[Federal Register Volume 63, Number 136 (Thursday, July 16, 1998)]
[Proposed Rules]
[Pages 38360-38364]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-18967]


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OFFICE OF PERSONNEL MANAGEMENT

48 CFR Parts 1609, 1632, 1652

RIN 3206-AI16


Federal Employees Health Benefits Program Improving Carrier 
Performance; Conforming Changes

AGENCY: Office of Personnel Management.


[[Page 38361]]


ACTION: Proposed rulemaking.

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SUMMARY: The Office of Personnel Management (OPM) is proposing to issue 
a regulation that would amend the Federal Employees Health Benefits 
Acquisition Regulation (FEHBAR) to underscore accountability for 
customer service and contractual compliance among the Federal Employees 
Health Benefits (FEHB) Program community-rated carriers. The regulation 
would enable OPM to better manage carriers' performance over key 
contract areas, including customer service measures, information and 
reporting requirements, and significant events that might affect 
service to enrollees. Accurate and timely performance by carriers will 
facilitate the Program meeting its customer service standards.

DATES: Comments must be received on or before August 17, 1998.

ADDRESSES: Written comments may be sent to Abby L. Block, Chief, 
Insurance Policy and Information Division, Office of Insurance 
Programs, Retirement and Insurance Service, Office of Personnel 
Management, P.O. Box 57, Washington, DC 20044; delivered to OPM, Room 
3425, 1900 E Street NW., Washington, DC; or FAX to (202) 606-0633.

FOR FURTHER INFORMATION CONTACT: Mary Ann Mercer, (202) 606-0004.

SUPPLEMENTARY INFORMATION: Among OPM's guiding principles in its role 
as administrator of the FEHB Program, and consistent with the 
Government's customer service initiatives, is the goal of ensuring high 
quality customer service for enrollees in the FEHB Program. In order to 
accomplish this goal, each carrier participating in the Program must 
meet its responsibility to provide high quality customer service.
    OPM's customer service focus has led to our establishing certain 
Program requirements that will enable both OPM and carriers to provide 
enrollees with the quality of service they expect. These requirements 
are generally set by regulation, the FEHB contract, or OPM's 
administrative policies, and the vast majority of FEHB carriers comply 
with them. Nevertheless, sometimes FEHB carriers fall short of one or 
more of the requirements, for example, by failing to meet a specified 
standard for customer service or submitting a required report late or 
with incorrect information. A carrier's failure to meet its obligations 
reduces OPM's ability to ensure that the FEHB Program provides good 
customer service to FEHB enrollees, and may reduce the Program's 
efficiency and effectiveness. Accordingly, OPM seeks to implement a 
system of monetary performance incentives that would hold community-
rated carriers accountable for their performance. Such incentives are 
already in place for experience-rated carriers.
    OPM has identified certain carrier obligations that, when unmet, 
can delay or keep customer service goals from being met. Some examples 
of poor performance reducing customer service are: Failure to meet 
customer service standards; failure to provide accurate and timely 
benefits and rate information, brochures, or reports; failure to comply 
with the disputed claims process; failure to comply with the 
requirement for a paperless enrollment system, failure to accurately 
reconcile enrollment data; and failure to cooperate in survey 
administration. A carrier's failure to meet its obligations, 
particularly with regard to surveys and brochures, impedes or delays 
OPM's ability to provide enrollees with information that will enable 
them to make an informed decision in selecting a health plan. An 
additional critical obligation is the carrier's responsibility to 
provide information regarding events that might have a material effect 
upon the carrier's ability to meet its obligations under the contract, 
such as, changes to its participating providers, a change of corporate 
name or ownership or a transfer of assets, and labor disputes. These 
events may reduce the carrier's ability to provide required services to 
our enrollees.
    Under authority of the regulations, OPM would withhold a portion of 
the community-rated carrier's premium if the carrier does not meet its 
FEHB Program obligations. It should be emphasized that we expect the 
vast majority of community-rated carriers will receive minor, if any, 
premium adjustment.
    Incentive percentage factors will be assigned to two basic 
elements, Customer Service and Critical Contract Compliance 
Requirements, described below. The Contracting Officer will assign a 
percentage factor for each basic element based on the carrier's 
demonstrated record in meeting its obligations during the contract 
year. The percentage factor will be applied to each community-rated 
carrier's total FEHB premiums. The aggregate withhold amount for any 
carrier would not exceed one percent of premium paid for any contract 
year. OPM would evaluate the carrier's performance after the contract 
year ends, apply the percentage factors directly to the total net-to-
carrier premium dollars paid for the preceding contract year, and 
withhold the amount from the carrier's periodic premium payments 
payable during the first quarter of the following contract year. 
Carriers could make alternative payment arrangements acceptable to 
their FEHB contracting officer.
    So that there will be no question as to what level of effort OPM 
expects, we have developed a standard evaluation list with sub-elements 
that will be used by the FEHB contracting officers in evaluating the 
carriers' performance, and will share it with all community-rated 
carriers during the public comment period. An understanding of the 
elements and sub-elements should make it easier for carriers to achieve 
full performance under the contract and ensure that the FEHB Program 
maintains its position as a leader in meeting its customers' needs.
    The regulation also amends FEHBAR 1632.170, Recurring payments to 
carriers, FEHBAR 1652.232-70, Payments-community-rated contracts, and 
FEHBAR 1652.232-71, Payments-experience-rated contracts, to enable OPM 
to withhold monies from premium payments for other contractual 
obligations, such as the carrier's share of the cost of a customer 
satisfaction survey.
    Reference changes have been made to the FEHBP Clause Matrix at 
1652.3 to conform to reference changes in the Federal Acquisition 
Regulation (FAR) [Chapter 1 of Title 48, Code of Federal Regulations] 
since the last FEHBP Clause Matrix update, and the reference to FAR 
52.215-70 is corrected to read 1652.215-70.

