Federal Employees Health Benefits Program; Interest Assessment on Audit Findings

OFFICE OF PERSONNEL MANAGEMENT

48 CFR Chapter 16

RIN 3206-AG35

Federal Employees Health Benefits Program; Interest Assessment on

Audit Findings

AGENCY: Office of Personnel Management.

ACTION: Interim regulations with request for comments.

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SUMMARY: The Office of Personnel Management (OPM) is issuing interim

regulations to clarify its intentions concerning the assessment of

interest on monies due the Federal Employees Health Benefits (FEHB)

Program when a comprehensive medical plan (CMP) submits defective cost

or pricing data to support its community rate. This clarification is

necessary because a few FEHB Program carriers are misinterpreting OMP's

current regulations.

DATES: Interim regulations are effective January 4, 1995. Comments must

be received on or before February 3, 1995.

ADDRESSES: Written comments may be sent to Lucretia F. Myers, Assistant

Director for Insurance programs, Retirement and Insurance Group, Office

of Personnel Management, P.O. Box 57, Washington, DC 20044; delivered

to OPM, Room 4351, 1900 E Street NW., Washington, DC; or FAXed to (202)

606-0633.

FOR FURTHER INFORMATION CONTACT:

Mary Ann Mercer, (202) 606-0191.

SUPPLEMENTARY INFORMATION: Recent final audit reports on community-

rated plans issued by OPM's Office of Inspector General include

monetary findings based on interest income lost to the FEHB Program

because of FEHB Program carrier overcharges. A few carriers have

questioned the period covered by the interest charges assessed by OPM.

Specifically, they question OPM's policy of charging interest on the

overcharges from the date the Government pays the inflated rate to the

date of the carrier's full repayment to the Government. They believe

that, in the absence of a specific contractual provision, OPM should

charge interest not from the date of the overpayment by the Government,

but from 30 days after its first written demand, as provided in the

Federal Acquisition Regulation (FAR) general interest clause at 52.232-

17. Because the monetary findings are significant in value, OPM is

issuing these regulations to clarify its policy.

In FEHB Program contracts with CMP's using community rates,

premiums and subscription income are determined on the basis of

community rating. A community rate is deemed the equivalent of the

FAR's description of an established catalog or market price. Each CMP

certifies to the accouracy of its pricing; or, if granted an exemption

by OPM, represents that all the statements made on or attached to its

SF 1412, Claim for Exemption from Submission of Certified Cost or

Pricing Data, are correct. If, upon audit, it is determined that the

rates are not correct and the carrier has overcharged the FEHB Program,

OPM assesses an interest charge in accordance with FAR 52.215-23, Price

Reduction for Defective Cost or Pricing Data--Modifications. This

provision allows the contracting officer to charge simple interest on

the amount of the overpayment computed from the date the overpayment is

made to the contractor to the date the Government is repaid by the

contractor.

FAR 52.215-23 applies to contract modifications involving a price

adjustment exceeding $100,000, but does not apply to modifications for

which the price is (1) based on adequate price competition; (2) based

on established catalog or market prices of commercial items sold in

substantial quantities to the general public; or (3) set by law or

regulation. OPM applies this clause as follows: A community rate is

deemed the equivalent of an established catalog or market price;

however, the defective community rates constitute that part of the

quoted rate that does not fall within the catalog or market part of the

price. Had the carrier priced the FEHB contract correctly according to

the catalog or market price, this clause would not become operative.

The defective portion of the rate is not a market or catalog price;

that is, the defective portion is a modification to the catalog or

market price. Since the carrier did not comply with the terms of its

submission, it is responsible for correcting the price so that it is

the catalog or market price and for making the government whole by

paying interest from the date the government was overcharged.

By restating this interest provision in a specific clause in the

FEHB Program acquisition regulations at FEHBAR 1652.215-70, OPM makes

it clear that its policy is to charge interest from the date it pays

the carrier the higher rate to the date the full repayment is made to

OPM.

Waiver of Notice of Proposed Rulemaking

Pursuant to section 553(b)(3)(A) of title 5 of the U.S. Code, I

find that good cause exists for waiving the general notice of proposed

rulemaking. The notice is being waived because the regulations simply

interpret rules and clarify OPM's current policy with respect to the

assessment of interest on amounts that become payable by the contractor

to the FEHB Fund.

E.O. 12866, Regulatory Review

This rule has been reviewed by OMB in accordance with E.O. 12866.

Regulatory Flexibility Act

I certify that this regulation will not have a significant economic

impact on a substantial number of small entities because it merely

reiterates and clarifies OPM's existing policy.

List of Subjects in 48 CFR Part 1652

Administrative practice and procedure, Government employees, Health

facilities, Health insurance, Health professions, Hostages, Reporting

and recordkeeping requirements, Retirement.

U.S. Office of Personnel Management.

Lorraine A. Green,

Deputy Director.

Accordingly, OPM is amending Chapter 16 of Title 48, Code of

Federal Regulations, as follows:

Chapter 16--Office of Personnel Management Federal Employees Health

Benefits Acquisition Regulation

PART 1601--FEDERAL ACQUISITION REGULATIONS SYSTEM

1. The authority citation for 48 CFR part 1652 continues to read as

follows:

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

2. In the clause under section 1652.215-70, the heading is revised

and two sentences are added to the end to read as follows:

Sec. 1652.215-70 Rate Reduction for Defective Pricing or Defective

Cost or Pricing Data.

* * * * *

Rate Reduction for Defective Pricing or Defective Cost or Pricing Data

(Oct 1994)

* * * When the Contracting Office determines that the Carrier

did not charge a market price and the Government is entitled to a

refund, the refund shall bear simple interest from the date the

overcharge was paid by the Government to the Carrier until the date

the overcharge is liquidated. In calculating the amount of interest

due, the quarterly rate determinations by the Secretary of the

Treasury under the authority of 26 U.S.C. 6621(a)(2) applicable to

the periods the overcharge was retained by the Carrier shall be

used.

(End of Clause)

[FR Doc. 94-29810 Filed 12-2-94; 8:45 am]

BILLING CODE 6325-01-M