[Federal Register Volume 74, Number 33 (Friday, February 20, 2009)]
[Rules and Regulations]
[Pages 7823-7824]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-3675]



48 CFR Part 1652

RIN 3206-AL66

Federal Employees Health Benefits Program Acquisition Regulation: 
Miscellaneous Clarifications and Corrections

AGENCY: U.S. Office of Personnel Management.

ACTION: Final rule.


SUMMARY: The U.S. Office of Personnel Management (OPM) is issuing a 
final rule to amend the Federal Employees Health Benefits Acquisition 
Regulations (FEHBAR). The rule clarifies the rate-setting process for 
community-rated carriers with respect to Similarly Sized Subscriber 
Groups (SSSG) and removes the ban on adjustments based on rate 
reconciliation for the final year of Federal Employees Health Benefits 
Program (FEHBP) contracts.

DATES: Effective Date: March 23, 2009.

Analyst at 202-606-0004, or e-mail [email protected].

SUPPLEMENTARY INFORMATION: The purpose of this regulation is to clarify 
requirements with respect to the rate-setting process for community-
rated carriers and to require rate reconciliation for the final 
contract term for community-rated carriers that leave the FEHBP.
    In prior years, carriers were not subjected to rate reconciliation 
in the final year of their contracts. Information technology and 
electronic transmission and storage of data now make it possible to 
efficiently perform rate reconciliation for the final contract year. 
Therefore, OPM will begin conducting such rate reconciliation on 
community-rated contracts that terminate after January 1, 2009.
    A proposed rule was published to amend 48 CFR part 1652 in the 
Federal Register at 73 FR 51260, September 2, 2008. OPM requested 
comments by October 2, 2008. We received one set of comments by that 
date, from an FEHBP carrier. The issues raised by the commenter are 
discussed below.
    The commenter did not have issue with our change at Sec.  1652.216-
70(b)(2) but suggested that we change ``methodology'' in the second 
sentence to ``established policy'' to be consistent with the language 
used earlier in the section. We have made this clarifying edit in the 
final rule.
    The commenter indicated that the rule at Sec.  1652.216-70(b)(7) 
would encourage carriers to reduce the discounts given to OPM or 
eliminate them entirely. The commentator stated that some carriers 
offer discounts to prevent against errors and changing assumptions in 
the rate proposal, such as changes in assumed Medicare Advantage or 
Medicare Part D rates. To offset these changes or errors, the carrier 
can then lower the discount it originally offered to OPM. The commenter 
suggested that we strike the word ``guaranteed'' from our regulation 
and indicate that discounts may be adjusted only ``if the adjustment 
results in no change to the net to carrier rate agreed to by OPM before 
the beginning of the contract year.''
    The proposed rule at Sec.  1652.216-70(b)(7) is consistent with the 
requirements of a fixed price health benefits contract established 
under the principles of community rating. That is, a plan's premium as 
agreed to at time of proposal may change only to the extent that it 
reflects a change that occurs in the plan's community. Discounts that 
are offered to OPM and guaranteed by the carrier cannot be adjusted 
after the start of the contract period.
    Finally, the commenter indicated that the proposed regulation was 
too broad at Sec.  1652.216-70(b)(8), because OPM sometimes purchases 
benefits that are greater than those that the carrier prices in its 
community using its ``established rating method.''
    Nothing in the proposed rule precludes a carrier from rating for 
FEHB-specific provisions or requirements. The carrier must utilize a 
consistent rating method for any FEHB-specific provisions and 
requirements, and would need to apply this same method to its community 
if such provisions or requirements are extended to its community.
    Therefore, for the reasons explained above and in the supplementary 
information of the proposed rule, the proposed rule amending 48 CFR 
part 1652 published in the Federal Register at 73 FR 51260, September 
2, 2008, is adopted as final with a minor clarification at Sec.  
1652.216-70(b)(2) to change ``methodology'' to ``established policy.''

Regulatory Flexibility Act

    I certify that this regulation will not have a significant economic 
impact on a substantial number of small entities because all the small 
plan FEHBP contracts fall below the threshold for submitting cost or 
pricing data.

[[Page 7824]]

Executive Order 12866, Regulatory Review

    This rule has been reviewed by the Office of Management and Budget 
in accordance with Executive Order 12866.

Lists of Subjects in 48 CFR Part 1652

    Government employees, Government procurement, Health insurance, 
Reporting and recordkeeping requirements.

U.S. Office of Personnel Management.
Kathie Ann Whipple,
Acting Director.

Accordingly, OPM is amending chapter 16 of title 48, Code of Federal 
Regulations, as follows:


Subchapter H--Clauses and Forms


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

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

Subpart 1652.2--Texts of FEHBP Clauses

2. In Sec.  1652.216-70, revise paragraphs (b)(2), (b)(3), (b)(4), and 
(b)(6), and add paragraphs (b)(7) and (b)(8) to read as follows:

Sec.  1652.216-70  Accounting and price adjustment.

* * * * *
    (b) * * *
    (2) The subscription rates agreed to in this contract shall be 
equivalent to the subscription rates given to the carrier's similarly 
sized subscriber groups (SSSGs) as defined in FEHBAR 1602.170-13. The 
subscription rates shall be determined according to the carrier's 
established policy, which must be applied consistently to the FEHBP and 
to the carrier's SSSGs. If an SSSG receives a rate lower than that 
determined according to the carrier's established policy, it is 
considered a discount. The FEHBP must receive a discount equal to or 
greater than the carrier's largest SSSG discount.
    (3) If, at the time of the rate reconciliation, the subscription 
rates are found to be lower than the equivalent rates for the lower of 
the two SSSGs, the carrier may include an adjustment to the Federal 
group's rates for the next contract period, except as noted in 
paragraph (b)(7) of this clause.
    (4) If, at the time of the rate reconciliation, the subscription 
rates are found to be higher than the equivalent rates for the lower of 
the two SSSGs, the carrier shall reimburse the Fund, for example, by 
reducing the FEHB rates for the next contract term to reflect the 
difference between the estimated rates and the rates which are derived 
using the methodology of the lower rated SSSG, except as noted in 
paragraph (b)(7) of this clause.
* * * * *
    (6) For contract years beginning on or after January 1, 2009, in 
the event this contract is not renewed, the final rate reconciliation 
will be performed. The carrier must promptly pay any amount owed to 
OPM. Any amount recoverable by the carrier is limited to the amount in 
the contingency reserve for the terminating plan as of December 31 of 
the terminating year.
    (7) Carriers may provide additional guaranteed discounts to the 
FEHBP that are not given to SSSGs. Any such guaranteed discounts must 
be clearly identified as guaranteed discounts. After the beginning of 
the contract year for which the rates are set, these guaranteed FEHBP 
discounts may not be adjusted.
    (8) Carriers may not impose surcharges (loadings not defined based 
on an established rating method) on the FEHBP subscription rates or use 
surcharges in the rate reconciliation process irrespective of whether 
surcharges are applied to the SSSGs.
* * * * *
[FR Doc. E9-3675 Filed 2-19-09; 8:45 am]