+-----------------------------------------+----------------------------+
| **FEHB Program Carrier Letter**         | **U.S. Office of Personnel |
|                                         | Management**               |
| # Community-Rated Carriers              |                            |
|                                         | **Office of Insurance      |
|                                         | Programs**                 |
+-----------------------------------------+----------------------------+
| > **Letter No. 1999-038 B** **Date:**   |                            |
| > August 18, 1999                       |                            |
| >                                       |                            |
| > Fee-for-service \[ n/a \]             |                            |
| > Experience-rated HMO \[ n/a \]        |                            |
| > Community-rated \[ 32 \]              |                            |
+-----------------------------------------+----------------------------+

> **SUBJECT: Amendments to the Standard Contracts for Community-Rated
> Carriers**
>
> Please review the enclosed Parts I through IV of the Standard Contract
> for community-rated carriers for Contract Year 2000. New language is
> in **boldface** and language to be deleted is in ~~strikeout~~. We are
> sending you a full contract this year that will incorporate in one
> document all contract changes made through December 31, 1999. You
> should limit your review to the changes only. Please keep in mind that
> the FEHBAR clauses went through the regulatory process before being
> incorporated into the contract. Therefore, recommended changes to
> FEHBAR clauses will be considered for the regulatory process and the
> 2001 contract. So that your comments can be considered, we must
> receive them no later than September 3, 1999.
>
> Section 1.21, Year 2000 Compliance, now includes medical equipment in
> the list of items that must be Year 2000 compliant, as well as more
> specific language with regard to the technology you use to perform
> date/time processing involving dates later than December 31, 1999. The
> clause now refers to hardware, software, and firmware containing
> embedded chip technology. The clause also prescribes OPM=s remedy in
> the event you are unable to provide benefits and services to enrollees
> as a result of non-compliant information technology. A system failure
> caused by the failure of hardware, software, or firmware containing
> embedded chip technology that results in your inability to deliver
> required benefits and services to FEHB enrollees is a significant
> event under Section 1.10, and we will take appropriate action as
> authorized under that clause.
>
> Two new Sections, 1.23, Notice to Enrollees on Termination of FEHBP or
> Provider Contract, and 1.24, Transitional Care, implement the
> continuity of care provisions of the Patients= Bill of Rights. Section
> 1.23 requires you to notify FEHB Program enrollees at least 90 days in
> advance when you terminate a specialty provider contract, unless you
> terminate the provider for cause. The requirement to notify enrollees
> also applies in the event you terminate all or a part of your FEHB
>
> contract, including service area reductions. Your prompt notice will
> ensure that the
>
> notification period and the transitional care period run concurrently.
>
> Section 1.24 sets out your responsibilities when an enrollee qualifies
> for transitional care because you are terminating all or a part of
> your FEHB contract or their specialty provider contract, or you are
> enrolling a new member who had to change carriers because the
> individual=s former carrier left the FEHB Program. The clause covers
> your responsibilities when your enrollees remain in your plan after a
> provider change. The clause also requires you to pay for or provide
> the services required at no additional cost to enrollees during the
> transition period. In addition, it requires you to ensure the
> providers promptly transfer all medical records to the designated new
> provider; provide any necessary assistance to enrollees in obtaining
> or amending medical records; and provide you with the information you
> need for quality assurance purposes.
>
> New Section 2.14, Continuing Requirements After Termination of the
> Carrier, states that when a carrier=s contract is terminated, it
> continues to be responsible for the obligations that it agreed to
> under the contract. Such obligations include offering conversion
> contracts to enrollees during the 31-day extension of coverage so that
> they may convert to a private policy with the carrier, providing
> benefits to the enrollee until the effective date of the new
> enrollment, and processing and paying disputed claims incurred under
> the contract.
>
> We have revised Sections 3.2, Accounting and Price Adjustment, and
> 3.3, Rate Reduction for Defective Pricing or Defective Cost or Pricing
> Data, to include guidance for carriers designated to participate in a
> DoD Demonstration Project authorized by Public Law 105-261. The law
> will allow certain Medicare and other eligible DoD beneficiaries to
> enroll in health benefit plans in certain geographic areas under the
> FEHB Program. On July 6, we published an interim regulation that
> amends the Federal Employees Health Benefits Acquisition Regulation
> (FEHBAR) to implement the law. The regulation includes the contract
> clauses we are proposing to amend, and you will have an opportunity to
> comment on them during the public comment period. We have also updated
> the clauses to incorporate Aplain language@ concepts.
>
> If you are a carrier participating in the DoD/FEHBP Demonstration
> Project, your contract amendment also includes a separate clause
> entitled AParticipation in the DoD Demonstration Project.@ The clause
> will be placed in Part IV of the contract. The clause requires you to
> participate in the DoD Demonstration Project and sets out reporting
> requirements.
>
> We also have updated the introductory language and paragraph (a)5. of
> Appendix D-a, FEHB Supplemental Literature Guidelines, and have
> included website material as supplemental marketing literature.
>
> When we send you the final contract, we will update Federal
> Acquisition Regulation clauses in Part V of the contract that have
> been revised during the past year so that the most recent version will
> appear in the contract. All new and revised clauses in Parts I through
> IV will show the date AJAN 2000.\" Revised FAR clauses in Part V will
> show the date of the FAR revision. You will receive the final contract
> for signature at the same time we execute your year 2000 rates and
> benefits.
>
> Please forward your comments to Mary Ann Mercer at OPM or fax them to
> (202) 606-0633. I look forward to working with you during contract
> year 2000.

Sincerely,

Frank D. Titus

Assistant Director

for Insurance Programs

Enclosure

**FEDERAL EMPLOYEES**

**HEALTH BENEFITS PROGRAM**

***STANDARD CONTRACT***

***FOR***

***COMMUNITY-RATED***

***HEALTH MAINTENANCE ORGANIZATION CARRIERS***

**2000**

(INSERT SIGNATURE PAGE OF CONTRACT)

## TABLE OF CONTENTS

This is a *community-rated contract for the Health Maintenance
Organization Carrier* and consists of the cover page, the table of
contents and the provisions, clauses and appendices as included in PARTS
1 through 6.

*PART I - GENERAL PROVISIONS*

1.1 DEFINITIONS OF FEHB TERMS

1.2 ENTIRE CONTRACT

1.3 ORDER OF PRECEDENCE

1.4 INCORPORATION OF LAWS AND REGULATIONS

1.5 RECORDS AND INFORMATION TO BE FURNISHED BY OPM

1.6 CONFIDENTIALITY OF RECORDS (FEHBAR)

1.7 STATISTICS AND SPECIAL STUDIES

1.8 NOTICE

1.9 FEHB QUALITY ASSURANCE

1.10 NOTICE OF SIGNIFICANT EVENTS (FEHBAR)

1.11 FEHB INSPECTION (FEHBAR)

1.12 CORRECTION OF DEFICIENCIES

1.13 INFORMATION AND MARKETING MATERIALS

1.14 MISLEADING, DECEPTIVE OR UNFAIR ADVERTISING (FEHBAR)

1.15 RENEWAL AND WITHDRAWAL OF APPROVAL (FEHBAR)

1.16 \[RESERVED\]

1.17 NOVATION AGREEMENT (FEHBAR)

1.18 AGREEMENT TO RECOGNIZE CARRIER\'S CHANGE OF NAME (FEHBAR)

1.19 CERTIFICATION UNDER P.L. 104-191 (HEALTH INSURANCE PORTABILITY AND
ACCOUNTABILITY ACT OF 1996)

1.20 PATIENT BILL OF RIGHTS

1.21 YEAR 2000 COMPLIANCE

1.22 HIPAA COMPLIANCE

1.23 NOTICE TO ENROLLEES ON TERMINATION OF FEHBP OR PROVIDER CONTRACT

1.24 TRANSITIONAL CARE

*PART II - BENEFITS*

2.1 ENROLLMENT ELIGIBILITY AND EVIDENCE OF ENROLLMENT

2.2 BENEFITS PROVIDED

2.3 PAYMENT OF BENEFITS AND PROVISION OF SERVICES AND SUPPLIES

2.4 TERMINATION OF COVERAGE AND CONVERSION PRIVILEGES

2.5 SUBROGATION

2.6 COORDINATION OF BENEFITS (FEHBAR)

2.7 DEBARMENT AND OTHER SANCTIONS

2.8 FILING HEALTH BENEFIT CLAIMS/COURT REVIEW OF DISPUTED CLAIMS

2.9 PROTECTION OF MEMBERS AGAINST PROVIDER CLAIMS

2.10 INDEPENDENT LABORATORIES

2.11 CLAIMS PROCESSING

2.12 CALCULATION OF COST SHARING PROVISIONS

2.13 BENEFITS PAYMENTS WHEN MEDICARE IS PRIMARY

2.14 CONTINUING REQUIREMENTS AFTER TERMINATION OF THE CARRIER

*PART III - PAYMENTS, CHARGES*

*AND ACCOUNTING*

3.1 PAYMENTS (FEHBAR)

3.2 ACCOUNTING AND PRICE ADJUSTMENT (FEHBAR)

3.3 RATE REDUCTION FOR DEFECTIVE PRICING OR DEFECTIVE COST OR PRICING
DATA (FEHBAR)

3.4 CONTRACTOR RECORDS RETENTION (FEHBAR)

3.5 APPROVAL FOR THE ASSIGNMENT OF CLAIMS (FEHBAR)

3.6 DISCREPANCIES BETWEEN ENROLLMENT AND PAYMENTS TO CARRIER

3.7 SURVEY CHARGES

*PART IV - SPECIAL PROVISIONS*

4.1 ALTERATIONS IN CONTRACT (FAR)

*PART V - STANDARD CLAUSES*

This contract shall include all of the following standard clauses
required by the Federal Acquisition Regulation (FAR) or Federal
Employees Health Benefits Acquisition Regulation (FEHBAR).

5.1 DEFINITIONS

5.2 \[RESERVED\]

5.3 GRATUITIES

5.4 COVENANT AGAINST CONTINGENT FEES

5.5 ANTI-KICKBACK PROCEDURES

5.6 \[RESERVED\]

5.7 AUDIT AND RECORDS-NEGOTIATION

5.8 \[RESERVED\]

5.9 \[RESERVED\]

5.10 \[RESERVED\]

5.11 \[RESERVED\]

5.12 \[RESERVED\]

5.13 \[RESERVED\]

5.14 UTILIZATION OF SMALL~~, SMALL DISADVANTAGED AND WOMEN-OWNED~~ SMALL
BUSINESS CONCERNS

5.15 \[RESERVED\]

5.16 \[RESERVED\]

5.17 CONVICT LABOR

5.18 CONTRACT WORK HOURS AND SAFETY STANDARDS ACT-OVERTIME
COMPENSATION-GENERAL

5.19 EQUAL OPPORTUNITY

5.20 EQUAL OPPORTUNITY PREAWARD CLEARANCE OF SUBCONTRACTS

5.21 NOTIFICATION OF VISA DENIAL

5.22 AFFIRMATIVE ACTION FOR DISABLED VETERANS AND VETERANS OF THE
VIETNAM ERA VETERANS

5.23 AFFIRMATIVE ACTION FOR WORKERS WITH DISABILITIES

5.24 CLEAN AIR AND WATER

5.25 DRUG FREE WORKPLACE

5.26 FEDERAL, STATE, AND LOCAL TAXES

5.27 \[RESERVED\]

5.28 TAXES-CONTRACTS PERFORMED IN U.S. POSSESSIONS OR PUERTO RICO

5.29 \[RESERVED\]

5.30 COST ACCOUNTING STANDARDS

5.31 DISCLOSURE AND CONSISTENCY OF COST ACCOUNTING PRACTICES

5.32 ADMINISTRATION OF COST ACCOUNTING STANDARDS

5.33 DISCOUNTS FOR PROMPT PAYMENT

5.34 INTEREST (FEHBAR MODIFICATION OF FAR)

5.35 ASSIGNMENT OF CLAIMS

5.36 DISPUTES

5.37 \[RESERVED\]

5.38 CHANGES\--NEGOTIATED BENEFITS

CONTRACTS

5.39 \[RESERVED\]

5.40 GOVERNMENT PROPERTY

(NEGOTIATED BENEFITS

CONTRACTS)

5.41 \[RESERVED\]

5.42 PREFERENCE FOR U.S.-FLAG AIR CARRIERS

5.43 \[RESERVED\]

5.44 AUTHORIZED DEVIATIONS IN CLAUSES

5.45 LIMITATION ON PAYMENTS TO INFLUENCE CERTAIN FEDERAL TRANSACTIONS

5.46 \[RESERVED\]

