[Federal Register Volume 76, Number 121 (Thursday, June 23, 2011)]
[Rules and Regulations]
[Pages 36857-36861]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-15602]
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Rules and Regulations
Federal Register
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having general applicability and legal effect, most of which are keyed
to and codified in the Code of Federal Regulations, which is published
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Federal Register / Vol. 76, No. 121 / Thursday, June 23, 2011 / Rules
and Regulations
[[Page 36857]]
OFFICE OF PERSONNEL MANAGEMENT
5 CFR Part 890
48 CFR Parts 1602, 1615, 1632, and 1652
RIN 3206-AM39
Federal Employees Health Benefits Program: New Premium Rating
Method for Most Community Rated Plans
AGENCY: U.S. Office of Personnel Management.
ACTION: Interim final rule with request for comments.
-----------------------------------------------------------------------
SUMMARY: The U.S. Office of Personnel Management (OPM) is issuing an
interim final regulation amending the Federal Employees Health Benefits
(FEHB) regulations and also the Federal Employees Health Benefits
Acquisition Regulation (FEHBAR). This interim final regulation replaces
the procedure by which premiums for community rated FEHB carriers are
compared with the rates charged to a carrier's similarly sized
subscriber groups (SSSGs). This new procedure utilizes a medical loss
ratio (MLR) threshold, analogous to that defined in both the Affordable
Care Act (ACA, Pub. L. 111-148) and the Department of Health and Human
Services (HHS) interim final regulation published December 1, 2010 (75
FR 74864). The purpose of this interim final rule is to replace the
outdated SSSG methodology with a more modern and transparent
calculation while still ensuring that the FEHB is receiving a fair
rate. This will result in a more streamlined process for plans and
increased competition and plan choice for enrollees. The new process
will apply to all community rated plans, except those under traditional
community rating (TCR). This new process will be phased in over two
years, with optional participation for non-TCR plans in the first year.
DATES: This interim final rule is effective July 25, 2011. Comments are
due on or before August 22, 2011.
FOR FURTHER INFORMATION CONTACT: Louise Dyer, Senior Policy Analyst,
(202) 606-0770, or by e-mail to Louise.Dyer@opm.gov.
SUPPLEMENTARY INFORMATION: The Office of Personnel Management is
issuing an interim final regulation to establish a new rate-setting
procedure for most FEHB plans that are subject to community rating.
Currently, a carrier's rates for its community rated FEHB plans are
compared with the rates the carrier charges to its similarly sized
subscriber groups (SSSGs) during a reconciliation process in the plan
year. This interim final regulation replaces this SSSG process with a
requirement that most community rated plans meet an FEHB-specific
medical loss ratio (MLR) target. Plans that are required to use
traditional community rating (TCR) per their state regulator will be
exempt from this new rate-setting procedure. This MLR-based rate
setting process will ensure the Government and Federal employees are
receiving a fair market rate and a good value for their premium
dollars.
ACA Medical Loss Ratio Requirement
Effective for 2011, most health insurance policies, including those
issued under FEHB, are required to meet a medical loss ratio standard
set forth in Federal law, or pay rebates to the individuals insured.
This MLR requirement was enacted in the ACA in a new section 2718 of
the Public Health Service Act titled ``Bringing Down the Cost of Health
Care Coverage,'' and is intended to control health care costs by
limiting the percentage of premium receipts that can be used for non-
claim costs (costs for purposes other than providing care or improving
the quality of care). The details of this ACA-required MLR formula
comparing non-claim costs to overall expenditures were promulgated in
an HHS interim final regulation published in the Federal Register on
December 1, 2010 (75 FR 74864). Non-claim costs include plan
administration costs, marketing costs, and profit. ACA requires that
health insurance issuers, beginning in calendar year 2011, meet an MLR
of 85% for large groups, (i.e., non-claim costs may not exceed 15%. If
an issuer does not meet the MLR target, it must pay a premium rebate.
