[Federal Register Volume 59, Number 61 (Wednesday, March 30, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-7468]
[[Page Unknown]]
[Federal Register: March 30, 1994]
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OFFICE OF PERSONNEL MANAGEMENT
48 CFR Parts 1601, 1602, 1609, 1615, 1632, 1642, 1646, 1652
RIN 3206-AE67
Federal Employees Health Benefits Acquisition Regulation;
Miscellaneous Changes
agency: Office of Personnel Management.
action: Final rulemaking.
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summary: The Office of Personnel Management (OPM) is issuing final
regulations that amend certain provisions of the Federal Employees
Health Benefits Acquisition Regulation (FEHBAR). The changes will more
precisely reflect the needs of OPM in contracting for health benefits
under the Federal Employees Health Benefits Program (FEHBP) and in the
general administration of the FEHBP contracts.
effective date: March 30, 1994.
for further information contact: Mary Ann Mercer, (202) 606-0191.
supplementary information: On June 29, 1993, OPM published proposed
regulations in the Federal Register (58 FR 34769) that would amend
certain community rating and experience rating provisions of the
FEHBAR. We received 36 comments, 28 from FEHBP community rated
carriers, two from FEHBP experience rated carriers, two from
organizations representing FEHBP health maintenance organizations
(HMOs) and similar managed care systems, two from law firms
representing a number of community rated FEHBP carriers, one from a law
firm representing an association of Federal health organizations, and
one from a Federal agency. We appreciate the observations and
suggestions offered and have taken them into consideration in these
regulations.
The majority of the comments were favorable toward OPM's efforts to
more effectively administer the FEHBP. Many of the commenters expressed
concerns, however, about the changes with respect to Similarly Sized
Subscriber Groups (SSSGs) and the quality assurance program
requirements proposed by OPM. A number of them offered suggestions as
to how OPM might further clarify the regulations to mitigate these
concerns.
The comments and recommendations received reflect the difficulty
OPM has experienced in specifying explicit standards in regulation in
these two areas. The conflicting comments and suggestions from the
carriers have prompted us to reconsider our decision to establish
explicit standards by regulation. Instead, OPM has decided to replace
the standards with guiding principles and will provide carriers with
specific criteria for SSSGs in the annual rate letters. In addition,
OPM intends to furnish specific quality assurance standards prior to
its FEHBP contract negotiations for the following contract year. This
approach will foster competitiveness and commercial practices in the
FEHBP by reflecting the latest developments in the insurance industry
and will thereby allow OPM to utilize the most recent market mechanisms
in the FEHBP.
This approach conforms to the principles of the Administration's
National Performance Review (NPR) as well. A key element of the NPR is
the simplification of government procurement regulations and processes,
a shifting from rigid rules to guiding principles, and replacement of
agency rules with policy directives and instructions, where
appropriate. An important advantage to this approach is that OPM will
no longer find its regulatory policies in these areas lagging behind
insurance industry trends because both OPM and the carriers will have
the flexibility to adjust quickly to current market conditions.
Pursuant to section 553(d)(3) of title 5 of the United States Code,
OPM is issuing these regulations with an immediate effective date. The
regulations are being made effective immediately so that they may be in
place before the rate letters for the 1995 FEHBP contract year are
mailed to the carriers.
The following will address the comments received and will clarify
OPM's intent with respect to those portions of the regulations changed
as well as those retained.
In the past, we have noted a general misunderstanding relating to
OPM's objective in using SSSGs to verify the Federal group's rate.
OPM's objective is to ensure that the Federal group's rate is
equivalent to the SSSGs' rates, thereby reflecting any market
advantages given to the SSSGs.
In the Supplementary Information section of the proposed
regulations, OPM asserted that it may examine any aspect of a carrier's
rating procedure to ensure that the carrier gives the Federal group an
equitable rate. This statement troubled a number of commenters who
expressed concern that, even where the carrier charges the Federal
group a rate that is equivalent to that charged the SSSGs, it is OPM's
practice to look beyond the SSSGs to determine whether the Federal
group is entitled to any rate adjustment. They contend that OPM's
regulations do not provide for any rate adjustment for the Federal
group based on rates charged a group that is not an SSSG. One commenter
interpreted the statement to mean that OPM will limit rates to the
lowest amounts charged by an HMO to its largest groups.
We would like to clarify that OPM's detailed examination of a
carrier's rating process is not an alternative procedure to identify
SSSGs. OPM will examine the rating methodology of the SSSGs to ensure
that it is consistent with that used for the Federal group. For
example, if the carrier uses traditional community rating (TCR) or
community rating by class (CRC) for the Federal group and the SSSGs,
OPM will verify that the carrier based on the self-and-family rates for
all three groups on the same underlying capitation rate and derived
them by the same general procedure. If the carrier uses adjusted
community rating (ACR) for all three groups, OPM will verify that the
carrier derived the self-and-family rates for all three groups by the
same general methodology.
We have revised the definition of SSSGs. The SSSGs are the two
groups closest in size to the Federal group that meet the criteria
specified in OPM's rate instructions. All groups are potentially SSSGs
except those which the carrier rates by retrospective experience
rating.
OPM does, however, reserve the right to examine the rate
development of non-SSSG groups. We want to emphasize that the sole
purpose of such analysis is to make certain that the Federal group's
rates are equivalent to the SSSGs' rates. For example, if an SSSG had a
special benefit (e.g., dental benefit) not included in the Federal
group benefit package, OPM would compare what the carrier charged the
SSSG with what it charged other groups for this benefit. The purpose
would be to verify that the SSSG received no discount. Carriers need
not be concerned that an OPM review of a commercial group makes it a
potential SSSG.
