Federal Employees Health Benefits Program Improving Carrier Performance; Conforming Changes

OFFICE OF PERSONNEL MANAGEMENT

48 CFR Parts 1609, 1632, 1652

RIN 3206-AI16

Federal Employees Health Benefits Program Improving Carrier

Performance; Conforming Changes

AGENCY: Office of Personnel Management.

[[Page 38361]]

ACTION: Proposed rulemaking.

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SUMMARY: The Office of Personnel Management (OPM) is proposing to issue

a regulation that would amend the Federal Employees Health Benefits

Acquisition Regulation (FEHBAR) to underscore accountability for

customer service and contractual compliance among the Federal Employees

Health Benefits (FEHB) Program community-rated carriers. The regulation

would enable OPM to better manage carriers' performance over key

contract areas, including customer service measures, information and

reporting requirements, and significant events that might affect

service to enrollees. Accurate and timely performance by carriers will

facilitate the Program meeting its customer service standards.

DATES: Comments must be received on or before August 17, 1998.

ADDRESSES: Written comments may be sent to Abby L. Block, Chief,

Insurance Policy and Information Division, Office of Insurance

Programs, Retirement and Insurance Service, Office of Personnel

Management, P.O. Box 57, Washington, DC 20044; delivered to OPM, Room

3425, 1900 E Street NW., Washington, DC; or FAX to (202) 606-0633.

FOR FURTHER INFORMATION CONTACT: Mary Ann Mercer, (202) 606-0004.

SUPPLEMENTARY INFORMATION: Among OPM's guiding principles in its role

as administrator of the FEHB Program, and consistent with the

Government's customer service initiatives, is the goal of ensuring high

quality customer service for enrollees in the FEHB Program. In order to

accomplish this goal, each carrier participating in the Program must

meet its responsibility to provide high quality customer service.

OPM's customer service focus has led to our establishing certain

Program requirements that will enable both OPM and carriers to provide

enrollees with the quality of service they expect. These requirements

are generally set by regulation, the FEHB contract, or OPM's

administrative policies, and the vast majority of FEHB carriers comply

with them. Nevertheless, sometimes FEHB carriers fall short of one or

more of the requirements, for example, by failing to meet a specified

standard for customer service or submitting a required report late or

with incorrect information. A carrier's failure to meet its obligations

reduces OPM's ability to ensure that the FEHB Program provides good

customer service to FEHB enrollees, and may reduce the Program's

efficiency and effectiveness. Accordingly, OPM seeks to implement a

system of monetary performance incentives that would hold community-

rated carriers accountable for their performance. Such incentives are

already in place for experience-rated carriers.

OPM has identified certain carrier obligations that, when unmet,

can delay or keep customer service goals from being met. Some examples

of poor performance reducing customer service are: Failure to meet

customer service standards; failure to provide accurate and timely

benefits and rate information, brochures, or reports; failure to comply

with the disputed claims process; failure to comply with the

requirement for a paperless enrollment system, failure to accurately

reconcile enrollment data; and failure to cooperate in survey

administration. A carrier's failure to meet its obligations,

particularly with regard to surveys and brochures, impedes or delays

OPM's ability to provide enrollees with information that will enable

them to make an informed decision in selecting a health plan. An

additional critical obligation is the carrier's responsibility to

provide information regarding events that might have a material effect

upon the carrier's ability to meet its obligations under the contract,

such as, changes to its participating providers, a change of corporate

name or ownership or a transfer of assets, and labor disputes. These

events may reduce the carrier's ability to provide required services to

our enrollees.

Under authority of the regulations, OPM would withhold a portion of

the community-rated carrier's premium if the carrier does not meet its

FEHB Program obligations. It should be emphasized that we expect the

vast majority of community-rated carriers will receive minor, if any,

premium adjustment.

Incentive percentage factors will be assigned to two basic

elements, Customer Service and Critical Contract Compliance

Requirements, described below. The Contracting Officer will assign a

percentage factor for each basic element based on the carrier's

demonstrated record in meeting its obligations during the contract

year. The percentage factor will be applied to each community-rated

carrier's total FEHB premiums. The aggregate withhold amount for any

carrier would not exceed one percent of premium paid for any contract

year. OPM would evaluate the carrier's performance after the contract

year ends, apply the percentage factors directly to the total net-to-

carrier premium dollars paid for the preceding contract year, and

withhold the amount from the carrier's periodic premium payments

payable during the first quarter of the following contract year.

Carriers could make alternative payment arrangements acceptable to

their FEHB contracting officer.

