[Federal Register Volume 63, Number 167 (Friday, August 28, 1998)]
[Rules and Regulations]
[Pages 45933-45935]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-23149]
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Rules and Regulations
Federal Register
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This section of the FEDERAL REGISTER contains regulatory documents
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Federal Register / Vol. 63, No. 167 / Friday, August 28, 1998 / Rules
and Regulations
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OFFICE OF PERSONNEL MANAGEMENT
5 CFR Part 890
RIN 3206-AI33
Federal Employees Health Benefits Program: Contributions and
Withholdings
AGENCY: Office of Personnel Management.
ACTION: Interim regulations with request for comments.
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SUMMARY: The Office of Personnel Management (OPM) is issuing interim
regulations to describe procedures for OPM's annual determination of
the weighted average of subscription charges in effect for self only
and for self and family enrollments under the Federal Employees Health
Benefits (FEHB)Program. The determinations are a requirement under
recent amendments to the FEHB law which authorize a new Government
contribution toward FEHB enrollment charges effective with the contract
year beginning in January 1999, which generally pays 72 percent of the
weighted average of subscription charges.
DATES: Interim regulations are effective August 28, 1998. We must
receive comments on or before September 28, 1998.
ADDRESSES: Send written comments to Abby L. Block, Chief, Insurance
Policy and Information Division, Retirement and Insurance Group, Office
of Personnel Management, P.O. Box 57, Washington, DC 20044; or hand
deliver to OPM, Room 3425, 1900 E Street NW., Washington, DC; or FAX to
(202) 606-0633.
FOR FURTHER INFORMATION CONTACT: Bonnie R. Rose (202) 606-0004.
SUPPLEMENTARY INFORMATION: The Balanced Budget Act of 1997, approved on
August 5, 1997 (Public Law 105-33, sec. 7002, 111 Stat. 662), amended
the Federal Employees Health Benefits (FEHB) law to authorize a new
Government contribution formula effective on the first day of the
contract year that begins in January 1999. In place of the ``Big-6''
formula, which evolved under FEHB law during the early 1970's, the new
formula bases Government contributions on the program-wide weighted
average costs, for self only and for self and family enrollments,
respectively.
The Big-6 formula provided a Government contribution for eligible
enrollees in any FEHB plan or option equal to the lesser of: (1) 60
percent of the simple average of self only or self and family
enrollment charges for the highest level of benefits offered under six
large plans described in law, or (2) 75 percent of charges for the
particular plan an individual elects to enroll in. Initially, the Big-6
formula effectively linked Government contributions to health plan
preferences of a majority of FEHB enrollees.
Over time, though, FEHB enrollees increasingly left high option
health plans which were the basis of the Big-6 formula and dispersed
themselves among other plans. During the 1970's and 1980's, the FEHB
Program expanded from several dozen to several hundred health plans and
health care inflation and rapid health plan premium increases during
this period encouraged enrollees to more carefully evaluate all
options. One distinct component of the Big-6 formula, the
Governmentwide Indemnity Benefit Plan, decided to terminate FEHB
participation at the end of 1989 due to escalating premiums and
declining enrollment. Because the average of premiums under the five
remaining Big-6 plans would have resulted in lower Government
contributions, Congress enacted temporary legislation to continue the
Big-6 calculation by using premiums for the five remaining formula
plans and a so-called phantom premium in place of the lapsed plan. The
phantom formula effectively held the Government contributions near 72
percent of total program costs and was due to expire at the end of 1998
in the absence of further action by Congress.
The 1997 amendments to the FEHB law require a determination by the
Office of Personnel Management (OPM) in advance of each contract year
of the weighted average of subscription charges that will be in effect
during the year under all FEHB plans, for self only and for self and
family types of enrollment, respectively. For employees and annuitants
generally, the law provides a Government contribution equal to the
lesser of: (1) 72 percent of the amount OPM determines is the program-
wide weighted average of subscription charges for the type of
enrollment the individual selects, or (2) 75 percent of the
subscription charge for a particular plan (5 U.S.C.Sec. 8906 (a) and
(b)). The intent of the new FEHB contribution formula, which is
referred to as the ``Fair Share'' formula, is to maintain a consistent
level of Government contributions, as a percent of the total program
costs, regardless of the configuration of participating health plans or
FEHB enrollment patterns.