Reduction of Comment Period for Proposed Rulemaking

    I have determined that the comment period will be thirty days 
because OPM must receive public comments on this new initiative as soon 
as possible in order to analyze them, work with interested parties, and 
publish a final regulation prior to the beginning of the 1999 Contract 
Year.

Regulatory Flexibility Act

    I certify that this regulation will not have a significant economic 
impact on a substantial number of small entities because in no case 
will it affect more than one percent of a carrier's premium.

List of Subjects in 48 CFR Parts 1609, 1632, and 1652

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


[[Page 38362]]


    Office of Personnel Management.
Janice R. Lachance,
Director.

    Accordingly, OPM is proposing to amend Chapter 16 of Title 48, Code 
of Federal Regulations, as follows:

CHAPTER 16--OFFICE OF PERSONNEL MANAGEMENT FEDERAL EMPLOYEES HEALTH 
BENEFITS ACQUISITION REGULATION

    1. The authority citation for 48 CFR Parts 1609, 1632, and 1652 
continue to read as follows:

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

PART 1609--CONTRACTOR QUALIFICATIONS

    2. Subpart 1609.71 is added to read as follows:

Subpart 1609.71--Performance Incentives

Sec.

1609.7101  Policy.
1609.7101-1  Community-rated carrier incentive elements.
1609.7101-2  Community-rated carrier performance incentive factors.

