[Federal Register Volume 59, Number 232 (Monday, December 5, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-29810]
[[Page Unknown]]
[Federal Register: December 5, 1994]
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OFFICE OF PERSONNEL MANAGEMENT
48 CFR Chapter 16
RIN 3206-AG35
Federal Employees Health Benefits Program; Interest Assessment on
Audit Findings
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 clarify its intentions concerning the assessment of
interest on monies due the Federal Employees Health Benefits (FEHB)
Program when a comprehensive medical plan (CMP) submits defective cost
or pricing data to support its community rate. This clarification is
necessary because a few FEHB Program carriers are misinterpreting OMP's
current regulations.
DATES: Interim regulations are effective January 4, 1995. Comments must
be received on or before February 3, 1995.
ADDRESSES: Written comments may be sent to Lucretia F. Myers, Assistant
Director for Insurance programs, Retirement and Insurance Group, Office
of Personnel Management, P.O. Box 57, Washington, DC 20044; delivered
to OPM, Room 4351, 1900 E Street NW., Washington, DC; or FAXed to (202)
606-0633.
FOR FURTHER INFORMATION CONTACT:
Mary Ann Mercer, (202) 606-0191.
SUPPLEMENTARY INFORMATION: Recent final audit reports on community-
rated plans issued by OPM's Office of Inspector General include
monetary findings based on interest income lost to the FEHB Program
because of FEHB Program carrier overcharges. A few carriers have
questioned the period covered by the interest charges assessed by OPM.
Specifically, they question OPM's policy of charging interest on the
overcharges from the date the Government pays the inflated rate to the
date of the carrier's full repayment to the Government. They believe
that, in the absence of a specific contractual provision, OPM should
charge interest not from the date of the overpayment by the Government,
but from 30 days after its first written demand, as provided in the
Federal Acquisition Regulation (FAR) general interest clause at 52.232-
17. Because the monetary findings are significant in value, OPM is
issuing these regulations to clarify its policy.
In FEHB Program contracts with CMP's using community rates,
premiums and subscription income are determined on the basis of
community rating. A community rate is deemed the equivalent of the
FAR's description of an established catalog or market price. Each CMP
certifies to the accouracy of its pricing; or, if granted an exemption
by OPM, represents that all the statements made on or attached to its
SF 1412, Claim for Exemption from Submission of Certified Cost or
Pricing Data, are correct. If, upon audit, it is determined that the
rates are not correct and the carrier has overcharged the FEHB Program,
OPM assesses an interest charge in accordance with FAR 52.215-23, Price
Reduction for Defective Cost or Pricing Data--Modifications. This
provision allows the contracting officer to charge simple interest on
the amount of the overpayment computed from the date the overpayment is
made to the contractor to the date the Government is repaid by the
contractor.
FAR 52.215-23 applies to contract modifications involving a price
adjustment exceeding $100,000, but does not apply to modifications for
which the price is (1) based on adequate price competition; (2) based
on established catalog or market prices of commercial items sold in
substantial quantities to the general public; or (3) set by law or
regulation. OPM applies this clause as follows: A community rate is
deemed the equivalent of an established catalog or market price;
however, the defective community rates constitute that part of the
quoted rate that does not fall within the catalog or market part of the
price. Had the carrier priced the FEHB contract correctly according to
the catalog or market price, this clause would not become operative.
The defective portion of the rate is not a market or catalog price;
that is, the defective portion is a modification to the catalog or
market price. Since the carrier did not comply with the terms of its
submission, it is responsible for correcting the price so that it is
the catalog or market price and for making the government whole by
paying interest from the date the government was overcharged.
By restating this interest provision in a specific clause in the
FEHB Program acquisition regulations at FEHBAR 1652.215-70, OPM makes
it clear that its policy is to charge interest from the date it pays
the carrier the higher rate to the date the full repayment is made to
OPM.
Waiver of Notice of Proposed Rulemaking
Pursuant to section 553(b)(3)(A) of title 5 of the U.S. Code, I
find that good cause exists for waiving the general notice of proposed
rulemaking. The notice is being waived because the regulations simply
interpret rules and clarify OPM's current policy with respect to the
assessment of interest on amounts that become payable by the contractor
to the FEHB Fund.
E.O. 12866, Regulatory Review
This rule has been reviewed by OMB in accordance with E.O. 12866.
Regulatory Flexibility Act
I certify that this regulation will not have a significant economic
impact on a substantial number of small entities because it merely
reiterates and clarifies OPM's existing policy.
List of Subjects in 48 CFR Part 1652
Administrative practice and procedure, Government employees, Health
facilities, Health insurance, Health professions, Hostages, Reporting
and recordkeeping requirements, Retirement.
U.S. 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 citation for 48 CFR part 1652 continues to read as
follows:
Authority: 5 U.S.C. 8913; 40 U.S.C. 486(c); 48 CFR 1.301.
2. In the clause under section 1652.215-70, the heading is revised
and two sentences are added to the end to read as follows:
Sec. 1652.215-70 Rate Reduction for Defective Pricing or Defective
Cost or Pricing Data.
* * * * *
Rate Reduction for Defective Pricing or Defective Cost or Pricing Data
(Oct 1994)
* * * When the Contracting Office determines that the Carrier
did not charge a market price and the Government is entitled to a
refund, the refund shall bear simple interest from the date the
overcharge was paid by the Government to the Carrier until the date
the overcharge is liquidated. In calculating the amount of interest
due, the quarterly rate determinations by the Secretary of the
Treasury under the authority of 26 U.S.C. 6621(a)(2) applicable to
the periods the overcharge was retained by the Carrier shall be
used.
(End of Clause)
[FR Doc. 94-29810 Filed 12-2-94; 8:45 am]
BILLING CODE 6325-01-M