5.47 PROTECTING THE GOVERNMENT\'S INTEREST WHEN SUBCONTRACTING WITH
CON­TRACTORS DEBARRED, SUSPENDED OR PROPOSED FOR

DEBARMENT

5.48 BANKRUPTCY

5.49 FEHBP TERMINATION FOR

CONVENIENCE OF THE

GOVERNMENT\--NEGOTIATED

BENEFITS CONTRACTS

5.50 FEHBP TERMINATION FOR DEFAULT\--NEGOTIATED BENEFITS CONTRACTS

5.51 \[RESERVED\]

5.52 \[RESERVED\]

5.53 NOTICE TO THE GOVERNMENT OF

> LABOR DISPUTES

5.54 \[RESERVED\]

5.55 EMPLOYMENT REPORTS ON DISABLED VETERANS AND VETERANS OF THE VIETNAM
ERA

5.56 AUTHORIZATION AND CONSENT

5.57 NOTICE AND ASSISTANCE REGARDING PATENT AND COPYRIGHT INFRINGEMENT

5.58 MANDATORY INFORMATION FOR ELECTRONIC FUNDS TRANSFER PAYMENT

~~5.59 CERTIFICATION OF NONSEGREGATED FACILITIES~~

5.59 **PROHIBITION OF SEGREGATED FACILITIES**

*PART VI \-- APPENDICES*

A- BROCHURE TEXT

B- SCHEDULE OF RATES, CHARGES AND LIMITATIONS

C- CONTRACT ADMINISTRATION DATA

D- (a) FEHBP SUPPLEMENTAL LITERATURE GUIDELINES JANUARY 1999; (b) RULES
GOVERNING ADVERTISEMENTS OF ACCIDENT AND SICKNESS INSURANCE WITH
INTERPRETIVE GUIDELINES, MODEL REGULATION SERVICE- JULY 1989, NATIONAL
ASSOCIATION OF INSURANCE COMMISSIONERS

E- ORDER OF BENEFIT DETERMINATION RULES, MODEL REGULATION
SERVICE-JANUARY 1996, NATIONAL ASSOCIATION OF INSURANCE COMMISSIONERS

PART I - GENERAL PROVISIONS

SECTION 1.1

DEFINITIONS OF FEHB TERMS (JAN 1997)

For purpose of this contract, the following definitions apply:

FEHBP: Federal Employees Health Benefits Program.

Enrollee: The Federal employee, annuitant, former spouse,
temporarily-covered former Federal employee or dependent, enrolled under
this contract.

Member: The Enrollee and/or an eligible dependent for benefit purposes,
and sometimes referred to as subscriber.

Act: The Federal Employees Health Benefits Act, as amended; chapter 89
of title 5, United States Code.

Regulations: (1) The Federal Employees Health Benefits Regulations; part
890, title 5, Code of Federal Regulations, and (2) chapters 1 and 16 of
title 48, Code of Federal Regulations.

Benefits: Covered services or payment for covered services set forth in
Appendix A, to which Members are entitled to the extent provided by this
contract.

Carrier: As defined by chapter 89 of title 5, United States Code, and
may be used interchangeably with the term Contractor.

Subcontractor:

> Any supplier, distributor, vendor, or firm that furnishes supplies or
> services to or for a prime contractor, or another subcontractor,
> except for providers of direct medical services or supplies pursuant
> to the Carrier\'s health benefits plan.

SECTION 1.2

ENTIRE CONTRACT (JAN 1996)

\(a\) This document as described in the *Table of Contents* constitutes
the entire contract between the parties. No oral statement of any person
shall modify or otherwise affect the terms, conditions, or
specifications stated in this contract. All modifications to the
contract must be made in writing by the duly authorized Contracting
Officer.

\(b\) All statements concerning coverage or benefits made by OPM, the
Carrier or by any individual covered under this policy shall be deemed
representations and not warranties. No such statement shall convey or
void any coverage, increase or reduce any benefits under this policy or
be used in the prosecution of or defense of a claim under this policy
unless it is contained in writing and a copy of the instrument
containing the statement is or has been furnished to the Member or to
the person making the claim.

SECTION 1.3

ORDER OF PRECEDENCE (JAN 1996)

Any inconsistency in this contract shall be resolved by giving
precedence in the following descending order: The Act, the regulations
in part 890, title 5, Code of Federal Regulations, the regulations in
chapters 1 and 16, title 48, Code of Federal Regulations, and this
contract.

SECTION 1.4

INCORPORATION OF LAWS AND REGULATIONS (JAN 1996)

\(a\) The applicable provisions of (1) chapter 89 of title 5, United
States Code; (2) OPM\'s regulations as contained in part 890, title 5,
Code of Federal Regulations; and (3) chapters 1 and 16 of title 48, Code
of Federal Regulations constitute a part of this contract as if fully
set forth herein, and the other provisions of this contract shall be
construed so as to comply therewith.

\(b\) If the Regulations are changed in a manner which would increase
the Carrier\'s liability under this contract, the change will be made
effective for the contract period subsequent to the period in which the
change is promulgated and, if the change is promulgated in November or
December, the change will not be effective until the second contract
year following the year in which the change is promulgated; unless (i)
The Carrier agrees to an earlier date or (ii) the change is ordered by
the Contracting Officer pursuant to the *Changes\--Negotiated Benefits
Contracts* clause of the contract.

SECTION 1.5

RECORDS AND INFORMATION TO BE FURNISHED BY OPM (JAN 1997)

\(a\) The OPM shall maintain or cause to be maintained records from
which may be determined the names and social security numbers of all
Enrollees. Such information shall be furnished to the Carrier by the
OPM, or other agencies of the Federal Government, at such times and in
such form and detail as will enable the Carrier to maintain a currently
accurate record of all Enrollees.

\(b\) The OPM shall direct the agencies to provide the Carrier, not less
often than quarterly, the names of Enrollees enrolled under the contract
by payroll office and the premium paid for those Enrollees for the
current pay cycle. The Carrier shall at least quarterly reconcile its
enrollment records with those provided by the Government.

\(c\) Neither clerical error (whether by the OPM, by any other
Government agency, or by the Carrier) in keeping any records pertaining
to coverage under this contract, nor delays in making entries thereon,
nor failure to make or account for any deduction of enrollment charges,
shall invalidate coverage otherwise validly in force or continue
coverage otherwise validly terminated. If any relevant facts pertaining
to any individual to whom coverage under this contract relates shall be
found to have been misstated, and if such misstatement affects the
existence or the amount or extent of coverage, the true facts shall be
used in determining whether coverage is in force under the terms of this
contract.

SECTION 1.6

CONFIDENTIALITY OF RECORDS (JAN 1991) (FEHBAR 1652.224-70)

\(a\) The Carrier shall use the personal data on employees and
annuitants that is provided by agencies and OPM, including social
security numbers, for only those routine uses stipulated for the data
and published annually in the *Federal Register* as part of OPM\'s
notice of systems of records.

\(b\) The Carrier shall also hold all medical records, and information
relating thereto, of Federal subscribers confidential except as follows:

\(1\) As may be reasonably necessary for the administration of this
contract;

\(2\) As authorized by the patient or his or her guardian;

\(3\) As disclosure is necessary to permit Government officials having
authority to investigate and prosecute alleged civil or criminal
actions;

\(4\) As necessary to audit the contract;

\(5\) As necessary to carry out the coordination of benefit provisions
of this contract; and

\(6\) For bona fide medical research or educational purposes. Release of
information for medical research or educational purposes shall be
limited to aggregated information of a statistical nature that does not
identify any individual by name, social security number, or any other
identifier unique to an individual.

\(c\) If the Carrier uses medical records for the administration of the
contract, or for bona fide research or educational purposes, it shall so
state in the Plan\'s brochure.

SECTION 1.7

STATISTICS AND SPECIAL STUDIES (JAN 1999)

\(a\) The Carrier shall maintain or cause to be maintained statistical
records of its operations under the contract and shall furnish OPM, in
the form prescribed by the Contracting Officer, the statistical reports
reasonably necessary for the OPM to carry out its functions under
Section 1308 and Chapter 89 of title 5, United States Code.

\(b\) The Carrier shall furnish such other reasonable statistical data
and reports of special studies as the Contracting Officer may from time
to time request for the purpose of carrying out its functions under
Chapter 89 of title 5, United States Code.

\(c\) The Carrier shall furnish the routine reports in the required
number of copies to the addresses specified in Appendix C, *Contract
Administration Data.*

\(d\) The Carrier shall notify the OPM Contract Representative
immediately upon a change in the name or address of the Carrier\'s
contract administrator(s).

SECTION 1.8

NOTICE (JAN 1991)

Where the contract requires that notice be given to the other party,
such notice shall be given in writing to the address specified in
Appendix C, *Contract Administration Data.*

SECTION 1.9

FEHB QUALITY ASSURANCE (JAN 1999)

\(a\) The Carrier shall develop and apply a quality assurance program
specifying procedures for assuring contract quality. At a minimum the
program must include procedures to address:

\(1\) Accuracy of Payments.

\(i\) Processing Accuracy - the number of FEHB claims processed
accurately divided by the total number of FEHB claims processed for the
given time period, expressed as a percentage.

[required standard]{.smallcaps}: An average of 95 percent of FEHB claims
must be processed accurately.

\(ii\) COB Processing - the Carrier must demonstrate that a
statistically valid sampling technique is routinely used to identify
FEHB claims prior to or after processing that require(d) coordination of
benefits (COB) with a third party payer. As an alternative, the Carrier
may provide evidence that it pursues all claims for COB.

\(2\) Timeliness of Payments to Members or Providers

\(i\) Average Processing Time (All FEHB Claims) - the average number of
working days from the date an FEHB claim is received to the date it is
adjudicated (paid, denied or a request for further information is sent
out), for the given time period, expressed as a cumula­tive percentage.

[required standard]{.smallcaps}:

\(A\) An average of 60 percent of FEHB claims received over the given
time period are adjudicated within 20 working days (28 calen­dar days).

\(B\) An average of 80 percent of FEHB claims received over the given
time period are adjudicated within 30 working days (42 calen­dar days).

\(C\) An average of 95 percent of FEHB claims received over the given
time period are adjudicated within 60 working days (84 calen­dar days).

\(3\) Quality of Services and Responsive­ness to Members

\(i\) Member Inquiries - the number of working days taken to respond to
an FEHB member\'s written inquiry, expressed as a cumulative percentage
for the given time period.

[required standard]{.smallcaps}:

\(A\) An average of 60 percent of FEHB member written inquiries are
responded to within 10 working days (14 calendar days).

\(B\) An average of 90 percent of FEHB member written inquiries are
responded to within 30 working days (42 calendar days).

\(ii\) Telephone Access - the Carrier shall report on the following
statistics concerning telephone access to the member services department
(or its equivalent) for the given time period. *Except that,* if the
Carrier does not have a computerized phone system, report results of
periodic surveys on telephone access.

\(A\) Telephone Waiting Time - the number of seconds elapsed before a
member\'s telephone call is connected to a Carrier

representative.

[required standard]{.smallcaps}: On average, no more than 1.5 minutes
elapse before a member\'s telephone call is connected to a Carrier
representative.

\(B\) Telephone Blockage Rate - the percentage of time that callers
receive a busy signal when calling the Carrier.

[required standard]{.smallcaps}: On average, callers receive a busy
signal no more than 10 percent of the time.

\(C\) Telephone Abandonment Rate - the number of calls attempted but not
completed (presumably because callers tired of waiting to be connected
to a Carrier representative) divided by the total number of calls
attempted (both completed and not completed), expressed as a percentage.

[required standard]{.smallcaps}: On average, no more than 8 percent of
calls are abandoned.

\(4\) Responsiveness to FEHB Member Requests for Reconsideration.

[required standard]{.smallcaps}: For 100 percent of written FEHB
disputed claim requests received for the given time period, within 30
days after receipt by the Carrier, the Carrier must affirm the denial in
writing to the FEHB member, pay the claim, provide the service, or
request addi­tional information reasonably necessary to make a
determination.

\(5\) Quality Assurance Plan - the Carrier must demonstrate that a
statistically valid sampling technique is routinely used prior to or
after processing to randomly sample FEHB claims against Carrier quality
assurance and abuse prevention standards.

\(6\) Physician Credentialing - the Carrier must demonstrate that it
requires the follow­ing credential checks of all of its physicians, both
during the initial hiring process and during periodic re-credentialing.
As an alternative, the Carrier may demonstrate that the following
credential checks are performed by a secondary source, such as a
hospital.

\(A\) Verification of medical school gradua­tion records.

\(B\) Routine check with local and/or state medical societies and/or
boards.

\(C\) Routine check of the Department of Health and Human Services
(DHHS) list of debarred providers.

\(D\) Routine check of the National Practitioner Data Bank.

\(7\) Appointments - All Health Maintenance Organization carriers must
meet the following standards for the given time period. *Except that,*
if this information is not routinely collected, report results from
periodic surveys.

[required standard]{.smallcaps}:

\(i\) Urgent appointments are available, on average, within 24 hours of
an authorized request for one.

