[Federal Register Volume 83, Number 82 (Friday, April 27, 2018)]
[Rules and Regulations]
[Pages 18399-18401]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-08933]

Rules and Regulations
                                                Federal Register

This section of the FEDERAL REGISTER contains regulatory documents 
having general applicability and legal effect, most of which are keyed 
to and codified in the Code of Federal Regulations, which is published 
under 50 titles pursuant to 44 U.S.C. 1510.

The Code of Federal Regulations is sold by the Superintendent of Documents. 


Federal Register / Vol. 83, No. 82 / Friday, April 27, 2018 / Rules 
and Regulations

[[Page 18399]]


5 CFR Part 890

RIN 3206-AN54

Federal Employees Health Benefits Program Flexibilities

AGENCY: Office of Personnel Management.

ACTION: Final rule.


SUMMARY: To correct an asymmetry in the insurance market for Federal 
employees and annuitants, this Final regulation provides all Federal 
Employees Health Benefits (FEHB) Program carriers the ability to offer 
the same number and types of plan options. Currently, OPM regulations 
defining minimum standards for health benefits plans allow certain 
plans to have two options and a high deductible health plan, while 
other plans may have three options of any type or two options and a 
high deductible health plan, creating an asymmetry between the 
potential offerings of health benefits plans. We have revised the 
regulations so all health benefits plans are able to offer three 
options or two options and a high deductible health plan. This final 
rule will give FEHB enrollees more choices in selecting a health plan 
that best meets their family's health care needs.

DATES: This rule is effective April 27, 2018.

FOR FURTHER INFORMATION CONTACT: Michael W. Kaszynski, Senior Policy 
Analyst, at [email protected] or (202) 606-0004.

SUPPLEMENTARY INFORMATION: To correct an asymmetry in the insurance 
market for Federal employees and annuitants, this Final regulation 
provides all Federal Employees Health Benefits (FEHB) Program carriers 
the ability to offer the same number and types of plan options. 
Currently, OPM regulations at 5 CFR 890.201 on minimum standards for 
health benefits plans allow plan types under 5 U.S.C. 8903(1) and (2) 
to have two options and a high deductible health plan, but plan types 
under 5 U.S.C. 8903(3) and (4) may have three options or two options 
and a high deductible health plan, creating an asymmetry between the 
potential offerings of types of health benefits plans. We have revised 
the regulations so all health benefits plans under 5 U.S.C. 8903 have 
the language that includes three options or two options and a high 
deductible health plan. This will give enrollees additional options 
when considering which health plan is best suited for them, for 
example, using a variety of variables such as premium, co-pay, and 
deductible costs, provider networks, and referral and pre-authorization 
policies. Since all health plans must compete annually for enrollees, 
the availability of additional options could create an incentive for 
plans to keep premiums as low as possible to attract enrollees. This 
regulation fully aligns with the Administration's goal of promoting 
quality and affordable health plan choices.

Response to Comments

    On December 19, 2017, OPM published this as a proposed rule in the 
Federal Register (82 FR 60126) and the 60 day comment period ended on 
February 20, 2018. OPM received comments from a citizen, several FEHB 
carriers, and a bankers' association.
    All the commenters were supportive of the regulation's goal to 
increase choice, competition and affordability. One FEHB carrier, the 
citizen and the bankers' association expressed agreement with the 
proposed regulatory change, while all commenting carriers supported 
OPM's stated purpose. However, some of the commenting carriers 
expressed the concern that the proposed adjustment to section Sec.  
890.201 will not increase competition in the FEHB Program because the 
regulatory change only affects the offerings of the Service Benefit 
Plan (SBP) carrier [since there is no current carrier contracted to 
offer the Indemnity Benefit Plan (IBP)]. The carriers noted that the 
Service Benefit Plan currently provides health insurance coverage to a 
significant portion of FEHB enrollees, dominating the FEHB insurance 
market. Two of the carriers proposed alternate statutory and regulatory 
changes to increase competition in the Program.
    OPM understands the concerns expressed by these FEHB carriers and 
appreciates the alternate proposals to increase competition, some of 
which would require legislative action to implement. However, OPM 
declines to adjust the proposed regulatory language based on these 
comments. OPM's primary objective for the FEHB Program, as detailed in 
the agency's strategic plan, is to enhance the quality and 
affordability of FEHB insurance offerings. In order to achieve that 
objective, this regulation's goal is to allow increased competition 
among FEHB Program plans. OPM considers a competitive environment as 
one in which all carriers conduct business under the same set of rules, 
meaning no carrier has the advantage of offering products that another 
carrier cannot. While plan benefits vary, OPM wants all carriers to be 
able to offer the same number and types of plan options. Carriers in 
the FEHB Program compete on price, quality, providers, and coverage 
levels. All carriers have the ability to adjust their premiums, focus 
on quality, recruit providers and promote their brand to compete with 
the largest insurer in the FEHB Program. That some carriers attract 
more enrollment than others is not evidence of an anti-competitive 
environment. The new option now available to be offered by the Service 
Benefit Plan may encourage carriers to make changes to their existing 
third products or add a new third product, creating more competition in 
the Program.
    Several carriers also asserted that the proposed rule exceeds OPM's 
authority under the FEHB Act and recommended that OPM withdraw the 
proposed rule. OPM declines to withdraw the proposed rule on this 
    OPM asserts that the statute allows both the SBP and the IBP to 
have more than two options of benefits. The legislative history of the 
FEHB Act (FEHBA) supports this conclusion. In designing the FEHB 
Program, Congress intended for employees to have free choice among 
health benefits plans in four major categories and the legislative 
history notes that the SBP and the IBP would each include ``at least'' 
two levels of benefits; H.R. Rep. No. 957, 86th Cong., 1st Sess. 1959, 
1959 U.S.C.C.A.N. 2913, 2915; 1959 WL 3975. OPM's