One carrier wanted to know if health insurance purchasing
cooperatives (HIPC) under state health care reform packages are
excluded from consideration as SSSGs. OPM will consider all group not
retrospectively experience rated as potential SSSGs. Assuming, then,
that the group is not retrospectively experience rated, the size of the
group in relation to the Federal group will be used to determine SSSGs.
Since a HIPC negotiates rates on behalf of a group, if this group
satisfies the size requirement, we would consider it to be an SSSG.
One carrier suggested that OPM should change the definition of the
SSSGs from one based on subscriber enrollment to one based on member
enrollment. Basing the SSSGs on member enrollment is not practicable
for the FEHBP because OPM does not have data on family members. The
only reliable data available to OPM is the subscriber headcount.
Consequently, OPM bases the SSSGs on subscriber enrollment.
One law firm stated that the carriers' evaluations should be
presumed correct in reconciling benefit differences unless inconsistent
application of such values can be demonstrated. The firm, as well as
another organization representing HMOs, is concerned that the actuaries
and auditors will determine the value of the same benefits differently.
OPM understands the concern. Nevertheless, OPM would be acting
irresponsibly if it presumed the carriers' evaluations are correct. The
fact that the Office of Actuaries accepts a rate proposal does not
guarantee that no errors in the overall rates or in a particular aspect
of the proposal will be uncovered in audit. This is precisely why the
annual rate instructions to the carriers specifically state that the
rate proposals are subject to audit.
Ten community rated carriers and one law firm voiced concern about
the requirement that the SSSGs be determined from enrollment data from
the current contract year rather than data from the year preceding the
contract year. They are concerned that the SSSGs may change as a result
of enrollment changes between the date rate proposals are submitted and
the date they are reconciled; that the HMO's target SSSGs may renew
after the reconciliation date; or that they may not renew at all. They
fear that the HMO may find itself out of compliance with the proposed
SSSG requirements. They believe that reconciliations should look only
at renewal dates already passed as of the time of reconciliation.
OPM explained in its 1993 rate instructions that, beginning with
the 1993 rate year, the enrollment for SSSGs would correspond to the
rate year. For example, for the 1993 rate year, the 1993 enrollment for
SSSGs would be used. Therefore, carriers need not be concerned that
``target'' SSSGs may renew after the reconciliation date or that they
may not renew at all. There are no longer any ``target'' SSSGs because,
beginning with the 1993 rate year, carriers do not determine the SSSGs
at the time of the proposal. A carrier now determines the SSSGs at the
time it submits the reconciliation to OPM. It is at that time (usually
around March of the rate year under consideration) that the carrier
will compare the enrollment of its other groups to that of the Federal
group.
We agree with the comment that reconciliations should look only at
renewal dates that are already passed at the time of the
reconciliation. OPM will address this question in the 1994
reconciliation instructions.
Seven community rated carriers believe OPM should retain the
benefits similarity requirement. OPM has dropped the benefits
similarity requirement because many carriers have found the phrase
``substantially the same benefit package'' vague. Future rate
instructions will further define groups excluded from SSSG
consideration. For example, we plan to exclude Medicaid groups,
Medicare groups, and groups which have only a stand-alone benefit
(e.g., dental benefits).
In the Supplementary Information section to the proposed
regulations, OPM referred to the definition of SSSG and stated that the
regulations authorize the use of Government groups as SSSGs, provided
that such groups are community rated. We stated that some carriers have
considered the provision optional and are excluding State and local
government groups even though they meet the SSG requirements and are
community rated. Four carriers and one law firm believe that HMOs
should have an option, not a mandate, to include state or local
government groups as SSSGs since state procurement laws often dictate
multiple year rate guarantees and the HMO Act does not require them to
be community rated. Another carrier commented that the regulations
concerning governmental groups are already permissive, not mandatory,
as evidenced by OPM's use of the word ``may'' in the current 1602.170-
11(c). In fact, the term ``may'' was intended as authority for OPM to
approve the use of Government groups as SSSGs if they are community
rated and was not directed at the carriers. It was OPM's lack of
clarity that caused the misunderstanding on the part of the carriers.
OPM deleted this provision in the proposed and final regulations,
because it is OPM's intention that government groups should not be
treated differently from other groups provided for under 1602.170-
11(a). Note that under the revised language of 1602.170-11, all groups
except those rated by retrospective experience rating are potential
SSSGs.
Several carriers raised questions specific to the proposed
regulations that may not be relevant to future guidance issued by the
Actuary. Consequently, we will not respond to them at this time. If
carriers have specific questions when they receive the rate letter,
then they should write or call OPM's Office of Actuaries for
clarification.
One commenter wanted to know whether a carrier could community rate
its SSSGs and use some other rating practices for some or all of its
other groups. It also wanted clarification whether, if OPM determines
the rates on the two SSSGs are comparable, the carriers could use
different rating methods or different rates with its other groups,
including a discount. If the rating method for an SSSG differs from
that used for the Federal group, OPM would review the SSSG rate to
ensure that the rating method had been properly applied and that no
discounts had been given to the group. As long as the Federal group
rates are equivalent to the SSSG rates, OPM is not concerned with the
plan's rating methods for its other groups.
