GAO reviewed certain aspects of the Federal Employees Health Benefits Program (FEHBP) to determine the reasonableness of the administrative costs that carriers basing their premiums on claims experience charged FEHBP.

GAO found that: (1) one carrier improperly charged FEHBP and the Retired Federal Employees Health Benefits Program about $7.2 million for federal income taxes on its service charge from 1982 through 1987 by reducing the investment income the programs earned on reserves that it held; (2) the carrier was not scheduled for an Office of Personnel Management (OPM) audit in fiscal year 1989; (3) any delay in recovering the improper charges would result in the health programs losing further investment income; and (4) the carrier would continue to have the interest-free use of program funds and could make the improper charges again in 1988.

Status Legend:

Review Pending-GAO has not yet assessed implementation status.

Open-Actions to satisfy the intent of the recommendation have not been taken or are being planned, or actions that partially satisfy the intent of the recommendation have been taken.

Closed-implemented-Actions that satisfy the intent of the recommendation have been taken.

Closed-not implemented-While the intent of the recommendation has not been satisfied, time or circumstances have rendered the recommendation invalid.

• Review Pending
• Open
• Closed - implemented
• Closed - not implemented

Recommendation for Executive Action

Recommendation: In order to hold the loss of investment income to a minimum, OPM should take action to recover the improper charges now rather than waiting until the next scheduled audit.

Agency Affected: Office of Personnel Management

Status: Closed - Implemented

Comments: OPM requested AETNA to refund charges in dispate and AETNA did so.