programs.  Generally, as set by statute, the government pays 72 percent of the  average premium across all FEHBP plans, but no more than 75 percent  of any particular plan’s premium. Enrollees pay the balance. Premiums  are intended to cover enrollees’ health care costs, plans’ administrative  expenses (including expenses associated with fraud and abuse  programs), reserve accounts specified by law, plan profits, and OPM’s  administrative costs. OPM negotiates plan premiums with carriers and  establishes premiums in one of two ways:
Experience-rated carriers set their premiums based on their  experience, that is, their actual costs of providing health care services  and the costs of administrative services. Experience-rated carriers  may offer fee-for-service plans or they may be local health  maintenance organizations. Of the $42.6 billion in expenses incurred  by the FEHBP in 2012, the majority—84 percent—was for the benefits  and administrative expenses of experience-rated carriers.
Community-rated carriers are generally health maintenance  organizations that set their FEHBP premiums based on a documented  methodology that is applied to other groups of insured individuals in  the same geographic community. These carriers receive fixed  payments—the premiums—for each enrollee, rather than receiving  payments for services rendered. Administrative costs are included in  the payment rate. In fiscal year 2012, the FEHBP paid $6.7 billion to  community-rated carriers.
Carriers’ costs for fraud and abuse programs are included with other  administrative costs (for experience-rated carriers) or within the fixed  payments (for community-rated carriers). As a result, the amounts that  carriers spend to prevent, detect, or correct fraud and abuse are not  clearly identifiable.
OPM is required to administer contingency reserve funds for FEHBP  carriers, which can help avoid major fluctuations in the FEHBP premiums  from year to year. OPM administers a contingency reserve fund in the  U.S. Treasury for each FEHBP plan, and unexpended contingency  reserves are carried forward. Experience-rated carriers may draw upon  their individual contingency reserve funds if claims are larger than  anticipated, or, if the balance is large enough, to avoid or reduce a  premium increase for the following year. For community-rated carriers,  OPM may negotiate an adjustment to the plan’s rates under certain  circumstances and use the contingency funds to pay for the adjustment.  For example, if the community rate changes between the time the carrier  estimated its rates (generally in spring) and the time that coverage  through the plan became effective (the following January), OPM  negotiates an adjustment.
OPM can adjust carriers’ profits based on performance, including the  performance of fraud and abuse programs, using mechanisms that differ  by the type of plan. There is no minimum profit. For experience-rated  carriers, OPM negotiates the plan’s profit rate by determining a service  charge using a process outlined in regulation that takes the plan’s   The service charge (or profit) for  performance into consideration. experience-rated carriers may not exceed 1.1 percent of the plan’s  projected claims and administrative fees. For community-rated carriers,  profits reflect the difference between the premiums and the actual costs.  Because they are not capped at a percentage of projected costs, profits  for community-rated carriers may be greater than profits for experience- rated carriers.
Regulations specify a process for OPM to consider a  community-rated plan’s performance and assess a penalty of up to   1 percent of the total premium payment. These penalties, which reduce  the carrier’s profits, may be assessed for noncompliance with contract  requirements, including fraud and abuse program requirements. (Service  charges apply only to experience-rated plans, while penalties apply only  to community-rated ones.)
Fraud and abuse in FEHBP plans affect the government, enrollees, and  carriers because fraud and abuse can add to premium costs, reduce  program reserves, or both. incentive to minimize fraud and abuse because raising premiums may  make their plans less appealing to potential enrollees than plans offered  by FEHBP carriers that have less fraud and abuse. Community-rated  carriers, which receive fixed payments for each enrollee rather than  payments for services rendered, have an additional financial incentive to  establish effective fraud and abuse programs because they can keep any  savings above and beyond the cost of establishing and maintaining the  programs.
In general, however, carriers have an  All carriers are susceptible to fraud and abuse, although the specific  vulnerabilities vary by the type of carrier. Experience-rated carriers that  offer fee-for-service plans are at particular risk for forms of fraud or abuse  associated with excess payments for care, for example, through billing for  services that are not medically necessary. Community-rated carriers,  which receive fixed payments for each enrollee rather than payments for  services rendered, are at particular risk for forms of fraud or abuse that  reduce the costs of providing care, for example, through inappropriate  dilution of medications.