[[Page 18400]]

interpretation of the FEHBA allows for carriers to have no fewer than 
two options, and supports the Agency's position on competition, quality 
and affordability in the FEHB Program. The precedent for adding 
additional options to the SBP was set in 2010 at 75 FR 76615. 
Additional innovative options can help the government compete with 
private employers for talented employees.
    FEHBA was enacted in 1959 with the recognition that competition was 
essential to maintain good benefits at low cost. Congress, however, did 
not seek to burden the Government with the administrative complexities 
of doing business with a large number of carriers throughout the nation 
competing for Federal enrollees. Recognizing that unrestricted 
competition could make the program administratively unwieldy and 
ineffective, competition was contemplated as occurring between and 
among the industry groups offering the various plan types. See 
testimony from the hearing before the House Committee on Post Office 
and Civil Service (Testimony) at 89-93; S Rept 498, 86th Cong 1st Sess 
1959 at 8-9. In considering the plan descriptions and types, it was 
clear that Congress valued and anticipated evolution in the health 
benefits services industry and intentionally left certain aspects of 
the law vague in order for the carriers and/or the Civil Service 
Commission (CSC) to apply discretion. Indeed, the Senate Report 
identifies, in its prefatory discussion of governing principles related 
to the Government as an employer, that the Federal Government has an 
opportunity to ``influence soundly the development of health services 
and ways of financing their costs, and that all responsible and 
promising efforts should be encouraged and not arbitrarily limited to 
any single approach. Reasonable competition among different types of 
programs will provide Federal employees with a better program.'' It 
appears clear from the legislative history of the FEHB Program that 
Congress intended the CSC and its successor OPM to reasonably interpret 
the law in a way that supports and encourages competition among the 
different categories of plans. Where the law as it presently reads, 
refers to ``at least'' in other places, it does so in an unrelated 
context, not necessarily related to OPM's discretion in establishing 
competition. Where the law does not speak to the number of levels or 
options, it is implicit that OPM has authority to restrict or encourage 
a carrier's addition of options in those plans. The need for a baseline 
of at least two options was intended to ensure sufficient choice to 
serve enrollees, given that the purpose of the law was to recruit and 
retain employees by establishing a program with a variety of offerings 
consisting of good coverage at low cost. The notion that OPM may in 
some way be constrained by language that does not expressly preclude 
more than two levels, mandating the agency to fail or refuse to 
modernize its thinking or react responsively to change engendered by 
transformations in the marketplace and in the arena of FEHB 
competition, is antithetical to the foundational premise of the 
program. Given the ongoing evolution of competition in the health care 
industry, OPM has now taken the view that the statute need not be read 
to require exactly two levels for SBP and IBP. We believe that so long 
as there are ``at least'' two levels of benefits, permitting additional 
levels of benefits does not contravene the statute; the goal of 
ensuring adequate competition while avoiding undue administrative 
complexity is satisfied.
    Carriers noted in their comments that OPM has asserted in the past 
that the SBP and the IBP are limited to offering only 2 options. While 
this may be relevant historical context, the current regulation allows 
both the SBP and the IBP to have 3 options, though one must be a high 
deductible health plan (HDHP). In other words, under the current 
regulation the SBP and the IBP are able to offer more than two levels 
of benefits. This regulation merely broadens carriers' ability to offer 
competitive options beyond HDHPs. Therefore, no changes have been made 
to the regulation based on these comments.

