[Federal Register Volume 63, Number 153 (Monday, August 10, 1998)]
[Rules and Regulations]
[Pages 42584-42586]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-21498]


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OFFICE OF PERSONNEL MANAGEMENT

48 CFR Part 1609

RIN 3206-AI27


Prohibition of ``Gag Clauses'' in the Federal Employees Health 
Benefits Program

AGENCY: Office of Personnel Management.

ACTION: Final rule making.

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SUMMARY: The Office of Personnel Management (OPM) is issuing a final 
regulation amending the Federal Employees Health Benefits Acquisition 
Regulations (FEHBAR) to prohibit health benefit carriers participating 
in the Federal Employees Health Benefits (FEHB) Program from entering 
into contracts or employment agreements with health care providers, 
provider groups, or health care workers that would include provisions 
or financial incentives that have the effect of limiting or restricting 
communication of

[[Page 42585]]

medically necessary services to FEHB enrollees.

DATES: This regulation is effective on September 9, 1998.

ADDRESSES: Comments should be directed to Abby L. Block, Chief, 
Insurance Policy and Information Division, OPM, Room 3425, 1900 E 
Street, NW., Washington, DC 20415-0001.

FOR FURTHER INFORMATION CONTACT: Michael W. Kaszynski, (202) 606-0004. 
You may submit comments and data by sending electronic mail (E-mail) 
to: [email protected].

SUPPLEMENTARY INFORMATION: On February 20, 1998, the President signed 
an Executive Memorandum directing the Office of Personnel Management 
(OPM) to take the necessary steps to bring the FEHB Program into 
contractual compliance with the Consumer (Patient) Bill of Rights and 
Responsibilities by no later than year end 1999. The Memorandum 
specifically directed OPM to propose regulations within 90 days to 
prohibit practices that restrict physician-patient communications about 
medically necessary treatment options. OPM's regulation prohibits FEHB 
participating carriers from placing provisions or financial incentives 
in contracts with health care providers, provider groups, or health 
care workers that would limit providers' or health care workers' 
ability to discuss medically necessary treatment options with Federal 
enrollees. We are aware that a proposal to enact a ``gag clause'' 
regulation raises three broad areas of concern regarding: (1) Potential 
impairment of a health plan's ability to review utilization against 
appropriate treatment protocols or perform quality assurance functions, 
(2) potential conflict with providers' or health plan sponsoring 
organizations' ethical, moral, or religious beliefs, and (3) impact on 
providers' or workers' ability to discuss non-covered or high cost 
treatment options. This regulation is not intended to limit a health 
plan's ability to perform utilization review or perform quality 
assurance functions, nor is it intended to cause providers, health care 
workers, or health plan sponsoring organizations to discuss treatment 
options that they would not ordinarily discuss in their customary 
course of practice because such options are inconsistent with their 
professional judgment or ethical, moral or religious beliefs.
    The regulation will ensure that providers and health care workers 
are not inhibited from communicating fully and openly with patients 
regarding medically necessary treatment options regardless of cost or 
whether the benefits are covered by their health plan. Simply stated, 
the amended regulation is intended to remove any contractual impediment 
to a candid and open physician-patient relationship.
    On May 21, 1998, OPM published a proposed regulation in the Federal 
Register (63 FR 27902). OPM received comments from three private 
citizens, two FEHB carriers, two medical specialty provider 
associations, one religious health association, one national 
organization for women and families, and two trade associations 
representing health maintenance organizations (HMOs), preferred 
provider organizations (PPOs), and fee-for-service (FFS) plans. We 
appreciate the observations and suggestions and have taken them into 
consideration in developing this final rule. The majority of the 
comments favored the proposed regulation. We were surprised, however, 
given our explicit statement of intent, at a few of the reactions that 
assumed that OPM would interpret the regulation in ways that would 
clearly be detrimental to the FEHB Program and the people it covers. A 
number of issues are addressed below.
    Seven commenters expressed their support or endorsement of the 
proposed regulation. One commenter indicated support for the rule 
because it assured that physicians and other providers participating in 
the FEHB Program will not be contractually enjoined from providing 
information on all medically appropriate treatment options. The 
commenter stated that a health plan's contractual requirements, such as 
coverage and cost, should not be an impediment to a candid discussion 
between a physician and patient concerning available, medically 
appropriate treatment options. One commenter applauded OPM for its work 
on improving patient care under the FEHB Program. One commenter 
indicated that he fully supports OPM's efforts to prohibit contractual 
clauses or incentives that prevent open communication between 
physicians and patients because he believes that such restrictions 
violate the most basic of rights in a free society.
    One commenter pointed out that, based on his experience in the 
health care industry, the problem is that HMOs reward physicians for 
not delivering care or intimidate physicians from providing care that 
would cost the HMO money. This commenter recommended that sanctions be 
incorporated into the regulation to prevent health plans from utilizing 
prohibited contractual clauses. No change has been made to the rule 
since existing regulations provide OPM with the authority to impose 
appropriate sanctions for violations, including withdrawal of approval 
of the carrier to participate in the FEHB Program.
    One commenter recommended that the regulation give adequate notice 
to FEHB carriers of the types of contract clauses that are prohibited. 
This commenter expressed support for ``gag clause'' prohibitions that 
prohibit practices, including contract clauses, that restrict patient-
provider communications, but stated that there is no compelling reason 
for prohibiting provider incentive plans in the FEHB Program since 
enrollees have the remedy of the disputed claims process or can change 
health plans annually if they find that their plan is limiting their 
access to medically necessary services. OPM believes that free and open 
communication between a provider or health care worker and a patient 
should be a basic right of all FEHB enrollees and should not be a 
matter left solely to the disputed claims process or be a variable 
matter for consideration in the enrollment decision making process. 
Therefore, all carriers under the FEHB Program will be held accountable 
to the same standard. The regulation has been revised to more 
specifically indicate the types of contract clauses that are 
prohibited.
    Three commenters expressed a concern that the regulation is broader 
in scope than required by the Patient Bill of Rights or the President's 
Executive Memorandum of February 20, 1998, and could be interpreted to 
prohibit capitation thereby limiting certain carriers' abilities to 
develop managed care arrangements. Specifically, one commenter thought 
that the regulation should not address ``incentive plans.'' Another 
commenter indicated that the regulation could have unintended 
consequences which could have a significant economic impact if it were 
interpreted to bar all incentive programs, capitation and withhold 
agreements in particular, from the FEHB Program. This commenter 
recommended that OPM allow the use of incentive plans but to adopt 
substantially the same rules in effect for Medicare to assure that such 
plans are reasonable. The intent of the OPM regulation is not to bar 
all incentive plans, capitation, or withhold agreements from inclusion 
in provider contracts. The intent of the regulation is to ensure that 
providers and health care workers are not inhibited in any way from 
communicating fully and openly with patients regarding medically 
necessary treatment options. OPM did not incorporate the same rules 
that