\(ii\) Routine appointments are available, on average, within 1 month of
an authorized request for one.

\(iii\) Average office waiting times - on average, members who arrive on
time for a scheduled appointment wait no more than 30 minutes before
they are seen by the provider of the medical service.

*(NOTE: For the purpose of this standard (7), a simplified
classification system is used in which all appointments are classified
as either emergency, urgent or routine. Emer­gency appointments must be
seen immediate­ly to prevent health deterioration. Urgent appointments
are those for the sudden, acute onset of symptoms that must be seen
within 1 (one) day to prevent health deterioration. All other
appointments are considered routine.)*

\(8\) Assessing Quality of Health Care. The Carrier shall collect data
on the measures endorsed by the Foundation for Accountability (FACCT),
as requested by the OPM for services rendered through the Carrier\'s
Preferred Provider Organization and/or Point of Service networks.
Further, the Carrier shall provide statistical reports in accordance
with FACCT guidelines when requested by OPM. The Carrier may be asked to
collect data on one or more measures in a specified geographic locality.
In addition, the Carrier shall report on measures developed by the
National Committee for Quality Assurance as directed by OPM.

\(b\) The Carrier shall conduct a program to assess its vulnerability to
fraud and abuse and shall operate a system designed to detect and
eliminate fraud and abuse internally by Carrier employees and
subcontractors, by providers providing goods or services to FEHB
Members, and by individual FEHB Members.

\(c\) The Carrier shall keep complete records of its quality assurance
procedures and fraud program and the results of their implementation and
make them available to the Government as determined by OPM. If the
Carrier cannot separate FEHB claims from all other claims, the Carrier
may report compliance based on all claims and indicate this on the
report.

\(d\) The Contracting Officer may order the correction of a deficiency
in the Carrier\'s quality assurance program or fraud program. The
Carrier shall take the necessary action promptly to implement the
Contracting Officer\'s order.

\(e\) Assessing Member Services. In addition to any other means of
surveying Plan members that the Carrier may develop, the carrier shall
participate in either a National Committee for Quality Assurance (NCQA)
Health Plan Employer Data and Information Set (HEDIS) consumer survey or
an FEHB-specific consumer survey, to provide feedback to enrollees on
enrollee experience with the various FEHB plans. The Carrier shall take
into account the published results of the survey, or other results as
directed by OPM, in identifying areas for improvement as part of the
Carrier=s quality assurance program. Payment of survey charges will be
in accordance with Section 3.7.

SECTION 1.10

NOTICE OF SIGNIFICANT EVENTS (JAN 1997) (FEHBAR 1652.222-70)

\(a\) The Carrier agrees to notify the Contracting Officer of any
Significant Event within ten (10) working days after the Carrier becomes
aware of it. As used in this section, a Significant Event is any
occurrence or anticipated occurrence that might reasonably be expected
to have a material effect upon the Carrier\'s ability to meet its
obligations under this contract, including, but not limited to, any of
the following:

\(1\) Disposal of major assets;

\(2\) Loss of 15% or more of the Carrier\'s overall membership;

\(3\) Termination or modification of any

contract or subcontract if such termination or modification might have a
material effect on the Carrier\'s obligations under this contract;

\(4\) Addition or termination of provider agreements;

\(5\) Any changes in underwriters, reinsurers or participating plans;

\(6\) The imposition of, or notice of the intent to impose, a
receivership, conserva­torship, or special regulatory monitoring;

\(7\) The withdrawal of, or notice of intent to withdraw State
licensing, HHS qualification, or any other status under Federal or State
law;

\(8\) Default on a loan or other financial obligation;

\(9\) Any actual or potential labor dispute that delays or threatens to
delay timely performance or substantially impairs the functioning of the
Carrier\'s facilities or facilities used by the Carrier in the
performance of the contract;

\(10\) Any change in its charter, constitution, or by-laws which affects
any provision of this contract or the Carrier\'s participation in the
Federal Employees Health Benefits Program;

\(11\) Any significant changes in policies and procedures or
interpretations of the contract or brochure which would affect the
benefits available under the contract or the costs charged to the
contract;

\(12\) Any fraud, embezzlement or misappropriation of FEHB funds; or

\(13\) Any written exceptions, reservations or qualifications expressed
by the independent accounting firm (which ascribes to the standards of
the American Institute of Certified Public Accountants) contracted with
by the Carrier to provide an opinion on its annual financial statements.

\(b\) Upon learning of a Significant Event OPM may institute action, in
proportion to the seriousness of the event, to protect the interest of
Members, including, but not limited to\--

\(1\) Directing the Carrier to take corrective action;

\(2\) Suspending new enrollments under this contract;

\(3\) Advising Enrollees of the Significant Event and providing them an
opportunity to transfer to another plan;

\(4\) Withholding payment of subscription income or restricting access
to the Carrier\'s Letter of Credit account;

\(5\) Terminating the enrollment of those Enrollees who, in the judgment
of OPM, would be adversely affected by he Significant Event; or

\(6\) Terminating this contract pursuant to Section 1.15, *Renewal and
Withdrawal of Approval.*

\(c\) Prior to taking action as described in paragraph (b) of this
clause, the OPM will notify the Carrier and offer an opportunity to
respond.

\(d\) The Carrier shall insert this clause in any subcontract or
subcontract modification if both the amount of the subcontract or
modification charged to the FEHBP (or, in the case of a community-rated
carrier, applicable to the FEHBP) exceeds \$100,000 and the amount of
the subcontract or modification to be charged to the FEHBP (or, in the
case of a community-rated carrier, applicable to the FEHBP) exceeds 25
percent of the total cost of the subcontract or modification. If the
Carrier is an HMO, it shall also insert this clause in all provider
agreements over \$25,000. If the Carrier is not an HMO, it shall also
insert this clause in the contract with its underwriter, if any. The
Carrier shall substitute \"Contractor\" or other appropriate reference
for the term \"Carrier.\"

SECTION 1.11

FEHB INSPECTION (JAN 1991) (FEHBAR 1652.246-70)

\(a\) The Government or its agent has the right to inspect and evaluate
the work performed or being performed under the contract, and the
premises where the work is being performed, at all reasonable times and
in a manner that will not unduly delay the work. If the Government or
its agent performs inspection or evaluation on the premises of the
Carrier or a subcontractor, the Carrier shall furnish and require the
subcontractor to furnish all reasonable facilities and assistance for
the safe and convenient performance of these duties.

\(b\) The Carrier shall insert this clause in all subcontracts for
underwriting and administrative services and shall substitute
\"Contractor\" or other appropriate reference for the term \"Carrier.\"

SECTION 1.12

CORRECTION OF DEFICIENCIES (JAN 1997)

\(a\) The Carrier shall maintain sufficient financial resources,
facilities, providers, staff and other necessary resources to meet its
obligations under this contract. If the OPM determines that the Carrier
does not demonstrate the ability to meet its obligations under this
contract, the OPM shall notify the Carrier of the asserted deficiencies.
The Carrier agrees that, within ten (10) working days following
notification, it shall present detailed plans for correcting the
deficiencies. These plans shall be presented in a form prescribed by the
OPM. Pending submission or implementation of plans required under this
Section, the OPM may institute action as it deems necessary to protect
the interests of Members, including, but not limited to:

\(1\) Suspending new enrollments under this contract;

\(2\) Advising Enrollees of the asserted deficiencies and providing them
an opportunity to transfer to another plan;

\(3\) Withholding payment of subscription income or restricting access
to the Carrier\'s Letter of Credit account; or

\(4\) Terminating the enrollment of those Enrollees who, in the judgment
of OPM, would be adversely affected by the deficiency.

\(b\) The Carrier agrees that failure to submit or to diligently
implement plans which are required under this Section shall constitute
sufficient grounds for termination of this contract pursuant to Section
1.15, *Renewal and Withdrawal of Approval.*

\(c\) Prior to taking action as described in paragraph (a) the OPM shall
notify the Carrier and offer an opportunity to respond.

\(d\) The Carrier shall include the substance of this clause in the
contract with its underwriter and substitute an appropriate term for
\"Carrier.\"

SECTION 1.13

INFORMATION AND MARKETING MATERIALS (JAN 1999)

\(a\) OPM and the Carrier shall agree upon language setting forth the
benefits, exclusions and other language of the Plan. OPM in its sole
discretion, may order the Carrier to print and distribute the agreed
upon brochure text in a format and quantity approved by OPM, including
an electronic brochure version for OPM=s World Wide Web Site. This
formatted document is referred to as the FEHB brochure. The Carrier
shall distribute the FEHB brochure to all Federal employees, annuitants,
former spouses and former employees and dependents enrolled in the Plan.
The Carrier shall also distribute the document(s) to Federal agencies to
be made available to such individuals who are eligible to enroll under
this contract. At the direction of OPM, the Carrier shall produce and
distribute an audio cassette version of the approved language. The
Carrier may print additional FEHB brochures for distribution or its own
use, but only in the approved format and at its own expense.

\(b\) Supplemental material. Only marketing materials or other
supplemental literature prepared in accordance with FEHBAR 1625.203-70
(Section 1.14 of this contract) may be distributed or displayed at or
through Federal facilities.

\(c\) The Carrier shall reflect the statement of benefits in the agreed
upon brochure text included at Appendix A of this contract, verbatim, in
the FEHB brochure.

\(d\) OPM may order the Carrier to prepare an addendum or reissue the
FEHB brochure or any piece(s) of supplemental marketing material at no
expense to the Government if it is found to not conform to the agreed
upon brochure text and/or supplemental marketing materials preparations
described in paragraphs (a), (b) and (c) of this section.

SECTION 1.14

MISLEADING, DECEPTIVE OR UNFAIR ADVERTISING (JAN 1991)(FEHBAR
1652.203-70)

\(a\) The Carrier agrees that any advertising material, including that
labeled promotional material, marketing material, or supplemental
literature, shall be truthful and not misleading.

\(b\) Criteria to assess compliance with paragraph (a) of this clause
are available in the *FEHB Supplemental Literature Guidelines* which are
developed by OPM and should be used, along with the additional
guidelines set forth in FEHBAR 1603.702, as the primary guide in
preparing material; further guidance is provided in the NAIC *Rules
Governing Advertising of Accident and Sickness Insurance With
Interpretive Guidelines.* Guidelines are periodically updated and
provided to the Carrier by OPM.

\(c\) Failure to conform to paragraph (a) of

this clause may result in a reduction in the service charge, if
appropriate, and corrective action to protect the interest of Federal
Members. Corrective action will be appropriate to the circumstances and
may include, but is not limited to the following actions by OPM:

\(1\) Directing the Carrier to cease and desist distribution,
publication, or broadcast of the material;

\(2\) Directing the Carrier to issue corrections at the Carrier\'s
expense and in the same manner and media as the original material was
made; and

\(3\) Directing the Carrier to provide, at the Carrier\'s expense, the
correction in writing by certified mail to all enrollees of the Plan(s)
that had been the subject of the original material.

\(d\) Egregious or repeated offenses may result in the following action
by OPM:

\(1\) Suspending new enrollments in the Carrier\'s Plan(s);

\(2\) Providing Enrollees an opportunity to transfer to another plan;
and

\(3\) Terminating the contract in accordance with Section 1.15, *Renewal
and Withdrawal of Approval.*

\(e\) Prior to taking action as described in paragraphs (c) and (d) of
this clause, the OPM will notify the Carrier and offer an opportunity to
respond.

\(f\) The Carrier shall incorporate this clause in subcontracts with its
underwriter, if any, and other subcontractors directly involved in the
preparation or distribution of such advertising material and shall
substitute \"Contractor\" or other appropriate reference for the term
\"Carrier.\"

SECTION 1.15

RENEWAL AND WITHDRAWAL OF APPROVAL (JAN 1991) (FEHBAR 1652.249-70)

\(a\) The contract renews automatically for a term of one (1) year each
January first, unless written notice of non-renewal is given either by
OPM or the Carrier not less than 60 calendar days before the renewal
date, or unless modified by mutual agreement.

\(b\) This contract also may be terminated at other times by order of
OPM pursuant to 5 U.S.C. 8902(e). After OPM notifies the Carrier of its
intent to terminate the contract, OPM may take action as it deems
necessary to protect the interests of Members, including but not limited
to\--

\(1\) Suspending new enrollments under the contract;

\(2\) Advising Enrollees of the asserted deficiencies; and

\(3\) Providing Enrollees an opportunity to transfer to another plan.

\(c\) OPM may, after proper notice, terminate the contract at the end of
the contract term if it finds that the Carrier did not have at least 300
Enrollees enrolled in its Plan at any time during the two preceding
contract terms.

SECTION 1.16

\[RESERVED\]

SECTION 1.17

NOVATION AGREEMENT (JAN 1996)

The agreement at FEHBAR 1642.1204 shall be submitted for approval to OPM
when the Carrier\'s assets or the entire portion of the assets pertinent
to the performance of this contract, as determined by the Government,
are transferred.