Expected Impact of Final Changes

    The FEHB Program currently contracts with 83 health plan carriers 
which offer a total of 262 health plan options. These changes are 
projected to create two additional plan options in the FEHB Program. 
OPM expects that this regulatory change allowing an increase in the 
number of plan options will have a positive effect on the market 
dynamics in the FEHB Program by potentially increasing competition 
between health plans. This regulatory change will allow health plans 
under 5 U.S.C. 8903(1) and (2) to offer a greater variety of lower 
cost, higher quality options to better serve FEHB Program enrollee 
interests. OPM will ensure that any new options are distinct and meet 
enrollee interests and that enrollees have access to adequate 
information to understand the available plan options.

Executive Order Requirements

    Executive Orders 13563 and 12866 direct 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). Executive 
Order 13563 emphasizes the importance of quantifying both costs and 
benefits, of reducing costs, of harmonizing rules, and of promoting 
flexibility. This rule has been designated a ``significant regulatory 
action,'' under Executive Order 12866.

Paperwork Reduction Act Requirements

    Notwithstanding any other provision of law, no person is required 
to respond to, nor shall any person be subject to a penalty for failure 
to comply with a collection of information subject to the requirements 
of the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq.) (PRA), 
unless that collection of information displays a currently valid Office 
of Management and Budget (OMB) Control Number.
    This rule involves an OMB approved collection of information 
subject to the PRA--OMB No. 3206-0160, Health Benefits Election Form. 
The public reporting burden for this collection is estimated to average 
30 minutes per response, including time for reviewing instructions, 
searching existing data sources, gathering and maintaining the data 
needed, and completing and reviewing the collection of information. The 
total burden hour estimate for this form is 9,000 hours. The systems of 
record notice for this collection is: OPM/Central 1 Civil Service 
Retirement and Insurance Records, available at https://www.opm.gov/information-management/privacy-policy/sorn/opm-sorn-central-1-civil-service-retirement-and-insurance-records.pdf.
    The FEHB Program currently has a total of 262 health plan options 
for employees to choose from for their health benefits coverage. 
Historically, about 18,000 FEHB participants switch health care plans 
in any given year. This regulation has the potential to add two new 
enrollment codes representing new plan options and is not anticipated 
to significantly change the burden associated with this collection. 
Send comments regarding the burden estimate or any other aspect of this 
collection of information, including suggestions for reducing this 
burden to [email protected].

[[Page 18401]]

Regulatory Flexibility Act

    I certify that these regulations will not have a significant 
economic impact on a substantial number of small entities.

E.O. 13771: Reducing Regulation and Controlling Regulatory Costs

    This Final rule is expected to be an E.O. 13771 deregulatory action 
as it addresses an asymmetry in the Federal Employees Health Benefits 
(FEHB) Program market by allowing all carriers to offer three plan 
options. Additional information can be found in the ``Expected Impact 
of Final Changes'' section of the rule.

List of Subjects in 5 CFR Part 890

    Administration and general provisions; Health benefits plans; 
Enrollment, Temporary extension of coverage and conversion; 
Contributions and withholdings; Transfers from retired FEHB Program; 
Benefits in medically underserved areas; Benefits for former spouses; 
Limit on inpatient hospital charges, physician charges, and FEHB 
benefit payments; Administrative sanctions imposed against health care 
providers; Temporary continuation of coverage; Benefits for United 
States hostages in Iraq and Kuwait and United States hostages captured 
in Lebanon; Department of Defense Federal Employees Health Benefits 
Program demonstration project; Administrative practice and procedure, 
Employee benefit plans, Government employees, Reporting and 
recordkeeping requirements, Retirement.

U.S. Office of Personnel Management.
Jeff T.H. Pon,

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


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.

2. Amend Sec.  890.201 by revising paragraph (b)(3)(i) and removing and 
reserving paragraph (b)(3)(ii).
    The revision reads as follows:

Sec.  890.201  Minimum standards for health benefits plans.

* * * * *
    (b) * * *
    (3)(i) Have either more than three options, or more than two 
options and a high deductible health plan (26 U.S.C. 223(c)(2)(A)) if 
the plan is described under 5 U.S.C. 8903(1), (2), (3) or (4).
* * * * *

[FR Doc. 2018-08933 Filed 4-26-18; 8:45 am]