[Federal Register Volume 80, Number 98 (Thursday, May 21, 2015)]
[Rules and Regulations]
[Pages 29203-29205]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-12378]



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  Federal Register / Vol. 80, No. 98 / Thursday, May 21, 2015 / Rules 
and Regulations  

[[Page 29203]]


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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: Final rule.

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SUMMARY: The United States Office of Personnel Management (OPM) is 
issuing a final rule to amend the Federal Employees Health Benefits 
(FEHB) Program regulations to reaffirm 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 FEHA Act. FEHB contracts and brochures must 
include, and in practice already include, a provision incorporating the 
carrier's subrogation and reimbursement rights, and FEHB plan brochures 
must contain an explanation of the carrier's subrogation and 
reimbursement policy.

DATES: This final rule is effective June 22, 2015.

FOR FURTHER INFORMATION CONTACT: Marguerite Martel, Senior Policy 
Analyst at (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 final 
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 final regulation also reaffirms that a FEHB carrier's rights and 
responsibilities 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. Some state courts 
have interpreted ambiguity in Section 8902(m)(1) to reach a contrary 
result and thereby to allow state laws to prevent or limit subrogation 
or reimbursement rights under FEHB contracts. In this final rule, OPM 
is exercising its rulemaking authority under 5 U.S.C. 8913 to ensure 
that carriers enjoy the full subrogation and reimbursement rights 
provided for under their contracts.
    The interpretation of Section 8902(m)(1) promulgated herein 
comports with longstanding Federal policy and 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.
    OPM proposed this amendment in a notice of proposed rulemaking on 
January 7, 2015 (80 FR 931). The proposed rule had a 30 day comment 
period during which OPM received 3 comments.
    Responses to comments on the proposed rule:
    OPM received comments from an association of FEHB carriers, a trade 
association serving subrogation and recovery professionals, and a 
provider of subrogation and recovery services. The comments all 
expressed support for the regulation and suggested some changes to 
clarify the language in the proposed rule.
    All commenters suggested edits to the proposed definitions of 
``subrogation'' and ``reimbursement'' at 5 CFR 890.101 to more 
completely reflect the universe of FEHB Program plan recoveries. All 
three commenters expressed concern with the reference to ``a 
responsible third party'' in the definitions, indicating that the use 
of this phrase has been interpreted to foreclose ``first party'' claims 
for subrogation and recoveries, such as uninsured and underinsured 
motorist coverage, and recommended adding other insurance including 
workers' compensation insurance, to the definition to be consistent 
with entitlements listed in the proposed Sec.  890.106(c)(2) and (f). 
OPM agrees that the definitions of subrogation and reimbursement should 
include first party claims. In addition, commenters noted that Sec.  
890.106(b) and (f) should be updated to reflect this change. The 
definitions at Sec.  890.101 and other corresponding sections have been 
updated accordingly as necessary.
    The commenters also suggested additional specific changes to the 
proposed definition of ``reimbursement.'' Two of the commenters noted 
that the definition of reimbursement should address the situation of 
both illness and injury. OPM has revised the definition of 
reimbursement to accept this change. One commenter suggested that the 
final rule clarify that the right of reimbursement is cumulative with 
and not exclusive of the right of subrogation. OPM has incorporated 
this clarification. Two commenters suggested that the definition should 
reflect that a covered individual need not have actually received a 
recovery payment so long as the covered individual is entitled to 
receive a payment. OPM does not agree that the right of reimbursement 
is sufficiently broad to require an individual to reimburse the carrier 
in a circumstance where the individual has not actually received a 
recovery, and rejects this change. One commenter indicated that the 
right of reimbursement is specific to a recovery from an individual who 
has received a

[[Page 29204]]

third party payment while the right of subrogation permits a carrier to 
recover directly from other sources. OPM agrees with this comment and 
has clarified the definition of ``subrogation'' accordingly.
    One commenter suggested that Sec.  890.106(b) be amended to align 
the regulation and FEHB carrier contract requirements. OPM has revised 
this section to refer to contractual requirements.
    One commenter noted that Sec.  890.106(f) should be clarified to 
ensure that the carrier has a subrogation right to recover directly 
from a responsible insurer all amounts available to or on behalf of the 
covered individual. We have clarified the provision accordingly.
    Two commenters noted that proposed Sec.  890.106(b) and (h) did not 
clearly reflect OPM's intention for this regulation to apply to 
existing contracts. We agree and are slightly revising the language of 
paragraphs (b) and (h) to be clearer. Paragraph (h) formalizes OPM's 
longstanding interpretation of what Section 8902(m)(1) has meant since 
Congress enacted it in 1978. This interpretation applies to all FEHBA 
contracts. Paragraph (b)(1) in the final rule likewise formalizes OPM's 
longstanding interpretation of subrogation and reimbursement clauses in 
carrier contracts as constituting a condition of and a limitation on 
the nature of benefits or benefits payments and on the provision of 
benefit payments. See Carrier Letter 2012-18. FEHBA contracts that 
contain subrogation and reimbursement clauses condition benefits and 
benefit payments on giving the carrier a right to pursue subrogation 
and reimbursement and therefore are directly related to benefits, 
benefit payments, and coverage within the meaning of Section 
8902(m)(1). The interpretations in paragraphs (b)(1) and (h) together 
clarify and ensure that carriers enjoy full subrogation and 
reimbursement rights notwithstanding any state law to the contrary, and 
they apply in any pending or future case.
    To clarify further the relationship among subrogation, 
reimbursement, benefits, and coverage, we are also in paragraph (b)(2) 
requiring carrier contracts that contain subrogation and reimbursement 
clauses to contain language specifying that benefits and benefit 
payments are extended to a covered individual on the condition that the 
carrier may pursue and receive subrogation and reimbursement. This 
substantive requirement, unlike the interpretation discussed above, 
will govern any benefit payment made under any carrier contract entered 
into after this regulation goes into effect.
    OPM is issuing this final rule with changes to Sec. Sec.  
890.101(a) and 890.106(b) and (f) as described above.

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 
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.

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 Parts 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.

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.

0
2. In Sec.  890.101, in paragraph (a), add definitions in alphabetical 
order for ``reimbursement'' and ``subrogation'' 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 suffered an illness or injury and has received, in 
connection with that illness or injury, a payment from any party that 
may be liable, any applicable insurance policy, or a workers' 
compensation program or insurance policy, and the terms of the 
carrier's health benefits plan require the covered individual, as a 
result of such payment, to reimburse the carrier out of the payment to 
the extent of the benefits initially paid or provided. The right of 
reimbursement is cumulative with and not exclusive of the right of 
subrogation.
* * * * *
    Subrogation means a carrier's pursuit of a recovery from any party 
that may be liable, any applicable insurance policy, or a workers' 
compensation program or insurance policy, as successor to the rights of 
a covered individual who suffered an illness or injury and has obtained 
benefits from that carrier's 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)(1) Any 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.
    (2) Any health benefits plan contract that contains a subrogation 
or reimbursement clause shall provide that 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 pursuant to the contract.
    (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

[[Page 29205]]

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 5 CFR 890.101 and is therefore not subject to the 
disputed claims process set forth at 5 CFR 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 any party that may be liable, or from 
the covered individual, or from any applicable insurance policy, or a 
workers' compensation program or insurance policy, all amounts 
available to or received by or on behalf of the covered individual by 
judgment, settlement, or other recovery, 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 any 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. 2015-12378 Filed 5-20-15; 8:45 am]
 BILLING CODE 6325-63-P