So that there will be no question as to what level of effort OPM

expects, we have developed a standard evaluation list with sub-elements

that will be used by the FEHB contracting officers in evaluating the

carriers' performance, and will share it with all community-rated

carriers during the public comment period. An understanding of the

elements and sub-elements should make it easier for carriers to achieve

full performance under the contract and ensure that the FEHB Program

maintains its position as a leader in meeting its customers' needs.

The regulation also amends FEHBAR 1632.170, Recurring payments to

carriers, FEHBAR 1652.232-70, Payments-community-rated contracts, and

FEHBAR 1652.232-71, Payments-experience-rated contracts, to enable OPM

to withhold monies from premium payments for other contractual

obligations, such as the carrier's share of the cost of a customer

satisfaction survey.

Reference changes have been made to the FEHBP Clause Matrix at

1652.3 to conform to reference changes in the Federal Acquisition

Regulation (FAR) [Chapter 1 of Title 48, Code of Federal Regulations]

since the last FEHBP Clause Matrix update, and the reference to FAR

52.215-70 is corrected to read 1652.215-70.

Reduction of Comment Period for Proposed Rulemaking

I have determined that the comment period will be thirty days

because OPM must receive public comments on this new initiative as soon

as possible in order to analyze them, work with interested parties, and

publish a final regulation prior to the beginning of the 1999 Contract

Year.

Regulatory Flexibility Act

I certify that this regulation will not have a significant economic

impact on a substantial number of small entities because in no case

will it affect more than one percent of a carrier's premium.

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

Administrative practice and procedure, Government employees,

Government procurement, Health facilities, Health insurance, Health

professions, Reporting and recordkeeping requirements, Retirement.

[[Page 38362]]

Office of Personnel Management.

Janice R. Lachance,

Director.

Accordingly, OPM is proposing to amend Chapter 16 of Title 48, Code

of Federal Regulations, as follows:

CHAPTER 16--OFFICE OF PERSONNEL MANAGEMENT FEDERAL EMPLOYEES HEALTH

BENEFITS ACQUISITION REGULATION

1. The authority citation for 48 CFR Parts 1609, 1632, and 1652

continue to read as follows:

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

PART 1609--CONTRACTOR QUALIFICATIONS

2. Subpart 1609.71 is added to read as follows:

Subpart 1609.71--Performance Incentives

Sec.

1609.7101 Policy.

1609.7101-1 Community-rated carrier incentive elements.

1609.7101-2 Community-rated carrier performance incentive factors.

Subpart 1609.71--Performance Incentives

1609.7101 Policy.

At the end of each contract period, the contracting officer shall

determine each community-rated carrier's responsiveness to the Program

requirements in 1609.7101-1.

1609.7101-1 Community-rated carrier incentive elements.

(a) Customer Service. This incentive element is intended to assist

OPM in achieving the goal of providing customer service that meets or

exceeds the expectations of Federal enrollees. The Customer Service

element shall represent 70 percent of the total calculation and shall

be based on the carrier's compliance with the following sub-elements:

(1) Meeting Customer Service Performance Standards. Compliance with

this sub-element is essential so that OPM can ensure that the carrier

is providing quality health care and other services to enrollees. The

contracting officer will evaluate this sub-element based on the

carrier's compliance with the FEHB Quality Assurance clause of the

contract and shall consider the carrier's demonstrated efforts in

responding to its members' needs, providing quality services, applying

its quality assurance program, verifying that its physicians are

credentialed, making appointments for patients, assessing the quality

of its health care, accurately processing claims, properly responding

to requests for reconsideration of disputed claims, and making timely

payments to members and providers.

(2) Timely Closure on Rates and Benefits Consistent with Policy

Guidelines. In order for information to be available to our customers

in time for the annual Open Season, carriers must work with OPM to

conclude benefits and rate negotiations by mid-August. The contracting

officer will evaluate this sub-element based on the carrier's

demonstrated record in providing its rate proposal, rate reconciliation

data, and necessary clarifications within the time frames prescribed by

and in the format required by OPM. The contracting officer also will

evaluate this sub-element based on the carrier's record in submitting

proposed benefit changes and clarifications and proposed brochure

language in accordance with the instructions in the Call Letter.

(3) Customer Information. Enrollees must have accurate information

and adequate time to make informed Open Season choices in selecting a

health plan. In evaluating this sub-element, the contracting officer

will consider the carrier's timely submission of the contract, signed

by the contracting official, to OPM; the carrier's compliance with

FEHBP Supplemental Literature Guidelines; the timeliness of the

carrier's compliance with the Information and Marketing Materials

clause of the contract and the carrier's efforts in submitting complete

and accurate brochures to OPM's distribution center for annuitants, OPM

contract specialists, and its current enrollees. The contracting

officer shall also consider the timely submission of an electronic

brochure for OPM's World Wide Web Site and the carrier's efforts in

verifying, within the OPM-specified time frame, the accuracy of the

information in the current FEHB Guide in preparation for the upcoming

contract period as part of this requirement.