If a carrier’s reserves are insufficient to cover its costs, including costs associated with  fraud or abuse, the carrier must fund its losses. According to OPM officials, losses due to  fraud and abuse would have to be substantial relative to legitimate costs for a carrier’s  reserves to prove insufficient.
section_title: OPM’s Offices with Responsibilities Involving Fraud and Abuse within the FEHBP
paragraphs: Two offices within OPM have key responsibilities involving fraud and  abuse within the FEHBP.
The Healthcare & Insurance—Federal Employee Insurance  Operations office, the contracting office, is responsible for  administering the FEHBP, contracting with carriers, and overseeing  carriers’ compliance. Oversight of carriers’ compliance with  requirements and guidance related to fraud and abuse is part of the  broader responsibility to ensure compliance. According to OPM  officials, 7 contract officers, 16 contract specialists, and 7 audit  resolution staff within the contracting office have general and discrete  oversight responsibilities, in addition to staff in the office’s supporting  branches (such as those providing program analyses and systems  support).
The OIG has responsibilities that involve two aspects of FEHBP fraud  and abuse efforts. First, as a law enforcement agency, the OIG’s  Office of Investigations may investigate potential fraud and abuse  within the FEHBP. (App. I provides information on carrier and OIG  fraud and abuse reporting requirements.) Second, as an oversight  entity, the OIG’s Office of Audits conducts audits of FEHBP carriers.  OIG officials told us that until recently the OIG’s audits of FEHBP  carriers generally focused on audits of carriers’ claims and payments  and not on the extent to which the plans comply with fraud and abuse  program requirements. The OIG has begun including an in-depth  examination of a carrier’s fraud and abuse program in some of its  audits. These audits have included reviews of policies and  procedures and reviews of files to determine whether potential fraud  and abuse cases were reported as required. After conducting in-depth  audits of the fraud and abuse programs of three of the larger FEHBP  experience-rated carriers, the OIG questioned their effectiveness, in  part because the programs’ outcomes, in terms of the prosecution of  fraud cases and recovery of defrauded funds, were minimal. The  OIG's findings from these audits included instances of failure to  provide required notice of potential fraud or abuse, failure to report the  amount of all recoveries of defrauded funds, and failure to include all  relevant expenses when reporting the cost of anti-fraud activities.
section_title: OPM’s Requirements and Guidance for FEHBP Carriers’ Fraud and Abuse Programs
paragraphs: OPM requires FEHBP carriers to establish programs to prevent, detect,  and eliminate fraud and abuse. FEHBP contracts contain minimum  requirements for fraud and abuse programs; according to officials from  OPM’s contracting office, these requirements accommodate differences  in carrier characteristics and so allow flexibility in fraud and abuse  program implementation. Each carrier is required by contract to:  conduct a program to assess vulnerability to fraud and abuse; operate a system designed to detect, eliminate, and follow up on fraud submit a report on fraud and abuse by March 31 of each year; demonstrate that a statistically valid sampling technique is used  routinely to compare FEHBP claims against the carrier’s quality  assurance standards and its fraud and abuse prevention standards; maintain records of fraud prevention activities; implement any corrective actions ordered by an OPM contracting  officer to correct a deficiency in its fraud prevention program; provide timely notification to the OIG of credible evidence of a  violation of federal criminal law involving fraud found in Title 18 of the  U. S. Code by a principal, employee, agent, or subcontractor; and provide timely notification to the contracting officer of any significant  event, including fraud, that might reasonably be expected to have a  material effect on the carrier’s ability to meet its obligations.
OPM also uses letters to carriers to issue requirements and guidance. For example, one carrier letter imposes requirements for reporting  potential fraud and abuse when a carrier has a reasonable suspicion that  fraud against the FEHBP has occurred or is occurring. (As indicated  above, app. I provides more information on carrier and OIG fraud and  abuse reporting requirements.) Another carrier letter presented guidance  on certain nonrequired standards for fraud and abuse programs.  Specifically, OPM identified a set of eight industry standards for fraud and  abuse programs (see text box), and in 2003, it issued a letter to carriers  indicating that it would like carriers to implement these standards.
