[Federal Register Volume 80, Number 4 (Wednesday, January 7, 2015)]
[Proposed Rules]
[Pages 931-933]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-30638]


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OFFICE OF PERSONNEL MANAGEMENT

5 CFR Part 890

RIN 3206-AN14


Federal Employees Health Benefits Program; Subrogation and 
Reimbursement Recovery

AGENCY: Office of Personnel Management.

ACTION: Proposed rule.

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SUMMARY: The United States Office of Personnel Management (OPM) is 
issuing a proposed rule to amend the Federal Employees Health Benefits 
(FEHB) Program regulations to clarify the conditional nature of FEHB 
Program benefits and benefit payments under the plan's coverage as 
subject to a carrier's entitlement to subrogation and reimbursement 
recovery, and therefore, that such entitlement falls within the 
preemptive scope of the U.S.C. FEHB contracts must include a provision 
incorporating the carrier's subrogation and reimbursement rights and 
FEHB plan brochures must explain the carrier's subrogation and 
reimbursement policy.

DATES: Comments are due on or before February 6, 2015.

ADDRESSES: Send written comments to Marguerite Martel, Senior Policy 
Analyst, Planning and Policy Analysis, U.S. Office of Personnel 
Management, Room 4312, 1900 E Street NW., Washington, DC; or FAX to 
(202) 606-4640 Attn: Marguerite Martel. You may also submit comments 
using the Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.

FOR FURTHER INFORMATION CONTACT: Marguerite Martel at 
[email protected] or (202) 606-0004.

SUPPLEMENTARY INFORMATION:  The FEHB Act, as codified at 5 U.S.C. 
8902(m)(1) provides: ``The terms of any contract under this chapter 
which relate to the nature, provision, or extent of coverage or 
benefits (including payments with respect to benefits) shall supersede 
and preempt any State or local law, or any regulation issued 
thereunder, which relates to health insurance or plans.'' This proposed 
regulation reaffirms that a covered individual's entitlement to FEHB 
benefits and benefit payments is conditioned upon, and limited by, a 
carrier's entitlement to subrogation and reimbursement recoveries 
pursuant to a subrogation or reimbursement clause in the FEHB contract. 
This proposed regulation also reaffirms that a FEHB carrier's rights 
and responsibilities

[[Page 932]]

