**Enclosure for Newly-Approved**

**Health Maintenance Organizations**

This enclosure provides newly-approved Health Maintenance Organizations
(HMO) with additional guidance on benefits and with instructions on the
submission of benefit and service area proposals for the upcoming
contract term (January 1 through December 31, 2000). We expect you to
propose benefits in accordance with the call letter. **Review this
entire enclosure; certain information applies to all plans.**

There are four parts to this enclosure:

Part One ‑ Preparing Your Benefit Proposal

Part Two ‑ Changes in Service Area Since You Applied to the FEHB Program

Part Three ‑ Open Season Materials and Reimbursement of Printing Costs

Part Four‑ Benefit Requirements for Newly-Approved HMOs

We will send you additional forms and materials needed to prepare your
brochure and other open season documents later this month. These will
include:

> 1\. A disk and hard copy of mandated (i.e., non‑negotiable) language
> and standard language, that may be modified to reflect the specifics
> of your plan, for the 2000 brochure.
>
> 2\. Printing specifications for the 2000 brochure.

After we complete negotiations and finalize benefits, we will send you
your brochure text file for 2000, along with electronic graphics and the
OPM authorization block for the cover of your 2000 brochure. In August,
we will send you your brochure quantities form, shipping labels, and
related open season instructions.

We will send rate instructions under separate cover. Keep in mind that
FEHB rate submissions are the cornerstone of our financial relationship
with HMOs. The FEHB rates and their supporting documentation are subject
to audit to ensure their accuracy and reasonableness. Misrepresentation
of your FEHB Program rates can result in criminal or civil legal actions
against the carrier or its officials. We, with the support of the
Inspector General\'s Office and the Justice Department, will
aggressively pursue any misrepresentation with respect to rates.

This calendar year is the first full year that we will judge
community-rated plans against our performance evaluation measures. One
factor - Customer Service - includes an element for *Timely Closure on
Rates and Benefits Consistent with Policy Guidelines.* We want you to be
aware that your benefit and rate submissions are subject to a
performance review.

Policies established in prior years remain in effect unless otherwise
indicated. **See Part IV of this enclosure for details.** We will not
consider proposals that are contrary to these policies.

In keeping with the spirit of the call letter, we remain extremely price
sensitive but do not limit HMOs to zero cost benefit tradeoffs. However,
we prefer that benefits remain consistent with your community package.

Our experience is that a plan with less than four years experience in
the FEHB Program is most at-risk for dropping out of the Program. Newer
plans that drop out are more likely to cite insufficient FEHB enrollment
as the reason for no longer wishing to participate. The FEHB Program is
a mature, managed care market. Your ability to differentiate yourself in
terms of pricing, benefits, or provider panel will go a long way in
determining your Program success. Keep your lines of communication open
with your OPM contract specialist. Don't hesitate to call if you have
any questions about the call letter or the material contained in this
enclosure.

**Part One ‑ Preparing Your Benefit Proposal**

We expect every HMO to prepare and submit a complete proposal in
accordance with these instructions by **May 31, 1999.**

Your actual benefit proposal will consist of several parts:

‑ Benefit package documentation;

> ‑ Proposed 2000 brochure language; and,
>
> \- Signed contracting official form

If you foresee unusual or extensive changes to your community package,
please discuss them with your OPM contract representative before you
prepare your submission.

You should adjust your community rate for the package you propose to
reflect the additional cost ‑ or savings ‑ of increased, reduced, or
excluded benefits resulting from OPM benefit requirements that are
specific to the FEHB group, such as improved mental benefits. If there
is no change to the rate because of such requirements, identify each
benefit difference nonetheless, by a zero on Attachment 2 (line 2) of
your rate calculation.

