[Federal Register Volume 63, Number 167 (Friday, August 28, 1998)]
[Rules and Regulations]
[Pages 45933-45935]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-23149]



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 Rules and Regulations
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  Federal Register / Vol. 63, No. 167 / Friday, August 28, 1998 / Rules 
and Regulations  

[[Page 45933]]


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OFFICE OF PERSONNEL MANAGEMENT

5 CFR Part 890

RIN 3206-AI33


Federal Employees Health Benefits Program: Contributions and 
Withholdings

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 describe procedures for OPM's annual determination of 
the weighted average of subscription charges in effect for self only 
and for self and family enrollments under the Federal Employees Health 
Benefits (FEHB)Program. The determinations are a requirement under 
recent amendments to the FEHB law which authorize a new Government 
contribution toward FEHB enrollment charges effective with the contract 
year beginning in January 1999, which generally pays 72 percent of the 
weighted average of subscription charges.

DATES: Interim regulations are effective August 28, 1998. We must 
receive comments on or before September 28, 1998.

ADDRESSES: Send written comments to Abby L. Block, Chief, Insurance 
Policy and Information Division, Retirement and Insurance Group, Office 
of Personnel Management, P.O. Box 57, Washington, DC 20044; or hand 
deliver to OPM, Room 3425, 1900 E Street NW., Washington, DC; or FAX to 
(202) 606-0633.

FOR FURTHER INFORMATION CONTACT: Bonnie R. Rose (202) 606-0004.

SUPPLEMENTARY INFORMATION: The Balanced Budget Act of 1997, approved on 
August 5, 1997 (Public Law 105-33, sec. 7002, 111 Stat. 662), amended 
the Federal Employees Health Benefits (FEHB) law to authorize a new 
Government contribution formula effective on the first day of the 
contract year that begins in January 1999. In place of the ``Big-6'' 
formula, which evolved under FEHB law during the early 1970's, the new 
formula bases Government contributions on the program-wide weighted 
average costs, for self only and for self and family enrollments, 
respectively.
    The Big-6 formula provided a Government contribution for eligible 
enrollees in any FEHB plan or option equal to the lesser of: (1) 60 
percent of the simple average of self only or self and family 
enrollment charges for the highest level of benefits offered under six 
large plans described in law, or (2) 75 percent of charges for the 
particular plan an individual elects to enroll in. Initially, the Big-6 
formula effectively linked Government contributions to health plan 
preferences of a majority of FEHB enrollees.
    Over time, though, FEHB enrollees increasingly left high option 
health plans which were the basis of the Big-6 formula and dispersed 
themselves among other plans. During the 1970's and 1980's, the FEHB 
Program expanded from several dozen to several hundred health plans and 
health care inflation and rapid health plan premium increases during 
this period encouraged enrollees to more carefully evaluate all 
options. One distinct component of the Big-6 formula, the 
Governmentwide Indemnity Benefit Plan, decided to terminate FEHB 
participation at the end of 1989 due to escalating premiums and 
declining enrollment. Because the average of premiums under the five 
remaining Big-6 plans would have resulted in lower Government 
contributions, Congress enacted temporary legislation to continue the 
Big-6 calculation by using premiums for the five remaining formula 
plans and a so-called phantom premium in place of the lapsed plan. The 
phantom formula effectively held the Government contributions near 72 
percent of total program costs and was due to expire at the end of 1998 
in the absence of further action by Congress.
    The 1997 amendments to the FEHB law require a determination by the 
Office of Personnel Management (OPM) in advance of each contract year 
of the weighted average of subscription charges that will be in effect 
during the year under all FEHB plans, for self only and for self and 
family types of enrollment, respectively. For employees and annuitants 
generally, the law provides a Government contribution equal to the 
lesser of: (1) 72 percent of the amount OPM determines is the program-
wide weighted average of subscription charges for the type of 
enrollment the individual selects, or (2) 75 percent of the 
subscription charge for a particular plan (5 U.S.C.Sec. 8906 (a) and 
(b)). The intent of the new FEHB contribution formula, which is 
referred to as the ``Fair Share'' formula, is to maintain a consistent 
level of Government contributions, as a percent of the total program 
costs, regardless of the configuration of participating health plans or 
FEHB enrollment patterns.
    The law requires OPM's determination of the amounts of the weighted 
average of subscription charges for each FEHB contract year, for self 
only and for self and family enrollments, not later than October 1 
immediately preceding the beginning of the contract year in January. By 
expressed provision of law, the weight given to each subscription 
charge that will be in effect for the following FEHB contract year must 
be commensurate with the number of enrollees eligible for a Government 
contribution and enrolled for the same plan or option as of March 31 of 
the year in which the determination is being made. Thus, OPM will 
multiply each subscription charge that will be in effect for the next 
contract year by the number of eligible enrollees who are in the plan 
and option to which the charge applies as of March 31 immediately 
preceding the contract year. We will then compute the total-dollar 
subscription charge amounts for all self only enrollments and for all 
self and family enrollments respectively. Finally, we will divide each 
dollar total by the corresponding total numbers under each enrollment 
type to achieve the program-wide weighted average costs.
    The FEHB law is very clear regarding the methodology for 
determining the program-wide weighted average of subscription charges 
in cases where health plans continue participation substantially 
unchanged from year to year. OPM is issuing regulations to explain how 
we intend to treat plans for

