Fraud and Abuse:

Stronger Controls Needed in Federal Employees Health Benefits Program

GGD-91-95: Published: Jul 16, 1991. Publicly Released: Jul 24, 1991.

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Pursuant to a congressional request, GAO reviewed the Office of Personnel Management's (OPM) internal controls over the Federal Employees Health Benefits Program, focusing on whether those controls adequately protected funds from fraud and abuse within the context of the Federal Managers' Financial Integrity Act of 1982 (FMFIA).

GAO found that: (1) OPM has not fully accomplished the objectives of FMFIA with respect to the health insurance program; (2) the OPM Retirement and Insurance Group (RIG) continues to rely almost entirely on the OPM Inspector General audit reports to perform the oversight role, although information provided by those audits covered carriers' activities that occurred 5 to 10 years ago; (3) during the past 13 years, misappropriation of funds occurred in 7 of the 25 fee-for-service plans; (4) although regulatory and contractual requirements establish control objectives for the carriers, the activities or procedures for accomplishing the objectives have been left to the discretion of the carriers until abuses are identified through audits or other means; (5) RIG does not conduct adequate program oversight of plan operations to identify internal control deficiencies or hold the carriers accountable for correcting such deficiencies; (6) RIG did not determine if the carriers timely or effectively corrected the problems identified in audits; (7) RIG did not provide the carriers adequate leadership or direction concerning the pursuit of provider fraud and abuse, and OPM did not implement its authority to administratively penalize fraudulent or abusive providers; (8) health insurance companies claim that the high cost of enrollee and provider fraud has been offset by their antifraud programs; and (9) OPM did not include program control weaknesses in its annual FMFIA reports.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: OPM developed minimum internal control and quality assurance standards for financial and claims processing controls for implementation by the carriers in May 1993. The standards are contained in the carriers' annual contracts with OPM.

    Recommendation: To achieve the objectives of FMFIA within the Federal Employees Health Benefits Program, the Director, OPM, should require RIG to assess the adequacy and effectiveness of the financial and claims processing controls used within the plans when conducting FMFIA evaluations of the health insurance program. An alternative approach for doing this would be to require the carriers to conduct FMFIA evaluations of their plans' controls and provide the results of their evaluations for RIG review.

    Agency Affected: Office of Personnel Management

  2. Status: Closed - Implemented

    Comments: OPM developed minimum internal control and quality assurance standards for financial and claims processing controls for implementation by the carriers in May 1993. The standards are contained in the carriers' annual contracts with OPM.

    Recommendation: To achieve the objectives of FMFIA within the Federal Employees Health Benefits Program, the Director, OPM, should require RIG to assess the adequacy and effectiveness of the financial and claims processing controls used within the plans when conducting FMFIA evaluations of the health insurance program. An alternative approach for doing this would be to require the carriers to conduct FMFIA evaluations of their plans' controls and provide the results of their evaluations for RIG review.

    Agency Affected: Office of Personnel Management: Office of the Inspector General (OPM)

  3. Status: Closed - Implemented

    Comments: OPM is continuing on-site program analysis visits and will expand such visits as resources permit. OPM is also working with OMB on procedures to implement cost accounting standards in the program and intends to make them effective with the 1995 contracts.

    Recommendation: To achieve the objectives of FMFIA within the Federal Employees Health Benefits Program, the Director, OPM, should require RIG to: (1) implement the program analysis and onsite visits RIG identified on December 31, 1989, as the corrective actions needed to address the problem of limited carrier oversight; and (2) further define what the program analysis is to entail and identify the financial and claims processing information it will need from the carriers on an ongoing basis to perform its analyses.

    Agency Affected: Office of Personnel Management

  4. Status: Closed - Implemented

    Comments: OPM is continuing on-site program analysis visits and will expand such visits as resources permit. OPM is also working with OMB on procedures to implement cost accounting standards in the program and intends to make them effective with the 1995 contracts.

    Recommendation: To achieve the objectives of FMFIA within the Federal Employees Health Benefits Program, the Director, OPM, should require RIG to: (1) implement the program analysis and onsite visits RIG identified on December 31, 1989, as the corrective actions needed to address the problem of limited carrier oversight; and (2) further define what the program analysis is to entail and identify the financial and claims processing information it will need from the carriers on an ongoing basis to perform its analyses.

    Agency Affected: Office of Personnel Management: Office of the Inspector General (OPM)

  5. Status: Closed - Implemented

    Comments: RIG integrated the followup of nonmonetary findings into the regular audit resolution process. RIG and the Office of the Inspector General (OIG) previously followed up specifically only on monetary findings.

