[Federal Register Volume 78, Number 204 (Tuesday, October 22, 2013)]
[Rules and Regulations]
[Pages 62441-62443]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-24585]



38 CFR Part 17

RIN 2900-AO85

VA Dental Insurance Program--Federalism

AGENCY: Department of Veterans Affairs.

ACTION: Direct final rule.


SUMMARY: The Department of Veterans Affairs (VA) is taking direct final 
action to amend its regulations related to the VA Dental Insurance 
Program (VADIP), a pilot program to offer premium-based dental 
insurance to enrolled veterans and certain survivors and dependents of 
veterans. Specifically, this rule will add language to clarify the 
limited preemptive effect of certain criteria in the VADIP regulations.

DATES: This rule is effective on December 23, 2013, without further 
notice, unless VA receives a significant adverse comment by November 
21, 2013.

ADDRESSES: Written comments may be submitted through http://www.regulations.gov; by mail or hand delivery to the Director, 
Regulation Policy and Management (02REG), Department of Veterans 
Affairs, 810 Vermont Avenue NW., Room 1068, Washington, DC 20420; or by 
fax to (202) 273-9026. Comments should indicate that they are submitted 
in response to ``RIN 2900-AO85-VA Dental Insurance Program--
Federalism.'' Copies of comments received will be available for public 
inspection in the Office of Regulation Policy and Management, Room 
1068, between the hours of 8:00 a.m. and 4:30 p.m., Monday through 
Friday (except holidays). Please call (202) 461-4902 (this is not a 
toll-free number) for an appointment. In addition, during the comment 
period, comments may be viewed online through the Federal Docket 
Management System at http://www.regulations.gov.

FOR FURTHER INFORMATION CONTACT: Kristin Cunningham, Director, Business 
Policy, Chief Business Office (10NB), Veterans Health Administration, 
Department of Veterans Affairs, 810 Vermont Avenue NW., Washington, DC 
20420; (202) 461-1599. (This is not a toll-free number.)

SUPPLEMENTARY INFORMATION: This rule amends 38 CFR 17.169 to add 
language to clarify the limited preemptive effect of certain criteria 
in the VA Dental Insurance Program (VADIP), a pilot program to offer 
premium-based dental insurance to enrolled veterans and certain 
survivors and dependents of veterans. Under VADIP, VA contracts with 
private insurers through the Federal contracting process to offer 
dental insurance, and the private insurer is then responsible for the 
administration of the dental insurance plan. VA's role under VADIP is 
primarily to form the contract with the private insurer and verify the 
eligibility of veterans, survivors, and dependents. VADIP is 
authorized, and its implementing regulations are required, by section 
510 of the Caregivers and Veterans Omnibus Health Services Act of 2010, 
Public Law 111-163 (2010) (section 510).
    ``Preemption'' refers to the general principle that Federal law 
supersedes conflicting State law. U.S. Const. art. VI, cl. 2; Gade v. 
Nat'l Solid Wastes Mgmt. Ass'n, 505 U.S. 88, 98 (1992); M'Culloch v. 
Maryland, 17 U.S. 316, 317 (1819). However, the subject of insurance 
regulation is unique. Under 15 U.S.C. 1012, no Act of Congress may be 
construed to invalidate, impair, or supersede any law enacted by any 
State for the purpose of regulating the business of insurance, unless 
such Act specifically relates to the business of insurance. Although 
section 510 does not include express preemption language, Congress 
intended to legislate about the business of insurance in several 
subsections of section 510, hence preempting conflicting State and 
local laws. See Swanco Ins. Co.-Arizona v. Hager, 879 F.2d 353, 359 
(8th Cir. 1989) (``Instead of total preemption, Congress `selected 
particularized means to [an] end in conscious recognition that a 
considerable area of state regulation would remain intact.' '') 
(quoting Ins. Co. of the State of Pa. v. Corcoran, 850 F.2d 88, 93 (2nd 
Cir. 1988)).
    For example, section 510(h) requires VA to determine and annually 
adjust VADIP insurance premiums. Determining premium rates is an 
important aspect of the ``business of insurance.'' Gilchrist v. State 
Farm Mut. Auto. Ins. Co., 390 F.3d 1327, 1331 (11th Cir. 2004) (citing 
United States Dep't of Treasury v. Fabe, 508 U.S. 491, 503 (1993); Grp. 
Life & Health Ins. Co. v. Royal Drug Co., 440 U.S. 205, 224 (1979)). 
States strictly regulate insurance premium rates. See 5 Steven Plitt et 
al., Couch on Insurance Sec.  69:13 (3d ed. 2012). If a State denies 
the premium rate set by VA and such rate is required by section 
510(h)(1) in order ``to cover all costs associated with the pilot 
program,'' then the state would frustrate ``the lawful objective of a 
[F]ederal statute.'' United States v. Composite State Bd. of Med. 
Exam'rs, State of Georgia, 656 F.2d 131, 135 n.4 (5th Cir. 1981).
    Applying these principles here, Congress specifically intended to 
legislate on the business of insurance under certain subsections of 
section 510. The following chart lists these subsections and their 
corresponding regulatory paragraphs.