FEHB-Specific MLR Threshold
Under this OPM regulation, in addition to being subject to the ACA-
required MLR, most FEHB community rated plans will be required to meet
an FEHB-specific MLR threshold for the annual rates negotiated for
their federal enrollment. This new requirement will be included in 48
CFR 1615.402(c)(3)(b) and will be phased in over two years. If the plan
falls below the FEHB-specific MLR threshold, the plan must pay a
subsidization penalty into a newly established Subsidization Penalty
Account (defined in 5 CFR 890.503(c)(6)). The FEHB-specific MLR
threshold will be set in OPM's annual rate instructions to FEHB plans
published in the spring of each year, rather than by regulation. If the
plan has met or exceeded the FEHB-specific MLR threshold, there is no
exchange of funds or adjustment of premiums necessary.
This rule establishes a process, in 48 CFR 1615.402(c)(3)(b), by
which FEHB community rated plans (other than plans using TCR) will
calculate and submit the MLR for their FEHB plans. This process will
take place after the end of the plan year and after the carrier has
calculated and submitted to HHS the ACA-required MLR. Under this
regulation, premium rates for community rated plans will continue to be
negotiated prior to the plan year based on the plan's community rating
methodology. There will continue to be a reconciliation process
starting April 30 of the plan year to update any new information
received after rates were set but prior to January 1 of the plan year,
including book rates filed with the state. Once SSSGs have been phased
out, most community rated plans will no longer be required to submit
SSSG information and the reconciliation process will not include
comparison with SSSGs. Instead of the SSSG comparison, there will be a
separate settlement with OPM after the end of the plan year based on
the FEHB-specific MLR threshold.
OPM will base its MLR definitions on the HHS Interim Final Rule of
December 1, 2010 (75 FR 74864). However, while the HHS MLR will be
calculated as a three-year sum, the FEHB-specific MLR threshold will be
calculated on a one-year basis to be consistent with the
[[Page 36858]]
annual renegotiation of FEHB premiums. The HHS interim final regulation
allows for a credibility adjustment for the ``special circumstance of
smaller plans, which do not have sufficient experience to be
statistically valid for purposes of the rebate provisions.'' The FEHB-
specific MLR threshold calculation may also include a credibility
adjustment, but, if used, the threshold will be lower, due to the
relative small size of FEHB enrollee populations. The FEHB-specific MLR
threshold target may be different from the ACA large group MLR of 85%.
In calculating the FEHB-specific MLR threshold, plans will be
aggregated as defined in that year's annual rate instructions issued to
carriers.
The use of an FEHB-specific MLR threshold in FEHB community rate
setting will allow for the removal of SSSGs for non-TCR plans while
preserving incentives for carriers to provide health insurance that is
affordable and that has appropriate controls on administrative
overhead. In recent years, there have been a declining number of fully
insured plans in the commercial market. Carriers are increasingly
unable to find groups similarly sized to the FEHB group for comparison
and are withdrawing from the program as a result.
This OPM regulation requires that the FEHB-specific MLR threshold
calculation take place after the ACA-required MLR calculation and any
rebate amounts due to the FEHB as a result of the ACA-required
calculation will not be included in the FEHB-specific MLR threshold
calculation. The HHS interim final MLR rule requires health insurance
issuers to submit their MLR calculation by June 1 of the year following
the MLR reporting year. Issuers must report information related to
earned premiums and expenditures in various categories, including
reimbursement for clinical services provided to enrollees, activities
that improve health care quality, and all other non-claims costs. The
HHS interim final regulation specifies that the report will include
claims incurred in the MLR reporting year and paid through March of the
following year.
To complete the FEHB-specific MLR threshold calculation after the
carrier calculated the ACA-required MLR, FEHB carriers will report
claims incurred in the plan year and paid through March 31 of the
following year. FEHB carriers will report the same categories of
information for the FEHB-specific MLR threshold calculation as reported
for the ACA-required MLR calculation; however, the FEHB-specific MLR
threshold calculation data will be based only on the FEHB population of
the health plan. Data will be reported to OPM with the rate filing for
the year following the MLR reporting year. Specific dates for reporting
MLR will be included in the rate instructions which are typically
released in April of each year.