(4) Cooperation in Surveys. FEHB enrollees rely on feedback from

the customer satisfaction survey in selecting a health plan. The

contracting officer will evaluate this sub-element based on the

carrier's record in cooperating with OPM and/or its designated

representative in administering a customer satisfaction survey as

specified in the FEHB contract and OPM guidance.

(5) Reconsideration/Disputed Claims. The requirement for carriers

to reconsider disputed health benefits claims is in 5 CFR 890.105. An

incomplete explanation of denied benefits by the carrier places a

burden on enrollees, causing them to seek reconsideration because the

carrier did not fully explain its denial. Incomplete responses to

enrollee requests for reconsideration drive enrollees to take the

additional step of requesting reconsideration by OPM. Late carrier

responses to OPM's requests for the carrier's reconsideration file

delays OPM's response to enrollees. When a dispute is brought to OPM

through the disputed claims process, community-rated carriers must

provide thorough and complete information according to OPM-specified

time frames. The contracting officer will evaluate this sub-element

based on the carrier's reconsideration files, including the responses

to enrollees' requests for reconsideration and the carrier's submission

of the reconsideration files to OPM for review of the carrier's

decisions within the time frame specified by OPM.

(6) Paperless Enrollment/Enrollment Reconciliation--(i) Paperless

Enrollment. The requirement to cooperate in the OPM designated system

for paperless enrollment is under the section entitled ``Enrollment

Instructions'' in the FEHB Supplemental Literature Guidelines in the

FEHB contract. The contracting officer will evaluate this sub-element

based on the carrier's efforts at setting up a method of accepting

electronic data transmission from the OPM designated electronic

enrollment system, processing enrollment changes on a weekly basis, and

issuing ID cards timely. Consideration will also be given if the

carrier does not accept enrollment verification letters provided

through the electronic system as proof of insurance.

(ii) Enrollment Reconciliation. The requirement for carriers to

reconcile their enrollment records on a quarterly basis with those

provided by Federal Government agencies is in the Records and

Information to be Furnished by OPM clause of the contract, as well as 5

CFR 890.110 and 5 CFR 890.308 (final regulations pending). The

carrier's cooperation in the enrollment reconciliation process is

essential so that OPM can determine the total premium payment to the

carrier. The contracting officer will evaluate this sub-element based

on the carrier's demonstrated record of complying with OPM guidance in

reconciling enrollments and resolving enrollment discrepancies, as well

as on the carrier's demonstrated record of following disenrollment

procedures in accordance with 5 CFR 890.110 and 890.308 (final

regulations pending).

(b) Critical Contract Compliance Requirements. This performance

[[Page 38363]]

incentive element shall represent 30 percent of the total computation

and shall be based on the carrier's compliance with the following sub-

elements:

(1) Notification of Changes in Name or Ownership; or Transfer of

Assets. OPM must be able to assess the viability of the carrier and its

ability to provide health care to enrollees so that they do not

experience difficulty obtaining treatment and other services. The

contracting officer will evaluate this sub-element based on the

carrier's compliance with FEHBAR Subparts1642.12, Novation and Change-

of-Name Agreements, and 1642.70, Management Agreement (in Lieu of

Novation Agreement).

(2) Notification of Other Significant Events. The carrier must

notify OPM of significant events such as lawsuits, strikes, and natural

disasters so that OPM can assess the carrier's ability to pay claims

and provide services to enrollees. In evaluating this sub-element, the

contracting officer will consider the carrier's demonstrated record of

compliance with 1652.222-70, including timely notification and

explanation of all significant events that may have a material effect

on the carrier's ability to perform the contract. Such events include,

but are not limited to: Disposal of major assets; loss of 15% or more

of its overall membership; addition or termination of provider

agreements; and changes of participating plans.

(3) Notification of Changes in Contract Administrators. OPM must be

able to reach the person responsible for managing the carrier's FEHB

contract without delay when an enrollee calls OPM in need of urgent

medical treatment, an ID card, or other service. Each carrier's

designated contact will maintain telephone and electronic

communications with OPM so that issues can be resolved quickly. The

contracting officer will evaluate this sub-element based on the

carrier's compliance with the Notice clause and Contract Administration

Data sheet in the contract, and will consider the carrier's record in

notifying OPM promptly of changes in its carrier Representative or

contracting official, mailing or electronic address, telephone or FAX

number.

(4) Submission of Required Reports. The reports specified in the

Statistics and Special Studies and FEHB Quality Assurance clauses of

the contract and are essential for tracking enrollment, finances,

rates, etc. The contracting officer will base the carrier's performance

in this sub-element on its demonstrated record in providing timely and

accurate performance, demographics, fraud and abuse, debarment, and CPA

reports, HEDIS and FACCT measures, and other reports as required by OPM

within the OPM-specified time frames.