                                     Subsection of     Paragraph of Sec.
              Topic                   section 510            17.169
Eligibility for VADIP...........  510(b)............  Sec.   17.169(b).
Duration of VADIP...............  510(c)............  N/A.
Coverage locations..............  510(d)............  N/A.
Plan benefits...................  510(f)............  Sec.
Enrollment periods..............  510(g)............  Sec.   17.169(d).
Establishing amounts of           510(h)............  Sec.
 premiums, time frame for                              17.169(c)(1).
 premium adjustments, and
 responsibility for payment of
Bases and minimum procedures for  510(i)............  Sec.  Sec.
 voluntary disenrollment.                              17.169(e)(2)-(e)(

[[Page 62442]]

    Consequently, these subsections of section 510 and their relevant 
regulatory counterparts preempt conflicting State and local laws.
    State and local laws, including laws relating to the business of 
insurance, are not preempted by section 510, however, in areas where 
section 510 is silent. Examples of such areas of law include claims 
processes, licensing, underwriting, and appeals related to 
involuntarily disenrollment. Additionally, if State or local laws, 
including laws relating to the business of insurance, are not in 
conflict with any portion of section 510, then such State or local law 
may coexist with section 510.
    Preemption allows for the implementation of uniform benefits in all 
States and may reduce the overall cost of VADIP. We therefore amend 
Sec.  17.169 to add preemption language in accordance with the 
discussion above.

Executive Order 13132, Federalism

    Section 6(c) of Executive Order 13132 (entitled ``Federalism'') 
requires an agency that is publishing a regulation that has federalism 
implications and that preempts State law to follow certain procedures. 
Regulations that have federalism implications, according to section 
1(a) of Executive Order 13132, are those that have ``substantial direct 
effects on the States, on the relationship between the national 
government and the States, or on the distribution of power and 
responsibilities among the various levels of government.''
    Because this regulation addresses a federalism issue, in particular 
preemption of State laws, VA conducted prior consultation with State 
officials in compliance with Executive Order 13132. VA solicited 
comment and input from State insurance regulators, through their 
representative national organization, the National Association of 
Insurance Commissioners (NAIC). In response to its request for 
comments, VA received a letter from the Chief Executive Officer of the 
NAIC, which agreed with VA's position that this rulemaking properly 
identifies the limited areas where the statutes and regulations 
implementing VADIP preempt state laws and regulations concerning the 
business of insurance. The NAIC also agreed with VA's position that 
state law and regulation should continue to apply where federal law and 
regulations are silent, including in the areas of licensing and claims 
processing. VA received no other comments from the NAIC on this 
    VA's promulgation of this regulation complies with the requirements 
of Executive Order 13132 by (1) in the absence of explicit preemption 
in the authorizing statute, identifying the clear evidence that 
Congress intended to preempt State law, or where the exercise of State 
authority conflicts with the exercise of Federal authority under a 
Federal statute; (2) limiting the preemption to only those areas where 
we find existence of a clear conflict or clear evidence of Congress' 
intention that Federal law preempt State law; (3) restricting the 
regulatory preemption to the minimum level necessary to achieve the 
objectives of the statute; (4) consulting with the State insurance 
regulators, as indicated above; and (5) providing opportunity for 
comment through this rulemaking and its companion proposed rulemaking, 
see RIN 2900-AO86.