Federal Acquisition Regulations require that each FEHB carrier must perform the  contract in accordance with prudent business practices, which include timely compliance  with OPM instructions and directives. 48 C.F.R. § 1609.7001(b)(1), (c)(4). Therefore,  carriers must comply with requirements contained in carrier letters.
section_title: OPM’s Contracting Office Monitors Compliance with Fraud and Abuse Program Requirements and Guidance by Reviewing Information and Conducting Site Visits
paragraphs: OPM’s contracting office staff conduct several activities to monitor  carriers’ compliance with fraud and abuse program requirements and  agency guidance, including reviewing carriers’ annual reports to OPM’s  contracting office, conducting site visits, reviewing and resolving OIG  audit findings, and reviewing disputed claims and enrollee complaints.  Contract officers use the information from these efforts to oversee carriers  and to determine carriers’ service charges and penalties.
subsections: section_title: Reviews of Annual Reports Submitted to OPM’s Contracting Office
paragraphs: Officials from OPM’s contracting office told us that contracting office staff  assess carriers’ compliance with fraud and abuse program requirements  and guidance, and monitor carriers’ performance by reviewing annual  reports from carriers.
In one routinely submitted report, the carrier describes its fraud and  abuse program, including operational information; organizational  structure; certain budget and cost allocation information; and  performance indicators, such as how the carrier measures the  performance of its antifraud efforts. Officials from OPM’s contracting  office told us that they review this report and assess the information  contained in the report against fraud and abuse program requirements  to determine the extent to which carriers met, and were thus in  compliance with, requirements. For example, OPM contracting office  staff assess the reported information, such as the criteria the carrier  uses for notifying the OIG of a potential fraud case, against OPM’s  requirements for reporting cases of potential fraud to the OIG.
A second report, specifically required by contract, provides additional  information about the carrier’s fraud and abuse program and the  carrier’s fraud and abuse activities and outcomes involving the  FEHBP during the year. The report contains a checklist showing  which of the nonrequired fraud and abuse industry standards the  carrier and any subcontractors implemented. Officials from OPM’s  contracting office told us that they assess this information against the  fraud and abuse program guidance to determine the extent to which  carriers implemented the recommended standards and to follow up  with those that have not implemented them. For example, according  to officials from OPM’s contracting office, a contracting officer  contacts a carrier whose report indicates that it did not implement one  of the components of a fraud and abuse program, such as having an  antifraud policy statement. In following up with the carrier, the  contracting officer indicates that OPM expects the carrier to  implement the component and may conduct a site visit, request an  OIG audit, or meet with the carrier to review evidence to confirm that  the carrier has come into compliance with OPM’s expectation.
Our review of a summary of carriers’ reports containing their responses to  the industry standards checklist for 2012 indicated that most carriers  submitted the report as required and their responses indicated  compliance with fraud and abuse program guidance. Officials from OPM’s  contracting office told us that, as part of their oversight, contracting  officers follow up with carriers whose reports suggest possible  noncompliance for the purpose of bringing them into compliance.  However, OPM contracting office staff did not follow up with carriers that  had not submitted their reports or whose reports indicated program  deficiencies until July 2013, after we inquired about these carriers’  reports. Specifically, although 5 carriers did not submit reports by   March 31, as required by contract, OPM contracting office staff did not  begin following up with 4 of these carriers until July 2013, in response to  our inquiry about OPM’s follow-up actions to obtain these reports. Based  on 2011 enrollment data, we estimate that these carriers together  accounted for about 0.1 percent of FEHBP enrollees. Most carriers  submitted timely reports indicating that either they or a subcontractor had  implemented the recommended, nonrequired industry standards for fraud  and abuse programs. However, 7 carriers submitted reports indicating  that neither they nor a subcontractor had implemented one or more of  those standards. For example, 2 of the 7 carriers indicated that neither  they nor a subcontractor had implemented a strategy for educating  enrollees about fraudulent and abusive practices and 1 of these carriers  had not published an antifraud policy statement or conducted formal fraud  awareness training with all its employees. Based on 2011 enrollment  data, we estimate that these 7 carriers together accounted for 0.8 percent  of FEHBP enrollees. OPM contracting staff did not begin following up with  these carriers until July 2013, after our inquiry, and as of August 2013  were still following up with 1 of these carriers.