Two carriers noted that the Federal HMO regulations issued by HHS
permit discounts (up to 5%) for groups which give the HMO special
administrative or marketing advantages and asked whether OPM would
recognize such discounts, or whether the discounts constitute defective
community rating. We recognize the legitimacy of banding for
administrative or marketing advantages. Any adjustments for these
reasons should be disclosed to OPM and provided to the Federal group,
if applicable.
A number of carriers were confused by OPM's statement in the
Supplementary Information section of the proposed regulations that a
carrier must give the Federal group the lowest discount given to any
SSSG. The confusion stemmed from 1615.802(b)(3), which states that a
downward price adjustment will be made if OPM determines that the rate
for one or both of the SSSGs is lower than that which would be obtained
by basing the rate on the plan's community rate and further provides
that such adjustments will be based on the lowest rate given to the
SSSG. This language was never intended to require the lowest rate.
Rather, it was meant to require the lowest rate derived using SSSG
methodology applied to the Federal group. We have revised the language
of the regulations to clarify our intent.
One carrier believes that OPM is no longer allowing experience
rating of HMOs. In fact, the reverse is true. Our regulations have
moved away from a strict interpretation of community rating over the
years. OPM is not eliminating experience rating by HMOs. On the
contrary, we allow prospective experience rating for community rated
plans in the form of Adjusted Community Rating. We also allow non-
community rated HMOs to use retrospective experience rating if they
satisfy certain reporting requirements.
Nine respondents commented that the effective date of the
regulations should be prospective. They argue that a retroactive
effective date potentially places contractors in violation of their
Certificates of Accurate Pricing for the 1993 contract year. OPM agrees
that the effective date should be prospective. These regulations will
be in effect beginning with the 1994 rate reconciliation.
In the proposed regulation, OPM adapted the FAR debarment
certification at 52.209-5 to fit the FEHBP. In this certification, the
carrier affirms that, among other things, neither it nor any of its
``principles'' is presently debarred, suspended, or declared ineligible
for the award of contracts by any Federal agency. One plan and one
association of HMOs wanted to know the equivalent of a ``principal''
(referred to in the certification) in a managed care company. The term
``principal'' is defined in the certification as ``officers; directors;
owners; partners; and persons having primary management or supervisory
responsibilities within a business entity. * * *'' We will not cite
specific positions in managed care or other facilities equivalent to
these positions because each organization's structure and
responsibilities are unique.
One respondent wanted to know if reliance solely on OPM's Inspector
General-provided information on debarred providers would satisfy the
ordinary course of business dealings standard in paragraph (e) of the
proposed certification. Carriers cannot rely solely on debarred
provider lists. Such lists include only health care providers, not non-
provider contractors, such as printing companies.
The proposed regulations added 52.209-6, ``Protecting the
Government's Interest When Subcontracting With Contractors Debarred,
Suspended, or Proposed for Debarment,'' as a mandatory clause for all
FEHBP carriers. This clause applies to all of the carrier's
subcontractors. Carriers should note that the definition of
subcontractor at 1602.170-12 excludes providers of direct medical
services or supplies pursuant to the carrier's health benefits plan. To
obtain information on whether or not a subcontractor is debarred, the
carrier should refer to FAR 9.404(d).
Under the proposed rules and pursuant to paragraph (d) of the
certification at FAR 52.209-5, the contractor is not required to set up
a system of records to determine whether each principal in the
organization is debarred or suspended. The fact that a system of
records is not required for debarred contractors and their principals
under the FAR, however, does not necessarily mean that no system of
records is needed to track debarred health care providers under 5 CFR
970. The two debarment procedures fall under different statutory
provisions and the issue under the latter is the payment of these
individuals rather than the notification of the debarment or suspension
status of the carrier's principals. Nevertheless, OPM expects that
neither the debarment procedures under the FAR nor those under 5 CFR
970 will require carriers to establish an additional system of records.
Carriers should be able to set up debarment procedures for contractors,
subcontractors, and providers within their existing systems.
The proposed regulations prescribed novation and change of name
agreements for FEHBP carriers (1642.12). Four commenters believe that
OPM's provision authorizing it to terminate the contract if the carrier
fails to submit the properly completed and signed novation agreement in
a timely manner is unduly harsh.
Transfer of Government contracts is prohibited by law (41 U.S.C.
15). However, the Government may recognize a third party as the
successor in interest to a Government contract when it is in the
Government's best interest. When it is not in the Government's best
interest to do so, the original contractor remains under contractual
obligation to the Government, and the contract may be terminated for
default should the original contractor not perform. These provisions
are set out in FAR 43.1204 (a) and (b) and are applicable to all
Government contractors. Thus, in FEHBAR subpart 1642.12, OPM is
proposing no harsher standard for FEHBP carriers than is expected of
other Government contractors. OPM simply intends to apply the
procedures required under the FAR. Thus, in order to protect the
interests of all FEHBP enrollees and to comply with the statute and
regulations prohibiting transfer of a Government contract, OPM must
obtain the novation agreement in a timely manner.
One of the commenters noted that OPM already has authority to
discipline carriers for repeated failure to comply with OPM
instructions and directives at 1609.701(c)(4), and those provisions
have a range of remedies in proportion to the seriousness of the
action, only the most stringent of which is termination of the
contract. Because Government contracts cannot be transferred, a
carrier's failure to submit a novation agreement is not on the same
level as an OPM instruction or directive. There is no less stringent
remedy than contract termination for failure to submit a Novation
Agreement.
Three carriers and one law firm requested that OPM define the
timeliness parameters in the novation and change of name agreements.
