[Federal Register Volume 80, Number 4 (Wednesday, January 7, 2015)]
[Proposed Rules]
[Pages 926-929]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-30633]
[[Page 925]]
Vol. 80
Wednesday,
No. 4
January 7, 2015
Part II
Office of Personnel Management
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5 CFR Part 890
48 CFR Parts 1602, 1615, and 1652
Federal Employees Health Benefits Program; Proposed Rules
Federal Register / Vol. 80, No. 4 / Wednesday, January 7, 2015 /
Proposed Rules
[[Page 926]]
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OFFICE OF PERSONNEL MANAGEMENT
48 CFR Parts 1602, 1615, and 1652
RIN 3206-AN00
Federal Employees Health Benefits Program; Rate Setting for
Community-Rated Plans
AGENCY: U.S. Office of Personnel Management.
ACTION: Notice of proposed rulemaking.
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SUMMARY: The U.S. Office of Personnel Management (OPM) is issuing a
Notice of Proposed Rulemaking to make changes to the Federal Employees
Health Benefits Acquisition Regulation (FEHBAR). These changes would:
Define which subscriber groups may be included for consideration as
similarly sized subscriber groups (SSSGs); require the SSSG to be
traditional community rated; establish that traditional community-rated
Federal Employees Health Benefits (FEHB) plans must select only one
rather than two SSSGs; and make conforming changes to FEHB contract
language to account for the new medical loss ratio (MLR) standard for
most community-rated FEHB plans.
DATES: Comments are due on or before March 9, 2015.
ADDRESSES: Send written comments to Delon Pinto, Senior Policy Analyst,
Planning and Policy Analysis, U.S. Office of Personnel Management, Room
4312, 1900 E Street NW., Washington, DC; or FAX to (202) 606-4640 Attn:
Delon Pinto. You may also submit comments using the Federal eRulemaking
Portal: http://www.regulations.gov. Follow the instructions for
submitting comments.
FOR FURTHER INFORMATION CONTACT: Delon Pinto, Senior Policy Analyst, at
[email protected] or (202) 606-0004.
SUPPLEMENTARY INFORMATION: The U.S. Office of Personnel Management is
issuing a notice of proposed rulemaking to update the Federal Employees
Health Benefits Acquisition Regulation to accommodate the new FEHB
specific medical loss ratio (MLR) requirement for most community-rated
plans as well as to update the similarly sized subscriber group (SSSG)
requirement for traditional community-rated plans.
Background on Federal Employees Health Benefits Rate-Setting for
Community Rated Plans
The Patient Protection and Affordable Care Act, Pub. L. 111-148,
was enacted on March 23, 2010; the Health Care and Education
Reconciliation Act, Pub. L. 111-152, was enacted on March 30, 2010
(these are collectively known as the ``Affordable Care Act''). In April
2012, OPM issued a final rule establishing an FEHB specific MLR
requirement to replace the SSSG comparison requirement for most
community rated FEHB plans (77 FR 19522). The FEHB specific MLR rules
are based on the medical loss ratio standard established by the
Affordable Care Act and defined by the U.S. Department of Health and
Human Services, the U.S. Department of Labor, and the U.S. Department
of Treasury in 26 CFR part 54, 29 CFR part 2590, 45 CFR part 146, and
45 CFR part 158. Community-rated FEHB plans were permitted to elect to
follow the FEHB specific MLR requirements instead of the SSSG
requirements for calendar year 2012. Beginning with the 2013 calendar
year, the FEHB specific MLR requirements were mandatory for all
community-rated carriers except those that are State-mandated to use
traditional community rating (TCR). State mandated TCR plans will
continue to be subject to the SSSG comparison requirements.
Provisions of This Proposed Regulation
This proposed rule makes three changes to the requirements for
SSSGs. In the past, OPM has required that plans identify two non-FEHB
subscriber groups (employer groups covered by an issuer) that are
closest in size to the FEHB group and, if either or both of those
groups received a discounted rate, the carrier must provide the largest
discount to FEHB. This proposed rule defines the entities whose groups
may be selected for comparison as an SSSG. In addition, this rule
states any SSSG must also be rated TCR in order to maintain alignment
between the TCR-rated FEHB group and the subscriber group used for
comparison. Last, OPM is requiring plans to identify one, rather than
two, SSSG subscriber groups used for the comparison. OPM considers it
unnecessary to require more than one comparison group if the SSSG must
also be rated TCR for the reasons set forth below.