[[Page 45934]]

purposes of determining the program-wide weighted average of 
subscription charges when conditions of a plan's FEHB participation 
change from one year to the next, including cases in which plans enter 
the FEHB Program, cease participation, or merge with another FEHB plan, 
and cases in which a health maintenance organization alters its 
previous rating structure.
    The regulations provide that OPM will proceed with our 
determination of the program-wide weighted average of subscription 
charges for the following contract year on September 1. If OPM and the 
carrier of any health plan which has applied to continue FEHB 
participation have not closed rate negotiations for the following 
contract year by September 1, the regulations state that OPM will apply 
deemed adjustments to such plan's current-year self only and self and 
family subscription charges for purposes of including enrollees of the 
plan in the determination of the coming year's program-wide weighted 
average of subscription charges. The deemed adjustments will be equal 
to any increase or decrease that OPM finds to exist in a calculation of 
the weighted-average of subscription charges using only those plans 
with which OPM has closed rate negotiations for the following contract 
year by September 1. There will be no readjustment in the program-wide 
weighted average charges based on rate negotiations closed after 
September 1.
    We expect deemed adjustments to be infrequent because provisions in 
5 CFR 890.203 require all FEHB plans to submit benefit and rate 
proposals to OPM not less than 7 months before a new contract year. 
However, the regulations will ensure that OPM can complete 
determination of program-wide weighted average charge amounts for each 
contract year by October 1 of the preceding year, as the law requires, 
and that complete information to assist enrollees in comparing health 
plan features is available at the start of the annual open enrollment 
period in November.
    Since newly participating or terminating FEHB plans inherently lack 
one of two requisite data needed for determining the program-wide 
weighted average of subscription charges, namely, previous enrollment 
or subscription charges for the following contract year, the 
regulations exclude data associated with these plans from these 
determinations. If two or more existing FEHB plans merge, or if a two-
option plan ceases to offer one of the options, the regulations state 
that OPM will use the combined enrollments from the merging plans, or 
the two plan options, for purposes of weighting the subscription 
charges for the successor entity.
    Contracts with comprehensive medical plans (CMPs) may include 
different rates for specified portions of the plan's service area and 
will assign a distinct enrollment code for each rating area. Such plans 
occasionally decide to split the existing rating area(s) into two or 
more new areas or to reconfigure geographic areas covered by existing 
rating codes. When this occurs, there may not be a direct correlation 
between the plan's current-year enrollment and rating codes for the 
following contract year for purposes of determining the weight to be 
given to each new subscription charge. So, where a participating CMP 
plan is altering its FEHB rating structure for the following contract 
year, the regulations provide that OPM will estimate what portion of 
the total enrollments under all rating codes for the same plan on March 
31 of the determination year correlates to each of the plan's rating 
codes for the following contract year.
    Finally, we are removing existing provisions in paragraph 5 CFR 
890.501(b), and the reference to paragraph (b) in 5 CFR 890.501(a), 
which reflect FEHB law in effect prior to 1974 amendments to the 
Government contribution formula (Public Law 93-246, section 1, 88 Stat. 
3).

Waiver of Notice of Proposed Rulemaking and Delay in Effective Date

    Pursuant to section 553(b)(3)(B) and (d)(3) of title 5, United 
States Code, I find that good cause exists for waiving the general 
notice of proposed rulemaking and for making these rules effective in 
less than 30 days. These regulations essentially expound on a 
requirement in the FEHB law, which includes a prescribed methodology, 
for OPM to make a determination of the weighted average of subscription 
charges in effect under all FEHB plans in each contract year after 
1998. Accordingly, notice of proposed rulemaking and public procedure 
thereon are unnecessary. Also, good cause exists for making these rules 
effective in less than 30 days. The law gives OPM some discretion 
regarding the time frame for making the required determination. For 
purposes of including information on Government contributions in 
materials for the annual FEHB open enrollment period in November, OPM 
concludes that determination of the weighted average of subscription 
charges must proceed on September 1 each year, beginning with 1998.

