[Federal Register Volume 61, Number 67 (Friday, April 5, 1996)]
[Rules and Regulations]
[Pages 15196-15199]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-8372]



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OFFICE OF PERSONNEL MANAGEMENT

48 CFR Parts 1604 and 1652

RIN 3206-AG30


Federal Employees Health Benefits Acquisition Regulation; Filing 
Health Benefit Claims; Addition of Contract Clause

AGENCY: Office of Personnel Management.

ACTION: Final rule.

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SUMMARY: The Office of Personnel Management (OPM) is issuing final 
regulations to add a new contract clause in part 1652 of the Federal 
Employees Health Benefits Acquisition Regulation (FEHBAR). The clause 
clarifies for both FEHB carriers and covered individuals the 
circumstances under which OPM may render a decision regarding a covered 
individual who asks OPM to review a health benefits plan's denial of a 
claim if the plan has either affirmed its denial when the covered 
individual requested reconsideration, or failed to respond to the 
covered individual's request for reconsideration as provided by OPM's 
regulations. The clause further clarifies the circumstances under which 
claimants may seek court review of benefit denials under the FEHB 
Program. The purpose of these final regulations is to specify that 
covered individuals who wish to bring legal action regarding a denial 
of an FEHB benefit must pursue such claim against OPM. Further, the 
regulations clarify the administrative review process that must precede 
legal action in the courts.

EFFECTIVE DATE: May 6, 1996.

FOR FURTHER INFORMATION CONTACT: Margaret Sears, (202) 606-0004.

SUPPLEMENTARY INFORMATION: On March 29, 1995, OPM published interim 
regulations in the Federal Register (60 FR 16056) that require 
individuals who want to bring suit concerning the denial of their 
health benefits claims to bring