section_title: Site Visits of Carriers
paragraphs: OPM contracting office staff also assess carriers’ compliance with fraud  and abuse program requirements and guidance during periodic site visits.  In contrast to the reviews of annual reports, which are performed  remotely, site visits provide an opportunity for contracting office staff to  collect, inspect, and follow up on fraud and abuse program information  on-site. During site visits, OPM contracting office staff review carriers’  fraud and abuse program documents and information systems, conduct  face-to-face meetings with carrier staff, and evaluate the extent to which  the carrier’s program meets fraud and abuse program requirements and  guidance. For example, during a site visit, OPM contracting office staff  may review the carrier’s program and system for fraud prevention and  detection, staffing, fraud awareness training, and examples of fraud and  abuse program activities. As a result of their review, contracting office staff may recommend areas for improvement or note best practices.
OPM contracting office staff conducted site visits that covered 96 carriers’  plans from 2008 through 2012 using a risk-based site selection strategy  that included carrier type, enrollment, and special circumstances.  Officials from OPM’s contracting office told us that although contracting  officers select experience-rated carriers for site visits every 3 to 5 years,  they may also select any experience-rated carrier for a site visit if the  carrier experiences consistent or urgent problems. According to officials  from OPM’s contracting office, in 2012, the 20 experience-rated carriers  selected for site visits accounted for 69 percent of FEHBP enrollment.addition, the officials told us that OPM contracting office staff select  community-rated carriers, which generally have smaller enrollments, for   In  site visits at their discretion and as OPM resources allow.7 community-rated carriers selected for site visits accounted for   0.55 percent of FEHBP enrollment, according to OPM contracting office  officials.
section_title: Review and Resolution of OIG Audit Findings
paragraphs: OPM contracting office staff review and resolve OIG audit findings as part  of their oversight of carriers’ fraud and abuse programs. In comparison to  reviews of annual reports of carriers’ self-reported compliance by OPM  contracting office staff, OIG audit findings identify areas of noncompliance  through an independent, on-site evaluation. Although site visits by both  OPM contracting office staff and the OIG assess carrier compliance, only  OIG audits assess the extent to which requirements and guidance have  been implemented as the agency intended, according to OPM contracting  office and OIG officials. OIG audits may also result in recommendations  to OPM contracting officers to oversee carriers’ implementation of  corrective actions intended to bring carriers into compliance. OPM  contracting office staff provide input to the OIG on planned audits as part  of the OIG’s risk-based audit selection strategy and may also request that  the OIG conduct a special audit on an area of concern. For example,  OPM contracting staff asked the OIG to assess one carrier’s internal  controls for preventing and detecting illegal practices and made a request  for a special audit to ensure one carrier’s compliance with contractual  requirements. In June 2013, OIG officials told us that they had conducted  eight audits that included findings related specifically to a carrier’s  compliance with fraud and abuse program requirements.
OPM contracting office staff address audit recommendations by  overseeing carriers’ implementation of corrective action(s) in response to  audit findings. To do so, contracting office staff review OIG audit findings  and carriers’ responses to audit findings, including corrective actions and  documentation supporting their implementation. For example, in one audit  we reviewed, the OIG recommended that an OPM contracting officer  verify that a carrier implements current policies and procedures regarding  communication of information about potential fraud and abuse and  develops and implements criteria for follow-up actions on reported cases  of potential fraud or abuse. Officials from OPM’s contracting office told us  that the carrier provided extensive documentation of its corrective actions  in response to audit findings. The officials also reported that OPM  contracting office staff are working with other carriers to address findings  from recent audits and close the resulting recommendations.