One carrier asked that OPM address transfer of payments to the new
company or under the new name. It believes that OPM's change in the
direction of premiums should follow more closely upon the carrier's
submission of the agreement to OPM.
Consistent with past OPM practice, we consider timely to be 30
calendar days. What is considered timely could vary, however, depending
on the circumstances in a particular situation. OPM will attempt to
accelerate the review process. Nevertheless, some delay may be
unavoidable. Submission of paperwork does not necessarily mean
automatic acceptance of a novation or change of name agreement, because
the agreement must be reviewed by OPM's counsel for legal sufficiency,
in accordance with FAR 42.1203(d).
Nine carriers believe that the proposed FEHBP-specific quality
assurance policies and procedures [Part 1646] would unnecessarily
burden carriers if the plan is already subject to Federal or State
quality assurance requirements. A number of the carriers recommended
that OPM accept the National Committee for Quality Assurance (NCQA)
Health Plan Employer Data and Information Set (HEDIS) standardized
performance reports as an acceptable means of meeting the FEHBP
contractual responsibility. OPM agrees with the carries in principle
and has taken a number of steps in this director. We have withdrawn the
proposed clause at 1646.246-70 relating to quality assurance/
performance standards. Thus, the audit inspection clause currently at
1652.246-70 will remain in effect. We have amended Part 1646 to provide
that OPM will issue specific performance standards for the FEHBP
contracts. Finally, we will inform the carriers which standards apply
prior to annual contract negotiations.
In the future, OPM will issue FEHBP-specific standards which we
will benchmark against the best performance standards in the insurance
industry, consistent with the NPR. All performance standards will be
evaluated against the same benchmark with the same results. We will
consider a variety of standards, including those suggested to us in the
written comments to the proposed regulations.
Pursuant to section 553(d) of title 5 of the U.S. Code, I find that
good cause exists for making these regulations effective immediately
upon publication so that they may be used during the 1995 FEHBP
contract negotiations.
E.O. 12866, Regulatory Review
This rule has been reviewed by the Office of Management and Budget
in accordance with E.O. 12866.
Regulatory Flexibility Act
I certify that these regulations will not have a significant
economic impact on a substantial number of small entities because they
primarily affect administrative procedures used by OPM and the FEHBP
carriers.
List of Subjects in 48 CFR Parts 1601, 1602, 1609, 1615, 1632,
1642, 1646, and 1652
Administrative practice and procedure, Government employees. Health
facilities, Health insurance, Health professions, Hostages, Reporting
and recordkeeping requirements, Retirement.
Office of Personnel Management.
Lorraine A. Green,
Deputy 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
PART 1601--FEDERAL ACQUISITION REGULATIONS SYSTEM
1. The authority citations for 48 CFR parts 1601, 1602, 1609, 1615,
1632, 1646, and 1652 continue to read as follows:
Authority: 5 U.S.C. 8913; 40 U.S.C. 486(c); 48 CFR 1.301.
2. In section 1601.102, the existing paragraph is designated as
paragraph (a) and a new paragraph (b) is added to read as follows:
Sec. 1601.102 Authority.
* * * * *
(b) The FEHBAR does not replace or incorporate regulations found at
5 CFR part 890, which provides the substantive policy guidance for
administration of the FEHBP under 5 U.S.C. Chapter 89. The following is
the order of precedence in interpreting a contract provision under the
FEHBP:
(1) 5 U.S.C. Chapter 89;
(2) 5 CFR part 890;
(3) 48 CFR Chapters 1 and 16;
(4) The FEHBP contract.
PART 1602--DEFINITION OF WORDS AND TERMS
3. Section 1602.170-11, is revised to read as follows:
Sec. 1602.170-11 Similarly sized subscriber groups.
Similarly sized subscriber groups (SSSGs) are a comprehensive
medical plan's two employer groups that:
(a) As of the date specified by OPM in the rate instructions, have
a subscriber enrollment closest to the FEHBP subscriber enrollment;
and,
(b) Use any rating method other than retrospective experience
rating; and,
(c) Meet the criteria specified in the rate instructions issued by
OPM.
PART 1609--CONTRACTOR QUALIFICATIONS
4. In part 1609, subpart 1609.4 is added; section 1609.701 in
subpart 1609.70 is redesignated as 1609.7001, and paragraphs (a)(7),
(b)(7), and (b)(8) are added to read as follows:
Subpart 1609.4--Debarment, Suspension, and Ineligibility
1609.470 Notification of Debarment, Suspension, and Ineligibility.
(FAR) 48 CFR, part 9, subpart 9.4 is supplemented as set out in the
certification required in 1609.471 by converting the FAR ``offeror's''
certification at (FAR) 48 CFR 52.209-5 into a carrier's certification.
This change reflects the FEHBP's statutory exemption from competitive
bidding (5 U.S.C. 8902), which obviates the issuance of solicitations.
1609.471 Contractor certification.
All FEHBP carriers and applicant carriers are required to submit
the following certification. Applicant carriers must submit the
certification prior to OPM's determination on the application for
approval to participate in the FEHBP. Current carriers must submit the
certification once, along with their benefit and rate proposals for the
1995 contract year.