SECTION 1.18

AGREEMENT TO RECOGNIZE CARRIER\'S CHANGE OF NAME (JAN 1996)

The agreement at FEHBAR 1642.1205 shall be submitted for approval to OPM
when the Carrier changes its name and the Government\'s and
Contractor\'s rights and obligations remain unaffected.

SECTION 1.19

CERTIFICATION UNDER P.L. 104-191 (HEALTH INSURANCE PORTABILITY AND
ACCOUNTABILITY ACT OF 1996) (JAN 1998)

The Carrier shall issue a certification of coverage for enrollees in
accordance with the regulations issued by the Health Care Financing
Administration.

SECTION 1.20

PATIENT BILL OF RIGHTS (JAN 1999)

\(a\) The Carrier shall implement the recommendations in the Health Care
Consumer Bill of Rights and Responsibilities (APatient Bill of Rights@)
in accordance with OPM guidance.

\(b\) During the Carrier=s provider contract renewal process, the
Carrier shall make any necessary modifications to such provider
contracts to comply with the recommendations of the Patient Bill of
Rights in accordance with OPM guidance. All new provider contracts with
the Carrier shall comply with the recommendations of the Patient Bill of
Rights in accordance with OPM guidance.

SECTION 1.21

YEAR 2000 COMPLIANCE (JAN ~~1999~~ **2000**)

\(a\) The Carrier shall ensure that the hardware, software, firmware,
**and medical equipment** **containing embedded chip technology** it
uses in the performance of its FEHB Program contract will accurately
process date/time data (including, but not limited to, calculating,
comparing and sequencing) involving dates later than December 31, 1999,
including leap year calculations. ~~On May 31, 1999, the Carrier shall
either notify the Contracting Officer that the system will be compliant
or provide the Contracting Officer with a contingency plan that will
detail how the system will remain operational after December 31, 1999.~~

\(b\) When acquiring information technology that will be required to
perform date/time processing involving dates later than December 31,
1999, the Carrier shall ensure that solicitations and contracts~~: (1)~~
require the information technology to be Year 2000 compliant ~~; or (2)
require that non-compliant information technology be upgraded to be Year
2000 compliant prior to the earlier of (i) the earliest date on which
the information technology may be required to perform date/time
processing involving dates later than December 31, 1999, or (ii)
December 31, 1999.~~

~~(c) Not later than May 31, 1999, the Carrier shall submit a copy of
its company purchase policy that the hardware, software, and firmware it
either contracts for or purchases is Year 2000 compliant.~~

~~(d)~~ **(c)** AYear 2000 compliant@ means that the information
technology accurately processes date/time data (including, but not
limited to, calculating, comparing, and sequencing) involving dates
later than December 31, 1999, including leap year calculations, to the
extent that other information technology used in combination with the
information technology being acquired, properly exchanges date/time data
with it.

**(d) A system failure caused by the failure of hardware, software,
firmware, or medical equipment** **containing embedded chip technology
that results in the Carrier=s inability to deliver benefits and services
to FEHB Program enrollees is a significant event under Section 1.10 of
this contract, Notice of Significant Events, and must be reported
promptly to OPM.**

SECTION 1.22

HIPAA COMPLIANCE (JAN 1998)

\(a\) The Carrier shall comply with and shall take all steps reasonably
necessary to ensure that its affiliates, subcontractors, and agents
comply with the guaranteed availability provisions of the Health
Insurance Portability and Accountability Act of 1996 (HIPAA) and
implementing regulations. AGuaranteed availability@ means the Carrier,
affiliates, subcontractors, and agents do not engage in practices
that: 1) decline to offer health insurance coverage (as defined in
section 2791(b)(1) of the Public Health Service Act Athe Act@ ) to, or
deny enrollment of an eligible individual (as defined in section 2741(b)
of the Act); or, 2) impose any preexisting condition exclusion (as
defined in section 2701(b)(1)(A) of the Act), with respect to such
coverage.

\(b\) A State or Federal enforcement action as the result of
noncompliance with the requirements of HIPAA is a significant event
under Section 1.10 of this contract, Notice of Significant Events. If
the Carrier, or any affiliate, subcontractor, or agent, is notified of
any enforcement action by any Federal or State authority with regard to
HIPAA compliance, the Carrier must notify OPM within ten working days of
learning of the action.

**SECTION 1.23**

**NOTICE TO ENROLLEES ON TERMINATION OF FEHBP OR PROVIDER CONTRACT (JAN
2000)**

**(a) Enrollees who are undergoing treatment for a chronic or disabling
condition or who are in the second or third trimester of pregnancy at
the time a carrier (1) terminates all or part of its FEHBP contract, or
(2) terminates the enrollee=s specialty provider contract for reasons
other than cause, may be able to continue to see their specialty
provider for up to 90 days or through their postpartum care.**

**(b) The Carrier shall notify its enrollees in writing of its intent to
terminate all or part of its FEHBP contract, including service area
reductions, or the enrollees= specialty provider contract, for reasons
other than cause in order to allow sufficient time for the enrollees to
arrange for continued care after the 90-day period. The Carrier shall
send the notice in time to ensure it is received by the enrollees no
less than 90 days prior to the date it terminates the contract, unless
the Carrier demonstrates it was prevented from doing so for reasons
beyond its control. The Carrier=s prompt notice will ensure that the
notification period and transitional care period run concurrently.**

**SECTION 1.24**

**TRANSITIONAL CARE (JAN 2000)**

**(a) ATransitional care@ is specialized care provided for up to 90 days
or through the postpartum period to an enrollee undergoing treatment for
a chronic or disabling condition or who is in the second or third
trimester of pregnancy when his or her carrier (1) terminates all or
part of its FEHBP contract, or (2) terminates the enrollee=s specialty
provider contract for reasons other than cause. The 90-day period begins
the earlier of the date the enrollee receives the notice required under
Section 1.23, Notice to Enrollees on Termination of FEHBP or Provider
Contract, or the date the Carrier=s or the provider=s contract ends.**

**(b) Beginning January 1, 2000, the Carrier shall ensure the
following:**

**(1) *If it terminates its FEHBP contract or a specialty provider*
*contract* other than for cause, it allows enrollees who are undergoing
treatment for a chronic or disabling condition or who are in the second
or third trimester of pregnancy to continue treatment under the
specialty provider for up to 90 days, or through their postpartum
period;**

**(2) *If it enrolls a new member who involuntarily changed carriers
because the enrollee=s former carrier was no longer available in the
FEHB Program*, it provides for the transitional care under the same
terms and conditions the enrollee had under the prior carrier; and,**

**(3) *For the Carrier=s non-transitional care enrollees who remain in
the plan after a provider change*, the enrollee is subject to the same
benefit provisions as all other members. There will be no vesting of
benefits;**

**(c) In addition, the Carrier shall (1) pay for or provide the
transitional care required under this clause at no additional cost to
enrollees;**

**(2) require the specialty provider to promptly transfer all medical
records to the designated new provider during or upon completion of the
transition period, as authorized by the patient;**

**(3) provide assistance to enrollees who want to obtain records from
the specialty provider and/or request that the provider amend or allow
them to append a record they believe is inaccurate, irrelevant, or
incomplete; and,**

**(4) require the specialty provider to give all necessary information
to the Carrier for quality assurance purposes.**

PART II - BENEFITS

SECTION 2.1

ENROLLMENT ELIGIBILITY AND EVIDENCE OF ENROLLMENT (JAN 1999)

\(a\) Enrollment.

\(1\) Each eligible individual who wishes to be enrolled in the plan
offered by this Carrier shall, as a prerequisite to such enrollment,
complete a Health Benefits Election Form or use an electronic or
telephonic method approved by OPM, within the time and under the
conditions specified in 5 CFR Part 890. The Government personnel office
having cognizance over the Enrollee shall promptly furnish notification
of such election to the Carrier.

\(2\) A person\'s eligibility for coverage, effective date of
enrollment, the level of benefits (option), the effective date of
termination or cancellation of a person\'s coverage, the date any
extension of a person\'s coverage ceases, and any continuance of
benefits beyond a period of enrollment and the date any such continuance
ceases, shall all be determined in accordance with regulations or
directions of OPM given pursuant to chapter 89, title 5, United States
Code.

\(b\) The Carrier shall, subject to the approval of the Contracting
Officer, define an area from which it will accept enrollments. The
Carrier may limit enrollment to individuals residing or employed inside
the approved area.

\(c\) The Carrier shall issue evidence of the Enrollee\'s coverage and
furnish to the Enrollee copies of any claim forms as necessary.

SECTION 2.2

BENEFITS PROVIDED (JAN 1999)

\(a\) The Carrier shall provide the benefits as described in the agreed
upon brochure text found in Appendix A.

\(1\) Benefits offered under this contract may be modified by the
Carrier to permit methods of treatment not expressly provided for, but
not prohibited by law, rule or Federal policy, if otherwise
contractually appropriate, and if such treatment is medically necessary
and is as cost effective as providing benefits to which the Member may
otherwise be entitled.

\(2\) The Carrier may pay for or provide a health service or supply in
an individual case which does not come within the specific benefit
provisions of the contract, if the Carrier determines the benefit is
within the intent of the contract, and the Carrier determines that the
provision of such benefit is in the best interests of the Federal
Employees Health Benefits Program.

\(3\) In individual cases, the Carrier, after consultation with and
concurrence by the Member and provider(s), may offer a benefit
alternative not ordinarily covered under this contract which will result
in equally effective medical treatment at no greater cost. The decision
to offer an alternative benefit is solely the Carrier\'s and is not
subject to OPM review under the disputed claims process.

\(b\) In each case when the Carrier provides a benefit in accordance
with the authority of (a)(1), (2) or (3) the Carrier shall document in
writing prior to the provision of such benefit the reasons and
justification for its determination. Such payment or provision of
services or supplies shall not be considered to be a precedent in the
disposition of similar cases.

\(c\) Except as provided for in (a) above, the Carrier shall provide
benefits for services or supplies in accordance with Appendix A.

\(d\) The Carrier, subject to (e) below, shall determine whether in its
judgment a service or supply is medically necessary or payable under
this contract.

\(e\) The Carrier agrees to pay for or provide a health service or
supply in an individual case if OPM finds that the Member is entitled
thereto under the terms of the contract.

SECTION 2.3

PAYMENT OF BENEFITS AND PROVISION OF SERVICES AND SUPPLIES (JAN 1996)

\(a\) By enrolling or accepting services under this contract, Members
are obligated to all terms, conditions, and provisions of this contract.
The Carrier may request Members to complete reasonable forms or provide
information which the Carrier may reasonably request; *provided*,
however, that the Carrier shall not require Members to complete any form
as a precondition of receiving benefits unless the form has first been
approved for use by OPM. Notwithstanding Section 2.11 *Claims
Processing,* forms requiring specific approval do not include claim
forms and other forms necessary to receive payment of individual claims.

\(b\) When members are required to file claims for covered benefits,
benefits shall be paid (with appropriate documentation of payment)
within a reasonable time after receipt of reasonable proof covering the
occurrence, character, and extent of the event for which the claim is
made. The claimant shall furnish satisfactory evidence that all services
or supplies for which expenses are claimed are covered services or
supplies within the meaning of the contract.

\(c\) The procedures and time period for receiving benefits and filing
claims shall be as specified in the agreed upon brochure text *(Appendix
A)*. However, failure to file a claim within the time required shall not
in itself invalidate or reduce any claim where timely filing was
prevented by administrative operations of Government or legal
incapacitation, provided the claim was submitted as soon as reasonably
possible.

\(d\) The Carrier may request a Member to submit to one or more medical
examinations to determine whether benefits applied for are for services
and supplies necessary for the diagnosis or treatment of an illness or
injury or covered condition. The examinations shall be made at the
expense of the Carrier.

\(e\) As a condition precedent to the provision of benefits hereunder,
the Carrier, to the extent reasonable and necessary and consistent with
Federal law, shall be entitled to obtain from any person, organization
or Government agency, including the Office of Personnel Management, all
information and records relating to visits or examination of, or
treatment rendered or supplies furnished to, a Member as the Carrier
requires in the administration of such benefits. The Carrier may obtain
from any insurance company or other organization or person any
information, with respect to any Member, which it has determined is
reasonably necessary to:

\(1\) identify enrollment in a plan,

\(2\) verify eligibility for payment of a claim for health benefits, and

\(3\) carry out the provisions of the contract, such as subrogation,
recovery of payments made in error, workers compensation, and
coordination of benefits.

\(f\) When claim filing is required, benefits are payable to the
Enrollee in the Plan or his or her assignees. However, under the
following circumstances different payment arrangements are allowed:

\(1\) Reimbursement Payments for the Enrollee. If benefits become
payable to the estate of an Enrollee or an Enrollee is a minor, or an
Enrollee is physically or mentally not competent to give a valid
release, the Carrier may either pay such benefits directly to a hospital
or other provider of services or pay such benefits to any relative by
blood or connection by marriage of the Enrollee determined by the
Carrier to be equitably entitled thereto.