Under the current SSSG methodology, adjustments due to SSSG
discounts are either deposited into plan-specific contingency reserve
accounts or factored into reduced premiums for enrollees in the
following plan year. Under this rule, if the FEHB-specific MLR
threshold calculation process requires an FEHB carrier to pay a
subsidization penalty, it will not be deposited into its own
contingency reserve fund but will instead be deposited into a
Subsidization Penalty Account established in the U.S. Treasury by OPM
for this purpose. These funds will be annually distributed, on a pro-
rata basis, to the contingency reserves of all non-TCR community rated
plans' contingency reserves.
Issuers failing to meet the FEHB-specific MLR threshold must make
any subsidization penalty payment within 60 days of notification of
amounts due. This payment would take place via wire transfer, similar
to the way carriers make payments required by the current
reconciliation process. In the case of carrier non-compliance, this
interim final rule includes authority for OPM to garnish premium
payments to the carrier in 1632.170(a)(3).
As stipulated in Section 8910 of Title 5 of the US Code, OPM will
include a provision in contracts with carriers that requires the
carrier to:
Furnish reasonable reports to OPM to enable it to carry
out its functions under this chapter.
Permit OPM and GAO to examine records, including those
from affiliates and vendors, as may be necessary to carry out the
purpose of this chapter.
Under this regulation, the new methodology becomes effective for
all non-TCR plans for the 2013 plan year. For the 2012 plan year, all
non-TCR health plans have an option of either: (1) Following the SSSG
requirements as currently stated and providing OPM the FEHB-specific
2011 and 2012 MLR threshold calculation by the date specified in the
2012 annual instructions; or (2) moving to the FEHB-specific MLR
threshold calculation with no requirement to submit SSSG information
after 2012. The FEHB-specific MLR threshold for plans choosing the
second option for 2012 will be set similar to the average MLR of FEHB's
experience rated plans. OPM expects to set the FEHB-specific MLR
threshold for 2013 and beyond at a reasonable level consistent with the
MLR that community rated plans are currently achieving under the SSSG
mechanism, but no lower than 85 percent. For those plans that stay
under the SSSG methodology, there would be no financial impact to the
plans from this regulation in the 2012 plan year. Community rated FEHB
plans that are required by state law to use TCR will be required to
continue using the SSSG methodology.
Background
There are two methods of determining premium rates for FEHB plans:
Community rating and experience-rating. This regulatory change will
apply to those FEHB plans that are subject to community rating. Under
current regulation, the community rated plan premiums are compared to
the premiums of SSSGs to ensure that FEHB receives the lowest available
premium rate.
TCR plans are those that set the same rates for all groups in a
community regardless of the health risks and other characteristics of
any specific group. Under TCR, an FEHB group must be charged the same
premium as all other groups in the area that receive the same set of
benefits. Healthier groups subsidize the less healthy groups that use
more health services. This subsidization is by design, and the health
plan cannot adjust premiums for a specific group to reflect the
percentage of premium revenue used for claim costs versus
administration. Therefore, OPM believes it inappropriate to impose an
MLR-based premium rating methodology on those FEHB plans that use TCR.
Currently, the only FEHB plans that use TCR are those operating in
states that require it.
Under current regulations, the premiums for community rated FEHB
plans are negotiated with OPM the August before the plan year begins on
January 1. Those negotiated rates are based on comparable rates offered
to other plans in the community, with some plans adjusting for age,
gender, and health risks of the community. Beginning in April of the
plan year, OPM conducts a reconciliation process to update any change
in rate assumptions that occurred after rates were set but before
January 1 of the plan year, such as new book rates filed in the state
in which the plan is issued. During this reconciliation process, each
FEHB community rated plan determines the two appropriate employer-based
subscriber groups that will serve as SSSGs for comparison. If a plan
has
[[Page 36859]]
provided a discounted rate to one of the SSSGs, the plan must match
that discount in the rate provided to FEHB. SSSGs are defined in FEHBAR
at 48 CFR 1602.170-13.
