[Federal Register Volume 59, Number 232 (Monday, December 5, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-29810]


[[Page Unknown]]

[Federal Register: December 5, 1994]


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OFFICE OF PERSONNEL MANAGEMENT

48 CFR Chapter 16
RIN 3206-AG35

 

Federal Employees Health Benefits Program; Interest Assessment on 
Audit Findings

AGENCY: Office of Personnel Management.

ACTION: Interim regulations with request for comments.

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SUMMARY: The Office of Personnel Management (OPM) is issuing interim 
regulations to clarify its intentions concerning the assessment of 
interest on monies due the Federal Employees Health Benefits (FEHB) 
Program when a comprehensive medical plan (CMP) submits defective cost 
or pricing data to support its community rate. This clarification is 
necessary because a few FEHB Program carriers are misinterpreting OMP's 
current regulations.

DATES: Interim regulations are effective January 4, 1995. Comments must 
be received on or before February 3, 1995.

ADDRESSES: Written comments may be sent to Lucretia F. Myers, Assistant 
Director for Insurance programs, Retirement and Insurance Group, Office 
of Personnel Management, P.O. Box 57, Washington, DC 20044; delivered 
to OPM, Room 4351, 1900 E Street NW., Washington, DC; or FAXed to (202) 
606-0633.

FOR FURTHER INFORMATION CONTACT:
Mary Ann Mercer, (202) 606-0191.

SUPPLEMENTARY INFORMATION: Recent final audit reports on community-
rated plans issued by OPM's Office of Inspector General include 
monetary findings based on interest income lost to the FEHB Program 
because of FEHB Program carrier overcharges. A few carriers have 
questioned the period covered by the interest charges assessed by OPM. 
Specifically, they question OPM's policy of charging interest on the 
overcharges from the date the Government pays the inflated rate to the 
date of the carrier's full repayment to the Government. They believe 
that, in the absence of a specific contractual provision, OPM should 
charge interest not from the date of the overpayment by the Government, 
but from 30 days after its first written demand, as provided in the 
Federal Acquisition Regulation (FAR) general interest clause at 52.232-
17. Because the monetary findings are significant in value, OPM is 
issuing these regulations to clarify its policy.
    In FEHB Program contracts with CMP's using community rates, 
premiums and subscription income are determined on the basis of 
community rating. A community rate is deemed the equivalent of the 
FAR's description of an established catalog or market price. Each CMP 
certifies to the accouracy of its pricing; or, if granted an exemption 
by OPM, represents that all the statements made on or attached to its 
SF 1412, Claim for Exemption from Submission of Certified Cost or 
Pricing Data, are correct. If, upon audit, it is determined that the 
rates are not correct and the carrier has overcharged the FEHB Program, 
OPM assesses an interest charge in accordance with FAR 52.215-23, Price 
Reduction for Defective Cost or Pricing Data--Modifications. This 
provision allows the contracting officer to charge simple interest on 
the amount of the overpayment computed from the date the overpayment is 
made to the contractor to the date the Government is repaid by the 
contractor.
    FAR 52.215-23 applies to contract modifications involving a price 
adjustment exceeding $100,000, but does not apply to modifications for 
which the price is (1) based on adequate price competition; (2) based 
on established catalog or market prices of commercial items sold in 
substantial quantities to the general public; or (3) set by law or 
regulation. OPM applies this clause as follows: A community rate is 
deemed the equivalent of an established catalog or market price; 
however, the defective community rates constitute that part of the 
quoted rate that does not fall within the catalog or market part of the 
price. Had the carrier priced the FEHB contract correctly according to 
the catalog or market price, this clause would not become operative. 
The defective portion of the rate is not a market or catalog price; 
that is, the defective portion is a modification to the catalog or 
market price. Since the carrier did not comply with the terms of its 
submission, it is responsible for correcting the price so that it is 
the catalog or market price and for making the government whole by 
paying interest from the date the government was overcharged.
    By restating this interest provision in a specific clause in the 
FEHB Program acquisition regulations at FEHBAR 1652.215-70, OPM makes 
it clear that its policy is to charge interest from the date it pays 
the carrier the higher rate to the date the full repayment is made to 
OPM.

Waiver of Notice of Proposed Rulemaking

    Pursuant to section 553(b)(3)(A) of title 5 of the U.S. Code, I 
find that good cause exists for waiving the general notice of proposed 
rulemaking. The notice is being waived because the regulations simply 
interpret rules and clarify OPM's current policy with respect to the 
assessment of interest on amounts that become payable by the contractor 
to the FEHB Fund.

E.O. 12866, Regulatory Review

    This rule has been reviewed by OMB in accordance with E.O. 12866.

Regulatory Flexibility Act

    I certify that this regulation will not have a significant economic 
impact on a substantial number of small entities because it merely 
reiterates and clarifies OPM's existing policy.

List of Subjects in 48 CFR Part 1652

    Administrative practice and procedure, Government employees, Health 
facilities, Health insurance, Health professions, Hostages, Reporting 
and recordkeeping requirements, Retirement.

U.S. Office of Personnel Management.
Lorraine A. Green,
Deputy Director.

    Accordingly, OPM is amending Chapter 16 of Title 48, Code of 
Federal Regulations, as follows:
Chapter 16--Office of Personnel Management Federal Employees Health 
Benefits Acquisition Regulation

PART 1601--FEDERAL ACQUISITION REGULATIONS SYSTEM

    1. The authority citation for 48 CFR part 1652 continues to read as 
follows:

    Authority: 5 U.S.C. 8913; 40 U.S.C. 486(c); 48 CFR 1.301.

    2. In the clause under section 1652.215-70, the heading is revised 
and two sentences are added to the end to read as follows:


Sec. 1652.215-70  Rate Reduction for Defective Pricing or Defective 
Cost or Pricing Data.

* * * * *

Rate Reduction for Defective Pricing or Defective Cost or Pricing Data 
(Oct 1994)

    * * * When the Contracting Office determines that the Carrier 
did not charge a market price and the Government is entitled to a 
refund, the refund shall bear simple interest from the date the 
overcharge was paid by the Government 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.

(End of Clause)

[FR Doc. 94-29810 Filed 12-2-94; 8:45 am]
BILLING CODE 6325-01-M