[Federal Register Volume 80, Number 125 (Tuesday, June 30, 2015)]
[Rules and Regulations]
[Pages 37178-37180]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-15988]



[[Page 37178]]

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OFFICE OF PERSONNEL MANAGEMENT

RIN 3206-AN13

48 CFR Parts 1609, 1615, 1632, and 1652


Federal Employees Health Benefits Program: FEHB Plan Performance 
Assessment System

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 system for assessing the annual 
performance of health plans contracted under the Federal Employees 
Health Benefits (FEHB) Program. The purpose of this rule is to measure 
and assess FEHB plan performance (both experience-rated and community-
rated plans) through the use of a common, objective, and quantifiable 
performance assessment.

DATES: This final rule is effective July 30, 2015.

FOR FURTHER INFORMATION CONTACT: Wenqiong Fu, Policy Analyst at (202) 
606-0004.

SUPPLEMENTARY INFORMATION: The Federal Employees Health Benefits (FEHB) 
Program was established in 1960 and provides health insurance to over 
eight million Federal employees, annuitants, and their family members. 
Chapter 89 of Title 5 United States Code, which authorizes the FEHB 
Program, allows OPM to contract with health insurance carriers to 
provide coverage under certain types of plans. FEHB contracts are 
either community-rated or experience-rated. In community-rated 
contracts, the overall premium is based on the carrier's standard 
rating methodology, taking into account factors in the larger 
geographic area or ``community.'' In experience-rated contracts, the 
FEHB carrier considers actual ``experience'' or medical costs of the 
group of covered lives. The two types of contracts are regulated under 
different sections of the FEHB Acquisition Regulation (FEHBAR). 
Premiums are determined according to distinct processes and plan 
performance is evaluated differently.
    On December 15, 2014, the Office of Personnel Management (OPM) 
published a proposed rule inviting comments on amendments to the FEHB 
Program regulations to amend OPM's assessment of plan performance. The 
30-day comment period ended on January 14, 2015. OPM received 8 
responses containing multiple comments. The comments are summarized and 
discussed below.

Responses to Comments on the Proposed Rule

    OPM received several comments requesting additional information on 
measurement criteria such as specific weighted measurement percentages, 
evaluation methods, measurement criteria, and measurement timelines, 
and requested opportunities to comment on these criteria. Commenters 
requested that OPM clarify the specific weights and measures within the 
regulation so they can better plan for the assessment period, and to 
more clearly adhere to the traditional regulatory structure for a 
weighted guidelines structured approach. Due to the evolving nature of 
clinical quality measures, and OPM's need to focus performance on 
policy-driven measures to be determined annually, it is no longer 
appropriate to retain fixed weights and measures in regulation. As 
stated in the proposed rule-making, OPM intends to retain the weighted 
guidelines structured approach as a regulatory framework and to provide 
applicable measurement criteria through advance carrier letter guidance 
with opportunity for comment, followed by incorporation of the 
measurement criteria as a contract amendment. Since 2014, OPM has 
issued three carrier letters (CL 2014-19, CL 2014-28, and CL 2015-10). 
Carrier Letter 2015-10 specifically addresses the types of questions 