[[Page 15197]]
such suits against OPM instead of the health benefits carrier, as had 
been the case previously. The interim regulations also clarified the 
administrative review procedures that must precede legal action in the 
courts, the circumstances under which suits may be brought against OPM, 
and that the court's review is limited to the record that was before 
OPM when it made its decision.
    OPM received 11 comments on the interim regulations. Three 
commenters suggested that we amend the regulations to clarify that the 
regulations apply to providers to whom the covered individual has 
assigned the right to pursue the claim. We have not accepted this 
suggestion because the right of access to the disputed claim process 
belongs to the covered individual. We have amended the interim 
regulations to clarify that another person or entity, whether or not a 
provider, can gain access to the disputed claims process only when 
acting on behalf of the covered individual and with the covered 
individual's specific written consent.
    Two commenters thought that the one-year period for initiating the 
disputed claims process was too long. They suggested a 90-day period 
instead. The one-year period has been OPM's policy since the disputed 
claims process was created in 1975. However, we believe that the period 
can now be reduced to 6 months if there are sufficient safeguards to 
protect the interests of individuals who, because of medical problems 
or for other reasons are unable to request reconsideration within the 6 
months time limit. Therefore, we are modifying the regulations to 
require that covered individuals who want to ask the plan to reconsider 
its denial must do so within 6 months after the denial unless the 
covered individual shows that he or she was prevented by a cause beyond 
his or her control from making the request within that time period. In 
addition, we are adding a provision to allow OPM to reopen a decision 
it made concerning a disputed claim if it receives evidence that was 
unavailable at the time OPM made its decision.
    Two commenters said that the amount of time carriers have to 
respond to requests for reconsideration--30 days--is too short, 
especially when the issue is medical necessity. They suggested that the 
carriers be allowed 45 days, with the option to extend the period for 
an additional 30 days, if necessary. They further suggested that the 
carriers be given 45 days rather than 30 to review additional 
information received from the covered individual or provider. In both 
cases, the 30-day period has been in place for a number of years and 
has been working well enough that we believe that extending the time 
period to 45 days would unnecessarily lengthen the time required to 
complete the disputed claims process. Therefore, we have not accepted 
these suggestions.
    Two commenters said that the time period for seeking judicial 
review should be tied to the date the covered individual receives OPM's 
decision rather than the date the care or service was provided. One 
commenter supported the provision basing the time limit on the date the 
care or service was provided and asked us not to change it. The interim 
regulations provide that legal action on a disputed claim may not be 
brought later than December 31 of the 3rd year after the year in which 
the care or service was provided. After considering these three 
comments we have decided not to modify our regulations at this time. 
This timeframe reflects our brochure language over the past several 
years. It is our experience that this timeframe works well; however, we 
will continue to monitor all timeframes in these regulations and make 
changes as warranted.
    Four commenters suggested that the regulations should explicitly 
state that court actions are not to be brought against a carrier or a 
carrier's subcontractors. One commenter suggested that we amend the 
regulations to state that the carrier is an indispensable party to the 
lawsuit. After considering these five comments, we have modified the 
regulations to specify that court action is not to be brought against 
the carrier or the carrier's subcontractors. Since it is OPM's 
decision, not the carrier's, that is being contested, it is appropriate 
that OPM, rather than the carriers, be the focus of lawsuits related to 
denial of benefits.
    Two commenters said that the interim regulations should be set 
aside because they adversely affect the covered individual's right (1) 
of access to State courts, (2) to seek monetary compensation for 
damages, (3) under State law to require insurer to prove that notice 
was given concerning changes in benefits and that contract language is 
clear, (4) to have the option to go to court without seeking OPM 
review, (5) to present evidence that OPM did not have when it made its 
determination, and (6) to seek an expedited ruling by the court when 
life or health is at issue. OPM's regulations have never offered such 
``rights.'' The interim regulations simply clarified that these 
opportunities are not available to covered individuals under the FEHB 
program. The FEHB law includes a provision specifically stating that 
the FEHB contract provisions that relate to the extent of coverage or 
benefits supersede and preempt any State law that relates to health 
insurance or plans to the extent that such law is inconsistent with 
FEHB contractual provisions. Therefore, we believe the interim 
regulations accurately reflect the intent of the FEHB law. Further, it 
has been OPM's policy, and will continue to be OPM's policy, to 
expedite the dispute resolution process when there are issues of life 
and health at stake. Premature involvement of the courts at such time 
is unnecessary. The only real change made by the interim regulations 
was which party to the FEHB contracts should be named in a suit.
    Two commenters said that the interim regulations should be set 
aside because they violated the Administrative Procedure Act in that 
they became effective before completing a comment period. The interim 
regulations were promulgated to provide immediate guidance and 
information to alleviate any burden on the FEHB enrollees in cases of 
possible litigation. It was OPM's view that immediate implementation of 
regulations that clarify and more fully explain the proper judicial 
review of an OPM decision sustaining a health benefit plan's denial of 
coverage would minimize unnecessary litigation and uncertainty. Thus, 
the interim regulations were intended to more clearly specify a review 
procedure that sometimes appeared to be unclear and was not always 
applied consistently.
    One commenter inquired whether the interim regulations removed a 
restriction so that there was good cause for issuing them in this form. 
It was OPM's view that the interim regulations remove the restriction 
requiring that enrollees sue a health benefits carrier when contesting 
an OPM decision that affirmed the carrier's determination that the 
benefit is not covered under the carrier's plan. Previously, enrollees 
could not bring suit against OPM directly even though they ultimately 
were contesting OPM's decision.
    One commenter asserted that the regulations should specify that 
they have no impact on an individual's rights under the Federal Sector 
Equal Employment Opportunity rule set forth in 29 CFR Part 1614. That 
is, individuals who believe they have been discriminated against in 
regard to insurance benefits because of disability or another protected 
basis are not required to pursue or exhaust the administrative remedy 
provided by these regulations before pursuing their rights under 29 CFR 
Part 1614. Since OPM has no authority concerning the provisions of 
title 29 of the Code of

[[Page 15198]]
Federal Regulations, it would not be appropriate to address an 
individual's rights under title 29 in this contract clause. Instead, 
the circumstances under which one may access remedies related to title 
29 should be included in title 29.
    One commenter felt that the interim regulations do not expressly 
prescribe time limits when the carrier fails to make its decision 
within 60 days after requesting, but not receiving, information from 
the covered individual. We have modified the regulations to clarify 
that this circumstance is included in the administrative process.
    One commenter objected to the requirement that the claimants must 
express their reasons in terms of the brochure provisions because 
enrollees sometimes do not have brochures. Since a dispute about a 
claim must be based on whether or not the claim was payable under the 
FEHB contract and the brochure sets forth the contract provisions, 
individuals need a brochure in order to know whether they have a 
dispute. They also need a brochure to obtain information on the 
procedures for disputing carriers' denials of claims. Further, 
brochures are easily obtainable from the plan. We find that this 
requirement is important in encouraging the individual to express his 
or her reasons in a manner that will facilitate a successful result 
when there is a valid dispute.
    Two commenters suggested that the regulations be revised to require 
that OPM's decision contain a notice of the covered individual's right 
to bring suit. We are not adopting that suggestion because we are 
adding that information to the brochures. The brochures will give 
complete information about the disputed claims process from the initial 
request to the carrier for reconsideration through the requirements for 
bringing suit when OPM concurs with the carrier's reconsideration 
decision to deny the claim.
    We have also modified paragraph (g)(3) of the clause to clarify 
that recovery in the FEHB Program is accomplished through a directive 
from OPM to the carrier to make payment according to the court's order.