Subpart 1609.71--Performance Incentives


1609.7101  Policy.

    At the end of each contract period, the contracting officer shall 
determine each community-rated carrier's responsiveness to the Program 
requirements in 1609.7101-1.
1609.7101-1 Community-rated carrier incentive elements.
    (a) Customer Service. This incentive element is intended to assist 
OPM in achieving the goal of providing customer service that meets or 
exceeds the expectations of Federal enrollees. The Customer Service 
element shall represent 70 percent of the total calculation and shall 
be based on the carrier's compliance with the following sub-elements:
    (1) Meeting Customer Service Performance Standards. Compliance with 
this sub-element is essential so that OPM can ensure that the carrier 
is providing quality health care and other services to enrollees. The 
contracting officer will evaluate this sub-element based on the 
carrier's compliance with the FEHB Quality Assurance clause of the 
contract and shall consider the carrier's demonstrated efforts in 
responding to its members' needs, providing quality services, applying 
its quality assurance program, verifying that its physicians are 
credentialed, making appointments for patients, assessing the quality 
of its health care, accurately processing claims, properly responding 
to requests for reconsideration of disputed claims, and making timely 
payments to members and providers.
    (2) Timely Closure on Rates and Benefits Consistent with Policy 
Guidelines. In order for information to be available to our customers 
in time for the annual Open Season, carriers must work with OPM to 
conclude benefits and rate negotiations by mid-August. The contracting 
officer will evaluate this sub-element based on the carrier's 
demonstrated record in providing its rate proposal, rate reconciliation 
data, and necessary clarifications within the time frames prescribed by 
and in the format required by OPM. The contracting officer also will 
evaluate this sub-element based on the carrier's record in submitting 
proposed benefit changes and clarifications and proposed brochure 
language in accordance with the instructions in the Call Letter.
    (3) Customer Information. Enrollees must have accurate information 
and adequate time to make informed Open Season choices in selecting a 
health plan. In evaluating this sub-element, the contracting officer 
will consider the carrier's timely submission of the contract, signed 
by the contracting official, to OPM; the carrier's compliance with 
FEHBP Supplemental Literature Guidelines; the timeliness of the 
carrier's compliance with the Information and Marketing Materials 
clause of the contract and the carrier's efforts in submitting complete 
and accurate brochures to OPM's distribution center for annuitants, OPM 
contract specialists, and its current enrollees. The contracting 
officer shall also consider the timely submission of an electronic 
brochure for OPM's World Wide Web Site and the carrier's efforts in 
verifying, within the OPM-specified time frame, the accuracy of the 
information in the current FEHB Guide in preparation for the upcoming 
contract period as part of this requirement.
    (4) Cooperation in Surveys. FEHB enrollees rely on feedback from 
the customer satisfaction survey in selecting a health plan. The 
contracting officer will evaluate this sub-element based on the 
carrier's record in cooperating with OPM and/or its designated 
representative in administering a customer satisfaction survey as 
specified in the FEHB contract and OPM guidance.
    (5) Reconsideration/Disputed Claims. The requirement for carriers 
to reconsider disputed health benefits claims is in 5 CFR 890.105. An 
incomplete explanation of denied benefits by the carrier places a 
burden on enrollees, causing them to seek reconsideration because the 
carrier did not fully explain its denial. Incomplete responses to 
enrollee requests for reconsideration drive enrollees to take the 
additional step of requesting reconsideration by OPM. Late carrier 
responses to OPM's requests for the carrier's reconsideration file 
delays OPM's response to enrollees. When a dispute is brought to OPM 
through the disputed claims process, community-rated carriers must 
provide thorough and complete information according to OPM-specified 
time frames. The contracting officer will evaluate this sub-element 
based on the carrier's reconsideration files, including the responses 
to enrollees' requests for reconsideration and the carrier's submission 
of the reconsideration files to OPM for review of the carrier's 
decisions within the time frame specified by OPM.
    (6) Paperless Enrollment/Enrollment Reconciliation--(i) Paperless 
Enrollment. The requirement to cooperate in the OPM designated system 
for paperless enrollment is under the section entitled ``Enrollment 
Instructions'' in the FEHB Supplemental Literature Guidelines in the 
FEHB contract. The contracting officer will evaluate this sub-element 
based on the carrier's efforts at setting up a method of accepting 
electronic data transmission from the OPM designated electronic 
enrollment system, processing enrollment changes on a weekly basis, and 
issuing ID cards timely. Consideration will also be given if the 
carrier does not accept enrollment verification letters provided 
through the electronic system as proof of insurance.
    (ii) Enrollment Reconciliation. The requirement for carriers to 
reconcile their enrollment records on a quarterly basis with those 
provided by Federal Government agencies is in the Records and 
Information to be Furnished by OPM clause of the contract, as well as 5 
CFR 890.110 and 5 CFR 890.308 (final regulations pending). The 
carrier's cooperation in the enrollment reconciliation process is 
essential so that OPM can determine the total premium payment to the 
carrier. The contracting officer will evaluate this sub-element based 
on the carrier's demonstrated record of complying with OPM guidance in 
reconciling enrollments and resolving enrollment discrepancies, as well 
as on the carrier's demonstrated record of following disenrollment 
procedures in accordance with 5 CFR 890.110 and 890.308 (final 
regulations pending).
    (b) Critical Contract Compliance Requirements. This performance