Regulatory Flexibility Act

    I certify that these regulations will not have a significant 
economic impact on a substantial number of small entities because the 
regulations only affect Federal Government contributions toward 
enrollment costs under the Federal Employee 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 5 CFR Part 890

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

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

    Accordingly, OPM is amending Title 5 of the Code of Federal 
Regulations as follows:

PART 890--FEDERAL EMPLOYEES HEALTH BENEFITS PROGRAM

    1. The authority citation for part 890 continues to read as 
follows:

    Authority: 5 U.S.C. 8913; Sec. 890.803 also issued under 50 
U.S.C. 403p, 22 U.S.C. 4069c and 4069c-1; subpart L also issued 
under sec. 599C of Pub. L. 101-513, 104 Stat. 2064, as amended; 
Sec. 890.102 also issued under sections 11202(f), 11232(e), and 
11246 (b) and (c) of Pub. L. 105-33, 111 Stat. 251.

Subpart E--Contributions and Withholdings

    2. Amend Sec. 890.501 by revising paragraphs (a) and (b) to read as 
follows:


Sec. 890.501  Government contributions.

    (a) The Government contribution toward subscription charges under 
all health benefits plans, for each enrolled employee who is paid 
biweekly, is the amount provided in section 8906 of title 5, United 
States Code, plus 4 percent of that amount.
    (b) In accordance with the provisions of 5 U.S.C. 8906(a) which 
take effect with the contract year that begins in January 1999, OPM 
will determine the amounts representing the weighted average of 
subscription charges in effect for each contract year, for self only 
enrollments and for self and family enrollments, as follows:
    (1) The determination of the weighted average of subscription 
charges will only include those health benefits plans

[[Page 45935]]

which are continuing FEHB Program participation from one contract year 
to the next.
    (i) If OPM and the carrier for a plan that will continue 
participation have closed negotiations on rates for the upcoming 
contract year by September 1 of the current contract year, i.e., the 
determination year, OPM will use the plan's negotiated subscription 
charges for the upcoming contract year in the determination of the 
weighted average of subscription charges.
    (ii) If OPM and the carrier for a plan that applied to continue 
participation have not closed rate negotiations for the upcoming 
contract year by September 1 of the determination year, OPM will make a 
deemed adjustment to such plan's subscription charges for the current 
contract year for purposes of counting eligible enrollees of the plan 
in the determination of weighted average charges for the upcoming 
contract year. The deemed adjustment will equal any increase or 
decrease OPM finds in its determination of the weighted average of 
subscription charges for the upcoming contract year for all plans with 
which OPM has closed rates on September 1 of the determination year.
    (iii) There will be no subsequent adjustment in the weighted 
average charges applicable to the upcoming contract year to reflect 
rate negotiations closed after September 1 of the determination year.
    (2) Except as otherwise specified in paragraphs (b)(2) (i) and 
(b)(2)(ii) of this section, the weight OPM gives to each subscription 
charge for purposes of determining the weighted average of subscription 
charges for the upcoming contract year will be proportionate to the 
number of individuals who, as of March 31 of the determination year, 
are enrolled in the plan or benefits option to which such charge 
applies and are eligible for a Government health benefits contribution 
in the upcoming contract year.
    (i) When a subscription charge for an upcoming contract year 
applies to a plan that is the result of a merger of two or more plans 
which contract separately with OPM during the determination year, or 
applies to a plan which will cease to offer two benefits options, OPM 
will combine the self only enrollments and the self and family 
enrollments from the merging plans, or from a plan's two benefits 
options, for purposes of weighting subscription charges in effect for 
the successor plan for the upcoming contract year.
    (ii) When a comprehensive medical plan (CMP) varies subscription 
charges for different portions of the plan's service area and the 
plan's contract for the upcoming contract year will reconfigure 
geographic areas associated with subscription charges, so that there 
will not be a direct correlation between enrollment in the 
determination year and rating areas for the upcoming contract year, OPM 
will estimate what portion of the plan's enrollees on March 31 of the 
determination year will be subject to each of the plan's subscription 
rates for the upcoming contract year.
    (3) After OPM weights each subscription charge as provided in 
paragraphs (b)(2), (b)(2)(i), and (b)(2)(ii) of this section, OPM will 
compute the total of subscription charges associated with self only 
enrollments, and the total of subscription charges associated with self 
and family enrollments. OPM will divide each subscription charge total 
by the total number of enrollments such amount represents to obtain the 
program-wide weighted average subscription charges for self only and 
for self and family enrollments, respectively.
* * * * *
[FR Doc. 98-23149 Filed 8-27-98; 8:45 am]
BILLING CODE 6325-01-P