MAMSI expects talks soon on federal audit HMO operator was found to overcharge for U.S. employees' premiums

Health care

November 13, 1998|By M. William Salganik | M. William Salganik,SUN STAFF

Mid Atlantic Medical Services Inc., the Rockville HMO operator, said yesterday it expects to begin settlement discussions soon on a federal audit that said that it overcharged for premiums on federal employee health insurance from 1992 to MAMSI announced Wednesday, when it released its third quarter financial results, that it was setting aside $16.5 million for the possible settlement. It had disclosed the audit in August, in a filing with the Securities and Exchange Commission.

Elizabeth Sammis, a MAMSI senior director and spokeswoman, said the company had received the draft audit in May, had responded to the draft and was awaiting a reply from the federal Office of Personnel Management, which administers the Federal Employee Health Benefits Program.

Then, she said, "we are assuming that when they get back to us, we will begin discussions about a possible settlement."

In its SEC filing, MAMSI said the audit found "the FEHBP was charged rates that exceeded the then market price, and the FEHBP is due about $14,000,000, which includes interest."

The audit found no improper charges from 1995 to 1997, Sammis said.

The Office of Personnel Management declined to discuss MAMSI, saying the audit results are not final. However, a spokesman for OPM said the agency routinely audits the more than 400 insurers participating in the program.

Those audits, the spokesman said, review whether the rates charged to FEHBP are calculated the same way as those charged to other large customers. "Frequently, we find errors in the rating," the spokesman said.

According to an OPM press release from last year, OPM recovered about $300 million from insurers from 1994 to 1997. Money recovered is used to reduce future benefits. The FEHBP pays out about $15 billion a year in benefits. On average, the government pays 72 percent of premiums, while employees pay 28 percent.

MAMSI covers about 1.8 million people in Maryland and nearby states, including 48,446 in FEHBP.

George F. Shipp, an analyst with Scott and Stringfellow who follows MAMSI, said of the potential payment to FEHBP, "relative to the potential of the company, it shouldn't make that much of a difference."

The announcement, which came after stock markets closed Wednesday, did not have great impact on MAMSI stock yesterday. Shares closed at $9.375, down 31.25 cents.

Adding to the uncertainty at MAMSI was an announcement last week that its board of directors split evenly in a vote of confidence in George T. Jochum, the company's chairman and chief executive. That touched off a dispute -- not yet resolved -- as to whether the vote effectively fired Jochum.

Pub Date: 11/13/98

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