TCR plans are those that, usually by State law, are required to set
the same rates for all subscriber groups 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 its
service area that receive the same set of benefits. The health plan
cannot adjust premiums for a specific group to reflect the healthcare
utilization characteristics of that specific group.
Since the TCR premium does not necessarily reflect the experience
of a specific group, an FEHB specific MLR requirement is not
appropriate. However, if a State-mandated TCR carrier has no other
groups that are TCR, and therefore no SSSG, the carrier will be subject
to the FEHB specific MLR requirements. In that situation, applying the
FEHB specific MLR requirement is appropriate.
Definition of Entities Included for SSSG Comparison
This proposed regulation identifies which SSSGs are available for
comparison under 48 CFR 1602.170-13. A subscriber group purchasing
healthcare benefits from an entity may be an SSSG if the entity is the
carrier, a division or subsidiary of the carrier, a separate line of
business or qualified separate line of business of the carrier, or if
the entity maintains a contractual arrangement with the carrier to
provide healthcare benefits. If the entity is any of the preceding, any
of its subscriber groups may be included as an SSSG so long as the
entity reports financial statements on a consolidated basis with the
carrier or shares, delegates, or otherwise contracts with the carrier,
any portion of its workforce that involves the management, design,
pricing, or marketing of the healthcare product.
Conforming Changes Due to MLR-Based FEHB Rate Requirements
The FEHBAR contains language required in all FEHB contracts with
health insurance carriers. In the April 2, 2012 final rule, OPM did not
update all of the FEHBAR contract language to account for the new FEHB-
specific MLR requirement. Omitted from that regulation were some
changes, described below, to 48 CFR 1652.215-70, ``Rate Reduction for
Defective Pricing or Defective Cost or Pricing Data,'' to account for
the new rules.
48 CFR 1652.215-70 describes how a contracting officer at OPM may
make an offset from premiums if pricing or cost and pricing data are
defective. This proposed rule adds a provision stating that such an
offset can be made if a Carrier, which is not mandated by the State to
use traditional community rating, has developed FEHB rates inconsistent
with the FEHB-specific MLR requirement. This proposed rule also adds a
provision that simple interest must be paid to the Government when an
MLR penalty is assessed as a result of an audit finding by the OPM
Office of the Inspector General (OIG). This is not a policy change, but
a conforming change so all FEHB
[[Page 927]]
contracts account for the new FEHB-specific MLR requirement.
The April 2, 2012 final rule included two different ``Certificates
of accurate cost or pricing data'' in 48 CFR 1615.406-2: One for SSSG
pricing, and one for MLR pricing. Previously there was only one
certificate for all carriers. This proposed rule changes some
references from ``certificate'' to ``certificates'' to reflect this
change.
Technical Corrections
This proposed rule includes two technical corrections that correct
inadvertent errors from earlier amendments to chapter 16 of the FEHBAR.
In the June 2011 interim final rule, the word ``issuer'' was used
erroneously in place of the word ``carrier'' in two places. Per chapter
89 title 5 U.S. Code, OPM is authorized to contract with carriers. This
technical correction is made in 48 CFR 1602.170-14(a) and 1652.216-
70(b)(2)(i).
This proposed rule also clarifies, in 48 CFR 1652.216-70(b), how
community-rated carriers must develop their FEHB rates. Previously,
this section erroneously stated that carriers should ``base their
rating methodology on the MLR threshold.'' The corrected language
states that all community-rated plans must develop the FEHB's rates
using their State-filed rating methodology or, if not required to file
with the State, their standard written and established rating
methodology.
Regulatory Flexibility Act
OPM certifies that this regulation will not have a significant
economic impact on a substantial number of small entities because the
regulation only affects health insurance carriers in the FEHB Program.
Executive Order 12866, Regulatory Review
This rule has been reviewed by the Office of Management and Budget
in accordance with Executive Order 12866. OPM has examined the impact
of this proposed rule as required by Executive Order 12866 and
Executive Order 13563, which direct 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 there will be no increased costs to
Federal agencies, Federal Employees, or Federal retirees in their
health insurance premiums.
Federalism
We have examined this rule in accordance with Executive Order
13132, Federalism, and have determined that this rule will not have any
negative impact on the rights, roles, and responsibilities of State,
local, or tribal governments.
List of Subjects in 48 CFR Parts 1602, 1615, and 1652
Government employees, Government procurement, Health insurance,
Reporting and recordkeeping requirements.
U.S. Office of Personnel Management.
Katherine Archuleta,
Director.
