Does OPM know that spouse on your federal health insurance plan is really your dog?

The Federal Employees Health Benefits Program has a problem. Its overseer, the Office of Personnel Management, doesn’t have a reliable way of know whether plan holders’ family members are actually eligible. The Government Accountability Office estimates insurers might be paying out a billion dollars a year on ineligible members. For more, Federal Drive with Tom Temin spoke with Seto Bagdoyan, Director of the GAO’s Forensic Audits and Investigative Service.

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Interview transcript:

Tom Temin
So this is a surprise, this particular problem, you would assume that people just sign up family members that are eligible. What did you study? And what did you find here? Let’s get the top line numbers.

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Seto Bagdoyan
As setting the context for this program, it covers a little over 8 million people at an annual cost of almost $60 billion. So it’s a substantial program. And Sen. Rick Scott (R-Fl.), asked us to look into this program, based on his experience while he was governor. He initiated an eligibility audit for the Florida equivalent of the [Federal Employees Health Benefits Program]. So that was the impetus for our work.

Tom Temin
And when you say $60 billion, is that the payouts from insurers or is that the premiums paid by federal budget?

Seto Bagdoyan
That is the premium cost. So it roughly comes out to $6,000-$7,000 per covered individual. If my math is correct.

Tom Temin
Right. And the implication then, is that premiums are driven by what the program costs. So the payouts are happening to cover healthcare for ineligible people that’s driving premiums up for everyone.

Seto Bagdoyan
That’s correct. Yes, so if you have ineligible people racking up claims costs, those are eventually rolled into future premiums. So you’re absolutely correct.

Tom Temin
So what is the fraud risk here? What’s potentially happening?

Seto Bagdoyan
Yeah, great question. Nobody has really looked at it systematically at the [Office of Personnel Management]. Their initial fraud risk assessment from 2020, did not address enrollee eligibility as a potential risk. So OPM doesn’t know. And you mentioned the estimate of about a billion dollars a year and lost money, essentially. It’s actually an extrapolation by OPM based on private industry data. So it’s not a systematic look as to how bad the problem might be. Just want to make that perfectly clear. We did not independently corroborate that number up.

Tom Temin
And do we know what the mechanism is? Do people enroll their dogs and give it a name or do they enroll third cousins or what’s going on? Do we think?

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Seto Bagdoyan
Couple of examples for you that we did flag. From closed cases there was a federal employee who kept his purported wife and stepchild on the rolls for about 12 years, and FEHB ended up paying out over $100,000 in claims. And there was another instance where an employee kept his ex-spouse following their divorce for 14 years. And that cost the government over $150,000. So it’s possible that these are real people, but they’re not eligible. Now, whether they disguise their dogs as eligible people, that’s up for discussion. But there is often just real people who are not eligible being joined into this program.

Tom Temin
And say, a state or in the private sector. Who is the burden upon to make sure that people are eligible? Would it be OPM in this case or would it be the insurers?

Seto Bagdoyan
When we did interview a number of insurers, including the biggest one that has over 60% of market share, they basically told us that once someone comes to them, they assume that someone else, either OPM and/or the employing agency, has vetted these people. So when they show up at the doorstep with a claim, the insurance carrier assumes that this individual or family is eligible.

Tom Temin
So everyone’s assuming everyone else’s verified those names.

Seto Bagdoyan
Yeah, it is a complex system. As you can imagine, there’s OPM, there’s the employing agency, there’s the carrier. And then the fourth level, of course, is the actual healthcare providers. So it’s very convoluted, but everybody seems to be pointing fingers at everybody else.

Tom Temin
We’re speaking with Seto Bagdoyan. He’s director of the Forensic Audits and Investigative Service at the Government Accountability Office. All right then, OPM is now aware. What can they do about it? What did you recommend? Is there a mechanism that could work here?

Seto Bagdoyan
Sure. We made four recommendations to OPM. They generally agreed with them. First, we said you got to figure out a system to ensure that employee agencies are following your most recent guidance, which is steps in the right direction, but they are forward looking. So OPM said yeah, we’re doing a few things. We might think about implementing this recommendation, we’ll get back to you. We also have made other recommendations like doing, essentially, an eligibility audit, which would be a retrospective look to see how many people OPM is carrying now that are not eligible and figure out basically who these people are and take steps to remove them. We also recommended that OPM conduct a thorough fraud risk assessment that would include eligibility as one of the potential key risks. And then in building out towards a more comprehensive anti-fraud strategy, document their assessment and create what we call a fraud risk profile. Which is essentially the DNA of individual risks. What’s it about? Where does it fall in priority and those kinds of things. So that eventually will feed into their progress management decision making?

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Tom Temin
Well, if someone has a spouse, and they get divorced and that person is no longer eligible, how would the government know that or how would a carrier know that?

Seto Bagdoyan
Well, nominally, the expectation is that individual would report that event, that qualifying life event, if you will, to their employer at a minimum, and then the system would take over from there to drop coverage at some date certain. Like when my son turned 21, I believe, he lost his dental coverage, because that’s when it expired. That was covered by me. So we had to go back and buy him his own coverage. But that was through the letter process, and so on, that involved my employer and the carrier. So if that doesn’t happen, the person is not ethical enough to do that, then you have this situation where nobody knows and it’s business as usual.

Tom Temin
Because in some cases, say you are a federal employee and you have a child, and you register that child that year. That’s verifiable. There are vital records. And there is what is entering their personnel record. And then you can automatically know that person was born 21 years ago, guess what. But a divorce or an ex-spouse, that type of thing. It’s hard to verify. So there are some data elements that exist that machines could find this. Others they don’t.

Seto Bagdoyan
Yeah, so an assessment process would flag those types of concerns. And through the strategy process aspirationally, at least, you would establish front loaded controls that would catch those types of instances.

Tom Temin
Because I guess divorces are also matters of public record in the courts.

Seto Bagdoyan
Right, exactly. So how much digging does one want to do in this case to verify that event? But if they’re not aware of it at all, then they have nothing to go by.

Tom Temin
Because over at the whole apparatus now at the Defense Department — which used to be at OPM for background investigations, for security clearance — they do have this at least nascent, continuous vetting process where there are public records and private data sources, commercially available, that are checked automatically by machine about people, to know if they’re in debt and so forth. I wonder if that same type of mechanism could apply for eligibility in this case?

Seto Bagdoyan
Potentially, of course, there’s going to be a cost and outcome tradeoff. But yeah, having gone through that security clearance update fairly recently, I’m aware of the things that you signed, that allow the government to check a whole bunch of things that you didn’t even know existed. So that might be a way but they have to do an assessment first to see where do they spend their money most effectively.

Tom Temin
Right. And just putting on my imagination hat. If everyone was charged $2 a year on their premium for fraud detection programs, then the program would take in $18 million a year. You can run a pretty good forensics program for that kind money.

Seto Bagdoyan
You might be onto something there Tom, yeah. You might get a cut out of it to for suggesting it.

Tom Temin
All right, I’ll take it. So at this point, though, OPM is it with respect to your report; the ball is in their court.

Seto Bagdoyan
That’s right. They were the impacted agency because they oversee the program and the recommendations were directed at the director, as I said. They concurred generally; of course, proof’s in the pudding as to how they implement it. We’ll monitor this over time. We usually give agencies some grace period. Some of them take several years to get there. Others act quickly because of reputational concerns and other things or they do take fraud risk and progress management seriously. And they act in a timely manner. So we’re hopeful OPM will take the right steps, but we’ll definitely keep their feet to the fire.

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