\(2\) Reimbursement Payments for a minor child. If a child is covered as
a family member under the Enrollee\'s self and family enrollment and is
in the custody of a person other than the Enrollee, and if that other
person certifies to the Carrier that he or she has custody of and
financial responsibility for the dependent child, then the Carrier may
issue an identification card for the dependent child(ren) to that person
and, when claim filing is required, may reimburse that person for any
covered medical service or supply.

\(3\) Reimbursement Payments to family members covered under the
Enrollee\'s self and family enrollment. If a covered child is legally
responsible, or if a covered spouse is legally separated, and if the
covered person does not reside with the Enrollee and certifies such
conditions to the Carrier, then the Carrier may issue an identification
card to the person and when claim filing is required, the Carrier may
reimburse that person for any covered medical service or supply.

\(4\) Any payments made in good faith in accordance with paragraphs
(f)(1) through (f)(3) shall fully discharge the Carrier to the extent of
such payment.

\(g\) Overpayments. If the Carrier or OPM determines that a Member\'s
claim has been paid in error for any reason, the Carrier shall make a
diligent effort to recover an overpayment to the member from the member
or, if to the provider, from the provider. Diligent effort to recover
overpayments means that upon discovering that an overpayment exists, the
Carrier shall\--

\(1\) Send a written notice of overpayment to the member or provider
that provides: (A) an explanation of when and how the overpayment
occurred, (B) when applicable, cite the appropriate contractual benefit
provision, (C) the exact identifying information (i.e., dollar amount
overpaid, date paid, check number, date of service and provider name),
(D) a request for payment of the debt in full, and (E) an explanation of
what may occur should the debt not be paid, including possible offset to
future benefits. The notice may also offer an installment option. In
addition, the Carrier shall provide the debtor with an opportunity to
dispute the existence and amount of the debt before proceeding with
collection activities;

\(2\) After confirming that the debt does exist and in the appropriate
amount, send follow-up notices to the member or the provider at 30, 60
and 90 day intervals, if the debt remains unpaid and undisputed;

\(3\) The Carrier may off-set future benefits payable to the member or
to a provider on behalf of the member to satisfy a debt due under the
FEHBP if the debt remains unpaid and undisputed for 120 days after the
first notice.

\(4\) After applying the first three steps, refer cases to a collection
attorney or a collection agency if the debt is not recovered;

\(5\) Make diligent effort to recover overpayments until the debt is
paid in full or determined to be uncollectible by the Carrier because it
is no longer cost effective to pursue further collection efforts or it
would be against equity and good conscience to continue collection
efforts.

\(6\) Suspend recovery efforts for a debt which is based upon a claim
that has been appealed as a disputed claim under Section 2.8, until the
appeal has been resolved;

\(7\) Maintain records that document individual unrecovered overpayment
collection activities for audit or future reference.

SECTION 2.4

TERMINATION OF COVERAGE AND CONVERSION PRIVILEGES (JAN 1996)

\(a\) A Member\'s coverage is terminated as specified in regulations
issued by the OPM. Benefits after termination of coverage are as
specified in the regulations.

\(b\) A Member is entitled to a temporary continuation of coverage or an
extension of coverage under the conditions and to the extent specified
in the regulations.

\(c\) A Member whose coverage hereunder has terminated is entitled, upon
application within the times and under the conditions specified in
regulations, to a non-group contract regularly offered for the purpose
of conversion from the contract or similar contracts. The conversion
contract shall be in compliance with 5 U.S.C., chapter 89, and
regulations issued thereunder.

\(d\) Costs associated with writing or providing benefits under
conversion contracts shall not be an allowable cost of this contract.

\(e\) The Carrier shall maintain on file with OPM copies of the
conversion policies offered to persons whose coverage under this
contract terminates and advise OPM promptly of any changes in the
policies. The Contracting Officer may waive this requirement where
because of the large number of different conversion policies offered by
the Carrier it would be impractical to maintain a complete up-to-date
file of all policies. In this case the Carrier shall submit a
representative sample of the general types of policies offered and
provide copies of specific policies on demand.

SECTION 2.5

SUBROGATION (JAN 1998)

\(a\) The Carrier shall subrogate FEHB claims in the same manner in
which it subrogates claims for non-FEHB members, according to the
following rules:

\(1\) The Carrier shall subrogate FEHB claims if it is doing business in
a State in which subrogation is permitted, and in which the Carrier
subrogates for non-FEHB members;

\(2\) The Carrier shall subrogate FEHB claims if it is doing business in
a State in which subrogation is prohibited, but in which the Carrier
subrogates for at least one plan covered under the Employee Retirement
Income Security Act of 1974 (ERISA);

\(3\) The Carrier shall not subrogate if it is doing business in a State
that prohibits subrogation, and in which the Carrier does not subrogate
for any plan covered under ERISA;

\(4\) For Carriers doing business in more than one State, the Carrier
shall apply the rules in (1) through (3) of this subsection according to
the rule applicable to the State in which the subrogation would take
place.

\(b\) The Carrier\'s subrogation procedures and policies shall be shown
in the agreed upon brochure text or made available to the enrollees upon
request.

SECTION 2.6

COORDINATION OF BENEFITS (JAN 1991) (FEHBAR 1652.204-71)

\(a\) The Carrier shall coordinate the payment of benefits under this
contract with the payment of benefits under Medicare, other group health
benefits coverages, and the payment of medical and hospital costs under
no-fault or other automobile insurance that pays benefits without regard
to fault.

\(b\) The Carrier shall not pay benefits under this contract until it
has determined whether it is the primary carrier or unless permitted to
do so by the Contracting Officer.

\(c\) In coordinating benefits between plans, the Carrier shall follow
the order of precedence established by the NAIC Model Guidelines for
Coordination of Benefits (COB) as specified by OPM.

\(d\) Where (1) the Carrier makes payments under this contract which are
subject to COB provisions; (2) the payments are erroneous, not in
accordance with the terms of the contract, or in excess of the
limitations applicable under this contract; and (3) the Carrier is
unable to recover such COB overpayments from the Member or the providers
of services or supplies, the Contracting Officer may allow such amounts
to be charged to the contract; the Carrier must be prepared to
demonstrate that it has made a diligent effort to recover such COB
overpayments.

\(e\) COB savings shall be reported by experience-rated carriers each
year along with the Carrier\'s annual accounting statement in a form
specified by OPM.

\(f\) Changes in the order of precedence established by the NAIC Model
Guidelines implemented after January 1 of any given year shall be
required no earlier than the beginning of the following contract term.

> *\[NOTE: Subsection 2.6(b) will not be applied to this community-rated
> carrier. When there is double coverage for covered benefits, other
> than emergency services from non-Plan providers, the Health
> Maintenance Organization Carrier will continue to provide benefits in
> full, but will seek payment for the services and supplies provided, to
> the extent that the services and supplies are covered by the other
> coverage, no-fault automobile insurance or other primary plan.
> Likewise, Subsection 2.6(d) is not applicable to community-rated
> carriers.\]*

SECTION 2.7

DEBARMENT AND OTHER SANCTIONS (JAN 1999)

\(a\) Notwithstanding 5 U.S.C. 8902(j) or any other provision of the law
and regulations, if, under 5 U.S.C. 8902a, 5 CFR 970, or Public Law
103-123 (or other applicable appropriations law), a provider is barred
from participating in the Program under 5 U.S.C. or the provider\'s
services under 5 U.S.C. are excluded, the Carrier agrees that no payment
shall be made by the Carrier pursuant to any contract under 5 U.S.C.
(either to such provider or by reimbursement) for any service or supply
furnished by such provider during the period of the debarment, except as
provided in 5 CFR 970.200(b).

\(b\) The OPM shall notify the Carrier when a provider is barred from
the FEHBP.

SECTION 2.8

FILING HEALTH BENEFIT CLAIMS/COURT REVIEW OF DISPUTED CLAIMS (MAR 1995)
(FEHBAR 1652.204-72)

\(a\) General. (1) The Carrier resolves claims filed under the Plan. All
health benefit claims must be submitted initially to the Carrier. If the
Carrier denies a claim, (or a portion of a claim), the covered
individual may ask the Carrier to reconsider its denial. If the Carrier
affirms its denial or fails to respond as required by paragraph (b) of
this clause, the covered individual may ask OPM to review the claim. A
covered individual must exhaust both the Carrier and OPM review
processes specified in this clause before seeking judicial review of the
denied claim.

\(2\) This clause applies to covered individuals and to other
individuals or entities who are acting on the behalf of a covered
individual and who have the covered individual\'s specific written
consent to pursue payment of the disputed claim.

\(b\) Time limits for reconsidering a claim. (1) The covered individual
has 6 months from the date of the notice to the covered individual that
a claim (or a portion of a claim) was denied by the Carrier in which to
submit a written request for reconsideration to the Carrier. The time
limit for requesting reconsideration may be extended when the covered
individual shows that he or she was prevented by circumstances beyond
his or her control from making the request within the time limit.

\(2\) The Carrier has 30 days after the date of receipt of a
timely-filed request for reconsideration to:

\(i\) Affirm the denial in writing to the covered individual;

\(ii\) Pay the bill or provide the service; or

\(iii\) Request from the covered individual or provider additional
information needed to make a decision on the claim. The Carrier must
simultaneously notify the covered individual of the information
requested if it requests additional information from a provider. The
Carrier has 30 days after the date the information is received to affirm
the denial in writing to the covered individual or pay the bill or
provide the service. The Carrier must make its decision based on the
evidence it has if the covered individual or provider does not respond
within 60 days after the date of the Carrier\'s notice requesting
additional information. The Carrier must then send written notice to the
covered individual of its decision on the claim. The covered individual
may request OPM review as provided in paragraph (b)(3) of this clause if
the Carrier fails to act within the time limit set forth in this
paragraph.

\(3\) The covered individual may write to OPM and request that OPM
review the Carrier\'s decision if the Carrier either affirms its denial
of a claim or fails to respond to a covered individual\'s written
request for reconsideration within the time limit set forth in paragraph
(b)(2) of this clause. The covered individual must submit the request
for OPM review within the time limit specified in paragraph (e)(1) of
this clause.

\(4\) The Carrier may extend the time limit for a covered individual\'s
submission of additional information to the Carrier when the covered
individual shows he or she was not notified of the time limit or was
prevented by circumstances beyond his or her control from submitting the
additional information.

\(c\) Information required to process requests for reconsideration. (1)
The covered individual must put the request to the Carrier to reconsider
a claim in writing and give the reasons, in terms of applicable brochure
provisions, that the denied claim should have been approved.

\(2\) If the Carrier needs additional information from the covered
individual to make a decision, it must:

\(i\) Specifically identify the information needed;

\(ii\) State the reason the information is required to make a decision
on the claim;

\(iii\) Specify the time limit (60 days after the date of the Carrier\'s
request) for submitting the information; and

\(iv\) State the consequences of failure to respond within the time
limit specified, as set out in paragraph (b)(2) of this section.

\(d\) Carrier determinations. The Carrier must provide written notice to
the covered individual of its determination. If the Carrier affirms the
initial denial, the notice must inform the covered individual of:

\(1\) The specific and detailed reasons for the denial;

\(2\) The covered individual\'s right to request a review by OPM; and

\(3\) The requirement that requests for OPM review must be received
within 90 days after the date of the Carrier\'s denial notice and
include a copy of the denial notice as well as documents to support the
covered individual\'s position.

\(e\) OPM review. (1) If the covered individual seeks further review of
the denied claim, the covered individual must make a request to OPM to
review the Carrier\'s decision. Such a request to OPM must be made:

\(i\) Within 90 days after the date of the Carrier\'s notice to the
covered individual that the denial was affirmed; or

\(ii\) If the Carrier fails to respond to the covered individual as
provided in paragraph (b)(2) of this clause, within 120 days after the
date of the covered individual\'s timely request for reconsideration by
the Carrier; or

\(iii\) Within 120 days after the date the Carrier requests additional
information from the covered individual, or the date the covered
individual is notified that the Carrier is requesting additional
information from a provider. OPM may extend the time limit for a covered
individual\'s request for OPM review when the covered individual shows
he or she was not notified of the time limit or was prevented by
circumstances beyond his or her control from submitting the request for
OPM review within the time limit.

\(2\) In reviewing a claim denied by the Carrier, OPM may

\(i\) Request that the covered individual submit additional information;

\(ii\) Obtain an advisory opinion from an independent physician;

\(iii\) Obtain any other information as may in its judgment be required
to make a determination; or

\(iv\) Make its decision based solely on the information the covered
individual provided with his or her request for review.