[[Page 42586]]

Medicare uses in regulating incentive plans since we are not trying to 
broadly regulate incentive plans, only those specific financial 
incentives that create an inducement to prevent full and open 
communication between providers and patients. OPM does not believe it 
is necessary to replicate the complexity of the Medicare regulation in 
the FEHB Program in order to meet the goals of the Patient Bill of 
Rights.
    One commenter expressed support for the principle that providers 
and workers have the ability to communicate fully and openly with 
patients regarding medically necessary treatment options regardless of 
cost or plan coverage. However, the commenter cautioned OPM not to 
interpret the rule to extend beyond communications to regulate broadly 
compensation arrangements between plans and providers. The commenter 
also suggested that we include a reference in the preamble that the 
proposed regulation is not intended to limit the ability of a health 
plan to operate its quality assurance program. While we believe that 
the proposed regulation made clear that OPM did not intend to regulate 
broadly compensation arrangements between plans and providers, we have 
reiterated that the provision only applies to open communication. The 
preamble has been revised to specify that the intent of the regulation 
is not to limit the ability of a health plan to operate its quality 
assurance program.
    One commenter asked that we specify in the regulation that nothing 
in the regulation should be construed to cause providers or carriers to 
violate their ethical, moral or religious beliefs. The regulation has 
been modified accordingly.
    One commenter indicated that if OPM believes that an exception for 
ethical or moral beliefs is necessary, the exception should be 
available to individuals only and not to health plans or insurance 
carriers. We have modified the regulation so that the exception for 
ethical, moral, or religious beliefs applies only to providers, health 
care workers, or health plan sponsoring organizations.

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 
will only affect health insurance carriers under the Federal Employees 
Health Benefits Program. Executive Order 12866, Regulatory Review
    This rule has been reviewed by the Office of Management and Budget 
in accordance with Executive Order 12866.

List of Subjects in 48 CFR Part 1609

    Administrative practice and procedure, Government employees, Health 
facilities, Health insurance, Health professionals, Hostages, Iraq, 
Kuwait, Lebanon, Reporting and record keeping requirements, Retirement.

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

    For the reasons set forth in the preamble OPM is amending 48 CFR 
Part 1609 as follows:

PART 1609--[AMENDED]

Subpart 1609.70--Minimum Standards for Health Benefits Carriers

    1. The authority citation for 48 CFR Part 1609 continues to read as 
follows:

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

    2. In Sec. 1609.7001 new paragraph (c)(7) is added to read as 
follows:


Sec. 1609.7001  Minimum Standards for Health Benefits Carriers

* * * * *
    (c) * * *
    (7) Entering into contracts or employment agreements with 
providers, provider groups, or health care workers that include 
provisions or financial incentives that directly or indirectly create 
an inducement to limit or restrict communication about medically 
necessary services to any individual covered under the FEHB Program. 
Financial incentives are defined as bonuses, withholds, commissions, 
profit sharing or other similar adjustments to basic compensation 
(e.g., service fee, capitation, salary) which have the effect of 
limiting or reducing communication about appropriate medically 
necessary services. Providers, health care workers, or health plan 
sponsoring organizations are not required to discuss treatment options 
that they would not ordinarily discuss in their customary course of 
practice because such options are inconsistent with their professional 
judgment or ethical, moral or religious beliefs.

[FR Doc. 98-21498 Filed 8-6-98; 2:53 pm]
BILLING CODE 6325-01-P