about measurement criteria addressed in the comments. OPM intends to 
provide carriers with transparency which will allow the new performance 
assessment system to retain flexibility and to mature over time. A 
number of commenters requested reasonable lead time and turnaround 
times after release of measures and assigned weights that will be the 
subject of performance and performance assessments. OPM intends to keep 
plans informed in a timely manner as we identify measurement criteria 
for future years so plans can have sufficient time to prepare for 
performance that will be evaluated in the following assessment cycle. 
We also highly encourage feedback and communication through our mailbox 
at [email protected]. For these reasons, OPM is not amending the 
rule in response to these comments.
    One commenter recommended that OPM seek to improve health care 
quality by offering enrollees access to high quality, accredited health 
care networks and prescription benefit managers. Another commenter 
recommended that OPM add plan accreditation as an element to the 
clinical quality, customer service, and resource use factors. OPM 
addressed plan accreditation in Carrier Letter (2014-10). The vast 
majority of FEHB health plans already meet OPM's accreditation 
requirement. However, not all health plan accreditors incorporate 
annual measurement of clinical quality, customer service, or resource 
use into their accreditation framework. OPM's plan performance 
assessment system standardizes this component of performance 
measurement for all FEHB plans. Contract Officers may also take plan 
performance on accreditation milestones into account in the Contract 
Oversight section. For these reasons, OPM is not amending the rule in 
response to this comment.
    One commenter requested OPM consider waiving the performance 
adjustment if a plan exceeds a Medical Loss Ratio threshold. OPM is not 
amending the rule in response to this comment. We believe it would not 
be appropriate for OPM to waive the performance expectations for those 
carriers that do not achieve their margin targets due to higher than 
expected claim loss. While we understand the performance adjustment is 
a concern, using it to cover the excess of the Medical Loss Ratio 
threshold is not the intent of the proposed assessment system.
    OPM received a comment recommending that experience rated carriers 
have the option for a cost plus incentive or fee contract. OPM is not 
amending the rule in response to this comment. OPM is not proposing to 
amend the types of contracts with which it contracts. For experience 
rated carriers, this rulemaking simply amends the performance 
assessment system used to determine the service charge.
    One commenter recommended that the performance assessment system 
should provide rewards and resources to allow plans to improve. Another 
commenter noted its understanding that OPM was comparing the quality 
indicators it proposes to incorporate into its performance assessment 
system with quality indicators relied upon by other large purchasers to 
influence payments to plans, and therefore recommended that OPM 
consider a different performance approach similar to that of Medicare 
Advantage plans quality rating programs. OPM did not propose to adopt 
the same mechanism that others use for influencing payments to plans, 
and declines to adopt these recommendations.
    One commenter recommended safeguards for FEHB experience rated 
contracts that allow them a minimum service charge payment of a 
negotiated