In addition to oversight of individual carriers, officials from OPM’s  contracting office told us that audit findings and recommendations help  them identify fraud and abuse program areas to focus on more broadly.  For example, OPM contracting office staff identified carriers’ sharing of  information about potential fraud and abuse as an area of concern after  audit findings indicated that certain carriers were not communicating  information about their fraud and abuse program activities as required. As  a result, officials from OPM’s contracting office told us that they are  reviewing documents from the OIG related to reporting and are in the  process of working to determine whether the current reporting  requirements are sufficient. As of August 2013, officials did not have a  timeline for completion of this activity.
section_title: Reviews of Disputed Claims and Enrollee Complaints
paragraphs: OPM contracting office staff review disputed claims and enrollee  complaints to identify indicators of potential fraud or abuse, among other  things. Officials told us that contracting officers’ reviews of disputed  claims may reveal suspicious patterns of drug utilization, multiple  complaints involving a single provider, or other indicators of potential   In addition to reviews of enrollees’ disputed claims,  fraud or abuse.OPM contracting office staff review enrollees’ complaints about other  aspects of the FEHBP, which could also indicate potential fraud or abuse,  and they intervene as necessary. For example, in response to an FEHBP  enrollee’s complaint regarding a carrier’s request for sensitive  information, OPM contracting office staff examined and confirmed the  legitimacy of the request.
section_title: OPM Contracting Office Staff Use Information from Monitoring Activities When Determining Carriers’ Service Charges or Penalties
paragraphs: OPM’s contracting office staff use information from their monitoring  activities—including their reviews of carriers’ annual reports, site visits,  reviews of OIG audit findings, and reviews of disputed claims and  enrollee complaints—when they determine carriers’ service charges or  penalties. Officials from OPM’s contracting office told us that service  charges or penalties may be adjusted to reflect noncompliance with fraud  and abuse program requirements. For experience-rated carriers, up to   45 percent of the service charge is based on contractor performance,  which includes failure to comply with contractual requirements. For  community-rated carriers, 30 percent of the penalty determination is  based on compliance with contractual requirements, with about half of  that based on the timeliness of report submissions, including submissions  of fraud and abuse reports. Officials from OPM’s contracting office  provided us with several examples of their use of information from their  monitoring activities when determining service charges:
OPM contracting office staff used an experience-rated carrier’s failure  to meet site visit scheduling, goals, and turn-around time as a  negative factor and the carrier’s reduction in the total number of  disputed claims submitted to OPM as a positive factor when  determining the carrier’s 2012 service charge.
OPM contracting office staff used the OIG’s audit findings that a  carrier was not in compliance with fraud and abuse reporting  requirements as a negative factor when determining the service  charge for that carrier in 2013.
section_title: OPM Contracting Office Staff Review Fraud and Abuse Program Outcomes, but Several Factors Contribute to the Challenge of Assessing Program Effectiveness
paragraphs: OPM contracting office staff review certain outcomes of carriers’ fraud  and abuse programs, but program outcomes do not provide complete  information about program effectiveness. Instead, the program outcomes  that OPM contracting office staff review provide partial information about  carriers’ fraud and abuse programs and may be useful for reporting  program accomplishments. For example, in 2011, carriers reported that  the outcomes of their fraud and abuse programs included 29 criminal  convictions and more than $23 million in recoveries to FEHBP.  However, program outcomes do not measure the success of strategies  intended to prevent or minimize fraud and abuse such as systems for  preauthorization or precertification. OPM officials reported that although  they are concerned about program outcomes that reflect the past, they  place emphasis on ensuring that carriers have preventive antifraud  strategies, such as prepayment controls (including system edits,  preauthorizations, and precertifications), in place to prevent future  occurrences of fraud and abuse. OPM contracting office staff also collect  information about how carriers assess their antifraud activities, in part to  determine whether carriers routinely assess their own antifraud programs.
OPM contracting office staff reported that they have not adopted specific  measures of program effectiveness for FEHBP fraud and abuse programs  because they have not identified an appropriate way to measure the  effectiveness of antifraud programs. Several factors contribute to  difficulties in developing a measure of the effectiveness for health care  antifraud programs. These factors include the following:
A lack of information about the baseline amount of fraud and abuse in  health care. We have previously reported that there is no reliable  baseline estimate of the amount of health care fraud in the United  States. Similarly, officials from OPM’s contracting office told us that  they cannot estimate the amount of fraud within FEHBP. A baseline  estimate could provide an understanding of the extent of fraud and,  with additional information on fraud and abuse program activities,  could help to clarify the effectiveness of antifraud program activities.