The law requires OPM's determination of the amounts of the weighted
average of subscription charges for each FEHB contract year, for self
only and for self and family enrollments, not later than October 1
immediately preceding the beginning of the contract year in January. By
expressed provision of law, the weight given to each subscription
charge that will be in effect for the following FEHB contract year must
be commensurate with the number of enrollees eligible for a Government
contribution and enrolled for the same plan or option as of March 31 of
the year in which the determination is being made. Thus, OPM will
multiply each subscription charge that will be in effect for the next
contract year by the number of eligible enrollees who are in the plan
and option to which the charge applies as of March 31 immediately
preceding the contract year. We will then compute the total-dollar
subscription charge amounts for all self only enrollments and for all
self and family enrollments respectively. Finally, we will divide each
dollar total by the corresponding total numbers under each enrollment
type to achieve the program-wide weighted average costs.
The FEHB law is very clear regarding the methodology for
determining the program-wide weighted average of subscription charges
in cases where health plans continue participation substantially
unchanged from year to year. OPM is issuing regulations to explain how
we intend to treat plans for
[[Page 45934]]
purposes of determining the program-wide weighted average of
subscription charges when conditions of a plan's FEHB participation
change from one year to the next, including cases in which plans enter
the FEHB Program, cease participation, or merge with another FEHB plan,
and cases in which a health maintenance organization alters its
previous rating structure.
The regulations provide that OPM will proceed with our
determination of the program-wide weighted average of subscription
charges for the following contract year on September 1. If OPM and the
carrier of any health plan which has applied to continue FEHB
participation have not closed rate negotiations for the following
contract year by September 1, the regulations state that OPM will apply
deemed adjustments to such plan's current-year self only and self and
family subscription charges for purposes of including enrollees of the
plan in the determination of the coming year's program-wide weighted
average of subscription charges. The deemed adjustments will be equal
to any increase or decrease that OPM finds to exist in a calculation of
the weighted-average of subscription charges using only those plans
with which OPM has closed rate negotiations for the following contract
year by September 1. There will be no readjustment in the program-wide
weighted average charges based on rate negotiations closed after
September 1.
We expect deemed adjustments to be infrequent because provisions in
5 CFR 890.203 require all FEHB plans to submit benefit and rate
proposals to OPM not less than 7 months before a new contract year.
However, the regulations will ensure that OPM can complete
determination of program-wide weighted average charge amounts for each
contract year by October 1 of the preceding year, as the law requires,
and that complete information to assist enrollees in comparing health
plan features is available at the start of the annual open enrollment
period in November.
Since newly participating or terminating FEHB plans inherently lack
one of two requisite data needed for determining the program-wide
weighted average of subscription charges, namely, previous enrollment
or subscription charges for the following contract year, the
regulations exclude data associated with these plans from these
determinations. If two or more existing FEHB plans merge, or if a two-
option plan ceases to offer one of the options, the regulations state
that OPM will use the combined enrollments from the merging plans, or
the two plan options, for purposes of weighting the subscription
charges for the successor entity.
Contracts with comprehensive medical plans (CMPs) may include
different rates for specified portions of the plan's service area and
will assign a distinct enrollment code for each rating area. Such plans
occasionally decide to split the existing rating area(s) into two or
more new areas or to reconfigure geographic areas covered by existing
rating codes. When this occurs, there may not be a direct correlation
between the plan's current-year enrollment and rating codes for the
following contract year for purposes of determining the weight to be
given to each new subscription charge. So, where a participating CMP
plan is altering its FEHB rating structure for the following contract
year, the regulations provide that OPM will estimate what portion of
the total enrollments under all rating codes for the same plan on March
31 of the determination year correlates to each of the plan's rating
codes for the following contract year.
Finally, we are removing existing provisions in paragraph 5 CFR
890.501(b), and the reference to paragraph (b) in 5 CFR 890.501(a),
which reflect FEHB law in effect prior to 1974 amendments to the
Government contribution formula (Public Law 93-246, section 1, 88 Stat.
3).
Waiver of Notice of Proposed Rulemaking and Delay in Effective Date
Pursuant to section 553(b)(3)(B) and (d)(3) of title 5, United
States Code, I find that good cause exists for waiving the general
notice of proposed rulemaking and for making these rules effective in
less than 30 days. These regulations essentially expound on a
requirement in the FEHB law, which includes a prescribed methodology,
for OPM to make a determination of the weighted average of subscription
charges in effect under all FEHB plans in each contract year after
1998. Accordingly, notice of proposed rulemaking and public procedure
thereon are unnecessary. Also, good cause exists for making these rules
effective in less than 30 days. The law gives OPM some discretion
regarding the time frame for making the required determination. For
purposes of including information on Government contributions in
materials for the annual FEHB open enrollment period in November, OPM
concludes that determination of the weighted average of subscription
charges must proceed on September 1 each year, beginning with 1998.
Regulatory Flexibility Act
I certify that these regulations will not have a significant
economic impact on a substantial number of small entities because the
regulations only affect Federal Government contributions toward
enrollment costs under the Federal Employee Health Benefits Program.