Administrative Procedure Act

    VA believes this regulatory amendment is non-controversial and 
anticipates that this rule will not result in any significant adverse 
comment, and therefore is issuing it as a direct final rule. The 
preemptive effect of certain criteria in this rulemaking is limited, 
and we have conducted formal consultation on the issue of preemption, 
in compliance with Executive Order 13132, Federalism. However, in the 
``Proposed Rules'' section of this Federal Register publication, we are 
publishing a separate, substantially identical proposed rule document 
that will serve as a proposal for the provisions in this direct final 
rule if any significant adverse comment is filed. See RIN 2900-AO86.
    For purposes of the direct final rulemaking, a significant adverse 
comment is one that explains why the rule would be inappropriate, 
including challenges to the rule's underlying premise or approach, or 
why it would be ineffective or unacceptable without a change. In 
determining whether an adverse comment is significant and warrants 
withdrawing a direct final rule, we will consider whether the comment 
raises an issue serious enough to warrant a substantive response in a 
notice-and-comment process in accordance with section 553 of the 
Administrative Procedure Act (5 U.S.C. 553). Comments that are 
frivolous, insubstantial, or outside the scope of the rule will not be 
considered adverse under this procedure. For example, a comment 
recommending an additional change to the rule will not be considered a 
significant comment unless the comment states why the rule would be 
ineffective or unacceptable without the additional change.
    Under direct final rule procedures, if no significant adverse 
comment is received within the comment period, the rule will become 
effective on the date specified above. After the close of the comment 
period, VA will publish a document in the Federal Register indicating 
that no significant adverse comment was received and confirming the 
date on which the final rule will become effective. VA will also 
publish a notice in the Federal Register withdrawing the proposed rule.
    However, if any significant adverse comment is received, VA will 
publish in the Federal Register a notice acknowledging receipt of a 
significant adverse comment and withdrawing this direct final rule. In 
the event this direct final rule is withdrawn because of receipt of any 
significant adverse comment, VA can proceed with the proposed 
rulemaking by addressing the comments received and publishing a final 
rule. Any comments received in response to this direct final rule will 
be treated as comments regarding the proposed rule. Likewise, any 
significant adverse comment received in response to the proposed rule 
will be considered as a comment regarding this direct final rule. VA 
will consider such comments in developing a subsequent final rule.

Effect of Rulemaking

    Title 38 of the Code of Federal Regulations, as revised by this 
rulemaking, represents VA's implementation of its legal authority on 
this subject. Other than future amendments to this regulation or 
governing statutes, no contrary guidance or procedures are authorized. 
All existing or subsequent VA guidance is read to conform with this 
rulemaking if possible or, if not possible, such guidance is superseded 
by this rulemaking.

Paperwork Reduction Act

    This document contains no provisions constituting a collection of 
information under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-

Regulatory Flexibility Act

    The Secretary hereby certifies that this regulatory amendment will 
not have a significant economic impact on a substantial number of small 
entities as they are defined in the Regulatory Flexibility Act, 5 
U.S.C. 601-612. Only States, dental insurers, certain veterans and 
their survivors and dependents, none of which are small entities, will 
be affected. Therefore, pursuant to 5 U.S.C. 605(b), this rulemaking is 
exempt from the initial and final regulatory flexibility

[[Page 62443]]

analysis requirements of sections 603 and 604.