**2000 FEHB Proposal Instructions**

A. Provide the following material by **May 31, 1999:**

> 1\. [Experience‑rated plans]{.underline} ‑ Provide a copy of a fully
> executed employer group contract evidencing the highest level of
> coverage offered for 1999. If you have not made changes to the highest
> level of coverage since filing your application to participate in the
> FEHB Program, then submit a statement to this effect. If you have made
> changes, submit a copy of the new benefit description and answer the
> questions below (you must have filed this benefit package and the
> associated rate with your State if a filing is required by the State):

Attach a chart displaying the following information:

a\. Benefits that are covered in one package but not the other;

> b\. Differences in coinsurance, copays, numbers of days of coverage
> and other levels of coverage between one package and the other;
>
> c\. Whether the costs of the differences in a. and b. are included
> within or are in addition to the community rate charged to other
> groups that purchase this community benefits package; and
>
> d\. The number of subscribers/contract holders who currently purchase
> each package.
>
> 2.[Community‑rated plans]{.underline} ‑ We prefer to purchase the same
> community benefit package that covers the majority of your
> subscribers/contract holders, with adjustments for any benefit
> differences resulting from specific requirements of the FEHB Program.
> If you offer a variety of community packages, propose the core package
> of benefits purchased by a majority (or the largest number) of plan
> subscribers or contract holders (not members or employer groups.) If
> we later determine that the community benefits package we purchased is
> not the community benefits package purchased on behalf of the
> majority, we will adjust your 2000 FEHB rates.
>
> Please append descriptions of community‑based riders (e.g.,
> prescription drugs, durable medical equipment) and other additions to
> the basic package that reflect changes, or mandated additions, to the
> community package. This material must evidence all benefits proposed
> for the FEHB Program for the 2000 contract term except those still
> under review by your State as described in Item B. below.

B.  Describe the procedure in your State for filing and/or obtaining
    approval of community benefit packages and changes. If filing and/or
    approval is required, **provide a copy of the approval issued by the
    State applicable to the community package you submit in response to
    A1 or A2 above.** Please highlight and address any State mandated
    benefits that you have not specifically addressed in previous
    negotiations with us. Please note that we will accept proposed
    benefit changes only if: (1) you submitted the changes to your State
    prior to May 31 and (2) you obtain approval and submit documentation
    of the approval to us by June 30, 1999. If State approval is granted
    by default, i.e., the State does not object to proposed changes
    within a certain period after receipt of the proposal, please so
    note; the review period must have elapsed without objection by June
    30.

> We will contact the State about benefits as necessary; please provide
> the name and phone number of the State official responsible for review
> of your plan\'s benefits. If your plan operates in more than one
> State, provide this information for each State.

Carrier Contracting Officials

The Office of Personnel Management (OPM) will not accept any contractual
action from

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including those involving rates and benefits, that is not signed by one
of the persons named below (including the executor of this form), or on
an amended form accepted by OPM. This list of contracting officials will
remain in effect until amended or revised by the Carrier.

The persons named below have the authority to sign a contract or
otherwise to bind the Carrier

for
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Enrollment
code(s):\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Typed name Title Signature Date

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By:
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(Signature of contracting official) (Date)

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(Typed name and title)

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(Phone number) (FAX Number)

**Part Two ‑ Changes in Service Areas**

**or Plan Designation Since You Applied**

**to the FEHB Program**

We expect that your present service area and the individual doctors or
medical groups with whom you contract to offer services to the FEHB will
be available to our members for the 2000 contract term. You must inform
us of any changes.

> **Service Area Reduction** ‑ Explain the reason for and provide
> supporting documentation (e.g., withdrawal notice from medical group)
> regarding any proposed reduction to your service area. Does this
> reduction apply only to the Federal group?
>
> **Service Area Expansion** ‑ You must propose any service area
> expansion by **May 31**. We will grant an extension no later than June
> 30 for submitting supporting documentation described below, including
> all necessary State authorizations. We cannot grant exceptions to this
> date.
>
> **Redesignation as a Mixed Model Plan** - If you applied as a Group
> Practice Plan (GPP) or Individual Practice Plan (IPP) during the
> application process and you now offer both types of providers,
> redesignation as a Mixed Model Plan (MMP) may be appropriate. You must
> request redesignation and describe the delivery system that you added.

**Please note:** You must indicate to us that the information you
provide concerning your delivery system is based on providers with whom
you have [executed]{.underline} contracts; letters of intent are not
acceptable in lieu of executed contracts. We also require that you state
that all contracts with providers contain a \"hold harmless\" clause.
Use the statement form on page 10.

