Federal Employees Health Benefits Program Improving Carrier Performance; Conforming Changes

OFFICE OF PERSONNEL MANAGEMENT

48 CFR Parts 1609, 1632 and 1652

RIN 3206-AI16

Federal Employees Health Benefits Program Improving Carrier

Performance; Conforming Changes

AGENCY: Office of Personnel Management.

ACTION: Final rule.

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

regulation that implements OPM's initiative to ensure high quality

customer service to its enrollees in the Federal Employees Health

Benefits (FEHB) Program by establishing a performance evaluation

program that will hold community-rated carriers accountable for their

performance. The regulation would enable OPM to better manage carriers'

performance in key contract areas, including customer service measures,

information and reporting requirements, and significant events that

might affect service to enrollees.

EFFECTIVE DATE: November 16, 1998.

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

SUPPLEMENTARY INFORMATION: On July 16, 1998, OPM issued a proposed

regulation in the Federal Register (63 FR 38360) 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. Such a program is 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. Percentage factors will be assigned to two overall

categories, Customer Service and Critical Contract Compliance

Requirements. The Contracting Officer will assign a percentage factor

for each category based on the carrier's record in meeting its

obligations during the contract year. The percentage factor will be

applied to each community-rated carrier's total annual FEHB premium.

The total amount withheld from a carrier cannot exceed one percent of

premium paid for any contract year. Accurate and timely performance by

carriers will facilitate the Program meeting its customer service

standards.

OPM received comments from sixteen insurance carriers, one

Government agency, and one health plan trade association. The majority

of the commenters were in favor of the proposed regulations, although

each had specific areas of concern, which are addressed below.

Comments focused on uncertainty regarding the amount of money at

potential risk; subjectivity of the FEHB Program Carrier Evaluation

rating system; the percentage of premium used; the absence of weights

for each category; the rating of performance elements when there is a

nonoccurrence of an event; and other sources than total premium for the

withhold. Some commenters had the perception that the withhold is a

penalty rather than an incentive or that OPM might unilaterally

withhold amounts for items not previously agreed to by contract. Others

were more concerned about the absence of notification to carriers of

withdrawal of funds, and the lack of an appeals process.

Numerous carriers felt the rating categories outlined in the

proposed regulation and provided in detail in draft separately to

carriers as the FEHB Program Carrier Evaluation form were subjective

and had no assigned weights to the items of the performance standards.

OPM considered the comments and made the following changes to the FEHB

Program Carrier Evaluation form. Each item of the performance standard

was ranked and assigned a weight, and components within such elements

were reviewed and streamlined to make the form more functional and

objective. The total Customer Service and Critical Contract Compliance

Requirements percentage factors remain unchanged at a maximum of one

percent of total premium.

Items of the standard, Meeting Customer Service Performance

Standards, were ranked as follows: (1) Timely Closure on Rates and

Benefits Consistent with Policy Guidelines; (2) Customer Information;

(3) Meeting Customer Service Performance Standards; (4) Cooperation in

Surveys; (5) Paperless Enrollment/Enrollment Reconciliation, and; (6)

Reconsideration/Disputed Claims. The Critical Contract Compliance

Requirements were ranked: (1) Timeliness of Submissions, (2)

Notification of Changes in Contract Administrators, and; (3)

Notification of Changes in Name or Ownership or Transfer of Assets, and

Notification of Other Significant Events.

One commenter expressed concern about how carriers would be rated

for the nonoccurrence of an event, such as would likely occur in the

Critical Contract Compliance Requirements. Carriers will be evaluated

on each item of the performance category and it is expected that, in

most cases, the performance factor percentage applied to carriers'

total premium will be substantially less than one percent. If an event

does not occur, no deduction will be taken.

OPM has considered the carriers' comments about using contingency

reserves as the source of the withhold,

[[Page 55337]]

but we do not believe such reserve is the appropriate vehicle. The

clause has been amended to allow the carrier 60 days in which to rebate

the FEHB Program before OPM will take action to withhold the amount

owed from the carrier's total premiums. Carriers are also assured that

OPM will not apply the withhold provision in the Payments clause to

matters not previously agreed to as a program or contract requirement

between OPM and the carriers.

Two commenters stated that the performance regulation does not

comport with the Debt Collection Act, 5 U.S.C. 5514. The Debt

Collection Act referenced by this commenter does not apply to the

government contracts affected by this regulation. Rather, that Act

relates to actions of the United States in collecting debts owed by

employees or members of the Armed Services by offset from certain

authorized sources of pay. The Act does not apply with respect to the

collection or offset of monies owed to the United States by an

insurance carrier under contract with the government.

The same commenters stated that the performance regulation does not

comport with ``Contract Debts,'' Part 32.6 of the FAR. It is OPM's view

that the contract debt provisions harmonize with and support the

implementation of the performance regulation. Assuming that the

performance failure were considered a contract debt, Part 32.6 of the

FAR contains provisions that contemplate liquidation of the debt by

credit against existing unpaid bills due the contractor, or offset of

the debt in place of demand for payment so long as an explanation of

the offset is provided. In the event that a performance amount is

withheld from premium payment to a carrier, OPM intends to provide full

information and explanation with respect to the offset. Thus, we do not

believe that the performance regulation fails to comport with Part 32.6

of the FAR.

Numerous commenters stated that the performance regulation

constitutes a penalty and not an incentive. In the private sector

various purchasing groups use comparable performance factors as

incentives. Such programs frequently require a rebate by the carrier

when certain purchaser set requirements are not met. Incentive by

definition is neither positive or negative. Nevertheless, we have

changed the term from performance incentive to performance clause.