Regulatory Flexibility Act

    I certify that this regulation will not have a significant economic 
impact on a substantial number of small entities because the regulation 
merely incorporates administrative procedures and regulatory 
requirements into FEHB contracts.

List of Subjects in 48 CFR Parts 1604 and 1652

    Government employees, Government procurement, Health insurance.

Office of Personnel Management.
James B. King,
Director.

    Accordingly, OPM is amending 48 CFR chapter 16 as follows:

PART 1604--ADMINISTRATIVE MATTERS

    1. The authority citation for parts 1604 and 1652 continue to read 
as follows:

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

    2. In part 1604; subpart 1604.71 is adopted as final and 
republished to read as follows:

Subpart 1604.71--Disputed Health Benefit Claims


Sec. 1604.7101  Filing Health Benefit Claims/Court Review of Disputed 
Claims.

    Guidelines for a Federal Employees Health Benefit (FEHB) Program 
covered individual to file a claim for payment or service and for legal 
actions on disputed health benefit claims are found at 5 CFR 890.105 
and 890.107, respectively. The contract clause at 1652.204-72 of this 
chapter, reflecting this guidance, must be inserted in all FEHB Program 
contracts.

PART 1652--CONTRACT CLAUSES

    3. In subpart 1652.2, section 1652.204-72 is revised and adopted as 
final to read as follows:

Subpart 1652.2--Texts of FEHBP Clauses


Sec. 1652.204-72  Filing Health Benefit Claims/Court Review of Disputed 
Claims.

    As prescribed in 1604.7101 of this chapter, the following clause 
must be inserted in all FEHB Program contracts.

Filing Health Benefit Claims/Court Review of Disputed Claims

    (a) General. (1) The Carrier resolves claims filed under the 
Plan. All health benefit claims must be submitted initially to the 
Carrier. If the Carrier denies a claim (or a portion of a claim), 
the covered individual may ask the Carrier to reconsider its denial. 
If the Carrier affirms its denial or fails to respond as required by 
paragraph (b) of this clause, the covered individual may ask OPM to 
review the claim. A covered individual must exhaust both the Carrier 
and OPM review processes specified in this clause before seeking 
judicial review of the denied claim.
    (2) This clause applies to covered individuals and to other 
individuals or entities who are acting on the behalf of a covered 
individual and who have the covered individual's specific written 
consent to pursue payment of the disputed claim.
    (b) Time limits for reconsidering a claim. (1) The covered 
individual has 6 months from the date of the notice to the covered 
individual that a claim (or a portion of a claim) was denied by the 
Carrier in which to submit a written request for reconsideration to 
the Carrier. The time limit for requesting reconsideration may be 
extended when the covered individual shows that he or she was 
prevented by circumstances beyond his or her control from making the 
request within the time limit.
    (2) The Carrier has 30 days after the date of receipt of a 
timely-filed request for reconsideration to:
    (i) Affirm the denial in writing to the covered individual;
    (ii) Pay the bill or provide the service; or
    (iii) Request from the covered individual or provider additional 
information needed to make a decision on the claim. The Carrier must 
simultaneously notify the covered individual of the information 
requested if it requests additional information from a provider. The 
Carrier has 30 days after the date the information is received to 
affirm the denial in writing to the covered individual or pay the 
bill or provide the service. The Carrier must make its decision 
based on the evidence it has if the covered individual or provider 
does not respond within 60 days after the date of the Carrier's 
notice requesting additional information. The Carrier must then send 
written notice to the covered individual of its decision on the 
claim. The covered individual may request OPM review as provided in 
paragraph (b)(3) of this clause if the Carrier fails to act within 
the time limit set forth in this paragraph.
    (3) The covered individual may write to OPM and request that OPM 
review the Carrier's decision if the Carrier either affirms its 
denial of a claim or fails to respond to a covered individual's 
written request for reconsideration within the time limit set forth 
in paragraph (b)(2) of this clause. The covered individual must 
submit the request for OPM review within the time limit specified in 
paragraph (e)(1) of this clause.
    (4) The Carrier may extend the time limit for a covered 
individual's submission of additional information to the Carrier 
when the covered individual shows he or she was not notified of the 
time limit or was prevented by circumstances beyond his or her 
control from submitting the additional information.
    (c) Information required to process requests for 
reconsideration. (1) The covered individual must put the request to 
the Carrier to reconsider a claim in writing and give the reasons, 
in terms of applicable brochure provisions, that the denied claim 
should have been approved.
    (2) If the Carrier needs additional information from the covered 
individual to make a decision, it must:
    (i) Specifically identify the information needed;
    (ii) State the reason the information is required to make a 
decision on the claim;