OPM will evaluate your proposal in accordance with these criteria: legal
authority to operate, adequate access to plan doctors and hospitals, and
plan ability to provide contracted benefits. Accordingly, please provide
the following information:

**A. Provide a description of the proposed change (if different from
what you proposed and what we accepted in your application):**

> 1\. Describe the proposed service area change by zip code, county,
> city or town, whichever is applicable.
>
> 2\. Provide a map of the old and new service areas.
>
> 3\. In addition to the access to providers within the proposed change
> you describe in C. below, be sure to describe access to care in
> contiguous areas within your existing service area. Show the distance
> in miles/minutes from the furthest point of the proposed change to
> current locations of plan primary care doctors and to contracting
> hospitals in your existing service area. (If your plan is a GPP, show
> the distance to a current center (not satellite) in the existing
> service area.)
>
> 4\. Include proposed language for this expansion in your brochure
> language submission in the Service Area description.

**B. Authority to operate in proposed area:**

> 1\. Please provide a copy of the State approval document authorizing
> you to both market and provide services in the changed area, and the
> name and telephone number of the person at the State agency who worked
> on the authorization. If you have not received State approval, note
> the June 30 deadline for our receipt of this documentation.
>
> 2\. If the new service area is not contiguous to your current service
> area, indicate whether or not you operate in the proposed area with
> the same articles of incorporation, license, management, benefits and
> rate as in your current service area. If not, explain in detail.

**C. Access to Providers** (if the service area you are proposing is
different from your application's) ‑ Please submit statements (signed by
an authorized contracting official who is listed on the form concerning
the availability of services in your new area, for each zip code,
county, city or town, whichever is applicable, as described in your
proposal. Please note that a provider directory is not sufficient.

1a. The number of primary care physicians in the proposed area with whom
you have [executed]{.underline} contracts.

1b. The total number of primary care physicians in the proposed area.

2a. The number of specialists in the proposed area with whom you have
[executed]{.underline} contracts.

2b. The total number of specialists in the area.

3a. The number of hospitals in the proposed area with whom you have
[executed]{.underline} contracts. List them.

3b. The total number of hospitals in the area.

4\. The average drive time to a primary care doctor.

5\. The average drive time to a specialist.

6\. The average drive time to a hospital.

7\. The approximate size of the proposed area at its longest (north to
south) and widest (east to west) points.

8\. Description of the general area (e.g., rural vs. urban, population,
geographic boundaries to access, etc.).

9\. Description of other services and their locations (e.g., pharmacies,
DME, etc.).

**Service Area and Additional Geographic Areas -** Federal employees and
annuitants who live within the service area we approve are eligible to
enroll in your plan. If you enroll commercial, non-Federal members from
an [additional]{.underline} geographic area that surrounds, or is
adjacent to, your service area you may propose to enroll Federal
employees and annuitants who live in this area. In addition, if the
State where you have legal authority to operate permits you to enroll
members who [work]{.underline} but do not reside within your commercial
service area, and/or any additional geographic area, you may propose the
same enrollment policy for your FEHB Program enrollees. We will provide
model language for stating your policy in your brochure.

Since benefits may be restricted for nonemergency care received outside
the service area where plan providers are generally located, your
proposal must include language to clearly describe this additional
geographic area as well as your service area.

**D. Redesignation as a Mixed Model Plan** ‑ This section applies
[only]{.underline} if you applied as a GPP or IPP and, since the
application approval, now offer both types of providers. Please indicate
the provider system you are adding.

If you are adding a GPP component to an existing IPP delivery system,
please note that in order to meet FEHB requirements, you must
demonstrate that the group includes \"at least

three physicians who receive all or a substantial part of their
professional income from the

HMO funds and who represent one or more medical specialties appropriate
and necessary for the population proposed to be served by the plan.\" (5
USC 8903(4)(A))

If we approve your proposal, you will need to provide the following
information:

> 1\. Do you require all members of a family to use the same delivery
> system, or may some members of a family use GPP doctors while others
> use IPP doctors?
>
> 2\. If you restrict members to one type of delivery system, what must
> a member do to change from one delivery system to the other during a
> contract term? How soon after it is requested would such a change be
> effective?
>
> 3\. If a member wants to change primary care doctors (centers for
> GPPs), what must the member do? Is there a limit on the number of
> times a member may change primary care doctors (centers)? If yes, will
> you waive the limit for FEHB members? How soon is a requested change
> effective?