\(3\) When OPM requests information from the Carrier, the Carrier must
release the information within 30 days after the date of OPM\'s written
request unless a different time limit is specified by OPM in its
request.

\(4\) Within 90 days after receipt of the request for review, OPM will
either:

\(i\) Give a written notice of its decision to the covered individual
and the Carrier; or

\(ii\) Notify the individual of the status of the review. If OPM does
not receive requested evidence within 15 days after expiration of the
applicable time limit in paragraph (e)(3) of this clause, OPM may make
its decision based solely on information available to it at that time
and give a written notice of its decision to the covered individual and
to the Carrier.

\(f\) OPM, upon its own motion, may reopen its review if it receives
evidence that was unavailable at the time of its original decision.

\(g\) Court review. (1) A suit to compel enrollment under \' 890.102 of
Title 5, Code of Federal Regulations, must be brought against the
employing office that made the enrollment decision.

\(2\) A suit to review the legality of OPM\'s regulations under this
part must be brought against the Office of Personnel Management.

\(3\) Federal Employees Health Benefits (FEHB) carriers resolve FEHB
claims under authority of Federal statute (chapter 89, title 5, United
States Code). A covered individual may seek judicial review of OPM\'s
final action on the denial of a health benefits claim. A legal action to
review final action by OPM involving such denial of health benefits must
be brought against OPM and not against the Carrier or the Carrier\'s
subcontractors. The recovery in such a suit shall be limited to a court
order directing OPM to require the Carrier to pay the amount of benefits
in dispute.

\(4\) An action under paragraph (3) of this clause to recover on a claim
for health benefits:

\(i\) May not be brought prior to exhaustion of the administrative
remedies provided in paragraphs (a) through (f) of this clause;

\(ii\) May not be brought later than December 31 of the 3rd year after
the year in which the care or service was provided; and

\(iii\) Will be limited to the record that was before OPM when it
rendered its decision affirming the Carrier\'s denial of benefits.

SECTION 2.9

PROTECTION OF MEMBERS AGAINST PROVIDER CLAIMS (JAN 1996)

\(a\) The Carrier shall provide the Contracting Officer with evidence
that its contracts with providers (hospitals and physicians) contain a
provision that, in the event of Carrier insolvency, or inability to pay
expenses for any reason, the providers shall not look to Members for
payment. The Carrier agrees that over 90 percent of the total benefit
cost under this contract will be provided under such contracts with
providers; or

\(b\) In lieu of subsection (a) above, the Contracting Officer may
accept such other combinations of coverage which provide protection of
Members against provider claims as defined in the NAIC (National
Association of Insurance Commissioners) Model HMO Act, as amended; or

\(c\) The Carrier shall provide the Contracting Officer with
documentation that it has such other appropriate combinations of
coverage which would provide protection of Members against provider
claims in the event of Carrier insolvency, or inability to pay expenses
for any reason.

\(d\) The Carrier shall notify the Contracting Officer as soon as it is
aware that it will not be able to satisfy the requirements stated in
subsections (a), (b), or (c) above.

SECTION 2.10

INDEPENDENT LABORATORIES (JAN 1991)

In order to assure a minimum standard of quality for laboratory
services, the Carrier agrees that it will not use independent
laboratories which do not comply with Medicare or similar standards.

SECTION 2.11

CLAIMS PROCESSING (JAN 1998)

A standardized claims filing process shall be used by all FEHB carriers.
The Carrier shall apply procedures for using the standard claims
process. At a minimum the Carrier\'s program must achieve the following
objectives:

\(1\) By the year 2000, the majority of provider claims should be
submitted electronically;

\(2\) All physicians shall be notified that future claims must be
submitted electronically or on the Health Care Financing Administration
1500 form;

\(3\) The Carrier shall not use any unique physician claim form(s) for
such FEHB member claims;

\(4\) The Carrier should reject all such claims submitted on forms other
than the HCFA 1500 form and shall explain the reason on the Explanation
of Benefits form; and

\(5\) The Carrier shall advise OPM of its progress in implementing this
policy as directed by the Contracting Officer.

SECTION 2.12 CALCULATION OF COST SHARING PROVISIONS (JAN 1996)

When the Member is required to pay a specified percentage of the cost of
covered services, the Member\'s obligation for covered services shall be
based on the amount the provider has agreed to accept as full payment,
including future discounts that are known and that can be accurately
calculated at the time the claim is processed. This includes for
example, prompt pay discounts as well as other discounts granted for
various business reasons.

SECTION 2.13

BENEFITS PAYMENTS WHEN MEDICARE IS PRIMARY (JAN 1998)

When a Member who is covered by Medicare Part A, Part B, or Parts A and
B on a fee-for-service basis (a) receives services that generally are
eligible for coverage by Medicare (regardless of whether or not benefits
are paid by Medicare) and are covered by the Carrier, and (b) Medicare
is the primary payer and the Carrier is the secondary payer for the
Member under the order of benefit determination rules stated in Appendix
A of this contract, then the Carrier shall limit its payment to an
amount that supplements the benefits payable by Medicare (regardless of
whether or not Medicare benefits are paid). When emergency services have
been provided by a Medicare nonparticipating institutional provider and
the provider is not reimbursed by Medicare, the Carrier shall pay its
primary benefits. Payments that supplement Medicare include amounts
necessary to reimburse the Member for Medicare deductibles, coinsurance,
and the balance between the Medicare approved amount and the Medicare
limiting charge made by non-participating providers. This provision does
not apply to debarred providers (see Section 2.7).

**SECTION 2.14**

**CONTINUING REQUIREMENTS AFTER TERMINATION OF THE CARRIER (JAN 2000)**

**(a) The Carrier shall fulfill all of the requirements agreed to under
the contract that continue after termination.**

**(b) Contract requirements that extend beyond the date of the Carrier=s
termination include, but are not limited to, offering conversion
contracts to enrollees during the 31-day extension of coverage for
conversion, providing benefits to the enrollee until the effective date
of the new enrollment, and processing and paying claims incurred prior
to the termination date**

PART III - PAYMENTS, CHARGES AND ACCOUNTING

SECTION 3.1

PAYMENTS (JAN 1999) (FEHBAR 1652.232-70)

\(a\) 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), 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).

\(c\) The specific subscription rates, charges, allowances and
limitations applicable to the contract are set forth in Appendix B.

\(d\) Recurring payments from premiums shall be due and payable not
later than thirty days after receipt by the Fund. The Contracting
Officer may authorize special nonrecurring payments from the Contingency
Reserve in accordance with OPM\'s regulations.

\(e\) In the event this contract between the Carrier and OPM is
terminated or not renewed in accordance with General Provision 1.15,
Renewal and Withdrawal of Approval, the Contingency Reserve of the
Carrier held by OPM shall be available to the Carrier to pay the
necessary and proper charges against this contract to the extent that
the reserves held by the Carrier are insufficient for that purpose.

> *\[NOTE: The adjustment for error or fraud referenced in paragraph (a)
> and the necessary and proper charges against this contract if the
> contract is terminated or not renewed, referenced in subsection (d),
> shall be limited to the subscription rate and any contingency reserve
> payment otherwise provided for in this contract and shall not include
> claim charges or other expenses attributable to individual Members.
> Further, FEHBAR 1652.216-70, Accounting and Price Adjustment, applies
> if any adjustment to the contract price is determined.\]*

SECTION 3.2

ACCOUNTING AND PRICE ADJUSTMENT (JAN ~~1998~~ **2000**) (FEHBAR
1652.216-70)

\(a\) *Annual Accounting Statement*. The Carrier, not later than 90 days
after the end of each contract period, shall furnish to OPM for that
contract period an accounting of its operations under the contract.
~~The accounting shall be in the form prescribed by OPM.~~ **The Carrier
shall follow the OPM prescribed accounting format.**

\(b\) *Adjustment.* (1) This contract is community rated as defined in
FEHBAR 1602.170-2.

\(2\) The subscription rates agreed to in this contract shall be
equivalent to the subscription rates given to the Carrier\'s similarly
sized subscriber groups (SSSGs) as defined in FEHBAR \'1602.170-13.

\(3\) If, at the time of the rate reconciliation, **the Carrier or OPM
find** the subscription rates ~~are found~~ to be lower than the
equivalent rates for the lower of the two SSSGs, the Carrier may include
an adjustment to the Federal group\'s rates for the next contract
period.

\(4\) If, at the time of the rate reconciliation, **the Carrier or OPM
find** the subscription rates to be higher than the equivalent rates for
the lower of the two SSSGs, the Carrier shall reimburse the Fund, for
example, by reducing the FEHB rates for the next contract term to
reflect the difference between the estimated rates and the rates which
are derived using the methodology of the lower rated SSSG.

\(5\) **The Government shall not allow or consider and the Carrier shall
not make any** ~~No~~ upward adjustment in the rate established for this
contract ~~will be allowed or considered by the Government or will be
made by the Carrier~~ in this or in any other contract period on the
basis of actual costs incurred, actual benefits provided, or actual size
or composition of the FEHBP group during this contract period.

\(6\) In the event this contract is not renewed, neither the Government
nor the Carrier shall be entitled to any adjustment or claim for the
difference between the subscription rates prior to rate reconciliation
and the actual subscription rates.

**(c) *[Exception for the 3-Year DoD Demonstration Project (10 U.S.C.
1108).]{.underline}* Similarly sized subscriber group (SSSG) rating
methodologies shall not be used to determine the reasonableness of the
Carrier=s demonstration project premium rates. The Carrier=s rates shall
not be adjusted for equivalency with SSSG rating methodologies. The
Carrier shall benchmark premiums against adjusted community rates if
available, Medigap offerings, or other similar products.**

(End of Clause)

SECTION 3.3

RATE REDUCTION FOR DEFECTIVE PRICING OR DEFECTIVE COST OR PRICING DATA
(JAN ~~1998~~ **2000**) (FEHBAR 1652.215-70)

\(a\) If **the Carrier increased** any rate established in connection
with this contract ~~was increased~~ because **it** (1) ~~the Carrier~~
submitted, or kept in its files in support of the FEHBP rate, cost or
pricing data that were not complete, accurate, or current as certified
in the Certificate of Accurate Cost or Pricing Data (FEHBAR
1615.804-70); (2) ~~the Carrier~~ submitted, or kept in its files in
support of the FEHBP rate, cost or pricing data that were not accurate
as represented in the rate proposal documents; (3) ~~the Carrier~~
developed FEHBP rates with a rating methodology and structure
inconsistent with that used to develop rates for similarly sized
subscriber groups (see FEHBAR \'1602.170-13) as certified in the
Certificate of Accurate Cost or Pricing Data for Community Rated
Carriers; or (4) ~~the Carrier~~ submitted or, or kept in its files in
support of the FEHBP rate, data or information of any description that
were not complete, accurate, and current\--then, the ~~rate shall be
reduced~~ **Carrier shall reduce the rate** in the amount by which the
price was increased because of the defective data or information.

(b)(1) If the Contracting Officer determines under paragraph (a) of this
clause that a price or cost reduction should be made, the Carrier agrees
not to raise the following matters as a defense: (i) The Carrier was a
sole source supplier or otherwise was in a superior bargaining position
and thus the price of the contract would not have been modified even if
accurate, complete, and current cost or pricing data had been submitted
or maintained and identified.

\(ii\) The Contracting Officer should have known that the cost or
pricing data in issue were defective even though the Carrier took no
affirmative action to bring the character of the data to the attention
of the Contracting Officer.

\(iii\) The contract was based on an agreement about the total cost of
the contract and there was no agreement about the cost of each item
procured under the contract.

\(iv\) The Carrier did not submit or keep in its files a Certificate of
Current Cost or Pricing Data.

(2)(i) Except as prohibited by subdivision (b)(2)(ii) of this clause,
**the Contracting Officer shall determine and allow an** **appropriate
offset** ~~an offset in an amount determined appropriate by the
Contracting Officer~~ based upon the facts ~~shall be allowed~~ against
the amount of a contract price reduction if\--

\(A\) The Carrier certifies to the Contracting Officer that, to the best
of the Carrier\'s knowledge and belief, the Carrier is entitled to the
offset in the amount requested; and

\(B\) The Carrier proves that the cost or pricing data were available
before the date of agreement on the price of the contract (or price of
the modification) and that the data were not submitted before such date.
(ii) ~~An offset shall not be allowed~~ **The Contracting Officer shall
not allow** **an offset** if\-- (A) The ~~understated data was known by
the Carrier~~ **Carrier knew the data** ~~to be~~ **was** understated
when the Certificate of Current Cost or Pricing Data was signed; or

\(B\) The Government proves ~~that~~ the facts demonstrate that the
contract price would not have increased in the amount to be offset even
if the available data had been submitted before the date of agreement on
price.