The difficulty of establishing a causal link between antifraud activities  and the amount of health care fraud or abuse. Although the efforts of  federal agencies and nongovernment entities may help to reduce  health care fraud, it is difficult to isolate the effect of any individual  action or to clearly establish that any change in the amount of fraud  was due to any specific cause. Thus, for example, a carrier’s  implementation of a specific fraud detection strategy may deter certain  types of fraud, but a reduction in those types of fraud could also have  been due to other causes, such as changes in laws or in prosecutorial  practice.
The difficulty of measuring the effect of efforts to prevent or deter  fraud and abuse. Officials from OPM’s contracting office reported that  they believe that FEHBP fraud and abuse program requirements and  their oversight of these programs have helped to limit the amount of  fraud in FEHBP. Officials and industry experts said, however, that it is  difficult to measure how much fraud or abuse is deterred or  prevented. For example, FEHBP carriers may place restrictions on  their provider networks to prevent individuals who are intent on fraud  from enrolling as providers, but it is difficult to measure the amount of  fraud or abuse that was prevented as a result of such restrictions.
Despite the challenges involved in assessing the effectiveness of  antifraud activities, OPM officials acknowledged the importance of  ensuring the prevention, detection, and correction of fraud and abuse  within the FEHBP. Others in the health care sector also acknowledge the  importance of measuring the effectiveness of antifraud activities and are  working to develop appropriate measures. For example, CMS recently  began an effort to estimate probable fraud involving specific home health  care services in Medicare that could provide information on the extent of  fraud that currently exists and, in coming years, how it has changed over  time. Establishing a baseline may make it feasible to study how antifraud  activities affect the level of home health care fraud. In addition, OPM told  us that they are continuing to monitor public and private sector efforts to  develop measures of the effectiveness of antifraud activities. If reliable  and valid measures of the effectiveness of antifraud programs are  identified, it will be important for OPM to determine whether those  measures are appropriate for the FEHBP.
section_title: Agency Comments
paragraphs: OPM and the OPM OIG reviewed a draft of this report and provided  technical comments, which we incorporated as appropriate.
As agreed with your office, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies of this report to the Acting  Director of OPM, appropriate congressional committees, and other  interested parties. The report also will be available at no charge on the  GAO website at http://www.gao.gov.
If you or your staffs have any questions about this report, please contact  me at (202) 512-7114 or kingk@gao.gov. Contact points for our Offices of  Congressional Relations and Public Affairs may be found on the last page  of this report. GAO staff who made major contributions to this report are  listed in appendix II.
section_title: Appendix I: Requirements for Carriers and OPM to Report Information about Potential Fraud and Abuse
paragraphs: There are requirements and procedures for reporting potential fraud and  abuse that apply to both the carriers that offer health care plans through  the Federal Employees Health Benefits Program (FEHBP) and the Office  of Personnel Management (OPM). These requirements and procedures  include communication between the carriers and OPM as well as  communication with law enforcement agencies and others, such as  Congress.
subsections: section_title: Requirements and Procedures for Reporting by Carriers
paragraphs: Carriers are required to report to both OPM’s Office of the Inspector  General (OIG) and OPM’s Healthcare & Insurance—Federal Employee  Insurance Operations office, which we refer to as the contracting office.
subsections: section_title: Reporting to the OIG
paragraphs: Carriers are required to report potential fraud and abuse to the OIG.  According to a letter OPM sent to carriers in 2011, carriers are required to  provide written notice to the OIG within 30 working days of becoming  aware of possible fraud or abuse. Carriers are to notify the OIG  regardless of the amount of money involved and without waiting to  determine whether there is sufficient evidence to substantiate the  allegation. The notice is generally to include information about the identity  of the suspected health care provider(s) or enrollee(s) and a brief  description of the allegation, among other things. The notice may request  that the OIG monitor a case being developed in preparation for a pending  referral, or it may request that the OIG decline the case so that the carrier  may participate in a class action lawsuit. According to OIG officials, the  notice may also include a referral to the OIG (i.e., a request that the OIG  evaluate the case).
As shown in figure 1, the carrier’s reporting requirements after providing  initial notice of potential fraud or abuse depend on the OIG’s response:  If the OIG decided to monitor the case and asked the carrier to  continue its investigation, then the carrier is to provide the OIG with  written status updates when it has additional information to  substantiate or refute the allegation.