The FEHB Program has experienced a decline in the number of
participating HMO plans in part due to concerns with the comparison of
rates to SSSGs. OPM's goal is to offer Federal employees, annuitants
and their families a broad choice of health insurance plans. To that
end, where there are significant barriers to entry or aspects of the
program that increase risk beyond an acceptable level for carriers, OPM
is taking steps to mitigate risks and eliminate barriers to entry.
The current methodology involving SSSG comparison has been cited by
some health plans as creating uncertainty and risk in the FEHB Program.
Uncertainty and risk have increased over the years as employers have
moved away from offering fully-insured products with community rates
for their employees. This trend has resulted in fewer appropriately-
sized employer groups that can be used in the SSSG calculation. Under
the current methodology, SSSGs are sometimes much smaller than the FEHB
group, diverging from the original intent of the regulation. There are
several cases in which FEHB groups are compared to groups much less
than half their size for the purpose of rate determination.
Waiver of Proposed Rulemaking
OPM has determined that it would be impracticable, unnecessary, and
contrary to the public interest to delay putting the provisions of this
interim final regulation in place until a public notice and comment
process has been completed. Under section 553(b) of the Administrative
Procedure Act (APA) (5 U.S.C. 551 et seq.) a general notice of proposed
rulemaking is not required when an agency, for good cause, finds that
notice and public comment thereon are impracticable, unnecessary, or
contrary to the public interest. FEHB plans must be in possession of
full information about OPM's rating methodology prior to May 31, 2011
in order to submit proposals for the 2012 plan year. In the absence of
the option of a new rating methodology, FEHB plans have indicated they
may discontinue participation in FEHB. Fewer participating FEHB plans
would constrain competition and limit choice for FEHB enrollees. This
OPM interim final regulation was completed as quickly as possible
following the publication of the regulatory definition of medical loss
ratio by HHS in December 2010, upon which this rule relies. Further,
plans have the option of subjecting themselves to the existing rating
methodology during the 2012 plan year, should they choose to do so.
Therefore, we find good cause to waive the notice of proposed
rulemaking and to issue this final rule on an interim basis, including
a 30-day public comment period.
Regulatory Impact Analysis
OPM has examined the impact of this rule as required by Executive
Order 12866 (September 1993, Regulatory Planning and Review) and
Executive Order 13563, which directs agencies to assess all costs and
benefits of available regulatory alternatives and, if regulation is
necessary, to select regulatory approaches that maximize net benefits
(including potential economic, environmental, public, health, and
safety effects, distributive impacts, and equity). A regulatory impact
analysis must be prepared for major rules with economically significant
effects of $100 million or more in any one year. This rule is not
considered a major rule because OPM estimates that premiums paid by
Federal employees and agencies will be very similar under the old and
new payment methodologies. This rule will be cost-neutral. OPM's
intention is to keep FEHB premiums stable and sustainable using this
more transparent methodology.
List of Subjects
5 CFR Part 890
Government employees, Health facilities, Health insurance, Health
professions, Hostages, Iraq, Kuwait, Lebanon, Military personnel,
Reporting and recordkeeping requirements, Retirement.
48 CFR Parts 1602, 1615, 1632, and 1652
Government employees, Government procurement, Health insurance,
Reporting and recordkeeping requirements.
U.S. Office of Personnel Management.
John Berry,
Director.
For the reasons set forth in the preamble, OPM amends part 890 of
title 5 CFR and chapter 16 of title 48 CFR (FEHBAR) as follows:
TITLE 5--ADMINISTRATIVE PERSONNEL
PART 890--FEDERAL EMPLOYEES HEALTH BENEFITS PROGRAM
Subpart E--Contributions and Withholdings
0
1. The authority citation for subpart E of part 890 continues to read
as follows:
Authority: 5 U.S.C. 8913; Sec. 890.303 also issued under Sec. 50
U.S.C. 403p, 22 U.S.C. 4069c and 4069c-1; Subpart L also issued
under Sec. 599C of Public Law 101-513, 104 Stat. 2064, as amended;
Sec. 890.102 also issued under Secs. 11202(f), 11232(e), 11246(b)
and (c) of Public Law 105-33, 111 Stat. 251; Sec. 721 of Public Law
105-261, 112 Stat. 2061 unless otherwise noted; Sec. 890.111 also
issued under Sec. 1622(b) of Public Law 104-106, 110 Stat. 515.