**Federal Employees Health Benefits Program**

**Statement About Service Area Expansion**

We have prepared the attached service area expansion proposal in
accordance with the requirements found in Part II, Changes in Service
Area, of Carrier Letter 1999-016. Specifically,

1\. All provider contracts have hold harmless provisions in them.

2\. All provider contracts are fully executed at the time of this
submission. I understand that letters of intent are not considered
contracts for purposes of this certification.

3\. All of the information provided in response to Part II, Paragraph C
(Access to Providers) is accurate as of the date of this statement.

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Signature of Plan Contracting Official

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Title

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Plan Name

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Date

**Part Three ‑ Open Season Material &**

**Reimbursement of Printing Costs**

**A. Your FEHB Brochure** ‑ We expect you to typeset and print your
brochures for the FEHB Program. You must meet the brochure production
schedule and the distribution deadlines. You will bear full
responsibility for the accuracy and timeliness of your FEHB brochure,
and we will hold you accountable for any brochure errors.

The Office of Insurance Programs will concentrate our attention on the
benefit proposals, obtaining agreement with the carriers on those
proposals, and perfecting language so that we clearly communicate the
coverage in a manner that is easily understood by our customers.
Carriers will have sole responsibility for preparing the camera ready
proof and printing the brochure.

We will advise you about any revisions to the mandatory language that
must appear in all FEHB brochures (such as the Disputed Claims page,
Inspector General Advisory on Fraud section, etc.). We will forward
additional information about the brochure production process later.

Once the benefit negotiation process is complete, we will electronically
transmit to you the agreed-upon brochure text language that is to be
printed in your 2000 brochure. You cannot alter this text. You should
begin the process of having the brochure typeset and readied for
printing, but you may **not** proceed with the actual printing until
your 2000 FEHB contract has been signed by OPM and by an authorized
carrier contracting official listed on the form on page 5. Appendix A to
the 2000 FEHB contract between OPM and you will contain the agreed-upon
brochure text language, and we will send you the entire contract for
signature.

After the 2000 FEHB contract is signed by OPM and by an authorized
carrier contracting official, you are free to proceed with the layout
and printing of your brochures. You may print the brochure when you are
confident that the brochure is correct. You are also required to create
a Portable Data File (PDF) of your brochure and submit it to OPM for
posting on our

website. **You are responsible for assuring that the brochure is
accurately typeset and conforms to the agreements reached on benefits
and the instructions for printing the brochure.** After printing the
brochure, please send 25 copies to your OPM contract specialist.

Many FEHB plans are affiliated with other FEHB plans, or are members of
a group of several subsidiary plans in the FEHB Program under a larger
parent organization. We urge you to discuss your brochure production
process with related plans and find ways to coordinate your efforts,
increase efficiency, and eliminate duplication of effort. Newly‑approved
FEHB plans

producing FEHB brochures for the first time can benefit from the
guidance and experience of related affiliate plans who have produced
FEHB brochures previously.

If we discover unauthorized material changes to benefits or language in
your printed brochure, you will reprint and redistribute corrected
brochures at your expense. In addition, you will notify all enrollees of
the error and of the correct available benefit, and be subject to the
penalties described below. It may be possible to correct some less
serious errors through printing and distributing addendum sheets
containing corrected brochure language, rather than reprinting the
brochure. Your OPM Contracting Officer will advise you of the necessary
corrective action. **It is in the best interests of you, your FEHB
members, and the FEHB Program to produce accurate FEHB brochures. Please
take appropriate steps during brochure production to assure the accuracy
of your brochures.**

**B. Rates** ‑ For 2000, the rates will appear on the back cover of your
brochure. We will send you the rates when they are released, in early
September.