[[Page 15199]]

    (iii) Specify the time limit (60 days after the date of the 
Carrier's request) for submitting the information; and
    (iv) State the consequences of failure to respond within the 
time limit specified, as set out in paragraph (b)(2) of this 
section.
    (d) Carrier determinations. The Carrier must provide written 
notice to the covered individual of its determination. If the 
Carrier affirms the initial denial, the notice must inform the 
covered individual of:
    (1) The specific and detailed reasons for the denial;
    (2) The covered individual's right to request a review by OPM; 
and
    (3) The requirement that requests for OPM review must be 
received within 90 days after the date of the Carrier's denial 
notice and include a copy of the denial notice as well as documents 
to support the covered individual's position.
    (e) OPM review. (1) If the covered individual seeks further 
review of the denied claim, the covered individual must make a 
request to OPM to review the Carrier's decision. Such a request to 
OPM must be made:
    (i) Within 90 days after the date of the Carrier's notice to the 
covered individual that the denial was affirmed; or
    (ii) If the Carrier fails to respond to the covered individual 
as provided in paragraph (b)(2) of this clause, within 120 days 
after the date of the covered individual's timely request for 
reconsideration by the Carrier; or
    (iii) Within 120 days after the date the Carrier requests 
additional information from the covered individual, or the date the 
covered individual is notified that the Carrier is requesting 
additional information from a provider. OPM may extend the time 
limit for a covered individual's request for OPM review when the 
covered individual shows he or she was not notified of the time 
limit or was prevented by circumstances beyond his or her control 
from submitting the request for OPM review within the time limit.
    (2) In reviewing a claim denied by the Carrier, OPM may:
    (i) Request that the covered individual submit additional 
information;
    (ii) Obtain an advisory opinion from an independent physician;
    (iii) Obtain any other information as may in its judgment be 
required to make a determination; or
    (iv) Make its decision based solely on the information the 
covered individual provided with his or her request for review.
    (3) When OPM requests information from the Carrier, the Carrier 
must release the information within 30 days after the date of OPM's 
written request unless a different time limit is specified by OPM in 
its request.
    (4) Within 90 days after receipt of the request for review, OPM 
will either:
    (i) Give a written notice of its decision to the covered 
individual and the Carrier; or
    (ii) Notify the individual of the status of the review. If OPM 
does not receive requested evidence within 15 days after expiration 
of the applicable time limit in paragraph (e)(3) of this clause, OPM 
may make its decision based solely on information available to it at 
that time and give a written notice of its decision to the covered 
individual and to the Carrier.
    (f) OPM, upon its own motion, may reopen its review if it 
receives evidence that was unavailable at the time of its original 
decision.
    (g) Court review. (1) A suit to compel enrollment under 
Sec. 890.102 of Title 5, Code of Federal Regulations, must be 
brought against the employing office that made the enrollment 
decision.
    (2) A suit to review the legality of OPM's regulations under 
this part must be brought against the Office of Personnel 
Management.
    (3) Federal Employees Health Benefits (FEHB) carriers resolve 
FEHB claims under authority of Federal statute (chapter 89, title 5, 
United States Code). A covered individual may seek judicial review 
of OPM's final action on the denial of a health benefits claim. A 
legal action to review final action by OPM involving such denial of 
health benefits must be brought against OPM and not against the 
Carrier or the Carrier's subcontractors. The recovery in such a suit 
shall be limited to a court order directing OPM to require the 
Carrier to pay the amount of benefits in dispute.
    (4) An action under paragraph (3) of this clause to recover on a 
claim for health benefits:
    (i) May not be brought prior to exhaustion of the administrative 
remedies provided in paragraphs (a) through (f) of this clause;
    (ii) May not be brought later than December 31 of the 3rd year 
after the year in which the care or service was provided; and
    (iii) Will be limited to the record that was before OPM when it 
rendered its decision affirming the Carrier's denial of benefits.

(End of Clause)

[FR Doc. 96-8372 Filed 4-4-96; 8:45 am]
BILLING CODE 6325-01-P