pertaining to subrogation and reimbursement relate to the nature, 
provision and extent of coverage or benefits and benefit payments 
provided under title 5, United States Code Chapter 89, and therefore 
are effective notwithstanding any state or local law or regulation 
relating to health insurance or plans. This interpretation comports 
with longstanding Federal policy, lowers the cost of benefits, and 
creates greater uniformity in benefits and benefits administration.
    Currently, and consistent with longstanding practice, FEHB Program 
contracts and the applicable statement of benefits (brochures) 
generally require carriers to seek reimbursement and/or subrogation 
recoveries, and covered individuals to reimburse the plan in the event 
of a third party recovery, in accordance with the terms of their FEHB 
contracts. The funds received by experience-rated carriers from these 
recoveries are required to be credited to the Employees Health Benefits 
Fund established by 5 U.S.C. 8909, held by the Treasury of the United 
States. For experience-rated carriers and most community-rated 
carriers, subrogation and reimbursement recoveries serve to lower 
subscription charges for individuals enrolled in the Federal Employees 
Health Benefits Program. These recoveries occur when an enrollee who is 
injured obtains benefits from his or her FEHB Program plan and either 
(1) the carrier recovers payment for those benefits from a third party 
as a subrogee of the enrollee or (2) the enrollee recovers payment for 
those benefits from a third party and the terms of the plan require the 
enrollee, as a result of recovery, to reimburse the carrier for 
benefits initially paid.
    As OPM explained in carrier letter 2012-18 (June 18, 2012), and as 
this proposed regulation would reaffirm, the carrier's right to 
subrogation and/or reimbursement recovery is a condition of the 
payments that enrollees are eligible to receive for benefits, and a 
limitation on their entitlement to the provision of these benefits. 
Subrogation and reimbursement clauses in turn relate to the nature, 
provision, and extent of coverage or benefits (and the payment of 
benefits) by making those payments conditional upon a right to 
subrogation or reimbursement of equivalent amounts, either from a 
third-party, or from the enrollee, in the event a third party is 
obligated to pay for the same injury or illness. The carrier's right to 
pursue these recoveries therefore falls within the purview of 5 U.S.C. 
8902(m)(1), and supersedes state laws that relate to health insurance 
or health plans.
    Interpreting subrogation and reimbursement clauses to fall within 
Section 8902(m)(1) is consistent with the definition of subrogation and 
reimbursement described above and their relationship to benefits and 
the payment of benefits. This interpretation also furthers Congress's 
goals of reducing health care costs and enabling uniform, nationwide 
application of FEHB contracts. The FEHB program insures approximately 
8.2 million federal employees, annuitants, and their families, a 
significant proportion of whom are covered through nationwide fee-for-
service plans with uniform rates. The government pays on average 
approximately 70% of Federal employees' plan premiums. 5 U.S.C. 
8906(b), (f). The government's share of FEHB premiums in 2014 was 
approximately $33 billion, a figure that tends to increase each year. 
OPM estimates that FEHB carriers were reimbursed by approximately $126 
million in subrogation recoveries in that year. Subrogation recoveries 
translate to premium cost savings for the federal government and FEHB 
enrollees. These cost savings are consistent with Congress's intent as 
expressed in the legislative history of the 1998 amendment to 5 U.S.C. 
8902(m)(1), indicating that Congress intended 5 U.S.C. 8902(m)(1) to 
``prevent carriers' cost-cutting initiatives from being frustrated by 
State laws,'' H. Rept. No. 105-374 at 9, 105th Cong., 1st Sess. (1997), 
and with uniform administration and cost-savings principles first 
envisioned as major goals of Congress as it initially enacted the FEHBA 
in 1959. See, H.R. Rep No. 86-957, 86th Cong. 1st Sess. (1959).
    In addition to its cost-savings goals, OPM recognizes a strong 
federal interest in national uniformity in coverage and benefits to 
include uniform administration of the FEHB program across state lines. 
This principle encompasses the need to apply uniform rules that affect 
the rights and obligations of enrollees in a given plan without regard 
to where they live. Disuniform application of FEHB contract terms as 
they apply to enrollees in different states is administratively 
burdensome, gives rise to uncertainty and litigation, and results in 
treating enrollees differently, although enrolled in the same plan and 
paying the same premium. It is OPM's understanding that Congress 
enacted the preemption provision to avoid such disparities, and to 
enhance the ability of the Federal Government to offer its employees a 
program of health benefits governed by a uniform set of legal rules.
    This proposed rule also clarifies that where a covered individual 
challenges a carrier's right of subrogation and reimbursement, that 
challenge is not a ``claim,'' which current OPM regulations define as 
``a request for payment of a health-related bill'' or the ``provision 
of a health-related service or supply.'' 5 CFR 890.101. Because 
subrogation and reimbursement challenges are not claims, they are not 
subject to the disputed claims process set forth at 5 CFR 890.105, 
890.107.
    The proposed rule adds definitions of subrogation and reimbursement 
to 5 CFR 890.101. In addition, the regulation replaces the current 
section 890.106, which is no longer needed due to creation of the 
Civilian Board of Contract Appeals. The proposed section 890.106 
defines an FEHB carrier's right to subrogation and reimbursement in 
accordance with this part. As the Federal agency with regulatory 
authority over the FEHB Program, OPM has consistently taken the 
position that the FEHB Act preempts state laws that restrict or 
prohibit FEHB Program carrier reimbursement and/or subrogation recovery 
efforts, and we continue to maintain this position.
    OPM is issuing proposed rule-making that further clarifies this 
provision of law.

Regulatory Impact Analysis

    OPM has examined the impact of this proposed rule as required by 
Executive Order 12866 and Executive Order 13563, which directs agencies 
to assess all costs and benefits of available regulatory alternatives 
and, if regulation is necessary, to select regulatory approaches that 
maximize net benefits (including potential economic, environmental, 
public, health, and safety effects, distributive impacts, and equity). 
A regulatory impact analysis must be prepared for major rules with 
economically significant effects of $100 million or more in any one 
year. This rule is not considered a major rule because there will be a 
minimal impact on costs to Federal agencies.

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 
only affects health insurance benefits of Federal employees and 
annuitants. Executive Order 12866.

Regulatory Review

    This rule has been reviewed by the Office of Management and Budget 
in accordance with Executive Orders 13563 and 12866.

[[Page 933]]

Federalism

    We have examined this rule in accordance with Executive Order 
13132, Federalism, and have determined that this rule restates existing 
rights, roles and responsibilities of State, local, or tribal 
governments.

List of Subjects in 5 CFR Part 890

    Administrative practice and procedure, Government employees, Health 
facilities, Health insurance, Health professions, Hostages, Iraq, 
Kuwait, Lebanon, Military personnel, Reporting and recordkeeping 
requirements, Retirement.