0
2. Add Sec. 890.503(c)(6) to read as follows:
Sec. 890.503 Reserves.
* * * * *
(c) * * *
(6) Subsidization penalty reserve. This reserve account shall be
credited with all subsidization penalties levied against community
rated plans outlined in 48 CFR 1615.402(c)(3)(b)(2). The funds in this
account shall be annually distributed to the contingency reserves of
all community rated plans subject to the FEHB-specific medical loss
ratio threshold on a pro-rata basis. The funds will not be used for one
specific carrier or plan.
TITLE 48--FEDERAL ACQUISITION REGULATIONS SYSTEM
CHAPTER 16--OFFICE OF PERSONNEL MANAGEMENT FEDERAL EMPLOYEES HEALTH
BENEFITS ACQUISITION REGULATION
Subchapter A--General
PART 1602--DEFINITIONS OF WORDS AND TERMS
0
3. The authority citation for part 1602 continues to read as follows:
Authority: 5 U.S.C. 8913; 40 U.S.C. 486(c); 48 CFR 1.301.
0
4. Sec. 1602.170-2(b) is revised to read as follows:
Sec. 1602.170-2 Community rate.
* * * * *
(b) Adjusted community rate means a community rate which has been
adjusted for expected use of medical resources of the FEHBP group. An
adjusted community rate is a prospective rate and cannot be
retroactively revised to reflect actual experience, utilization, or
costs of the
[[Page 36860]]
FEHBP group, except as described in Sec. 1615.402(c)(4).
0
5. Sec. 1602.170-5(b) is revised to read as follows:
Sec. 1602.170-5 Cost or pricing data.
* * * * *
(b) Community rated carriers. Cost or pricing data for community
rated carriers is the specialized rating data used by carriers in
computing a rate that is appropriate for the Federal group and
similarly sized subscriber groups (SSSGs). Such data include, but are
not limited to, capitation rates; prescription drug, hospital, and
office visit benefits utilization data; trend data; actuarial data;
rating methodologies for other groups; standardized presentation of the
carrier's rating method (age, sex, etc.) showing that the factor
predicts utilization; tiered rates information; ``step-up'' factors
information; demographics such as family size; special benefit loading
capitations; and adjustment factors for capitation. After the 2012 plan
year, reconciled rates for community rated carriers, other than those
required by state law to use Traditional Community Rating (TCR), will
be required to meet an FEHB-specific medical loss ratio threshold
published annually in OPM's rate instructions to FEHB carriers.
0
6. Redesignate Sec. Sec. 1602.170-13 through 1602.170-15 as Sec. Sec.
1602.170-14 through 1602.170-15 respectively.
0
7. Add new Sec. 1602.170-14 to read as follows:
Sec. 1602.170-14 FEHB-specific medical loss ratio threshold
calculation.
(a) Medical loss ratio (MLR) means the ratio of plan incurred
claims, including the issuer's expenditures for activities that improve
health care quality, to total premium revenue determined by OPM, as
defined by the Department of Health and Human Services.
(b) The FEHB-specific MLR will be calculated on an annual basis,
with the prior year's ratio having no effect on the current plan year.
This FEHB-specific MLR will be measured against an FEHB-specific MLR
threshold to be put forth by OPM in the annual rate instruction letter
to FEHB carriers.
(c) OPM will set a credibility adjustment to account for the
special circumstances of small FEHB plans in annual rate instructions
to carriers.