If the OIG declined the case, the carrier may proceed with its  investigation without further contact with the OIG unless (1) the carrier  develops significant new information and believes that the OIG should  reconsider; (2) the case is accepted for investigation by one or more  other federal, state, or local law enforcement agencies; or (3) the case  is accepted for prosecution at the federal level, such as by a U.S.  Attorney’s Office or by the Department of Justice. If any of these  events occurs, the carrier is to provide the OIG with a written status  update.
If the OIG requested a referral, the carrier is to submit the referral  within 120 days or to provide monthly status updates starting on day  121.
Upon request, all carriers must furnish the OIG with FEHBP claims  information and supporting documentation relevant to open criminal, civil,  or administrative investigations and, absent extenuating circumstances,  must do so within 30 calendar days. The carrier may refer the case to the  OIG at any time and does not need a request from the OIG to do so.
Carriers are to submit status updates, which summarize new information,  to the OIG when:  the carrier develops significant new information that the carrier  believes would aid the OIG in determining whether to request a  referral or decline the case;  the carrier determines that the allegation had no merit or that no false  or fraudulent activity took place as alleged;  the carrier closes its inquiry;  the carrier wishes to proceed with administrative debt collection,  recovery, or settlement of an FEHBP overpayment; or  the OIG requests a status update.
When the carrier refers the case to the OIG (whether the referral was  solicited by the OIG or not), the referral is to be in writing and to include  (among other things) information about the identity of the suspected  health care provider(s) or enrollee(s); a comprehensive description of the  suspected fraud or abuse; and copies of any analyses, documents, or  other information the carrier has that is relevant to the allegation.
section_title: Reporting to the Contracting Office
paragraphs: Each carrier files two annual reports with the OPM contracting office;  these reports provide information about the carrier’s fraud and abuse  program and summarize relevant activities.
In one report, the carrier is to respond to a questionnaire that OPM’s  contracting office staff use to obtain information about the carrier’s  procedures for reporting potential fraud, including its criteria for  notifying law enforcement agencies and the OIG of potential fraud and  how it manages referrals from hotlines, law enforcement agencies,  and others. (This annual report also covers other aspects of the  carrier’s fraud and abuse program—its organization, certain budget  information, performance indicators, and other operational  information.)
A second report provides additional information about the fraud and  abuse program and covers the carrier’s fraud and abuse activities and  outcomes involving the FEHBP during the year—the number of cases  it opened, dollars recovered, number of criminal convictions, and so  forth.
section_title: Requirements and Procedures for Reporting by OPM
paragraphs: OPM is required to provide information to the carriers that notified it of  potential fraud or abuse and, depending on the case, may be required to  report information to other law enforcement entities. In addition, OPM  may share information about fraud or abuse with other carriers and  antifraud entities.
subsections: section_title: Reporting to Carriers That Notified the OIG of Potential Fraud or Abuse
paragraphs: When the OIG receives a carrier’s notification of potential fraud or abuse,  or when the OIG receives a status update about an instance of potential  fraud and abuse from a carrier, the OIG is to respond in writing within   30 calendar days to inform the carrier of its level of interest in the case.  Specifically, the OIG may (1) monitor the case, asking the carrier to  continue investigating and provide status updates as appropriate,   (2) decline the case, or (3) request a referral. (The OIG does not need a  referral from a carrier to pursue a case; it has the authority to pursue any  allegations of fraud or abuse that involve the FEHBP.) According to OIG  officials, when reaching a decision about its response to the carrier, the  OIG weighs information about patient safety; the type of fraud that is  potentially at issue (e.g., whether it seems to involve a pattern of  potentially fraudulent activity or not and whether it seems to be local or is  potentially widespread); the evidence in support of the allegation; the  dollar value of the alleged fraud or abuse; the resources that would likely  be required to pursue the case; and whether a prosecutor is likely to  pursue the case.
section_title: Reporting to Other Law Enforcement Entities
paragraphs: Depending on the case, there may be requirements or procedures for the  OIG to report information about potential fraud or abuse to other law  enforcement entities, including the Federal Bureau of Investigation (FBI),  U.S. Attorneys, or state or local prosecutors. According to the OIG’s  investigative manual, preliminary evaluation of information regarding  potential health care fraud involves determining whether there is enough  risk of patient harm or enough risk of financial exposure to continue  investigating the allegation. The OIG may also initiate a preliminary  inquiry proactively, for example, when its review of information about a  program yields information that suggests potential fraud or abuse. If a  preliminary inquiry indicates credible evidence that a criminal, civil, or  administrative violation may have occurred, the OIG decides whether to  initiate an investigation, refer the allegation to another law enforcement  agency, or seek to conduct a joint investigation with another law  enforcement agency.