Debarment, Suspension, Proposed Debarment, and Other Responsibility
Matters
The Carrier certifies, to the best of its knowledge and belief,
that--
(a) The Carrier and/or any of its Principals--
(1) Are ( ) are not ( ) presently debarred, suspended, proposed
for debarment, or declared ineligible for the award of contracts by
any Federal agency;
(2) Have ( ) have not ( ), within a 3-year period preceding this
certification, been convicted of or had a civil judgment rendered
against them for: Commission of fraud or a criminal offense in
connection with obtaining, attempting to obtain, or performing a
public (Federal, state, or local) contract or subcontract; violation
of Federal or state antitrust statutes relating to the submission of
offers; or commission of embezzlement, theft, forgery, bribery,
falsification or destruction of records, making false statements, or
receiving stolen property; and
(3) Are ( ) are not ( ) presently indicted for, or otherwise
criminally or civilly charged by a governmental entity with,
commission of any of the offenses enumerated in subdivision (a)(2)
of this clause.
(4) The Carrier has ( ) has not ( ), within a 3-year period
preceding this certification, had one or more contracts terminated
for default by any Federal agency.
(b) Principals, for the purposes of this certification, means
officers; directors; owners; partners; and persons having primary
management or supervisory responsibilities within a business entity
(e.g., general manager; plant manager; head of a subsidiary,
division, or business segment, and similar positions).
This certification concerns a matter within the jurisdiction of
an agency of the United States and the making of a false,
fictitious, or fraudulent certification may render the Carrier
subject to prosecution under section 1001, title 18, United States
Code.
(c) The Carrier shall provide immediate written notice to the
Contracting Officer if, at any time, the Carrier learns that its
certification was erroneous when submitted or has become erroneous
by reason of changed circumstances.
(d) A Carrier's certification that any of the actions mentioned
in the certification exists will not necessarily result in
termination of the contract. However, the certification, or the
Carrier's failure to provide such additional information as
requested by the Contracting Officer, will be considered in
connection with a determination of the Carrier's responsibility
under subpart 1609.70, Minimum Standards for Health Benefits
Carriers.
(e) Nothing contained in the certification shall be construed to
require establishment of a system of records in order to render, in
good faith, the certification required by this section. The
knowledge and information of the Carrier is not required to exceed
that which is normally possessed by a prudent person in the ordinary
course of business dealings.
(f) The certification in this section is a material
representation of fact upon which reliance is placed by the
Contracting Officer. If it is later determined that the Carrier
knowingly rendered an erroneous certification, in addition to other
remedies available to the Government, the Contracting Officer may
terminate the contract for default.
Carrier Name:----------------------------------------------------------
----------------------------------------------------------------------
Name of Chief Executive Officer
Date signed:-----------------------------------------------------------
(End of Certificate)
1609.7001 Minimum standards for health benefits carriers.
(a) * * *
(7) It must timely submit to OPM a properly completed and signed
novation or change-of-name agreement in accordance with subpart 1642.12
of this chapter.
(b) * * *
(7) Application of performance standards for assuring contract
quality as required by 1646.270(d).
(8) Establishment and maintenance of a system of internal control
that provides reasonable assurance that:
(i) The provision and payments of benefits and other expenses are
in compliance with legal, regulatory, and contractual guidelines;
(ii) FEHB funds, property, and other assets are safeguarded against
waste, loss, unauthorized use, or misappropriation; and,
(iii) Data are accurately and fairly disclosed in all reports
required by OPM.
* * * * *
5. In section 1615.802, paragraph (a) is redesignated as paragraph
(a)(1) and revised, paragraph (b)(3) is revised, a new paragraph (b)(4)
is added, paragraph (c) is redesignated as paragraph (a)(2) and
republished, and section 1615.804-70 is revised to read as follows:
Subpart 1615.8--Price Negotiation
1615.802 Policy.
* * * * *
(a)(1) Cost analysis shall be used for contracts where premiums and
subscription income are determined on the basis of experience rating.
(2) The application of FAR 15.802(b)(2) should not be construed to
prohibit the consideration of preceding year surpluses or deficits in
carrier-held reserves in the rate adjustments for subsequent year
renewals of contracts based on cost analysis.
(b) * * *
(3) Contracts will be subject to a downward price adjustment if OPM
determines that the Federal group was charged more than it would have
been charged using a methodology consistent with that used for the
SSSGs. Such adjustments will be based on the lowest rates determined
for the Federal group using the methodology (including discounts) for
the two SSSGs.
(4) FEHBP community rated carriers shall comply with SSSG criteria
provided annually by OPM in the rate instructions for the applicable
contract period.
1615.804-70 Certificate of accurate pricing for community rated plans.
The contracting officer shall require a carrier that rates using a
community rate as defined by FEHBAR 1602.170-2 to execute the
Certificate of Accurate Pricing for Community Rated Plans contained in
this section unless the carrier has been exempted from filing certified
cost or pricing data pursuant to 1615.802(b)(1). The carrier shall
submit the Certificate to OPM at the time it submits its rate
reconciliation.
Certificate of Accurate Pricing for Community Rated Plans
This is to certify that, to the best of my knowledge and belief:
(1) the cost or pricing data submitted (or, if not submitted,
maintained and identified by the carrier as supporting
documentation) to the Contracting Officer or the Contracting
Officer's representative or designee in support of the ______* FEHBP
rates were developed in accordance with the requirements of 48 CFR
Chapter 16 and the FEHBP contract, and are accurate, complete, and
current as of the date this certificate is executed; and (2) The
FEHBP rates were developed in a manner consistent with the
methodology used to rate the plan's similarly sized subscriber
groups and approved by OPM.
---------------------------------------------------------------------------
*Insert the year for which the rates apply. Normally, this will
be the year for which the rates are being reconciled.