For the reasons set forth in the preamble, OPM proposes to amend
chapter 16 of title 48 CFR (FEHBAR) as follows:
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
1. 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
2. Revise 1602.170-13 to read as follows:
1602.170-13 Similarly sized subscriber groups.
(a) A Similarly sized subscriber group (SSSG) is a non-FEHB
employer group that:
(1) As of the date specified by OPM in the rate instructions, has a
subscriber enrollment closest to the FEHBP subscriber enrollment;
(2) Uses traditional community rating; and
(3) Meets the criteria specified in the rate instructions issued by
OPM.
(b) Any group with which an entity enters into an agreement to
provide health care services is a potential SSSG (including groups that
are traditional community rated and covered by separate lines of
business, government entities, groups that have multi-year contracts,
and groups having point-of-service products) except as specified in
paragraph (c) of this section.
(1) An entity's subscriber groups may be included as an SSSG if the
entity is any of the following:
(i) The carrier;
(ii) A division or subsidiary of the carrier;
(iii) A separate line of business or qualified separate line of
business of the carrier; or
(iv) An entity that maintains a contractual arrangement with the
carrier to provide healthcare benefits.
(2) A subscriber group covered by an entity meeting any of the
criteria under paragraph (b)(1) of this section may be included for
comparison as a SSSG if the entity meets any of the following criteria:
(i) It reports financial statements on a consolidated basis with
the carrier; or
(ii) Shares, delegates, or otherwise contracts with the carrier,
any portion of its workforce that involves the management, design,
pricing, or marketing of the healthcare product.
(c) The following groups must be excluded from SSSG consideration:
(1) Groups the carrier rates by the method of retrospective
experience rating;
(2) Groups consisting of the carrier's own employees;
(3) Medicaid groups, Medicare-only groups, and groups that receive
only excepted benefits as defined at section 9832(c) of title 26,
United States Code;
(4) A purchasing alliance whose rate-setting is mandated by the
State or local government;
(5) Administrative Service Organizations (ASOs);
(6) Any other group excluded from consideration as specified in the
rate instructions issued by OPM.
(d) OPM shall determine the FEHBP rate by selecting the lowest rate
derived by using rating methods consistent with those used to derive
the SSSG rate.
(e) In the event that a State-mandated TCR carrier has no SSSG,
then it will be subject to the FEHB specific MLR requirement.
0
3. Revise 1602.170-14(a) to read as follows:
1602.170-14 FEHB-specific medical loss ratio threshold calculation.
Medical Loss Ratio (MLR) means the ratio of plan incurred claims,
including the carrier'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 in 45 CFR part 158.
* * * * *
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Subchapter C--Contracting Methods and Contract Types
PART 1615--CONTRACTING BY NEGOTIATION
0
4. The authority citations for part 1615 continue to read as follows:
Authority: 5 U.S.C. 8913; 40 U.S.C. 486(c); 48 CFR 1.301.
0
5. In 1615.402, revise paragraphs (c)(2), (c)(3)(i)(A) and (B), and
(c)(4) to read as follows:
1615.402 Pricing policy.
* * * * *
(c) * * *
(2) For contracts with fewer than 1,500 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 submit its rate proposal, utilization data, and a certificate of
accurate cost or pricing data required in 1615.406-2. In addition, OPM
will require the carrier to complete the proposed rates form containing
cost and pricing data, and the Community-Rate Questionnaire, but will
not require the carrier to send these documents to OPM. The carrier
will keep the documents on file for periodic auditor and actuarial
review in accordance with 1652.204-70. OPM will perform a basic
reasonableness test on the data submitted. Rates that do not pass this
test will be subject to further OPM review.
* * * * *
(3) * * *
(i) * * *
(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 SSSG. 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
SSSG. Such adjustments will be based on the rate determined by using
the methodology (including discounts) the carrier used for the SSSG.
* * * * *
(4) 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
similarly-sized subscriber group (SSSG). Such adjustments will be based
on the rate determined by using the methodology (including discounts)
the carrier used for the SSSG.
* * * * *
0
6. In 1615.406-2, revise the section heading and the first certificate
to read as follows:
1615.406-2 Certificates of accurate cost or pricing data for
community-rated carriers.
* * * * *
(Beginning of first certificate)
Certificate of Accurate Cost or Pricing Data for Community-Rated
Carriers (SSSG methodology)
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 __* 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 (2) 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 Group.
* Insert the year for which the rates apply.
