Barry McVay's FEDERAL CONTRACTS DISPATCH
DATE: June 8, 2000
FROM: Barry McVay, CPCM
SUBJECT: Federal Employees Health Benefits Program Acquisition Regulation (FEHBAR); Department of Defense (DOD) Demonstration Project
SOURCE: Federal Register, June 8, 2000, Vol. 65, No. 111, page 36382
AGENCIES: Office of Personnel Management (OPM)
ACTION: Final Rule
SYNOPSIS: OPM is finalizing with changes the July 6, 1999, interim rule that amended the FEHBAR to implement Section 721 of the Defense Authorization Act for 1999 (Public Law 105-261). Section 721 established authority for a demonstration project under which certain Medicare and other eligible DOD beneficiaries can enroll in health benefit plans in certain geographic areas under the Federal Employees Health Benefits (FEHB) program.
EDITOR'S NOTE: The FEHBAR is Chapter 16 of Title 48 of the Code ofFederal Regulations.
EFFECTIVE DATE: July 10, 2000.
FOR FURTHER INFORMATION CONTACT: Michael W. Kaszynski, Policy Analyst, Insurance Policy and Information Division, OPM, Room 3425, 1900 E Street, NW, Washington, DC 20415-0001; 202-606-0004; e-mail: firstname.lastname@example.org.
SUPPLEMENTAL INFORMATION: Section 721 of Public Law 105-261 became law on October 17, 1998. It authorized a demonstration project in which no more than 66,000 individuals in no more than 10 selected geographic areas would be eligible to enroll under the FEHB program. The demonstration project will be conducted for three years, from January 1, 2000, through December 31, 2002. Title 5 of the Code of Federal Regulations, Chapter 890, Federal Employees Health Benefits Program, Section 890.1303, Eligibility, provides the definition of an "eligible beneficiary". Basically, those eligible to participate are current or former members of the uniformed services who are entitled to hospital insurance benefits, an unremarried former spouse, or a dependent of a deceased or current or former member.
DOD, with OPM concurrence, selected eight geographical areas for the demonstration project: Dover Air Force Base, DE; all of Puerto Rico; Fort Knox, KY; Greensboro/Winston-Salem/High Point, NC; Dallas, TX; Humboldt County, CA, and surrounding counties; Naval Hospital, Camp Pendleton, CA; and New Orleans, LA. Beneficiaries who are provided coverage under the demonstration project are not eligible to receive care at a military medical treatment facility or to enroll in a health care plan under DOD's TRICARE program. Individuals who disenroll or cancel enrollment from the demonstration project are not eligible to reenroll in the demonstration project. OPM will establish separate risk pools for developing demonstration project enrollee premium rates. The government contribution for demonstration enrollees will be paid by DOD and cannot exceed the maximum percentage or dollar amount that the government would have contributed had the enrollee been enrolled as a regular FEHB enrollee in the same health benefits plan and at the same level of benefits.
OPM determined that it was necessary to specify certain differences from existing FEHB Program regulations because of the unique features of the demonstration project. Therefore, on July 6, 1999, OPM issued an interim rule implementing Section 721. OPM received comments from three organizations: one trade association representing FEHB fee-for-service/PPO [preferred provider organization] plans, one fee-for-service/PPO health benefit carrier, and one employee union. As a result, OPM is finalizing the rule with changes.
- Paragraph (e), Exceptions for the 3-Year DOD Demonstration Project (10 U.S.C. 1108), was added to FEHBAR 1615.802, Policy, by the interim rule, and is finalized without changes.
- Paragraph (c), Exceptions for the 3-Year DOD Demonstration Project (10 U.S.C. 1108), was added to FEHBAR 1632.170, Recurring Premium Payments to Carriers, by the interim rule, and it is finalized with many changes. A new subparagraph (3) is added which states, "Carriers will account separately for health benefits charges paid using demonstration project funds and regular FEHB funds. Direct administrative costs attributable solely to the demonstration project will be fully chargeable to the demonstration project. Indirect administrative costs associated with the demonstration project will be allocated to the demonstration project based on the percentage obtained by dividing the dollar amount of claims processed under the demonstration project by the dollar amount of total claims processed for FEHB Program activity." Also, paragraph (7), which pertains to experience-rated carriers, and new paragraph (8), which pertains to community-rated carriers, specify the disposition of any surplus demonstration project premiums ("OPM will place any surplus demonstration project premiums in the regular Contingency Reserves of all carriers continuing in the FEHB Program for the contract year following the year in which the demonstration project ends.") In addition, subparagraph (8) permits community-rated carriers "to request funds from the Employees Health Benefits Fund to mitigate excessive costs in relation to premiums." (EDITOR'S NOTE: Paragraph (7) was paragraph (4) in the interim rule.)
- Both FEHBAR 1652.215-70, Rate Reduction for Defective Pricing or Defective Cost or Pricing Data, and FEHBAR 1652.216-70, Accounting and Price Adjustment, had the same paragraph added by the interim rule (paragraphs (d) and (c), respectively), which prohibited similarly sized subscriber group (SSSG) rating methodologies from being used to determine the reasonableness of the carrier's demonstration project premium rates. To those paragraphs are added identical subparagraphs, which state, "The Carrier shall account separately for health benefits charges paid using demonstration project funds and regular FEHB funds. Direct administrative costs attributable solely to the demonstration project shall be fully chargeable to the demonstration project. Indirect administrative costs associated with the demonstration project will be allocated to the demonstration project based on the percentage obtained by dividing the dollar amount of claims processed under the demonstration project by the dollar amount of total claims processed for FEHB Program activity."
- FEHBAR 1652.216-71, Accounting and Allowable Cost, is revised for clarity.
- A paragraph (f), Exceptions for the 3-Year DOD Demonstration Project (10 U.S.C. 1108), is added to FEHBAR 1652.232-70, Payments -- Community-Rated Contracts. It duplicates the coverage in paragraph (8) of FEHBAR 1632.170 (see above).
- Paragraph (f), Exceptions for the 3-Year DOD Demonstration Project (10 U.S.C. 1108), was added to FEHBAR 1652.232-71, Payments -- Experience-Rated Contracts, by the interim rule. To it is added language which duplicates the coverage added to paragraph (7) of FEHBAR 1632.170 (see above).
In addition, the following miscellaneous changes are being made to the FEHBAR by this final rule:
- The Debt Collection Improvement Act of 1996 (Public Law 104-134) requires each contractor doing business with a government agency to furnish its Taxpayer Identification Number (TIN). To comply with this requirement, FEHBAR 1652.204-73, Taxpayer Identification Number, is added.
- FEHBAR Subpart 1652.3, FEHBP Clause Matrix, is updated to conform to changes in the Federal Acquisition Regulation (FAR) since the Matrix was last revised in 1998.
- Paragraph (b)(ii)(B)(2) of FEHBAR 1652.216-71 is revised to clarify that the term "state" includes a U.S. territory or possession.
FOR FURTHER INFORMATION CONTACT: Barry McVay at 703-451-5953 or by e-mail to BarryMcVay@FedGovContracts.com.
Copyright 2000 by Panoptic Enterprises. All Rights Reserved.
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