**C. Reimbursement of Printing Costs** ‑ We will reimburse
community‑rated plans for costs associated with printing the quantity of
brochures that we authorize the plan to print, and we recognize these as
allowable charges for experience-rated plans. These charges to the FEHB
Program will be accounted for as part of the community-rated plans' rate
reconciliation process. We will not reimburse or allow the costs of
printing open season marketing materials, or of brochures, addenda, or
other informational materials required to correct brochure printing
errors.

**D. Penalties for Brochure Production Errors** ‑ Carriers that
efficiently produce accurate FEHB brochures will benefit from the
additional time and increased freedom our brochure production process
provides them. However, carriers that are unable to produce accurate
brochure proofs will face additional work as printing deadlines
approach. We expect FEHB carriers to devote the resources necessary to
ensure the accuracy and content of their brochures.

We will assess penalties based on the significance of the error. You
will also be required to take appropriate corrective action (at your
expense) to assure that FEHB members receive the correct information.
You may not charge penalties and the cost of corrective action (e.g.,
reprinting and redistributing corrected brochures or addendum sheets) to
the FEHB Program.

Possible penalties (in addition to appropriate corrective action) would
be a disallowance of not less than \$500, but if more, not more than 50
percent of your brochure printing cost.

We will also take the error into account when we conduct community-rated
plans' annual performance evaluation and determine experience-rated
plans' service charge.

**E. Penalties for Late Brochure Distribution** ‑ We\'ve experienced
problems with carriers failing to ship requested brochure quantities to
OPM\'s delivery point in Cedar Rapids, Iowa in a timely manner and, less
frequently, to Federal agencies. Most FEHB brochures are delivered on
time. **However, if you do not ship timely, you may be subject to the
penalties cited in Item D. above.** (The penalty will be increased as
warranted by the delay.) If your plan is community‑rated, we will deduct
the penalty as a part of the rate reconciliation and when we consider
your performance evaluation. If your plan is experience-rated, we will
consider failure to ship timely when we determine your service charge.
To avoid such actions, please make timely shipping to Cedar Rapids and
Federal agencies a priority when you distribute Plan brochures this
Fall.

**Part IV - Benefit Requirements for**

**Newly-Approved HMOs**

Policies established in prior years remain in effect unless otherwise
indicated. Some of them are highlighted here as aids to you in preparing
your proposal. We will not consider proposed benefits that are contrary
to these policies. You should work closely with your contract specialist
to develop a complete benefit package for 2000.

A. **Mental Health and Substance Abuse** ‑ We do not accept annual
dollar limits or lifetime maximums on benefits for the treatment of
mental illness. This does not apply to benefits for inpatient treatment
of alcoholism and drug abuse. In addition, we encourage plans to move
away from contractual day and visit limitations and high deductibles for
treatment of mental conditions. We would like to see you make patient
access to adequate mental health services happen through managed care
networks of behavioral health care providers and innovative benefits
design.

B. **Maternity and Mastectomy Admissions** - All plans must provide for
maternity admission lengths of stay of at least 48 hours after a regular
delivery and 96 hours after a caesarian delivery, at the mother\'s
option. Similarly, all plans must provide a mastectomy patient the
option of having the procedure performed on an inpatient basis and
remaining in the hospital for at least 48 hours after the procedure.

C. **Pre-existing Conditions** - We do not allow pre-existing condition
limitations on any benefit, including cosmetic surgery and dental
benefits.

D. **Point of Service Product** ‑ We will consider proposals to offer a
Point of Service product under the FEHB Program [only if you can
demonstrate experience with a private sector employer who has purchased
this product]{.underline}.

E. **Waiver of Office Visit Copayments for Prenatal and Postnatal Care**
‑ A number of plans waive these copayments to help assure that pregnant
members obtain adequate pre‑ and post‑natal care, and thereby increase
the likelihood that their babies will be born without complications. We
encourage other HMOs to do the same.

F. **Coverage for Fertility Drugs** ‑ We require you to cover treatment
of infertility, but this requirement does not include related
prescription drugs. Brochure language should clearly indicate whether
you cover fertility drugs or not, in both the infertility benefit
description and the prescription drug benefit description.