Firm:------------------------------------------------------------------
Name:------------------------------------------------------------------
Title:-----------------------------------------------------------------
Signature:-------------------------------------------------------------
Date of Execution:-----------------------------------------------------
(End of Certificate)
PART 1632--CONTRACT FINANCING
6. In Subpart 1632.6, section 1632.617 is revised to read as
follows:
1632.617 Contract clause.
The clause at (FAR) 48 CFR 52.232-17 will be modified in all FEHBP
contracts to exclude the words ``net of any applicable tax credit under
the Internal Revenue Code (26 U.S.C. 1481).''
Subchapter G--Contract Management
7. Add a heading for Subchapter G immediately after part 1633 to
read as follows:
Subchapter G--Contract Management
8. In Subchapter G, Part 1642 is added to read as follows:
PART 1642--CONTRACT ADMINISTRATION
Subpart 1642.12--Novation and Change-of-Name Agreements
Sec.
1642.1201 Definitions.
1642.1204 Agreement to recognize a successor in interest (novation
agreement).
1642.1205 Agreement to recognize carrier's change of name.
Subpart 1642-70--Management Agreement (in Lieu of Novation Agreement)
1642.7001 Management agreement.
Authority: 5 U.S.C. 8913; 40 U.S.C. 486(c); 48 CFR 1.301.
Subpart 1642.12--Novation and Change-of-Name Agreements
1642.1201 Definitions.
The definitions at (FAR) 48 CFR 42.1201 shall have the same meaning
for this subpart.
1642.1204 Agreement to recognize a successor in interest (novation
agreement).
(a) (FAR) 48 CFR 42.1204 shall be implemented as provided in this
section. The contracting officer shall insert the following agreement
in all FEHBP contracts for use when the contractor's assets or the
entire portion of the assets pertinent to the performance of the
contract, as determined by the Government, are transferred.
Novation Agreement
The (insert corporate name) (Transferor), a corporation duly
organized and existing under the laws of (insert State) with its
principal office in (insert city, state); the (insert corporate
name) (Transferee), (if appropriate add ``formerly known as the
______ Corporation'') a corporation duly organized and existing
under the laws of (insert State) with its principal office in
(insert city); and the UNITED STATES OF AMERICA (Government) enter
into this Agreement effective (insert date transfer of assets became
effective under applicable State law).
(a) THE PARTIES AGREE TO THE FOLLOWING FACTS:
(1) The Government, represented by various Contracting Officers
of the Office of Personnel Management (OPM), has entered into
Contract Number ______ with the Transferor. The term contracts, as
used in this Agreement, means the contract cited in this paragraph
and all other contracts and purchase orders, including any and all
amendments and modifications made between the Government and the
Transferor before the effective date of this Agreement (whether or
not performance and payment have been completed and releases
executed if the Government or the Transferor has any remaining
rights, duties, or obligations under these contracts and purchase
orders).
(2) As of ____ 19__ (insert date transfer of assets became
effective under applicable State law), the Transferor has
transferred to the Transferee all the assets of the Transferor, or
the entire portion of the Transferor's assets pertinent to
performing the contract, as determined by OPM, by virtue of a(an)
(insert term describing the legal transaction involved) between the
Transferor and the Transferee.
(3) The Transferee has acquired all the assets of the
Transferor, or the entire portion of the Transferor's assets
pertinent to performing the contract, as determined by OPM, by
virtue of the transfer in paragraph (a)(1).
(4) The Transferee has assumed all obligations and liabilities
of the Transferor pertinent to performing the contract, as
determined by OPM, by virtue of the transfer in paragraph (a)(1).
(5) The Transferee is in a position to fully perform all
obligations that may exist under the contract.
(6) It is consistent with the Government's interest to recognize
the Transferee as the successor party to the contract.
(7) Evidence of the transfer in paragraph (a)(1) has been filed
with the Government.
(8) [If applicable:] A certificate dated ____, 19__, signed by
the Secretary of State of (insert State), to the effect that the
corporate name of (insert old corporate name) was changed to (insert
new corporate name) on ____, 19__, has been filed with the
Government.
(b) IN CONSIDERATION OF THESE FACTS, THE PARTIES AGREE THAT BY
THIS AGREEMENT--
(1) The Transferor confirms the transfer to the Transferee, and
waives any claims and rights against the Government or the Federal
Employees Health Benefits Fund that it now has or may have in the
future in connection with the contract.
(2) The Transferee agrees to be bound by and to perform the
contract in accordance with the conditions contained in the
contract. The Transferee also assumes all obligations and
liabilities of, and all claims against, the Transferor pertinent to
the contract, as determined by OPM, as if the Transferee were the
original party to the contract.
(3) The Transferee ratifies all previous actions taken by the
Transferor with respect to the contract, with the same force and
effect as if the action had been taken by the Transferee.
(4) The Government recognizes the Transferee as the Transferor's
successor in interest in and to the contract. The Transferee by this
Agreement becomes entitled to all rights, titles, and interests of
the Transferor in and to the contract as if the Transferee were the
original party to the contract. Following the effective date of this
Agreement, the terms Carrier and Contractor as used in the contract,
shall refer to the Transferee.
(5) Except as expressly provided in this Agreement, nothing in
it shall be construed as a waiver of any rights of the Government
against the Transferor.
(6) All payments and reimbursements previously made by the
Government to the Transferor, and all other previous actions taken
by the Government under the contract, shall be considered to have
discharged those parts of the Government's obligations under the
contract. All payments and reimbursements made by the Government
after the date of this Agreement in the name of or to the Transferor
shall have the same force and effect as if made to the Transferee,
and shall constitute a complete discharge of the Government's
obligations under the contract, to the extent of the amounts paid or
reimbursed.
