E9-3675. Federal Employees Health Benefits Program Acquisition Regulation: Miscellaneous Clarifications and Corrections

AGENCY:

U.S. Office of Personnel Management.

ACTION:

Final rule.

SUMMARY:

The U.S. Office of Personnel Management (OPM) is issuing a final rule to amend the Federal Employees Health Benefits Acquisition Regulations (FEHBAR). The rule clarifies the rate-setting process for community-rated carriers with respect to Similarly Sized Subscriber Groups (SSSG) and removes the ban on adjustments based on rate reconciliation for the final year of Federal Employees Health Benefits Program (FEHBP) contracts.

DATES:

Effective Date: March 23, 2009.

FOR FURTHER INFORMATION CONTACT:

Edward M. DeHarde, Senior Policy Analyst at 202-606-0004, or e-mail [e-mail].

SUPPLEMENTARY INFORMATION:

The purpose of this regulation is to clarify requirements with respect to the rate-setting process for community-rated carriers and to require rate reconciliation for the final contract term for community-rated carriers that leave the FEHBP.

In prior years, carriers were not subjected to rate reconciliation in the final year of their contracts. Information technology and electronic transmission and storage of data now make it possible to efficiently perform rate reconciliation for the final contract year. Therefore, OPM will begin conducting such rate reconciliation on community-rated contracts that terminate after January 1, 2009.

A proposed rule was published to amend 48 CFR part 1652 in the Federal Register at 73 FR 51260, September 2, 2008. OPM requested comments by October 2, 2008. We received one set of comments by that date, from an FEHBP carrier. The issues raised by the commenter are discussed below.

The commenter did not have issue with our change at § 1652.216-70(b)(2) but suggested that we change “methodology” in the second sentence to “established policy” to be consistent with the language used earlier in the section. We have made this clarifying edit in the final rule.

The commenter indicated that the rule at § 1652.216-70(b)(7) would encourage carriers to reduce the discounts given to OPM or eliminate them entirely. The commentator stated that some carriers offer discounts to prevent against errors and changing assumptions in the rate proposal, such as changes in assumed Medicare Advantage or Medicare Part D rates. To offset these changes or errors, the carrier can then lower the discount it originally offered to OPM. The commenter suggested that we strike the word “guaranteed” from our regulation and indicate that discounts may be adjusted only “if the adjustment results in no change to the net to carrier rate agreed to by OPM before the beginning of the contract year.”

The proposed rule at § 1652.216-70(b)(7) is consistent with the requirements of a fixed price health benefits contract established under the principles of community rating. That is, a plan's premium as agreed to at time of proposal may change only to the extent that it reflects a change that occurs in the plan's community. Discounts that are offered to OPM and guaranteed by the carrier cannot be adjusted after the start of the contract period.

Finally, the commenter indicated that the proposed regulation was too broad at § 1652.216-70(b)(8), because OPM sometimes purchases benefits that are greater than those that the carrier prices in its community using its “established rating method.”

Nothing in the proposed rule precludes a carrier from rating for FEHB-specific provisions or requirements. The carrier must utilize a consistent rating method for any FEHB-specific provisions and requirements, and would need to apply this same method to its community if such provisions or requirements are extended to its community.

Therefore, for the reasons explained above and in the supplementary information of the proposed rule, the proposed rule amending 48 CFR part 1652 published in the Federal Register at 73 FR 51260, September 2, 2008, is adopted as final with a minor clarification at § 1652.216-70(b)(2) to change “methodology” to “established policy.”

Regulatory Flexibility Act

I certify that this regulation will not have a significant economic impact on a substantial number of small entities because all the small plan FEHBP contracts fall below the threshold for submitting cost or pricing data.

Executive Order 12866, Regulatory Review

This rule has been reviewed by the Office of Management and Budget in accordance with Executive Order 12866.

Lists of Subjects in 48 CFR Part 1652

• Government employees
• Government procurement
• Health insurance
• Reporting and recordkeeping requirements

U.S. Office of Personnel Management.

Kathie Ann Whipple,

Acting Director.

Accordingly, OPM is amending chapter 16 of title 48, Code of Federal Regulations, as follows:

CHAPTER 16—OFFICE OF PERSONNEL MANAGEMENT FEDERAL EMPLOYEES HEALTH BENEFITS ACQUISITION REGULATION

Subchapter H—Clauses and Forms

PART 1652—CONTRACT CLAUSES

1. The authority citation for part 1652 continues to read as follows:

Authority: 5 U.S.C. 8913; 40 U.S.C. 486(c); 48 CFR 1.301.

Subpart 1652.2—Texts of FEHBP Clauses

2. In § 1652.216-70, revise paragraphs (b)(2), (b)(3), (b)(4), and (b)(6), and add paragraphs (b)(7) and (b)(8) to read as follows:

§ 1652.216-70

Accounting and price adjustment.

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(b) * * *

(2) The subscription rates agreed to in this contract shall be equivalent to the subscription rates given to the carrier's similarly sized subscriber groups (SSSGs) as defined in FEHBAR 1602.170-13. The subscription rates shall be determined according to the carrier's established policy, which must be applied consistently to the FEHBP and to the carrier's SSSGs. If an SSSG receives a rate lower than that determined according to the carrier's established policy, it is considered a discount. The FEHBP must receive a discount equal to or greater than the carrier's largest SSSG discount.

(3) If, at the time of the rate reconciliation, the subscription rates are found to be lower than the equivalent rates for the lower of the two SSSGs, the carrier may include an adjustment to the Federal group's rates for the next contract period, except as noted in paragraph (b)(7) of this clause.

(4) If, at the time of the rate reconciliation, the subscription rates are found to be higher than the equivalent rates for the lower of the two SSSGs, the carrier shall reimburse the Fund, for example, by reducing the FEHB rates for the next contract term to reflect the difference between the estimated rates and the rates which are derived using the methodology of the lower rated SSSG, except as noted in paragraph (b)(7) of this clause.

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(6) For contract years beginning on or after January 1, 2009, in the event this contract is not renewed, the final rate reconciliation will be performed. The carrier must promptly pay any amount owed to OPM. Any amount recoverable by the carrier is limited to the amount in the contingency reserve for the terminating plan as of December 31 of the terminating year.

(7) Carriers may provide additional guaranteed discounts to the FEHBP that are not given to SSSGs. Any such guaranteed discounts must be clearly identified as guaranteed discounts. After the beginning of the contract year for which the rates are set, these guaranteed FEHBP discounts may not be adjusted.

(8) Carriers may not impose surcharges (loadings not defined based on an established rating method) on the FEHBP subscription rates or use surcharges in the rate reconciliation process irrespective of whether surcharges are applied to the SSSGs.

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