Subchapter C--Contracting Methods and Contract Types
PART 1615--CONTRACTING BY NEGOTIATION
0
7. The authority citation for part 1615 continues to read as follows:
Authority: Audit and records--5 U.S.C. 8913; 40 U.S.C. 486(c);
48 CFR 1.301. Negotiation--5 U.S.C. 8902.
0
8. Revise Sec. 1615.402(c)(3) to read as follows:
Sec. 1615.402 Pricing policy.
* * * * *
(c) * * *
(3) For plan year 2012, plans will have the option of continuing to
use the similarly sized subscriber group (SSSG) rating methodology
described in paragraph (c)(3)(i) of this section or using the MLR
rating methodology described in paragraph (c)(3)(ii) of this section.
All non-traditional community rated (TCR) plans will be required to
submit FEHB-specific MLR information for every year beginning with plan
year 2011.
(i) Similarly sized subscriber group (SSSG) methodology. (A) For
contracts with 1,500 or more enrollee contracts for which the FEHB
Program premiums for the contract term will be at or above the
threshold at FAR 15.403-4(a)(1), OPM will require the carrier to
provide the data and methodology used to determine the FEHB Program
rates. OPM will also require the data and methodology used to determine
the rates for the carrier's SSSGs. The carrier will provide cost or
pricing data required by OPM in its rate instructions for the
applicable contract period. OPM will evaluate the data to ensure that
the rate is reasonable and consistent with the requirements in this
chapter. If necessary, OPM may require the carrier to provide
additional documentation.
(B) 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 lower of the two rates
determined by using the methodology (including discounts) the carrier
used for the two SSSGs.
(C) FEHB Program community-rated carriers will comply with SSSG
criteria provided by OPM in the rate instructions for the applicable
contract period.
(ii) FEHB-specific medical loss ratio (MLR) threshold methodology.
(A) For contracts with 1,500 or more enrollee contracts for which the
FEHB Program premiums for the contract term will be at or above the
threshold at FAR 15.403-4(a)(1), OPM will require the carrier to
provide the data and methodology used to determine the FEHB Program
rates. OPM will also require the data and methodology used to determine
the medical loss ratio (MLR) as defined in the ACA (Public Law 111-148)
and as defined by HHS in implementing regulations for all FEHB
community rated plans other than those required by state law to use
Traditional Community Rating. The carrier will provide cost or pricing
data, as well as the FEHB-specific MLR threshold data required by OPM
in its rate instructions for the applicable contract period. OPM will
evaluate the data to ensure that the rate is reasonable and consistent
with the requirements in this chapter. If necessary, OPM may require
the carrier to provide additional documentation.
(B) Contracts will be subject to a subsidization penalty if OPM
determines that the FEHB group did not meet the FEHB-specific MLR
threshold specified in the annual rate instruction to carriers. Such a
subsidization penalty will be deposited into a Subsidization Penalty
Account held at the U.S. Treasury. This Subsidization Penalty Account
will be held in common with all community rated carriers and will be
annually distributed to the contingency reserve accounts of all non-TCR
community rated plans on a pro-rata basis.
(C) FEHB Program community-rated carriers will comply with the MLR
criteria, including the FEHB-specific MLR threshold provided by OPM in
the rate instructions for the applicable contract period. FEHB plans
that are required by state law to use TCR are exempt from this
requirement and will use the SSSG methodology outlined in of this
section (c)(3)(i) of this section.
* * * * *
0
9. Revise Sec. 1615.406-2 to read as follows:
Sec. 1615.406-2 Certificate of accurate cost or pricing data for
community rated carriers.
The contracting officer will require a carrier with a contract
meeting the requirements in 1615.402(c)(2) or 1615.402(c)(3) to execute
the Certificate of Accurate Cost or Pricing Data contained in this
section. A carrier with a contract meeting the requirements in
1615.402(c)(2) will complete the Certificate and keep it on file at the
carrier's place of business in accordance with 1652.204-70. A carrier
with a contract meeting the requirements in 1615.402(c)(3) will submit
the Certificate to OPM along with its rate reconciliation, which is
submitted during the first quarter of the applicable contract year.