(7) The Transferor and the Transferee agree that the Government
is not obligated to pay or reimburse either of them for, or
otherwise give effect to, any costs, taxes, or other expenses, or
any related increases, directly or indirectly arising out of or
resulting from the transfer of this Agreement, other than those that
the Government in the absence of this transfer or Agreement would
have been obligated to pay or reimburse under the terms of the
contract.
(8) The Transferor guarantees payment of all liabilities and the
performance of all obligations that the Transferee (i) assumes under
this Agreement or (ii) may undertake in the future should this
contract be modified under its terms and conditions. The Transferor
waives notice of, and consents to, any such future modifications.
(9) The contract shall remain in full force and effect, except
as modified by this Agreement. Each party has executed this
Agreement effective (insert the date transfer of assets became
effective under applicable State law).
UNITED STATES OF AMERICA,
By __________ Date__________
Title __________
(Enter Transferor's name)
By __________ Date__________
Title __________
(Corporate Seal)
(Enter Transferee's name)
By __________
Title __________
(Corporate Seal)
Certificate
I, ______, certify that I am the Secretary of (insert name of
Transferor); that ______, who signed this Agreement for this
corporation, was then ______ of this corporation; and that this
Agreement was duly signed for and on behalf of this corporation by
authority of its governing body and within the scope of its
corporate powers.
Witness my hand and the seal of this corporation this ______ day
of ______, 19____.
By __________
(Corporate Seal)
Certificate
I, ______, certify that I am the Secretary of (insert name of
Transferee); that ______, who signed this Agreement for this
corporation, was then ______ of this corporation; and that this
Agreement was duly signed for and on behalf of this corporation by
authority of its governing body and within the scope of its
corporate powers.
Witness my hand and the seal of this corporation this ______ day
of ______ 19__,
By---------------------------------------------------------------------
(Corporate Seal)
(End of Agreement)
(b) Failure to submit the properly completed and signed Novation
Agreement in a timely manner shall be cause for termination of the
contract by OPM in accordance with FEHBAR 1652.249-70.
(c) The Contracting Officer shall terminate the contract if it is
determined not to be in the Government's interest to recognize a
successor in interest to the contract. The effective date will be
decided by the Contracting Officer after considering the best interests
of FEHBP enrollees.
1642.1205 Agreement to recognize carrier's change of name.
(a) (FAR) 42.1205 shall be implemented as provided in this section.
The Contracting Officer shall insert the following Agreement in all
FEHBP contracts for use when the carrier changes its name and the
Government's and contractor's rights and obligations remain unaffected.
Change-of-Name Agreement
The (insert new Carrier name), a corporation duly organized and
existing under the laws of (insert State), and the UNITED STATES OF
AMERICA (Government), enter into this Agreement effective (insert
date when the change of name became effective under applicable State
law).
(a) THE PARTIES AGREE TO THE FOLLOWING FACTS:
(1) The Government, represented by various Contracting Officers
of the Office of Personnel Management (OPM), has entered into
Contract Number ______ with the (insert old Carrier name). The term
contracts as used in this Agreement means the contract cited in this
paragraph and all other contracts and purchase orders and all
modifications thereto made by the Government and the Contractor
before the effective date of this Agreement (whether or not
performance and payment have been completed and releases executed if
the OPM or the Carrier has any remaining rights, duties, or
obligations under these contracts and purchase orders).
(2) The (insert old Carrier name), by an amendment to its
certificate of incorporation, dated ____, 19__, has changed its
corporate name to (insert new Carrier name).
(3) This amendment accomplishes a change of corporate name only
and all rights and obligations of the Government and the Carrier
under the contract are unaffected by this change.
(4) Documentary evidence of this change of corporate name has
been filed with the Government.
(b) IN CONSIDERATION OF THESE FACTS, THE PARTIES AGREE THAT:
(1) The contract is amended by substituting the name `` (insert
new Carrier name)'' for the name ``(insert old Carrier name)''
wherever it appears in the contract; and
(2) Each party has executed this Agreement effective the day and
year stated in paragraph (a)(2).
UNITED STATES OF AMERICA,
__________ Date __________---------------------------------------------
Title------------------------------------------------------------------
(Enter new Carrier name)
By __________ Date __________
Title------------------------------------------------------------------
(Corporate Seal)
Certificate
I, ______, certify that I am the Secretary of (insert new
Carrier name); that ______, who signed this Agreement for this
corporation, was then (insert position held) of this corporation;
and that this Agreement was duly signed for and on behalf of this
corporation by authority of its governing body and within the scope
of its corporate powers.
Witness my hand and the seal of this corporation this ____ day
of ____ 19__.
By---------------------------------------------------------------------
(Corporate Seal)
(End of Agreement)
(b) Failure to submit the properly completed and signed Change-of-
Name Agreement in a timely manner may be cause for termination of the
contract by OPM in accordance with FEHBAR 1652.249-70.
Subpart 1642-70--Management Agreement (in Lieu of Novation
Agreement)
1642.7001 Management agreement.
When it is in the best interest of FEHBP enrollees to continue a
contract for an interim period after the carrier discontinues its
operations and has entered into a Purchase and Sale Agreement (or other
descriptive term), but before a successor in interest has been
recognized by OPM, the carrier may submit for OPM approval a Management
Agreement that enables it to continue a contract through an agreement
with a third party to administer the day-to-day performance of the
contract. Examples of situations in which a Management Agreement may be
accepted by OPM are:
(a) When a transfer of assets does not meet the criteria for a
novation;
(b) While a request for a novation is pending;
(c) While awaiting a decision on a request for a novation;
(d) As an interim measure, when the timing of a transfer of assets
or the timing of a carrier's withdrawal make administration of the
contract inconvenient;
(e) When it is not in the interests of the Government to either
recognize a successor in interest or to immediately terminate the
existing FEHBP contract.