    Recommendation: To achieve the objectives of FMFIA within the Federal Employees Health Benefits Program, the Director, OPM, should require RIG to make the carriers accountable for implementing Inspector General audit recommendations for correcting internal control deficiencies and ensure that corrective actions taken by the carriers are timely and effective.

    Agency Affected: Office of Personnel Management

  6. Status: Closed - Implemented

    Comments: OPM printed the OIG fraud hotline number in health benefits brochures and required the carriers to submit periodic reports on the number, type, and disposition of fraud and abuse cases pursued to help it evaluate the magnitude of the problem and develop a program to address it. In February 1993, OPM started an activity to prevent payments or contracts between debarred providers and carriers. OPM's RI also continues to assist OPM's IG with its sanction program.

    Recommendation: To achieve the objectives of FMFIA within the Federal Employees Health Benefits Program, the Director, OPM, should require RIG to develop and implement an aggressive program for preventing and detecting enrollee and provider fraud and abuse. In developing this program, RIG should determine the minimum claims processing controls that should be contractually required of the carriers. As a basis for making this determination, RIG should evaluate and compare the costs and results of the activities currently performed by the carriers and obtain information on the fraud and abuse prevention and detection activities used in other government and private-sector insurance programs.

    Agency Affected: Office of Personnel Management

  7. Status: Closed - Implemented

    Comments: Carriers are required to provide recommended reports semi-annually. OPM plans to strengthen the fraud and abuse detection requirements of the carriers, especially the fee-for-service plans. Currently, fraud and abuse review is limited to receipt of semi-annual reports from the carriers on the number, type, and disposition of fraud and abuse cases pursued and in coordination with the OIG. In December 1993, OPM communicated a standard definition of fraud to the carriers for use in their semi-annual reports.

    Recommendation: To achieve the objectives of FMFIA within the Federal Employees Health Benefits Program, the Director, OPM, should require RIG to monitor the magnitude of enrollee and provider fraud and abuse in the program and the carriers' efforts to address the problem by, for example, requiring the carriers to submit periodic reports on the number, type, and disposition of the fraud and abuse cases pursued.

    Agency Affected: Office of Personnel Management

  8. Status: Closed - Implemented

    Comments: Responsibility was assigned to OIG, which began operating an administrative sanctions program under the Nonprocurement Debarment and Suspension Common Rule in 1993. Instructions have been issued to carriers requiring them to develop and implement plans for withholding payments from debarred providers and to report to OIG semiannually the numbers of claims disallowed. OIG is continuing to explore opportunities for improving the sanctions program through legislation.

    Recommendation: The Director, OPM, should determine where the responsibilities for implementing the authority to administratively penalize fraudulent and abusive providers should be organizationally placed within OPM, RIG, or the Office of the Inspector General (OIG) and require the responsible organizations to develop an action plan for implementing the authority as soon as possible.

    Agency Affected: Office of Personnel Management

  9. Status: Closed - Not Implemented

    Comments: OPM program offices have determined that the weaknesses are corrected, but will continue to report the weaknesses within FEHBP. The Office of the Chief Financial Officer will validate the corrective actions before OPM formally recognizes resolution of this area.

    Recommendation: The Director, OPM, should include the weaknesses discussed in this report in the annual FMFIA report to the President and Congress until the above recommendations are implemented.

    Agency Affected: Office of Personnel Management

  10. Status: Closed - Implemented

    Comments: OIG developed an action plan to reduce the audit cycle to 3 years by June 30, 1996. The plan called for additional staff, auditing technique revisions, and analysis of the present auditing program. It was expected that, if additional staff had been approved for the increments planned, the deadline would have been met. Future staff increases, however, remain unlikely given current budget scenarios. Consequently, OIG does not expect to make further significant progress toward reducing the audit cycle to 3 years. With present staffing, it would take about 9 years to audit each fee-for-service plan at least once. Due to prioritizing, some plans would be audited less frequently than once every 9 years, while others would be audited more frequently. In collaboration with program officials, OIG is exploring opportunities for improving carrier internal controls. Stronger carrier controls will reduce the resources needed to perform each audit, thereby increasing the frequency of audits.

    Recommendation: The Inspector General, OPM, should identify and implement the actions needed to achieve its goal of a 3- to 5-year audit cycle for the fee-for-service plans.

    Agency Affected: Office of Personnel Management: Office of the Inspector General (OPM)

 

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