Executive Orders 12866 and 13563

    Executive Orders 12866 and 13563 direct agencies to assess the 
costs and benefits of available regulatory alternatives and, when 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, and other advantages; distributive impacts; 
and equity). Executive Order 13563 (Improving Regulation and Regulatory 
Review) emphasizes the importance of quantifying both costs and 
benefits, reducing costs, harmonizing rules, and promoting flexibility. 
Executive Order 12866 (Regulatory Planning and Review) defines a 
``significant regulatory action,'' which requires review by the Office 
of Management and Budget (OMB), as ``any regulatory action that is 
likely to result in a rule that may: (1) Have an annual effect on the 
economy of $100 million or more or adversely affect in a material way 
the economy, a sector of the economy, productivity, competition, jobs, 
the environment, public health or safety, or State, local, or tribal 
governments or communities; (2) Create a serious inconsistency or 
otherwise interfere with an action taken or planned by another agency; 
(3) Materially alter the budgetary impact of entitlements, grants, user 
fees, or loan programs or the rights and obligations of recipients 
thereof; or (4) Raise novel legal or policy issues arising out of legal 
mandates, the President's priorities, or the principles set forth in 
this Executive Order.''
    The economic, interagency, budgetary, legal, and policy 
implications of this regulatory action have been examined and it has 
been determined not to be a significant regulatory action under 
Executive Order 12866. VA's impact analysis can be found as a 
supporting document at http://www.regulations.gov, usually within 48 
hours after the rulemaking document is published. Additionally, a copy 
of the rulemaking and its impact analysis are available on VA's Web 
site at http://www1.va.gov/orpm/, by following the link for ``VA 
Regulations Published.''

Unfunded Mandates

    The Unfunded Mandates Reform Act of 1995 requires, at 2 U.S.C. 
1532, that agencies prepare an assessment of anticipated costs and 
benefits before issuing any rule that may result in expenditure by 
State, local, and tribal governments, in the aggregate, or by the 
private sector, of $100 million or more (adjusted annually for 
inflation) in any one year. This rule will have no such effect on 
State, local, and tribal governments, or on the private sector.

Catalog of Federal Domestic Assistance

    The Catalog of Federal Domestic Assistance numbers and titles for 
the programs affected by this document are 64.009 Veterans Medical Care 
Benefits and 64.011 Veterans Dental Care.

Signing Authority

    The Secretary of Veterans Affairs, or designee, approved this 
document and authorized the undersigned to sign and submit the document 
to the Office of the Federal Register for publication electronically as 
an official document of the Department of Veterans Affairs. Jose D. 
Riojas, Chief of Staff, Department of Veterans Affairs, approved this 
document on September 16, 2013, for publication.

List of Subjects in 38 CFR Part 17

    Administrative practice and procedure, Dental health, Government 
contracts, Health care, Health professions, Health records, Veterans.

    Dated: October 17, 2013.
William F. Russo,
Deputy Director, Regulation Policy and Management, Office of the 
General Counsel, Department of Veterans Affairs.

    For the reasons stated in the preamble, VA amends 38 CFR part 17 as 


1. The authority citation for part 17 continues to read as follows:

    Authority:  38 U.S.C. 501, and as noted in specific sections.

2. In Sec.  17.169, add paragraph (g) to read as follows:

Sec.  17.169  VA Dental Insurance Program for veterans and survivors 
and dependents of veterans (VADIP).

* * * * *
    (g) Limited preemption of State and local law. To achieve important 
Federal interests, including but not limited to the assurance of the 
uniform delivery of benefits under VADIP and to ensure the operation of 
VADIP plans at the lowest possible cost to VADIP enrollees, paragraphs 
(b), (c)(1), (c)(2), (d), and (e)(2) through (5) of this section 
preempt conflicting State and local laws, including laws relating to 
the business of insurance. Any State or local law, or regulation 
pursuant to such law, is without any force or effect on, and State or 
local governments have no legal authority to enforce them in relation 
to, the paragraphs referenced in this paragraph or decisions made by VA 
or a participating insurer under these paragraphs.
* * * * *
[FR Doc. 2013-24585 Filed 10-21-13; 8:45 am]