PART 1646--QUALITY ASSURANCE
9. In part 1646, subpart 1646.2 and the title for subpart 1646.3
are added to read as follows:
Subpart 1646.2--Contract Quality Requirements
Sec.
1646.270 General.
Subpart 1646.3--Contract Clauses
1646.301 Contractor inspection requirements.
Authority: 5 U.S.C. 8913; 40 U.S.C. 486(c); 48 CFR 1.301.
Subpart 1646.2--Contract Quality Requirements
1646.270 General.
(a) This section prescribes general policies and procedures to
ensure that services acquired under the FEHBP contract conform to the
contract's quality requirements.
(b) OPM shall periodically evaluate the contractor's system of
internal controls under the quality assurance program required by the
contract and will acknowledge in writing whether or not the system is
consistent with the requirements set forth in the contract. After the
initial review, subsequent reviews may be limited to changes in the
contractor's internal control guidelines. However, a limited review
does not diminish the contractor's obligation to apply the full
internal control system.
(c) OPM will issue specific performance standards for the FEHBP
contracts and will inform carriers of the applicable performance
standards prior to negotiations for the contract year. OPM will
benchmark its standards against standards generally accepted in the
insurance industry. The contracting officer may authorize nationally
recognized standards to be used to fulfill this requirement.
(d) FEHBP carriers shall comply with the performance standards
issued under paragraph (c) of this section.
Subpart 1646.3--Contract Clauses
1646.301 Contractor inspection requirements.
* * * * *
PART 1652--CONTRACT CLAUSES
10. In section 1652.000, FAR clauses 52.230-3, 52.230-4, 52.230-5
and clause dates are removed and the following FAR clauses are added in
numerical sequence as follows:
1652.000 Applicable clauses.
Section and Clause Title
* * * * *
52.203-7 Anti-Kickback Procedures.
52.203-9 Requirement for Certificate of Procurement Integrity--
Modification.
52.203-12 Limitation on Payments to Influence Certain Federal
Transactions.
52.209-6 Protecting the Government's Interest When Subcontracting
With Contractors Debarred, Suspended, or Proposed for Debarment.
* * * * *
52.223-6 Drug-Free Workplace.
* * * * *
52.230-2 Cost Accounting Standards.
52.230-3 Disclosure and Consistency of Cost Accounting Practices.
52.230-5 Administration of Cost Accounting Standards.
* * * * *
52.242-13 Bankruptcy.
* * * * *
52.249-2 Termination for Convenience of the Government (Fixed-
Price).
52.249-8 Default (Fixed-Price Supply and Service).
* * * * *
12. In subpart 1652.3, section 1652.370, the full entries in the
FEHBP clause matrix for FAR clauses 52.230-3, 52.230-4 and 52.230-5 are
removed and the following FAR clause references are added in numerical
sequence to read as follows:
Subpart 1652.3--FEHBP Clause Matrix
1652.370 Use of the Matrix.
* * * * *
FEHBP CLAUSE MATRIX
* * * * *
--------------------------------------------------------------------------------------------------------------------------------------------------------
Use with contracts based on
-----------------------------
Clause No. Text reference Title Use status Cost analysis Price
analysis
--------------------------------------------------------------------------------------------------------------------------------------------------------
* * * * * * *
FAR 52.203-9.............. FAR 3.104-10(b)........... Requirement for Certificate of Procurement M T T
Integrity--Modification.
FAR 52.203-12............. FAR 3.808................. Limitation on Payments to Influence Certain Federal M T T
Transactions.
* * * * * * *
FAR 52.209-6.............. FAR 9.409(b).............. Protecting the Government's Interest When M T T
Subcontracting With Contractors Debarred,
Suspended, or Proposed for Debarment.
* * * * * * *
FAR 52.215-27............. FAR 15.804-8(e)........... Termination of Defined Benefit Pension Plans....... M T T
* * * * * * *
FAR 52.215-39............. FAR 15.804-8(f)........... Reversion or Adjustment of Plans for Postretirement M T T
Benefits Other Than Pensions (PRB).
* * * * * * *
FAR 52.222-1.............. FAR 22.103-5(a)........... Notice to the Government of Labor Disputes......... M T T
* * * * * * *
FAR 52.230-2.............. FAR 30.201-4(a)(1)........ Cost Accounting Standards.......................... A T T
FAR 52.230-3.............. FAR 30.201-4(b)(1)........ Disclosure and Consistency of Cost Accounting A T T
Practices.
FAR 52.230-5.............. FAR 30.201-4(d)(1)........ Administration of Cost Accounting Standards........ A T T
* * * * * * *
FAR 52.242-13............. FAR 42.903................ Bankruptcy......................................... M T T
* * * * * * *
FAR 52.249-2.............. FAR 49.502(b)(1)(i)....... Termination for Convenience of the Government M T T
(Fixed-Price).
FAR 52.249-8.............. FAR 49.504(a)(1).......... Default (Fixed-Price Supply and Service)........... M T T
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[FR Doc. 94-7468 Filed 3-29-94; 8:45 am]
BILLING CODE 6325-01-M
