Group Health Incorporated Claimed Some Unallowable Medicare Postretirement Benefit Costs for Calendar Years 2009 Through 2016

GHI, a subsidiary of EmblemHealth Services Company, LLC, administered Medicare operations under Coordination of Benefits (COB) contracts with CMS. During our audit period, GHI also performed Medicare work on the Medicare Secondary Payer Recovery and Benefit Coordination and Recovery (MSPRC) contracts. GHI also performed work as a subcontractor on the Retiree Drug Subsidy (RDS) contract. GHI participates in the EmblemHealth Services Health and Welfare Benefits Plan. The purpose of this plan is to provide medical and life coverage to eligible retirees and their eligible family members. Medicare Reimbursement of Postretirement Benefit Plan CostsCMS reimburses a portion of its contractors’ PRB costs. In claiming PRB costs, contractors must follow cost reimbursement principles contained in the FAR and applicable CAS as required by the Medicare contracts. To be allowable for Medicare reimbursement, pay-as-you-go PRB costs must be assigned to the period in which the benefits are actually provided, or when the costs are paid to an insurer, provider, or other recipient for current-year benefits or premiums. Incurred Cost Proposal AuditsAt CMS’s request, Figliozzi & Company, P.C. (Figliozzi), Kearney & Company, P.C. (Kearney), and Davis Farr, LLP (Farr), performed audits of the ICPs that GHI submitted for CYs 2009 through 2016. The objectives of the Figliozzi, Kearney, and Farr ICP audits were to determine whether costs were allowable in accordance with the FAR, the U.S. Department of Health and Human Services Acquisition Regulation, and the CAS. For our current audit, we relied on the Figliozzi, Kearney, and Farr ICP audit findings and recommendations when computing the allowable PRB costs discussed in this report. We incorporated the results of the Figliozzi, Kearney, and Farr ICP audits into our computations of the audited indirect cost rates, and ultimately the PRB costs claimed, for the contracts subject to the FAR. CMS will use our report on allowable PRB costs, as well as the Figliozzi, Kearney, and Farr ICP audit reports, to determine the final indirect cost rates and the total allowable contract costs for GHI for CYs 2009 through 2016.