[[Page 37179]]

percentage of the prior year's service charge, with the option to reset 
the minimum payment every 3 years with reference to a percentage of the 
average service charge paid over the prior three years. OPM is not 
amending the rule in response to this comment. As described in the 
proposed rule, we believe making adjustments to the service charge 
based on plan performance in the areas identified to be measured is 
critical in allowing the assessment system to grow, evolve, and remain 
flexible. However, in Carrier Letter 2015-10, we have addressed a 
minimum adjustment methodology for carriers that achieve a performance 
score that is below a threshold.
    Several commenters requested additional information on Contract 
Oversight with concerns about specific components within this 
performance area and the objectivity of assessment in this performance 
area compared to the other three quantified performance areas. OPM has 
issued guidance on this issue in our Carrier Letters (2014-28) and 
(2015-10). Carrier Letter 2015-10 specifically addresses Contract 
Oversight measurement. As described in the proposed rule, OPM's purpose 
is to establish a program-wide assessment system that allows 
performance-based criteria to be linked to health plan premium 
disbursements. OPM will assess performance for the Contract Oversight 
performance area using many sources of information, most of which are 
used with discretion in the current processes for the service charge 
and incentive performance criteria. For these reasons, OPM is not 
amending the rule in response to these comments.
    OPM received several comments that the proposed rule omitted group 
size as an element. The prior group size element under Contract cost 
risk (1615.404-70(a)(2)) was omitted because OPM is replacing the 
current profit analysis factors with a new framework. However, OPM has 
allowed a minimum adjustment methodology for carriers that achieve a 
performance score that is below a threshold. The methodology is 
designed based on group size and is described in detail in Carrier 
Letter (2015-10).
    One commenter requested OPM provide quarterly performance reports 
in order to inform carriers and allow them to make corrections or 
improvements to ensure better performance each year. OPM plans to use 
an annual evaluation cycle since many measures are collected annually, 
and not quarterly. Three of the new performance areas, Clinical 
Quality, Customer Service, and Resource Use, are based on measures 
contained in annual evaluation systems. OPM is committed to 
transparency with regard to the performance assessment system and has 
plans to make available a dashboard that carriers may use to view their 
individual performance ratings and overall scores. For these reasons, 
OPM declines to accept this comment.
    We received one comment regarding the use of HEDIS and CAHPS 
measures to measure performance. The commenter stated that the health 
carrier does not have direct control to influence the decisions of the 
patient and their family or their health care providers, and 
recommended attributing modest weight to these measures. This commenter 
further asserted that CAHPS is an experience survey which measures 
perception rather than satisfaction, that HEDIS and CAHPS reflect 
successful data collection efforts and not necessarily quality 
improvement, and that CAHPS recently stopped its survey of members for 
whom Medicare is primary, which will negatively impact FEHB results. 
Other commenters recommended the use of other measurement tools and 
voiced their concerns that HEDIS and CAHPS measure the carrier's entire 
book of commercial business and not just the FEHB program. OPM is not 
amending the proposed rule in response to these comments. OPM's 
intention with the proposed performance assessment system is to build 
on already established requirements for FEHB Carriers to report 
evaluations by HEDIS and CAHPS. The goal of the new performance 
assessment system is to build on the quality initiatives OPM has 
implemented in recent years, such as public reporting of HEDIS scores.
    We want to incentivize carriers who achieve high performance in 
areas such as clinical quality, customer service and resource use. 
While HEDIS and CAHPS measure the carrier's entire book of business, 
and may be imperfect measures of customer satisfaction, they are well 
recognized national measurement systems in the health insurance arena. 
Our goal is to ensure that FEHB enrollees receive the highest quality 
services, and we believe the data from HEDIS and CAHPS best serves the 
purpose of recognizing good health plan performance. In addition, our 
methodologies for specific measures have been purposefully selected to 
prioritize those that are most actionable at the health plan level. 
Therefore, for the initial Performance Assessment year, we believe that 
using HEDIS and CAHPS reports as our evaluation best reflects our goals 
of evaluating plan performance against national commercial benchmarks. 
We welcome feedback and suggestions from carriers on other externally 
validated measures for consideration in future years.
    We received one comment that the proposed change to 1652.232-71 was 
a drafting error and should be withdrawn. OPM agrees this is a drafting 
error and withdraws the proposed language. OPM is not changing the 
current procedure that allows an experience-rated plan to draw down the 
service charge from the Contingency Reserve through its Letter of 
Credit Account. We are simply changing the calculation of that service 
charge based on the plan's performance assessment.
    One individual recommended that the new assessment system include a 
measure that requires FEHB to provide services comparable to those 
available under Medicare. This rule-making is intended to address plan 
performance, not the types of services available under health plans. 
All FEHB plans provide essential health benefits identified by the 
Affordable Care Act. Therefore, OPM is not amending the proposed rule 
in response to this comment.

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 
affects only health insurance carriers under the Federal Employees 
Health Benefits Program.

Executive Orders 13563 and 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 will not have any 
negative impact on the rights, roles and responsibilities of State, 
local, or tribal governments.

List of Subjects in 48 CFR Parts 1609, 1615, 1632 and 1652

    Government employees, Government procurement, Health insurance.

U.S. Office of Personnel Management.
Katherine Archuleta,
Director.

    For the reasons set forth in the preamble, OPM amends chapter 16 of 
title 48 CFR (FEHBAR) as follows:

[[Page 37180]]

PART 1609--CONTRACTOR QUALIFICATIONS

0
1. The authority citation for part 1609 continues to read as follows:

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

Subpart 1609.71--[Removed]

0
2. Remove subpart 1609.71.

PART 1615--CONTRACTING BY NEGOTIATION

0
3. The authority citation for part 1615 continues to read as follows:

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


0
4. In section 1615.404-4, paragraph (a) is revised to read as follows:


1615.404-4  Profit.