\(c\) When the Contracting Officer determines that the rates shall be
reduced and the Government is thereby entitled to a refund, the Carrier
shall be liable to and shall pay the FEHB Fund at the time the
overpayment is repaid\--

\(1\) Simple interest on the amount of the overpayment from the date the
~~overpayment was paid from the FEHB Fund to the Carrier~~ **Government
paid the Carrier the overpayment from the FEHB Fund** until the date the
**Carrier liquidates the** overcharge ~~is liquidated~~. In calculating
the amount of interest due, **the Carrier shall use** 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 **Carrier retained
the** overcharge ~~was retained by the Carrier shall be used~~; and,

\(2\) A penalty equal to the amount of overpayment, if the Carrier
knowingly submitted cost or pricing data which was incomplete,
inaccurate, or noncurrent.

**(d) *Exception for the DoD Demonstration Project.* Similarly sized
subscriber group (SSSG) rating methodologies shall not be used to
determine the reasonableness of the Carrier=s demonstration project
premium rates. The Carrier=s rates shall not be adjusted for equivalency
with SSSG rating methodologies.** **The Carrier shall benchmark premiums
against adjusted community rates if available, Medigap offerings, or
other similar products.**

(End of Clause)

SECTION 3.4

CONTRACTOR RECORDS RETENTION (JAN 1999) (FEHBAR 1652.204-70)

Notwithstanding the provisions of Section 5.7 (FAR 52.215-2(f)) *Audit
and Records - Negotiation* the Carrier shall retain and make available
all records applicable to a contract term that support the annual
statement of operations and, for contracts that exceed the threshold at
FAR 15.403-4(a)(1), the rate submission for that contract term for a
period of 5 years after the end of the contract term to which the
records relate, except that individual enrollee and/or patient claim
records shall be maintained for 3 years after the end of the contract
term to which the claim records relate.

SECTION 3.5

APPROVAL FOR ASSIGNMENT OF CLAIMS (JAN 1991) (FEHBAR 1652.232-73)

\(a\) Notwithstanding the provisions of Section 5.35 \[FAR 52.232-23\],
*Assignment of Claims*, the Carrier shall not make any assignment under
the Assignment of Claims Act without the prior written approval of the
Contracting Officer.

\(b\) Unless a different period is specified in the Contracting
Officer\'s written approval, an assignment shall be in force only for a
period of one year from the date of the Contracting Officer\'s approval.
However, assignments may be renewed upon their expiration.

SECTION 3.6

DISCREPANCIES BETWEEN ENROLLMENT AND PAYMENTS TO CARRIER (JAN 1999)

\(a\) The OPM and the Carrier recognize that the portion of subscription
payments under Section 3.1(a) forwarded by OPM to the Carrier for
Enrollees may not be consistent with the Carrier\'s reconciliation of
enrollment under Section 1.5. Therefore, the OPM and the Carrier agree:

\(1\) That any individual discrepancies discovered in the course of
reconciliation, in which the agency certifying officer and the Carrier
agree as to the enrollment status of the individual, shall be corrected
by the applicable agency to reflect the valid enrollment(s). If the
reconciliation indicates that the subscription payments were not made or
were made in error, appropriate adjustments shall be made by the agency
to the Fund pursuant to law. Any adjustment in the subscription charges
received by the Fund from the agency as a result of a reconciliation
shall be forwarded by OPM under Section 3.1(a); and

\(2\) That the rates in Appendix B include an adjustment to the
subscription charges equal to one percent in full resolution of all
discrepancies not corrected under Section 3.6(b)(1).

\(b\) In consideration of the adjustments in Section 3.6(a)(1) and (2),
the Carrier accepts the adjustment to the subscription charges in full
resolution of all obligations of the Government in connection with the
subscription payments as described in this section 3.6, and waives any
rights it may have to claims for subscription payments under Section
3.1(a).

\(c\) The OPM and the Carrier shall review the reconciliation process
and this provision for Contract Year 2001.

SECTION 3.7

SURVEY CHARGES (JAN 1999)

\(a\) If the Carrier contracts with a National Committee for Quality
Assurance (NCQA) certified vendor to conduct the annual consumer
assessment survey, paragraph (b) does not apply.

\(b\) If the Carrier participates in an FEHB-specific annual consumer
assessment survey, it shall pay OPM=s contractor a pro rata share of the
total cost of conducting the survey. The Carrier shall pay a separate
fee for each plan option and /or rating area. The Carrier agrees to pay
the contractor=s invoice within 30 days of the billing date. If the
Carrier does not remit payment to the survey contractor within 60 days
of the billing date, OPM shall withhold the amount due from the
Carrier=s subscription charges according to FEHBAR 1652.232-70,
PaymentsBcommunity-rated contracts, and forward payment to the survey
contractor.

PART IV \-- SPECIAL PROVISIONS

SECTION 4.1

ALTERATIONS IN CONTRACT (JAN 1998)

(FAR 52.252.4)

Portions of this contract are altered as follows:

\(a\) Sections 5.30, 5.31, 5.32. Cost Accounting Standards, part 30 of
the FAR, has not yet been implemented for the FEHBP community rated
contracts. Sections 5.30, 5.31 and 5.32 are not applicable to this
contract.

\(b\) Section 3.2. As required by Public Law 101-508, \' 8909 of title
5, U.S.C., and Section 3.2(b) of this contract are amended by the
following:

\(1\) No tax, fee, or other monetary payment may be imposed, directly or
indirectly, on a Carrier or an underwriting or plan administration
subcontractor of an approved health benefits plan by any State, the
District of Columbia, or the Commonwealth of Puerto Rico, or by any
political subdivision or other governmental authority thereof, with
respect to any payment made from the Fund.

\(2\) Paragraph (1) shall not be construed to exempt any Carrier or
subcontractor of an approved health benefits plan from the imposition,
payment, or collection of a tax, fee, or other monetary payment on the
net income or profit accruing to or realized by such Carrier or
underwriting or plan administration subcontractor from business
conducted under this Chapter, if that tax, fee, or payment is applicable
to a broad range of business activity.

**(c)** **PARTICIPATION IN /FEHBP**

**DEMONSTRATION PROJECT**

**(JAN 2000)**

**(a) The Carrier shall participate in the DoD/FEHBP Demonstration
Project authorized by 10 U.S.C. 1108 (ADoD Demonstration Project@) under
the terms and conditions specified by OPM.**

**(b) In setting the premium rate, the Carrier shall comply with the
requirements in Section 3.2, Accounting and Price Adjustment (FEHBAR
1652.216-70), and 3.3, Rate Reduction for Defective Pricing or Defective
Cost or Pricing Data (FEHBAR 1652.215-70).**

**(c) In the event that the Carrier experiences costs far in excess of
the premiums for the DoD enrollment group, OPM will work with the
Carrier to make an equitable adjustment.**

**(d) The Carrier shall compile, maintain, and, when requested by OPM,
report data on the plan=s experience to produce reports containing the
following information and analysis:**

**(1) The number of eligible beneficiaries who elect to participate in
the demonstration project.**

\(2\) The number of eligible beneficiaries who elected to participate in
the demonstration project and did not have Medicare Part B coverage
before electing to participate.

\(3\) The costs of health benefits charges and the costs (direct and
indirect) of administering the benefits and services provided to
eligible beneficiaries who elect to participate in the demonstration
project as compared to similarly situated enrollees in the FEHB Program.

**(4) Prescription drug costs for demonstration project beneficiaries.**

Proposed Year 2000 Amendments to the Standard Contract for

**Community-Rated Carriers (DoD Demonstration Project)**

1\. Redate Section 1.21, YEAR 2000 COMPLIANCE, as JAN 2000 and update
and revise the clause as follows:

SECTION 1.21

YEAR 2000 COMPLIANCE (JAN ~~1999~~ **2000**)

\(a\) The Carrier shall ensure that the hardware, software, firmware,
**and medical equipment** **containing embedded chip technology** it
uses in the performance of its FEHB Program contract will accurately
process date/time data (including, but not limited to, calculating,
comparing and sequencing) involving dates later than December 31, 1999,
including leap year calculations. ~~On May 31, 1999, the Carrier shall
either notify the Contracting Officer that the system will be compliant
or provide the Contracting Officer with a contingency plan that will
detail how the system will remain operational after December 31, 1999.~~

\(b\) When acquiring information technology that will be required to
perform date/time processing involving dates later than December 31,
1999, the Carrier shall ensure that solicitations and contracts~~: (1)~~
require the information technology to be Year 2000 compliant ~~; or (2)
require that non-compliant information technology be upgraded to be Year
2000 compliant prior to the earlier of (i) the earliest date on which
the information technology may be required to perform date/time
processing involving dates later than December 31, 1999, or (ii)
December 31, 1999.~~

~~(c) Not later than May 31, 1999, the Carrier shall submit a copy of
its company purchase policy that the hardware, software, and firmware it
either contracts for or purchases is Year 2000 compliant.~~

~~(d)~~ **(c)** AYear 2000 compliant@ means that the information
technology accurately processes date/time data (including, but not
limited to, calculating, comparing, and sequencing) involving dates
later than December 31, 1999, including leap year calculations, to the
extent that other information technology used in combination with the
information technology being acquired, properly exchanges date/time data
with it.

**(d) A system failure caused by the failure of hardware, software,
firmware, or medical equipment** **containing embedded chip technology
that results in the Carrier=s inability to deliver benefits and services
to FEHB Program enrollees is a significant event under Section 1.10 of
this contract, Notice of Significant Events, and must be reported
promptly to OPM.**

2\. Add new Sections 1.23, NOTICE TO ENROLLEES ON TERMINATION OF FEHBP
OR PROVIDER CONTRACT, and 1.24, TRANSITIONAL CARE, to implement the
continuity of care provisions of the Patient Bill of Rights, as follows:

**SECTION 1.23**

**NOTICE TO ENROLLEES ON TERMINATION OF FEHBP OR PROVIDER CONTRACT (JAN
2000)**

**(a) Enrollees who are undergoing treatment for a chronic or disabling
condition or who are in the second or third trimester of pregnancy at
the time a carrier (1) terminates all or part of its FEHBP contract, or
(2) terminates the enrollee's specialty provider contract for reasons
other than cause, may be able to continue to see their specialty
provider for up to 90 days or through their postpartum care.**

**(b) The Carrier shall notify its enrollees in writing of its intent to
terminate all or part of its FEHBP contract, including service area
reductions, or the enrollees' specialty provider contract, for reasons
other than cause in order to allow sufficient time for the enrollees to
arrange for continued care after the 90-day period. The Carrier shall
send the notice in time to ensure it is received by the enrollees no
less than 90 days prior to the date it terminates the contract, unless
the Carrier demonstrates it was prevented from doing so for reasons
beyond its control. The Carrier's prompt notice will ensure that the
notification period and the transitional care period run concurrently.**

**SECTION 1.24**

**TRANSITIONAL CARE (JAN 2000)**

**(a) ATransitional care@ is specialized care provided for up to 90 days
or through the postpartum period to an enrollee undergoing treatment for
a chronic or disabling condition or who is in the second or third
trimester of pregnancy when his or her carrier (1) terminates all or
part of its FEHBP contract, or (2) terminates the enrollee=s specialty
provider contract for reasons other than cause. The 90-day period begins
the earlier of the date the enrollee receives the notice required under
Section 1.23, Notice to Enrollees on Termination of FEHBP or Provider
Contract, or the date the Carrier=s or the provider=s contract ends.**

**(b) Beginning January 1, 2000, the Carrier shall ensure the
following:**

**(1) *If it terminates a specialty provider* *contract* other than for
cause, it allows enrollees who are undergoing treatment for a chronic or
disabling condition or who are in the second or third trimester of
pregnancy to continue treatment under the specialty provider for up to
90 days, or through their postpartum period, under the same terms and
conditions that existed at the beginning of the transitional care
period; and**

**(2) *If it enrolls a new member who involuntarily changed carriers
because the enrollee=s former carrier was no longer available in the
FEHB Program*, it provides for the transitional care under the same
terms and conditions the enrollee had under the prior carrier.**

**(c) In addition, the Carrier shall (1) pay for or provide the
transitional care required under this clause at no additional cost to
enrollees;**

**(2) require the specialty provider to promptly transfer all medical
records to the designated new provider during or upon completion of the
transition period, as authorized by the patient;**

**(3) provide assistance to enrollees who want to obtain records from
the specialty provider and/or request that the provider amend or allow
them to append a record they believe is inaccurate, irrelevant, or
incomplete; and,**

**(4) require the specialty provider to give all necessary information
to the Carrier for quality assurance purposes.**

3\. Add a new clause 2.14, CONTINUING REQUIREMENTS AFTER TERMINATION OF
THE CARRIER, to reinforce certain existing contractual requirements as
follows:

**SECTION 2.14**

**CONTINUING REQUIREMENTS AFTER TERMINATION OF THE CARRIER (JAN 2000)**

**(a) The Carrier shall fulfill all of the requirements agreed to under
the contract that continue after termination.**

**(b) Contract requirements that extend beyond the date of the Carrier=s
termination include, but are not limited to, offering conversion
contracts to enrollees during the 31-day extension of coverage for
conversion, providing benefits to the enrollee until the effective date
of the new enrollment, and processing and paying claims incurred prior
to the termination date.**

4\. Redate Section 3.2, ACCOUNTING AND

PRICE ADJUSTMENT, as JAN 2000; add a new paragraph (c) to implement the
DoD/FEHBP Demonstration Project authorized by 10 U.S.C. 1108; and make
clarifying changes as follows:

SECTION 3.2

ACCOUNTING AND PRICE ADJUSTMENT (JAN ~~1998~~ **2000**) (FEHBAR
1652.216-70)

\(a\) *Annual Accounting Statement*. The Carrier, not later than 90 days
after the end of each contract period, shall furnish to OPM for that
contract period an accounting of its operations under the contract.
~~The accounting shall be in the form prescribed by OPM.~~ **The Carrier
shall follow the OPM prescribed accounting format.**

\(b\) *Adjustment.* (1) This contract is community rated as defined in
FEHBAR 1602.170-2.

