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Panoptic Enterprises' FEDERAL CONTRACTS DISPATCH

DATE: March 26, 2004

SUBJECT: Federal Employees Health Benefits Acquisition Regulation (FEHBAR); Contract Cost Principles and Procedures

SOURCE: Federal Register, March 26, 2004, Vol. 69, No. 59, page 15774

AGENCIES: Office of Personnel Management (OPM)

ACTION: Proposed Rule

SYNOPSIS: OPM is proposing to amend the FEHBAR to include additional contract cost principles and procedures for FEHB program experience-rated contracts for clarity and to enhance oversight of FEHB carriers.

EDITOR'S NOTE: The FEHBAR is Chapter 16 of Title 48 of the Code of Federal Regulations (CFR). It is available at: http://www.access.gpo.gov/nara/cfr/cfrhtml_00/Title_48/48cfrv6_00.html#1601.

DATES: Comments on the proposed rule must be submitted on of before May 25, 2004.

ADDRESSES: Submit comments on the proposed rule to Abby L. Block, Deputy Associate Director, Employee and Family Support Policy, Strategic Human Resources Policy Division, Office of Personnel Management, Room 3400, 1900 E Street NW, Washington, DC 20415-3601; or by fax to 202-606-0633; or by e-mail to: aseaston@opm.gov.

FOR FURTHER INFORMATION CONTACT: Anne Easton, 202-606-0004.

SUPPLEMENTAL INFORMATION: OPM currently contracts with 32 experience-rated fee-for-service carriers and health maintenance organizations (HMOs) for health care coverage for FEHB enrollees. Under FEHB law, it is part of OPM's responsibility to insure that rates charged by health benefits plans reasonably and equitably reflect the cost of the benefits provided.

OPM's Inspector General (IG) regularly audits experience-rated carriers to determine if they are in compliance with the Cost Principles in Federal Acquisition Regulation (FAR) Part 31, Contract Cost Principles and Procedures, and the FEHBAR, which are the sole sources of cost accounting principles and practices for FEHB contracts.

The basic cost accounting principles in FAR Part 31 have been in place for over 40 years. During that period, significant improvements in cost accounting principles and practices have been made -- advances in information technology enable FEHB contractors to implement cost accounting practices more complex than those generally used when OPM adopted the FAR cost principles. Also, there are some differences in interpretation regarding the allocation of costs to carriers' contracts. Therefore, OPM proposes to update the FEHBAR to allow carriers to use more current contract cost accounting principles and practices and to provide for consistent interpretation of its requirements across the FEHB program.

The following changes are proposed to the FEHBAR:

EDITOR'S NOTE: In the introduction to the proposed rule, OPM states, "We have worked collaboratively with carriers to develop procedures that are consistent with insurance industry practices and assure an equitable allocation of costs to the FEHB program. When added to our current financial reporting and disclosure requirements, these new provisions will enhance our oversight of the FEHB Program. Because they have been developed in coordination with the standard practices used by experience-rated carriers, we expect they can be implemented within the FEHB Program promptly and without impediments, following the public comment period."

FOR FURTHER INFORMATION CONTACT: Panoptic Enterprises at 703-451-5953 or by e-mail to Panoptic@FedGovContracts.com.

Copyright 2004 by Panoptic Enterprises. All Rights Reserved.

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