OIG's Latest FEHBP Audit and the $203,700,000 Checkout "Oops"

Imagine you're at a supermarket where you're accidentally overcharged $100 due to errors at the checkout. The check-out person says:

“Oops, I sincerely apologize” and then proceeds to take the next in line. 

“But what about my money? You can’t just keep my $200!” you say, but they are already half-way through the next customer's cart.

 “Ma'am, I don’t keep the money, the store does.  Its too much trouble to go back and re-check everything and figure out what was overcharged and what wasn’t.  We'll do better next time.” 

Absurd right?  The Office of Inspector General (OIG) certainly seemed to think so when it found out that certain Anthem BCBS plans had overcharged the Federal Employee Health Benefit Program (FEHBP) by about $200M.  When the OIG demanded that Anthem BCBS make the FEHBP (i.e., taxpayers) whole, BCBS Association disagreed with the OIG’s recommendation to disallow the overcharges, citing their "proactive measures" in discovering the error and initiating recovery efforts, even if they were ultimately unsuccessful. 

Absurd right?  But this isn’t a ridiculous hypothetical, this is reality.   

Some background: In November 2023, OIG published its Final Audit Report of certain Anthem BCBS Plans for the FEHBP in years 2019 to 2021. The objective of the audit was to determine whether charges to FEHBP members by four Anthem BCBS plans were in accordance with BCBS Association’s contract with U.S. Office of Personnel Management and the plan documents.   

The audit team employed specific criteria to select claims for review, focusing on certain areas of potential overpayment or error. Specifically, they looked at Point of Service (POS) Claims Review: The audit identified all claims where the FEHBP was the primary insurer, total claim amount paid was $100 or greater, and then they chose POS groups where the total amount paid over $50 million, leading to a selection of 10 out of 44 POS groups. The aim was to review a representative sample of claims with higher payment values. They also targeted claims with "unlisted," "miscellaneous," or "unclassified" procedure codes with an amount where the plan paid greater than $200,000.   Other reviews included duplicate claims, provider network status reviews, and coordination of benefits with Medicare. 

The selection of claims for review was a mix of judgmental (based on specific criteria like amount paid) and random sampling. OIG stated that its  “focus was on identifying significant overpayments and errors, thereby providing a comprehensive overview of the FEHBP’s claims processing and payment operations.”

Audit Findings:  The audit revealed a substantial issue with overpayments totaling approximately $203.7 million. This figure comprises $203.7 million in overpayments and a relatively minor $23,915 in underpayments. The errors were primarily attributed to two areas: Non-Par Provider Overpayment System Error and Provider Network Status Errors. This magnitude of overcharges is significant, indicating serious lapses in claims processing and payment operations.

The "Oops." In 2019 there was apparently a 'glitch' in Anthem BCBS’s systems that led to the FEHBP being overcharged by $203.2 million. Put simply, it was like a programming error that caused items to ring up at a higher price than they should.  But in this case, it was hundreds of millions of dollars and high-priced medical claims.  The issue was ultimately addressed with a “program update” on December 22, 2021, but the damage was done. 

Following the identification of these overpayments, efforts to recover the funds were initiated. However, as of the report's date (and over two years after the issue was identified), only a fraction of the overcharged amount had been recovered ($213,420).  As noted above, the BCBS Association has expressed their disagreement with OIG’s recommendation to disallow the overcharges and yet, they remain one of the largest carriers for FEHBP members.  And lest there be any doubt about the potential impact for these types of “system errors” in these select plans, over $7.9 billion in health benefits payments went through these four Anthem BCBS Plan sites alone. 

Why Does it Matter: FEHBP is the largest employer-sponsored health plan in the country, spending over $50 billion annually to provide health benefits to more than 8 million people.  How many more OIG Audit Reports must be filed before someone in DC sees and acts upon the pressing need for accountability and transparency from its vendors.  This is a recurring pattern: carriers and pharmacy benefit managers (PBMs) make costly errors amounting to hundreds of millions of dollars, yet the consequences often amount to little more than a nominal reprimand.

These entities not only escape punishment, but they also seem to be continuously rewarded with contract extensions and even additional government business.  There seems to be little stewardship of taxpayer dollars and a total disregard of the principles of accountability and strict oversight. 

The FEHBP's approach should be more 'practice what you preach' than 'do as I say, not as I do', ensuring vendor accountability aligns with its mandate to protect both taxpayer dollars and the health of millions.