[[Page 38363]]

incentive element shall represent 30 percent of the total computation 
and shall be based on the carrier's compliance with the following sub-
elements:
    (1) Notification of Changes in Name or Ownership; or Transfer of 
Assets. OPM must be able to assess the viability of the carrier and its 
ability to provide health care to enrollees so that they do not 
experience difficulty obtaining treatment and other services. The 
contracting officer will evaluate this sub-element based on the 
carrier's compliance with FEHBAR Subparts1642.12, Novation and Change-
of-Name Agreements, and 1642.70, Management Agreement (in Lieu of 
Novation Agreement).
    (2) Notification of Other Significant Events. The carrier must 
notify OPM of significant events such as lawsuits, strikes, and natural 
disasters so that OPM can assess the carrier's ability to pay claims 
and provide services to enrollees. In evaluating this sub-element, the 
contracting officer will consider the carrier's demonstrated record of 
compliance with 1652.222-70, including timely notification and 
explanation of all significant events that may have a material effect 
on the carrier's ability to perform the contract. Such events include, 
but are not limited to: Disposal of major assets; loss of 15% or more 
of its overall membership; addition or termination of provider 
agreements; and changes of participating plans.
    (3) Notification of Changes in Contract Administrators. OPM must be 
able to reach the person responsible for managing the carrier's FEHB 
contract without delay when an enrollee calls OPM in need of urgent 
medical treatment, an ID card, or other service. Each carrier's 
designated contact will maintain telephone and electronic 
communications with OPM so that issues can be resolved quickly. The 
contracting officer will evaluate this sub-element based on the 
carrier's compliance with the Notice clause and Contract Administration 
Data sheet in the contract, and will consider the carrier's record in 
notifying OPM promptly of changes in its carrier Representative or 
contracting official, mailing or electronic address, telephone or FAX 
number.
    (4) Submission of Required Reports. The reports specified in the 
Statistics and Special Studies and FEHB Quality Assurance clauses of 
the contract and are essential for tracking enrollment, finances, 
rates, etc. The contracting officer will base the carrier's performance 
in this sub-element on its demonstrated record in providing timely and 
accurate performance, demographics, fraud and abuse, debarment, and CPA 
reports, HEDIS and FACCT measures, and other reports as required by OPM 
within the OPM-specified time frames.


1609.7101-2  Community-rated carrier performance incentive factors.

    OPM will apply the Customer Service and Critical Contract 
Compliance Requirements percentage factors specified by the contracting 
officer when a community-rated carrier does not provide the 
information, payment, or service, perform the function, or otherwise 
meet its obligations as stated in 1609.7101-1. The factors will be 
added and applied to the carrier's total premium dollars paid for the 
preceding contract period. The amount obtained after the total premium 
is multiplied by the factor will be withheld from the carrier's 
periodic premium payments payable during the first quarter of the 
following contract period, unless an alternative payment arrangement is 
made with the carrier's contracting officer.
    The incentive factors for each basic element are set forth below:

          Community-Rated Carrier Performance Incentive Factors         
------------------------------------------------------------------------
                                                              Incentive 
                                                             factor (To 
                                                                 be     
                                                             multiplied 
                          Element                            by premium 
                                                            and withheld
                                                                from    
                                                              carrier's 
                                                              payments) 
------------------------------------------------------------------------
I. Customer Service (70% of Total)........................          .007
II. Critical Contract Compliance Requirements (30% of                   
 Total)...................................................          .003
Maximum Aggregate Percent of Premium......................          .01 
------------------------------------------------------------------------