The OIG may refer the allegation to another law enforcement agency  when (1) the subject matter is by law investigated by another agency;   (2) the allegation does not involve OPM employees, contractors,  programs, or property; (3) the allegation involves OPM indirectly, while  having a major impact on another agency; or (4) the allegation involves a   According to the OIG’s  threat to the safety of a high government official.investigative manual, these referrals are to include a presentation of the  complaint or allegation and any facts developed by the OIG.
Reporting to the FBI. According to the OIG’s investigative manual, the  OIG is to refer a case to the FBI when appropriate. In addition, if the  OIG determines that there is sufficiently credible evidence to convert a  preliminary inquiry into a criminal investigation, guidance from the  Office of the Attorney General specifies that the OIG is to notify the  FBI within 30 days, absent exigent circumstances. According to OIG  officials, when reaching a decision about whether to convert a  preliminary inquiry into a criminal investigation, the OIG weighs  patient safety, the extent of likely FEHBP exposure, the extent to  which the allegations appear to be supportable, and the likelihood of  prosecution (either criminal or civil).
Reporting to U.S. Attorneys. According to the OIG’s investigative  manual, if the OIG determines that a case should be referred to a U.S.  Attorney’s Office, a formal presentation normally occurs after the OIG  has completed its investigation. The OIG expects its agents to  establish and maintain working relationships with U.S. Attorneys’  Offices, and expects them to consult as soon as they have information  that indicates that an investigation may corroborate an allegation.  According to the OIG, early consultation allows the OIG to focus its  investigative efforts on and support prosecutive potential. If early  consultation results in acceptance of a case for prosecution, the OIG  is to provide the prosecutor with a preliminary investigation report.
Reporting to state or local prosecutors. If a case is declined by U.S.  Attorneys, the OIG may refer the case to state or local prosecutors.
section_title: Reporting to Congress and Federal Agencies
paragraphs: Under the Inspector General Act of 1978, as amended, the OIG is  required to report its activities and accomplishments (including those  related to fraud and abuse) to Congress semiannually, and the agency is  required to submit a response to each semiannual report. The OIG may  also prepare reports in response to requests from other federal agencies  (including GAO) or from congressional committees or members.
section_title: Communication with Carriers and Antifraud Entities
paragraphs: The OIG may notify multiple carriers of suspected fraud or abuse and  may share information about potential fraud and abuse through  participation in interagency health care fraud task forces or other fraud  detection and prevention organizations.
Consistent with the Health Insurance Portability and Accountability Act,  which encourages coordination and information sharing between federal,  state, and local law enforcement programs to control health care fraud  and the sharing of related information with the private sector,shares information with several antifraud entities:
The OIG participates as a law enforcement liaison to the National  Health Care Anti-Fraud Association (NHCAA). According to OIG  officials, the OIG works with the NHCAA and its members (which  include many FEHBP carriers) on training, education, and sharing  information about trends in health care fraud and participates in  NHCAA-sponsored training and conferences, and the OIG liaison to  the NHCAA participates on NHCAA committees and meets with the  NHCAA on a regular basis.
The OIG organizes and operates an FEHBP Carrier Task Force that  includes the OIG and representatives of the largest FEHBP carriers.  According to OIG officials, this task force meets on a quarterly basis  to share information about cases and fraud trends and to discuss  emerging fraud-related issues.
section_title: Appendix II: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact
section_title: Staff Acknowledgments
paragraphs: In addition to the contact named above, key contributors to this   report were Kristi Peterson, Assistant Director; Kristen Joan Anderson;   George Bogart; and Jennel Lockley.