    U.S. Office of Personnel Management.
Katherine Archuleta,
Director.
    Accordingly, OPM proposes to amend title 5, Code of Federal 
Regulations, part 890 as follows:

PART 890--FEDERAL EMPLOYEES HEALTH BENEFITS PROGRAM

0
1. The authority citation for part 890 continues to read as follows:

    Authority: 5 U.S.C. 8913; Sec. 890.301 also issued under sec. 
311 of Pub. L. 111-03, 123 Stat. 64; Sec. 890.111 also issued under 
section 1622(b) of Pub. L. 104-106, 110 Stat. 521; Sec. 890.112 also 
issued under section 1 of Pub. L. 110-279, 122 Stat. 2604; 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), 11246 (b) and (c) of Pub. L. 105-33, 
111 Stat. 251; and section 721 of Pub. L. 105-261, 112 Stat. 2061; 
Pub. L. 111-148, as amended by Pub. L. 111-152.

0
2. In Sec.  890.101(a), add definitions for ``Reimbursement'' and 
``Subrogation'' in alphabetical order to read as follows:


Sec.  890.101  Definitions; time computations.

    (a) * * *
    Reimbursement means a carrier's pursuit of a recovery if a covered 
individual has been injured and has received a payment from a 
responsible third party and the terms of the plan require the covered 
individual, as a result of recovery, to pay the carrier out of the 
recovery to the extent of the benefits initially paid or provided.
* * * * *
    Subrogation means a carrier's pursuit of a recovery from a 
responsible third party as successor to the rights of an injured 
covered individual who has obtained benefits from that health benefits 
plan.
* * * * *
0
3. Section 890.106 is revised to read as follows:


Sec.  890.106  Carrier entitlement to pursue subrogation and 
reimbursement recoveries.

    (a) All health benefit plan contracts shall provide that the 
Federal Employees Health Benefits (FEHB) carrier is entitled to pursue 
subrogation and reimbursement recoveries, and shall have a policy to 
pursue such recoveries in accordance with the terms of this section.
    (b) In any health benefits plan that contains a subrogation or 
reimbursement clause, including contracts entered into before the 
effective date of this regulation, benefits and benefit payments are 
extended to a covered individual on the condition that the FEHB carrier 
may pursue and receive subrogation and reimbursement recoveries if such 
benefits or benefit payments are for an injury or illness that is the 
responsibility of a third party. FEHB carriers' right to pursue and 
receive subrogation and reimbursement recoveries constitutes a 
condition of and a limitation on the nature of benefits or benefit 
payments and on the provision of benefits under the plan's coverage.
    (c) Contracts shall provide that the FEHB carriers' rights to 
pursue and receive subrogation or reimbursement recoveries arise upon 
the occurrence of the following:
    (1) The covered individual has received benefits or benefit 
payments as a result of an illness or injury; and
    (2) The covered individual has accrued a right of action against a 
third party for causing that illness or injury; or has received a 
judgment, settlement or other recovery on the basis of that illness or 
injury; or is entitled to receive compensation or recovery on the basis 
of the illness or injury, including from insurers of individual (non-
group) policies of liability insurance that are issued to and in the 
name of the enrollee or a covered family member.
    (d) A FEHB carrier's exercise of its right to pursue and receive 
subrogation or reimbursement recoveries does not give rise to a claim 
within the meaning of Sec.  890.101 and is therefore not subject to the 
disputed claims process set forth at Sec.  890.105.
    (e) Any subrogation or reimbursement recovery on the part of a FEHB 
carrier shall be effectuated against the recovery first (before any of 
the rights of any other parties are effectuated) and is not impacted by 
how the judgment, settlement, or other recovery is characterized, 
designated, or apportioned.
    (f) Pursuant to a subrogation or reimbursement clause, the FEHB 
carrier may recover directly from the covered individual all amounts 
received by or on behalf of the covered individual by judgment, 
settlement, or other recovery from any third party or its insurer, or 
the covered individual's insurer, to the extent of the amount of 
benefits that have been paid or provided by the carrier.
    (g) Any contract must contain a provision incorporating the 
carrier's subrogation and reimbursement rights as a condition of and a 
limitation on the nature of benefits or benefit payments and on the 
provision of benefits under the plan's coverage. The corresponding 
health benefits plan brochure must contain an explanation of the 
carrier's subrogation and reimbursement policy.
    (h) A carrier's rights and responsibilities pertaining to 
subrogation and reimbursement under a FEHB contract relate to the 
nature, provision, and extent of coverage or benefits (including 
payments with respect to benefits) within the meaning of 5 U.S.C. 
8902(m)(1). These rights and responsibilities are therefore effective 
notwithstanding any state or local law, or any regulation issued 
thereunder, which relates to health insurance or plans.

[FR Doc. 2014-30638 Filed 1-6-15; 8:45 am]
BILLING CODE 6325-63-P