1609.7101-2 Community-rated carrier performance incentive factors.

OPM will apply the Customer Service and Critical Contract

Compliance Requirements percentage factors specified by the contracting

officer when a community-rated carrier does not provide the

information, payment, or service, perform the function, or otherwise

meet its obligations as stated in 1609.7101-1. The factors will be

added and applied to the carrier's total premium dollars paid for the

preceding contract period. The amount obtained after the total premium

is multiplied by the factor will be withheld from the carrier's

periodic premium payments payable during the first quarter of the

following contract period, unless an alternative payment arrangement is

made with the carrier's contracting officer.

The incentive factors for each basic element are set forth below:

Community-Rated Carrier Performance Incentive Factors

------------------------------------------------------------------------

Incentive

factor (To

be

multiplied

Element by premium

and withheld

from

carrier's

payments)

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I. Customer Service (70% of Total)........................ .007

II. Critical Contract Compliance Requirements (30% of

Total)................................................... .003

Maximum Aggregate Percent of Premium...................... .01

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PART 1632--CONTRACT FINANCING

3. In section 1632.170, paragraphs (a) and (b)(1) are revised to

read as follows:

1632.170 Recurring premium payments to carriers.

(a)(1) Recurring payments to carriers of community-rated plans. OPM

will pay to carriers of community-rated plans the premium payments

received for the plan less the amounts credited to the contingency and

administrative reserves, amounts assessed under paragraph (a)(2) of

this section, and amounts due for other contractual obligations.

Premiums will be due and payable not later than 30 days after receipt

by the Employees Health Benefits (EHB) Fund.

(2) The sum of the two performance incentive factors applicable

under 1609.7101-2 will be multiplied by the carrier's total net-to-

carrier premium dollars paid for the preceding contract period. The

amount obtained after the total premium is multiplied by the sum of the

factors will be withheld from the carrier's periodic premium payment

payable during the first quarter of the following contract period

unless an alternative payment arrangement is made with the carrier's

contracting officer. OPM will deposit the withheld funds in the

carrier's contingency reserve for the plan. The aggregate amount

withheld annually for performance for any carrier shall not exceed one

percent of premium for any contract period.

(b)(1) Recurring payments to carriers of experience-rated plans.

OPM will make payments on a letter of credit (LOC) basis. Premium

payments received for the plan, less the amounts credited to the

contingency and administrative reserves and amounts for other

obligations due under the contract, will be made available for carrier

drawdown not later than 30 days after receipt by the EHB Fund.

* * * * *

PART 1652--CONTRACT CLAUSES

4. The clause heading and paragraph (a) of the clause in section

1652.232-70 are revised to read as follows:

1652.232-70 Payments--community-rated contracts.

* * * * *

PAYMENTS (JAN 1999)

(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 assessed under 1609.7101-2,

and amounts for other obligations due under the contract, plus any

payments made by OPM from the Contingency Reserve.

* * * * *

5. In section 1652.232-71, the clause heading and paragraph (a) of

the clause are revised to read as follows:

1652.232-71 Payments--experience-rated contracts.

* * * * *

PAYMENTS (JAN 1999)

(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

[[Page 38364]]

Fund (hereinafter called the Fund) less the amounts set aside by OPM

for the Contingency Reserve and for the administrative expenses of

OPM and amounts for other obligations due under the contract, plus

any payments made by OPM from the Contingency Reserve.

* * * * *

1652.244-70 [Amended]

6. In section 1652.244-70, in paragraph (f) of the clause, the FAR

reference ``15.903(d)'' is removed and the FAR reference ``15.404-

4(c)(4)(i)'' is added in its place.

7. Section 1652.370 in the table in paragraph (c) the following

clauses and Text references in the FEHBP Clause Matrix are revised as

follows: FAR 52.215-22 and FAR 15.804-8(a) are revised to read 52.215-

10 and 15.408(b) respectively; 52.215-24 and 15.804-8(c) are revised to

read 52.215-12 and 15.408(d) respectively; 52.215-27 and 15.804-8(e)

are revised to read 52.215-15 and 15.408(g) respectively; 52.215-30 and

15.904(a) are revised to read 52.215-16 and 15.408(h) respectively;

52.215-31 and 15.904(b) are revised to read 52.215-17 and 15.408(i)

respectively; and 52.215-39 and 15.804-8(f) are revised to read 52.215-

18 and 15.408(j) respectively; FAR 52.215-70 is revised to read

1652.215-70.

[FR Doc. 98-18967 Filed 7-15-98; 8:45 am]

BILLING CODE 6325-01-P