    (a) When the pricing of FEHB Program contracts is determined by 
cost analysis (experience-rated) or by a combination of cost and price 
analysis (community rated), OPM will determine a performance based 
percentage of the price using a weighted guidelines structured approach 
based on the profit analysis factors described in 1615.404-70. For 
experience-rated plans, OPM will use the performance based percentage 
so determined to develop the profit or fee prenegotiation objective, 
which will be the total profit (service charge) negotiated for the 
contract. For community-rated plans, OPM will use the performance based 
percentage so determined to develop an adjustment to net-to-carrier 
premiums, (performance adjustment) to be made during the first quarter 
of the following contract period.
* * * * *

0
5. Section 1615.404-70 is revised to read as follows:


1615.404-70  Profit analysis factors.

    (a) OPM Contracting Officers will apply a weighted guidelines 
method in developing the performance based percentage for FEHB Program 
contracts. For experience-rated plans, the performance based percentage 
will be applied to projected incurred claims and allowable 
administrative expenses. For community-rated plans, the performance 
based percentage will be applied to subscription income and will be 
used to calculate a performance adjustment to net-to-carrier premiums, 
as described at 48 CFR 1632.170(a)(2), to be made during the first 
quarter of the following contract period. In the context of the factors 
outlined in FAR 15.404- 4(d), OPM will assess performance of FEHB 
carriers according to four factors.
    (1) Clinical quality. OPM will consider elements within such 
domains as preventive care, chronic disease management, medication use, 
and behavioral health. This factor incorporates elements from the FAR 
factor ``contractor effort.''
    (2) Customer service. OPM will consider elements within such 
domains as communication, access, claims, and member experience/
engagement. This factor incorporates elements of the FAR factor 
``contractor effort.''
    (3) Resource use. OPM will consider elements within such domains as 
utilization management, administrative, and cost trends. This factor 
incorporates elements of the FAR factors ``contractor effort,'' 
``contract cost risk,'' and ``cost control and other past 
accomplishments.''
    (4) Contract oversight. OPM will consider an assessment of contract 
performance in specific areas such as audit findings, fraud/waste/
abuse, and responsiveness to OPM, benefits/network management, contract 
compliance, technology management, data security, and Federal 
socioeconomic programs. This factor could incorporate any of the FAR 
profit analysis factors listed at 15.404-4(d)(1)(i)-(vi).
    (b) The sum of the maximum scores for the profit analysis factors 
will be 1 percent.

PART 1632--CONTRACT FINANCING

0
6. The authority citation for part 1632 continues to read as follows:

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


0
7. In section 1632.170, paragraph (a)(2) is revised to read as follows:


1632.170  Recurring premium payments to carriers.

    (a) * * *
    (2) The difference between one percent and the performance based 
percentage of the contract price described at 1615.404-4 will be 
multiplied by the carrier's subscription income for the year of 
performance and the resulting amount (performance adjustment) will be 
withheld from the net-to-carrier premium disbursement during the first 
quarter of the following contract period unless an alternative payment 
arrangement is made with the carrier's Contracting Officer. Amounts 
withheld from a community rated plan's premium disbursement will be 
deposited into the plan's Contingency Reserve.
* * * * *

PART 1652--CONTRACT CLAUSES

0
8. 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.


0
9. In section 1652.232-70, revise the introductory text and paragraph 
(a) and remove paragraph (f). The revisions read as follows:


1652.232-70  Payments--Community-rated contracts.

    As prescribed in 1632.171, the following clause shall be inserted 
in all community-rated FEHBP contracts:

Payments (JAN 2000)

    (a) OPM will pay to the Carrier, in full settlement of its 
obligations under this contract, subject to adjustment for error or 
fraud, the subscription charges received for the plan by the Employees 
Health Benefits Fund (hereinafter called the Fund) less the amounts set 
aside by OPM for the Contingency Reserve and for the administrative 
expenses of OPM, amounts for obligations due pursuant to paragraph (b) 
of this clause and the performance adjustment described at 1615.404-4, 
plus any payments made by OPM from the Contingency Reserve.
* * * * *


1652.232-71  [Amended]

0
10. In section 1652.232-71, remove paragraph (f).

[FR Doc. 2015-15988 Filed 6-29-15; 8:45 am]
 BILLING CODE 6325-63-P