[Federal Register Volume 78, Number 205 (Wednesday, October 23, 2013)]
[Proposed Rules]
[Pages 63143-63145]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-24588]



38 CFR Part 17

RIN 2900-AO86

VA Dental Insurance Program--Federalism

AGENCY: Department of Veterans Affairs.

ACTION: Proposed rule.


SUMMARY: The Department of Veterans Affairs (VA) proposes 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 would add language to clarify the preemptive effect of certain 
criteria in the VADIP regulations.

DATES: Comments must be received by VA on or before November 22, 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-AO86-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 proposed rule would amend 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

[[Page 63144]]

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:

                  Topic                      Subsection of section 510          Paragraph of Sec.   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.   17.169(c)(2).
Enrollment periods.......................  510(g).......................  Sec.   17.169(d).
Establishing amounts of premiums, time     510(h).......................  Sec.   17.169(c)(1).
 frame for premium adjustments, and
 responsibility for payment of premiums.
Bases and minimum procedures for           510(i).......................  Sec.  Sec.   17.169(e)(2)-(e)(5).
 voluntary disenrollment.

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 propose 
changes to Sec.  17.169 that would 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 direct final 
rulemaking, see RIN 2900-AO85.

Administrative Procedure Act

    On October 22, 2013, VA published a separate, substantively 
identical direct final rule in the Federal Register. See RIN 2900-AO85. 
The publication of the direct final rule and the proposed rule will 
speed notification and comments for rulemaking under section 553 of the 
Administrative Procedure Act should we have to withdraw the direct 
final rule due to receipt of any significant adverse comment.
    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.
    Under direct final rule procedures, if no significant adverse 
comment is received within the comment period, the direct final rule 
will become effective on the date specified in RIN 2900-AO85. 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 in the Federal Register a notice withdrawing this 
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 the direct final rule. In 
the event the direct final rule is withdrawn because of any significant 
adverse comment, VA can proceed with this proposed rulemaking by 
addressing the comments received and publishing a final rule. Any 
comments received in response to the direct final rule will be treated 
as comments regarding this proposed rule. VA will consider such 
comments in developing a subsequent final rule. Likewise, any 
significant adverse comment received in response to this proposed rule 
will be considered as a comment regarding the direct final rule.
    VA believes this regulatory amendment would be non-controversial 
and anticipates that this rule would not result in any significant 

[[Page 63145]]

comment, and therefore is issuing it with a 30-day comment period.

Effect of Rulemaking

    Title 38 of the Code of Federal Regulations, as proposed to be 
revised by this proposed rulemaking, would represent 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 would be authorized. All existing or subsequent 
VA guidance would be read to conform with this rulemaking if possible 
or, if not possible, such guidance would be superseded by this 

Paperwork Reduction Act

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

Regulatory Flexibility Act

    The Secretary hereby certifies that this proposed regulatory 
amendment would 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, would be affected. Therefore, pursuant to 5 U.S.C. 
605(b), this rulemaking is exempt from the initial and final regulatory 
flexibility 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 proposed 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 proposed rule would have no such 
effect on State, local, and tribal governments, or on the private 

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, Regulations Policy and Management, Office of the 
General Counsel, Department of Veterans Affairs.

    For the reasons stated in the preamble, VA proposes to amend 38 CFR 
part 17 as follows:


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 (e)(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. 2013-24588 Filed 10-22-13; 8:45 am]