Executive Order 12866, Regulatory Review
This rule has been reviewed by the Office of Management and Budget
in accordance with Executive Order 12866.
List of Subjects in 5 CFR Part 890
Administrative practice and procedure, Government employees, Health
facilities, Health insurance, Health professions, Hostages, Iraq,
Kuwait, Lebanon, Reporting and record keeping requirements, Retirement.
U.S. Office of Personnel Management.
Janice R. Lachance,
Director.
Accordingly, OPM is amending Title 5 of the Code of Federal
Regulations as follows:
PART 890--FEDERAL EMPLOYEES HEALTH BENEFITS PROGRAM
1. The authority citation for part 890 continues to read as
follows:
Authority: 5 U.S.C. 8913; Sec. 890.803 also issued under 50
U.S.C. 403p, 22 U.S.C. 4069c and 4069c-1; subpart L also issued
under sec. 599C of Pub. L. 101-513, 104 Stat. 2064, as amended;
Sec. 890.102 also issued under sections 11202(f), 11232(e), and
11246 (b) and (c) of Pub. L. 105-33, 111 Stat. 251.
Subpart E--Contributions and Withholdings
2. Amend Sec. 890.501 by revising paragraphs (a) and (b) to read as
follows:
Sec. 890.501 Government contributions.
(a) The Government contribution toward subscription charges under
all health benefits plans, for each enrolled employee who is paid
biweekly, is the amount provided in section 8906 of title 5, United
States Code, plus 4 percent of that amount.
(b) In accordance with the provisions of 5 U.S.C. 8906(a) which
take effect with the contract year that begins in January 1999, OPM
will determine the amounts representing the weighted average of
subscription charges in effect for each contract year, for self only
enrollments and for self and family enrollments, as follows:
(1) The determination of the weighted average of subscription
charges will only include those health benefits plans
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which are continuing FEHB Program participation from one contract year
to the next.
(i) If OPM and the carrier for a plan that will continue
participation have closed negotiations on rates for the upcoming
contract year by September 1 of the current contract year, i.e., the
determination year, OPM will use the plan's negotiated subscription
charges for the upcoming contract year in the determination of the
weighted average of subscription charges.
(ii) If OPM and the carrier for a plan that applied to continue
participation have not closed rate negotiations for the upcoming
contract year by September 1 of the determination year, OPM will make a
deemed adjustment to such plan's subscription charges for the current
contract year for purposes of counting eligible enrollees of the plan
in the determination of weighted average charges for the upcoming
contract year. The deemed adjustment will equal any increase or
decrease OPM finds in its determination of the weighted average of
subscription charges for the upcoming contract year for all plans with
which OPM has closed rates on September 1 of the determination year.
(iii) There will be no subsequent adjustment in the weighted
average charges applicable to the upcoming contract year to reflect
rate negotiations closed after September 1 of the determination year.
(2) Except as otherwise specified in paragraphs (b)(2) (i) and
(b)(2)(ii) of this section, the weight OPM gives to each subscription
charge for purposes of determining the weighted average of subscription
charges for the upcoming contract year will be proportionate to the
number of individuals who, as of March 31 of the determination year,
are enrolled in the plan or benefits option to which such charge
applies and are eligible for a Government health benefits contribution
in the upcoming contract year.
(i) When a subscription charge for an upcoming contract year
applies to a plan that is the result of a merger of two or more plans
which contract separately with OPM during the determination year, or
applies to a plan which will cease to offer two benefits options, OPM
will combine the self only enrollments and the self and family
enrollments from the merging plans, or from a plan's two benefits
options, for purposes of weighting subscription charges in effect for
the successor plan for the upcoming contract year.
(ii) When a comprehensive medical plan (CMP) varies subscription
charges for different portions of the plan's service area and the
plan's contract for the upcoming contract year will reconfigure
geographic areas associated with subscription charges, so that there
will not be a direct correlation between enrollment in the
determination year and rating areas for the upcoming contract year, OPM
will estimate what portion of the plan's enrollees on March 31 of the
determination year will be subject to each of the plan's subscription
rates for the upcoming contract year.
(3) After OPM weights each subscription charge as provided in
paragraphs (b)(2), (b)(2)(i), and (b)(2)(ii) of this section, OPM will
compute the total of subscription charges associated with self only
enrollments, and the total of subscription charges associated with self
and family enrollments. OPM will divide each subscription charge total
by the total number of enrollments such amount represents to obtain the
program-wide weighted average subscription charges for self only and
for self and family enrollments, respectively.
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[FR Doc. 98-23149 Filed 8-27-98; 8:45 am]
BILLING CODE 6325-01-P