PART 1632--CONTRACT FINANCING

    3. In section 1632.170, paragraphs (a) and (b)(1) are revised to 
read as follows:


1632.170  Recurring premium payments to carriers.

    (a)(1) Recurring payments to carriers of community-rated plans. OPM 
will pay to carriers of community-rated plans the premium payments 
received for the plan less the amounts credited to the contingency and 
administrative reserves, amounts assessed under paragraph (a)(2) of 
this section, and amounts due for other contractual obligations. 
Premiums will be due and payable not later than 30 days after receipt 
by the Employees Health Benefits (EHB) Fund.
    (2) The sum of the two performance incentive factors applicable 
under 1609.7101-2 will be multiplied by the carrier's total net-to-
carrier premium dollars paid for the preceding contract period. The 
amount obtained after the total premium is multiplied by the sum of the 
factors will be withheld from the carrier's periodic premium payment 
payable during the first quarter of the following contract period 
unless an alternative payment arrangement is made with the carrier's 
contracting officer. OPM will deposit the withheld funds in the 
carrier's contingency reserve for the plan. The aggregate amount 
withheld annually for performance for any carrier shall not exceed one 
percent of premium for any contract period.
    (b)(1) Recurring payments to carriers of experience-rated plans. 
OPM will make payments on a letter of credit (LOC) basis. Premium 
payments received for the plan, less the amounts credited to the 
contingency and administrative reserves and amounts for other 
obligations due under the contract, will be made available for carrier 
drawdown not later than 30 days after receipt by the EHB Fund.
* * * * *

PART 1652--CONTRACT CLAUSES

    4. The clause heading and paragraph (a) of the clause in section 
1652.232-70 are revised to read as follows:


1652.232-70  Payments--community-rated contracts.

* * * * *

PAYMENTS (JAN 1999)

    (a) OPM will pay to the Carrier, in full settlement of its 
obligations under this contract, subject to adjustment for error or 
fraud, the subscription charges received for the plan by the 
Employees Health Benefits Fund (hereinafter called the Fund) less 
the amounts set aside by OPM for the Contingency Reserve and for the 
administrative expenses of OPM, amounts assessed under 1609.7101-2, 
and amounts for other obligations due under the contract, plus any 
payments made by OPM from the Contingency Reserve.
* * * * *
    5. In section 1652.232-71, the clause heading and paragraph (a) of 
the clause are revised to read as follows:


1652.232-71  Payments--experience-rated contracts.

* * * * *

PAYMENTS (JAN 1999)

    (a) OPM will pay to the Carrier, in full settlement of its 
obligations under this contract, subject to adjustment for error or 
fraud, the subscription charges received for the Plan by the 
Employees Health Benefits

[[Page 38364]]

Fund (hereinafter called the Fund) less the amounts set aside by OPM 
for the Contingency Reserve and for the administrative expenses of 
OPM and amounts for other obligations due under the contract, plus 
any payments made by OPM from the Contingency Reserve.
* * * * *


1652.244-70  [Amended]

    6. In section 1652.244-70, in paragraph (f) of the clause, the FAR 
reference ``15.903(d)'' is removed and the FAR reference ``15.404-
4(c)(4)(i)'' is added in its place.
    7. Section 1652.370 in the table in paragraph (c) the following 
clauses and Text references in the FEHBP Clause Matrix are revised as 
follows: FAR 52.215-22 and FAR 15.804-8(a) are revised to read 52.215-
10 and 15.408(b) respectively; 52.215-24 and 15.804-8(c) are revised to 
read 52.215-12 and 15.408(d) respectively; 52.215-27 and 15.804-8(e) 
are revised to read 52.215-15 and 15.408(g) respectively; 52.215-30 and 
15.904(a) are revised to read 52.215-16 and 15.408(h) respectively; 
52.215-31 and 15.904(b) are revised to read 52.215-17 and 15.408(i) 
respectively; and 52.215-39 and 15.804-8(f) are revised to read 52.215-
18 and 15.408(j) respectively; FAR 52.215-70 is revised to read 
1652.215-70.

[FR Doc. 98-18967 Filed 7-15-98; 8:45 am]
BILLING CODE 6325-01-P