(Beginning of certificate)
Certificate of Accurate Cost or Pricing Data for Community-Rated
Carriers
This is to certify that, to the best of my knowledge and belief:
(1)(a) The cost or
[[Page 36861]]
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 ----*FEHB Program rates were developed
in accordance with the requirements of 48 CFR Chapter 16 and the
FEHB Program contract and are accurate, complete, and current as of
the date this certificate is executed; and (b) the methodology used
to determine the FEHB Program rates is consistent with the
methodology used to determine the rates for the carrier's Similarly
Sized Subscriber Groups if complying with Sec. 1602.170-13a.
or
(c) The determination of the carrier's FEHB-specific medical
loss ratio for ** is accurate, complete, and consistent with the
methodology as stated in Sec. 1615.402(c)(3)(b) if complying with
Sec. 1602.170-13b.
* Insert the year for which the rates apply. Normally, this will
be the year for which the rates are being reconciled.
** Insert the year for which the MLR calculation applies.
Normally, this will be the year before the year being reconciled.
Firm:------------------------------------------------------------------
Name:------------------------------------------------------------------
Signature:-------------------------------------------------------------
Date of Execution------------------------------------------------------
(End of certificate)
Subchapter E--General Contracting Requirements
PART 1632--CONTRACT FINANCING
0
10. The authority citation for part 1632 continues to read as follows:
Authority: 5 U.S.C. 8913; 40 U.S.C. 486(c); 48 CFR 1.301.
0
11. Add Sec. 1632.170(a)(3) to read as follows:
Sec. 1632.170 Recurring premium payments to carriers.
(a) * * *
(3) Any subsidization penalty levied against a community rated plan
as outlined in 48 CFR 1615.402(c)(3)(ii)(B) must be paid within 60 days
from notification. If payment is not received within the 60 day period,
OPM will withhold from the community rated carriers the periodic
premium payment payable until fully recovered. OPM will deposit the
withheld funds in the subsidization penalty reserve described in 5 CFR
890.503(c)(6).
* * * * *
Subchapter H--Clauses and Forms
PART 1652--CONTRACT CLAUSES
0
12. 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.
0
13. Revise 1652.216-70(b)(2) though (b)(5) as follows:
Sec. 1652.216-70 Accounting and price adjustment.
* * * * *
(b) * * *
(2) The subscription rates agreed to in this contract shall be
based on paragraphs (b)(2)(i) or (ii) of this clause. Effective January
1, 2013 all community rated plans must base their rating methodology on
the medical loss ratio (MLR) threshold described in paragraph (b)(2)(i)
of this clause unless traditional community rating is mandated in the
state where they are domiciled:
(i) The subscription rates agreed to in this contract shall meet
the FEHB-specific MLR threshold as defined in FEHBAR 1602.170-13b. The
ratio of a plan's incurred claims, including the issuer's expenditures
for activities that improve health care quality, to total premium
revenue shall not be lower than the FEHB-specific MLR threshold
published annually by OPM in its rate instructions.
(ii) 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 1602.170-13a. 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 the rates are determined by SSSG comparison, then:
(i) 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)(3)(iii) of this clause.
(ii) 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)(3)(iii) of this clause.
(iii) 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.
(4) If rates are determined by comparison with the FEHB-specific
MLR threshold, then if the MLR for the carrier's FEHB plan is found to
be lower than the published FEHB-specific MLR threshold, the carrier
must pay a subsidization penalty into a subsidization penalty account.
(5) The following apply to community rated plans, regardless of the
rating methodology:
(i) No upward adjustment in the rate established for this contract
will be allowed or considered by the Government or will be made by the
Carrier in this or in any other contract period on the basis of actual
costs incurred, actual benefits provided, or actual size or composition
of the FEHBP group during this contract period.
(ii) 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.
(iii) 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 in any
circumstance.
[FR Doc. 2011-15602 Filed 6-22-11; 8:45 am]
BILLING CODE 6325-64-P