G. **Immunizations for Children** ‑ All FEHB plans must provide coverage
for childhood immunizations, including the cost of inoculations or sera.

H. **Transplants** ‑All plans must provide coverage for all
non‑experimental bone marrow transplants (including non‑experimental
allogeneic bone marrow transplants, and autologous bone marrow
transplants for acute lymphocytic and non‑lymphocytic leukemia, advanced
Hodgkin\'s lymphoma, advanced non‑Hodgkin\'s lymphoma, advanced
neuroblastoma, and testicular, mediastinal, retroperitoneal, and ovarian
germ cell tumors), cornea, heart, liver, and kidney transplants. In
addition, all FEHB plans must provide coverage for HDC/ABMT for the
treatment of breast cancer, multiple myeloma, and epithelial ovarian
cancer. You may limit coverage for these three conditions to services
received in clinical trials, provided both randomized and nonrandomized
trials are included (the benefit may not be limited to randomized
trials). Otherwise, experimental transplant procedures need not be
covered, but you must provide necessary follow‑up care to the
experimental procedure. All HMOs must cover related medical and hospital
expenses of the donor (when the recipient is covered by the Plan). If
the donor has primary coverage that provides benefits for organ
transplant donors,you will coordinate benefits according to NAIC
guidelines, as with any other benefit.

> You may exclude from your FEHB benefits other transplants not mandated
> by us if they are not in the community benefit package we purchase,
> and as permitted by applicable State law.

I. **Dental and Vision Benefits** ‑ We will consider dental or vision
care benefits only from community‑rated plans and only when they are a
part of the core community benefits package we purchase.

J. **Prescription Drugs** ‑ All plans must provide at least a minimum
level of coverage for all medically necessary drugs that require a
prescription for their use, and insulin.

> Drug benefit deductibles may not exceed \$600 and member coinsurance
> may not exceed 50%. We don't allow lifetime or annual benefit maximums
> on prescription drugs.
>
> You must cover disposable needles and syringes to administer covered
> injectables, IV fluids and medications for home use, growth hormones,
> and allergy serum. In addition, you must provide benefits for
> \"off‑label\" use of covered medications if prescribed for such use by
> a plan doctor in accordance with generally accepted medical practice.
>
> You may use a drug formulary as long as the plan provides benefits for
> non‑formulary drugs when prescribed by a Plan doctor. You cannot use
> the formulary as a means to
>
> exclude benefits for the types of drugs mandated for the FEHB. We
> don't allow blanket exclusions of broad categories of drugs such as
> \"non‑generics,\" \"psychotropic drugs,\" or \"injectables\".

K.  Coverage for Contraceptives -You must provide coverage for all
    FDA-approved prescriptions and devices for contraception.

L.. **DHHS‑Mandated Benefits** ‑ All HMOs **must** offer certain
benefits that are mandated for Federally qualified plans by the
Department of Health and Human Services (DHHS), **without limitation as
to time and cost,** other than as prescribed in the Public Health
Service Act and DHHS regulations. These required benefits include:

 Nonexperimental bone marrow, cornea, kidney, and liver transplants
(see H. above for other FEHB requirements in this area);

 Short‑term rehabilitative therapy (physical, speech, and
occupational), if significant improvement in the patient\'s condition
can be expected within two months;

 Family planning services, including all necessary nonexperimental
infertility services, to include artificial insemination with either the
husband\'s or donor sperm. You don't have to cover the cost of donor
sperm. You may exlude other costs of conception by artificial means or
assisted reproductive technology (such as in vitro fertilization or
embryo transplants) to the extent permitted by applicable State law;

 Home health services;

 Inhospital administration of blood and blood products (including
\"blood processing\");

 Surgical treatment of morbid obesity, when medically necessary;

 Implants ‑ the surgical procedure must be covered, although the cost
of the device may be excluded.

> Federally qualified community‑rated plans offer these benefits at no
> additional cost, i.e., the cost is covered by the community rate.
> Community-rated plans that are not Federally‑qualified should reflect
> the cost of any non‑community benefits on Attachment 2 of their rate
> calculation (if there is no additional cost, the cost entry should be
> zero).