Firm:------------------------------------------------------------------
Name:------------------------------------------------------------------
Signature:-------------------------------------------------------------
Date of Execution:-----------------------------------------------------
(End of first certificate)
* * * * *
Subchapter H--Clauses and Forms
PART 1652--CONTRACT CLAUSES
0
7. 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
8. In 1652.215-70, revise paragraphs (a) and (c) to read as follows:
1652.215-70 Rate Reduction for Defective Pricing or Defective Cost or
Pricing Data.
* * * * *
(a) If any rate established in connection with this contract was
increased because:
(1) The Carrier submitted, or kept in its files in support of the
FEHBP rate, cost or pricing data that were not complete, accurate, or
current as certified in one of the Certificates of Accurate Cost or
Pricing Data (FEHBAR 1615.406-2);
(2) The Carrier submitted, or kept in its files in support of the
FEHBP rate, cost or pricing data that were not accurate as represented
in the rate reconciliation documents or MLR Calculation;
(3) The Carrier developed FEHBP rates for traditional community-
rated plans with a rating methodology and structure inconsistent with
that used to develop rates for a similarly sized subscriber group (see
FEHBAR 1602.170-13) as certified in the Certificate of Accurate Cost or
Pricing Data for Community-Rated Carriers;
(4) The Carrier, who is not mandated by the State to use
traditional community rating, developed FEHBP rates with a rating
methodology and structure inconsistent with its State-filed rating
methodology (or if not required to file with the State, their standard
written and established rating methodology) or inconsistent with the
FEHB specific medical loss ratio (MLR) requirements (see FEHBAR
1602.170-13); or
(5) The Carrier submitted or, kept in its files in support of the
FEHBP rate, data or information of any description that were not
complete, accurate, and current--then, the rate shall be reduced in the
amount by which the price was increased because of the defective data
or information.
* * * * *
(c) When the Contracting Officer determines that the rates shall be
reduced and the Government is thereby entitled to a refund or that the
Government is entitled to a MLR penalty, the Carrier shall be liable to
and shall pay the FEHB Fund at the time the overpayment is repaid or at
the time the MLR penalty is paid--
(1) Simple interest on the amount of the overpayment from the date
the overpayment was paid from the FEHB Fund 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;
(2) A penalty equal to the amount of overpayment, if the Carrier
knowingly
[[Page 929]]
submitted cost or pricing data which was incomplete, inaccurate, or
noncurrent; and
(3) Simple interest on the MLR penalty from the date on which the
penalty should have been paid to the FEHB Fund to the date on which the
penalty was or will be actually paid to the FEHB fund. The interest
rate shall be calculated as specified in paragraph (c)(1) of this
clause.
0
9. In 1652.216-70, revise paragraphs (b)(2), (3), (7), and (8) to read
as follows:
1652.216-70 Accounting and price adjustment.
* * * * *
(b) * * *
(2) Effective January 1, 2013 all community-rated plans must
develop the FEHBP's rates using their State-filed rating methodology
or, if not required to file with the State, their standard written and
established rating methodology. A carrier who mandated by the State to
use traditional community rating will be subject to paragraph
(b)(2)(ii) of this clause. All other carriers will be subject to
paragraph (b)(2)(i) of this clause.
(i) The subscription rates agreed to in this contract shall meet
the FEHB-specific MLR threshold as defined in FEHBAR 162.170-14. The
ratio of a plan's incurred claims, including the carrier'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 group (SSSG) as defined in FEHBAR 1602.170-13. The
subscription rates shall be determined according to the carrier's
established policy, which must be applied consistently to the FEHBP and
to the carrier's SSSG. If the 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 SSSG discount.
(3) If subject to paragraph (b)(2)(ii) of this clause, then:
(i) If, at the time of the rate reconciliation, the subscription
rates are found to be lower than the equivalent rates for the SSSG, 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 SSSG,
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 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 the SSSG. 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.
* * * * *
(7) Carriers may provide additional guaranteed discounts to the
FEHBP. Any such guaranteed discounts must be clearly identified as
guaranteed discounts. After the beginning of the contract year for
which the rates are set, these guaranteed FEHBP discounts may not be
adjusted.
(8) Carriers may not impose surcharges (loadings not defined based
on an established rating method) on the FEHBP subscription rates or use
surcharges in the rate reconciliation process. If the carrier is
subject to the SSSG rules and imposes a surcharge on the SSSG, the
carrier cannot impose the surcharge on FEHB.
* * * * *
[FR Doc. 2014-30633 Filed 1-6-15; 8:45 am]
BILLING CODE 6325-63-P