In response to concerns about a carrier's right to appeal a

performance determination, OPM seeks to assure carriers that the

appeals process will be consistent with the appeals process for other

issues of contract administration. In the event that a performance

factor is applied against a carrier, OPM will inform the carrier of the

amount due and will provide documentation supporting the reasons for

the performance finding. The carrier may seek reconsideration of the

finding, and may contest the Contracting Officer's final decision by

asserting a claim against the government in the same manner that the

carrier would pursue any other administrative claim under the contract.

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 record keeping requirements, Retirement.

Office of Personnel Management.

Janice R. Lachance,

Director.

Accordingly, OPM is amending title 48 CFR Parts 1609, 1632, and

1652 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 Evaluation

Sec.

1609.7101 Policy.

1609.7101-1 Community-rated carrier incentive performance elements.

1609.7101-2 Community-rated carrier performance factors.

1609.7101 Policy.

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

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

requirements in 1609.7101-1.

1609.7101-1 Community-rated carrier incentive performance elements.

(a) Customer Service. This 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 category

will represent 70 percent of the total calculation and will be based on

the carrier's compliance with the following items:

(1) 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 the established time frames.

The contracting officer will evaluate this item based on the carrier's

demonstrated record in providing its rate reconciliation and benefits

information within the time frames prescribed by and in the format

required by OPM.

(2) Customer Information. Enrollees must have accurate information

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

health plan. In evaluating this item, the contracting officer will

consider the carrier's timeliness and accuracy of information.

(3) Meeting Customer Service Performance Standards. Compliance with

this item 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 item based on the carrier's

submission of the Consumer Assessment of Health Plans Study (CAHPS)

survey results and other measures as required contractually between OPM

and the carrier. (This element will be implemented beginning with

contract year 2000).

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

the consumer assessment survey in selecting a health plan. The

contracting officer will evaluate this item based on the carrier's

record in cooperating with OPM and/or its designated representative in

administering a consumer assessment survey or providing comparable

survey results as specified in the FEHB contract and OPM guidance.

(5) 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 item based on

the carrier's

[[Page 55338]]

ability to accept electronic data transmission from the OPM designated

electronic enrollment system and issue ID cards timely.

(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. The contracting officer will evaluate

this item based on the carrier's demonstrated record of initiating

reconciliation procedures with applicable agency payroll offices on a

quarterly basis in accordance with OPM guidance on 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.

(6) 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. Late carrier responses to

OPM's requests for the carrier's reconsideration file delays OPM's

response to enrollees. The contracting officer will evaluate this item

based on whether the carrier provided OPM a complete reconciliation

file within the time frame specified.

(b) Critical Contract Compliance Requirements. This performance

category will represent 30 percent of the total computation and will be

based on the carrier's compliance with the following items:

(1) Timely Submissions. 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. In

evaluating this item, the contracting officer will consider the

carrier's timely submission of the contract, signed by the contracting

official, to OPM, and on its demonstrated record in providing timely

and accurate reports as required.

(2) 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 must maintain telephone and electronic

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

contracting officer will evaluate this item 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.

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

Assets, and Notification of Other Significant Events. 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. Additionally, with regard to

notification to OPM of other significant events, the carrier must

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

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

services to enrollees. The contracting officer will evaluate this item

based on the carrier's compliance with FEHBAR Subparts 1642.12,

Novation and Change-of-Name Agreements, 1642.70, Management Agreement

(in Lieu of Novation Agreement), and 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.

1609.7101-2 Community-rated carrier performance 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 total premium will

be multiplied by the sum of all the factors and the resulting amount

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 factors for each basic element are set forth as follows:

Community-Rated Carrier Performance Factors

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Performance

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 Performance Factor...................... .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.

Premium payments will be due and payable not later than 30 days after

receipt by the Federal Employees Health Benefits (FEHB) Fund.

(2) The sum of the two performance 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 will 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 FEHB Fund.

* * * * *

[[Page 55339]]

PART 1652--CONTRACT CLAUSES

4. In 1652.232-70 the clause date is revised, and paragraphs (b),

(c), and (d) are redesignated as (c), (d), and (e) respectively,

paragraph (a) is revised, and a new paragraph (b) is added 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 FEHBAR

1609.7101-2, and amounts for obligations due pursuant to paragraph

(b) of this clause, plus any payments made by OPM from the

Contingency Reserve.

(b) OPM will notify the Carrier of amounts due for outstanding

obligations under the contract. Not later than 60 days after the

date of written notice from OPM, the Carrier shall reimburse OPM. If

payment is not received within the prescribed time frame, OPM shall

withhold the amount due from the subscription charges owed the

Carrier under paragraph (a) of this clause.

* * * * *

5. In 1652.232-71 the clause date is revised, paragraphs (b), (c),

and (d) are redesignated as (c), (d), and (e) respectively, paragraph

(a) is revised, and a new paragraph (b) is added 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 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 obligations due

pursuant to paragraph (b) of this clause, plus any payments made by

OPM from the Contingency Reserve.

(b) OPM will notify the Carrier of amounts due for outstanding

obligations under the contract. Not later than 60 days after the

date of written notice from OPM, the Carrier shall reimburse OPM. If

payment is not received within the prescribed time frame, OPM shall

withhold the amount due from the subscription charges owed the

Carrier under paragraph (a) of this clause.

* * * * *

1652.244-70 [Amended]

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

``15.903(d)'' is removed and the FAR reference ``15.404-4(c)(4)(i)'' is

added in its place.

7. The following clauses and Text references in the FEHBP Clause

Matrix at 1652.3 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.

8. In Subpart 1652.3, FEHBP Clause Matrix, clause number 52.222-36

is revised to read Affirmative Action for Workers with Disabilities.

[FR Doc. 98-27343 Filed10-14-98; 8:45 am]

BILLING CODE 6325-01-P