\(2\) The subscription rates agreed to in this contract shall be
equivalent to the subscription rates given to the Carrier\'s similarly
sized subscriber groups (SSSGs) as defined in FEHBAR1602.170-13.

\(3\) If, at the time of the rate reconciliation, **the Carrier or OPM
find** the subscription rates ~~are found~~ to be lower than the
equivalent rates for the lower of the two SSSGs, the Carrier may include
an adjustment to the Federal group\'s rates for the next contract
period.

\(4\) If, at the time of the rate reconciliation, **the Carrier or OPM
find** the subscription rates to be higher than the equivalent rates for
the lower of the two SSSGs, the Carrier shall reimburse the Fund, for
example, by reducing the FEHB rates for the next contract term to
reflect the difference between the estimated rates and the rates which
are derived using the methodology of the lower rated SSSG.

\(5\) **The Government shall not allow or consider and the Carrier shall
not make any** ~~No~~ upward adjustment in the rate established for this
contract ~~will be allowed or considered by the Government or will be
made by the Carrier~~ in this or in any other contract period on the
basis of actual costs incurred, actual benefits provided, or actual size
or composition of the FEHBP group during this contract period.

\(6\) In the event this contract is not renewed, neither the Government
nor the Carrier shall be entitled to any adjustment or claim for the
difference between the subscription rates prior to rate reconciliation
and the actual subscription rates.

**(c) *[Exception for the 3-Year DoD Demonstration Project (10 U.S.C.
1108).]{.underline}* Similarly sized subscriber group (SSSG) rating
methodologies shall not be used to determine the reasonableness of the
Carrier=s demonstration project premium rates. The Carrier=s rates shall
not be adjusted for equivalency with SSSG rating methodologies. The
Carrier shall benchmark premiums against adjusted community rates if
available, Medigap offerings, or other similar products.**

(End of Clause)

5\. Redate Section 3.3, RATE REDUCTION FOR DEFECTIVE PRICING OR
DEFECTIVE COST OR PRICING DATA (FEHBAR 1652.215-70), as JAN 2000; add a
new paragraph (d) to implement the DoD/FEHBP Demonstration Project
authorized by 10 U.S.C. 1108; and make clarifying changes as follows:

SECTION 3.3

RATE REDUCTION FOR DEFECTIVE PRICING OR DEFECTIVE COST OR PRICING DATA
(JAN ~~1998~~ **2000**) (FEHBAR 1652.215-70)

\(a\) If **the Carrier increased** any rate established in connection
with this contract ~~was increased~~ because **it** (1) ~~the Carrier~~
submitted, or kept in its files in support of the FEHBP rate, cost or
pricing data that were not complete, accurate, or current as certified
in the Certificate of Accurate Cost or Pricing Data (FEHBAR
1615.804-70); (2) ~~the Carrier~~ submitted, or kept in its files in
support of the FEHBP rate, cost or pricing data that were not accurate
as represented in the rate proposal documents; (3) ~~the Carrier~~
developed FEHBP rates with a rating methodology and structure
inconsistent with that used to develop rates for similarly sized
subscriber groups (see FEHBAR \'1602.170-13) as certified in the
Certificate of Accurate Cost or Pricing Data for Community Rated
Carriers; or (4) ~~the Carrier~~ submitted or, or kept in its files in
support of the FEHBP rate, data or information of any description that
were not complete, accurate, and current\--then, the ~~rate shall be
reduced~~ **Carrier shall reduce the rate** in the amount by which the
price was increased because of the defective data or information.

(b)(1) If the Contracting Officer determines under paragraph (a) of this
clause that a price or cost reduction should be made, the Carrier agrees
not to raise the following matters as a defense: (i) The Carrier was a
sole source supplier or otherwise was in a superior bargaining position
and thus the price of the contract would not have been modified even if
accurate, complete, and current cost or pricing data had been submitted
or maintained and identified.

\(ii\) The Contracting Officer should have known that the cost or
pricing data in issue were defective even though the Carrier took no
affirmative action to bring the character of the data to the attention
of the Contracting Officer.

\(iii\) The contract was based on an agreement about the total cost of
the contract and there was no agreement about the cost of each item
procured under the contract.

\(iv\) The Carrier did not submit or keep in its files a Certificate of
Current Cost or Pricing Data.

(2)(i) Except as prohibited by subdivision (b)(2)(ii) of this clause,
**the Contracting Officer shall determine and allow an** **appropriate
offset** ~~an offset in an amount determined appropriate by the
Contracting Officer~~ based upon the facts ~~shall be allowed~~ against
the amount of a contract price reduction if\--

\(A\) The Carrier certifies to the Contracting Officer that, to the best
of the Carrier\'s knowledge and belief, the Carrier is entitled to the
offset in the amount requested; and

\(B\) The Carrier proves that the cost or pricing data were available
before the date of agreement on the price of the contract (or price of
the modification) and that the data were not submitted before such date.

\(ii\) ~~An offset shall not be allowed~~ **The Contracting Officer
shall not allow** **an offset** if\-- (A) The ~~understated data was
known by the~~

~~Carrier~~ **Carrier knew the data** ~~to be~~ **was** understated when
the Certificate of Current Cost or Pricing Data was signed; or

\(B\) The Government proves ~~that~~ the facts demonstrate that the
contract price would not have increased in the amount to be offset even
if the available data had been submitted before the date of agreement on
price.

\(c\) When the Contracting Officer determines that the rates shall be
reduced and the Government is thereby entitled to a refund, the Carrier
shall be liable to and shall pay the FEHB Fund at the time the
overpayment is repaid\--

\(1\) Simple interest on the amount of the overpayment from the date the
~~overpayment was paid from the FEHB Fund to the Carrier~~ **Government
paid the Carrier the overpayment from the FEHB Fund** until the date the
**Carrier liquidates the** overcharge ~~is liquidated~~. In calculating
the amount of interest due, **the Carrier shall use** 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 **Carrier retained
the** overcharge ~~was retained by the Carrier shall be used~~; and,

\(2\) A penalty equal to the amount of overpayment, if the Carrier
knowingly submitted cost or pricing data which was incomplete,
inaccurate, or noncurrent.

**(d) *[Exception for the DoD Demonstration Project.]{.underline}*
Similarly sized subscriber group (SSSG) rating methodologies shall not
be used to determine the reasonableness of the Carrier=s demonstration
project premium rates. The Carrier=s rates shall not be adjusted for
equivalency with SSSG rating methodologies.** **The Carrier shall
benchmark premiums against adjusted community rates if available,
Medigap offerings, or other similar products.**

(End of Clause)

6\. Add a new clause under Section 4.1, entitled PARTICIPATION IN THE
DoD DEMONSTRATION PROJECT, to implement the joint DoD/FEHBP
Demonstration Project authorized by 10 U.S.C. 1108, as follows:

**SECTION 4.1**

**PARTICIPATION IN /FEHBP**

**DEMONSTRATION PROJECT**

**(JAN 2000)**

**(a) The Carrier shall participate in the DoD/FEHBP Demonstration
Project authorized by 10 U.S.C. 1108 (ADoD Demonstration Project@) under
the terms and conditions specified by OPM.**

**(b) In setting the premium rate, the Carrier shall comply with the
requirements in Section 3.2, Accounting and Price Adjustment (FEHBAR
1652.216-70), and 3.3, Rate Reduction for Defective Pricing or Defective
Cost or Pricing Data (FEHBAR 1652.215-70).**

**(c) In the event the Carrier experiences costs far in excess of the
premiums for the DoD enrollment group, OPM will work with the Carrier to
make an equitable adjustment.**

**(d) The Carrier shall compile, maintain, and, when requested by OPM,
report data on the plan=s experience to produce reports containing the
following information and analysis:**

**(1) The number of eligible beneficiaries who elect to participate in
the demonstration project.**

\(2\) The number of eligible beneficiaries who elected to participate in
the demonstration project and did not have Medicare Part B coverage
before electing to participate.

\(3\) The costs of health benefits charges and the costs (direct and
indirect) of administering the benefits and services provided to
eligible beneficiaries who elect to participate in the demonstration
project as compared to similarly situated enrollees in the FEHB Program.

**(4) Prescription drug costs for demonstration project beneficiaries.**

7\. Update the introductory paragraph and paragraph (a)5. of Appendix
D-a to include website material under supplemental literature, as
follows:

APPENDIX D-a

FEHB SUPPLEMENTAL LITERATURE GUIDELINES

This is the primary guide a Carrier should use to assess whether the
Carrier\'s supple­mental marketing literature**, including website
material,** complies with FEHBAR 1603.70, Misleading, Deceptive or
Unfair Advertising. (Use the NAIC Guidelines for additional guidance
when needed.)

a\) 5. Under the FEHBP, the FEHB brochure is ~~based on text approved by
OPM and is a complete statement of benefits, limitations, and
exclusions~~

**the official statement of benefits.** Include the follow­ing statement
**(website material should include the statement as a preface)** in all
supplemental litera­ture which in any way discusses Plan benefits:

\"*This is a summary \[or brief description\] of the features of the
\[insert Plan\'s name\]. Before making a final decision, please read the
Plan\'s Federal brochure (\[insert bro­chure number\]). All benefits are
subject to the definitions, limitations, and exclusions set forth in the
Federal brochure.*

**FEDERAL EMPLOYEES**

**HEALTH BENEFITS PROGRAM**

***STANDARD CONTRACT***

***FOR***

***COMMUNITY-RATED***

***HEALTH MAINTENANCE ORGANIZATION CARRIERS***

**2000**

(INSERT SIGNATURE PAGE OF CONTRACT)

TABLE OF CONTENTS

This is a *community-rated contract for the Health Maintenance
Organization Carrier* and consists of the cover page, the table of
contents and the provisions, clauses and appendices as included in PARTS
1 through 6.

*PART I - GENERAL PROVISIONS*

1.1 DEFINITIONS OF FEHB TERMS

1.2 ENTIRE CONTRACT

1.3 ORDER OF PRECEDENCE

1.4 INCORPORATION OF LAWS AND REGULATIONS

1.5 RECORDS AND INFORMATION TO BE FURNISHED BY OPM

1.6 CONFIDENTIALITY OF RECORDS (FEHBAR)

1.7 STATISTICS AND SPECIAL STUDIES

1.8 NOTICE

1.9 FEHB QUALITY ASSURANCE

1.10 NOTICE OF SIGNIFICANT EVENTS (FEHBAR)

1.11 FEHB INSPECTION (FEHBAR)

1.12 CORRECTION OF DEFICIENCIES

1.13 INFORMATION AND MARKETING MATERIALS

1.14 MISLEADING, DECEPTIVE OR UNFAIR ADVERTISING (FEHBAR)

1.15 RENEWAL AND WITHDRAWAL OF APPROVAL (FEHBAR)

1.16 \[RESERVED\]

1.17 NOVATION AGREEMENT (FEHBAR)

1.18 AGREEMENT TO RECOGNIZE CARRIER\'S CHANGE OF NAME (FEHBAR)

1.19 CERTIFICATION UNDER P.L. 104-191 (HEALTH INSURANCE PORTABILITY AND
ACCOUNTABILITY ACT OF 1996)

1.20 PATIENT BILL OF RIGHTS

1.21 YEAR 2000 COMPLIANCE

1.22 HIPAA COMPLIANCE

1.23 NOTICE TO ENROLLEES ON TERMINATION OF FEHBP OR PROVIDER CONTRACT

1.24 TRANSITIONAL CARE

*PART II - BENEFITS*

2.1 ENROLLMENT ELIGIBILITY AND EVIDENCE OF ENROLLMENT

2.2 BENEFITS PROVIDED

2.3 PAYMENT OF BENEFITS AND PROVISION OF SERVICES AND SUPPLIES

2.4 TERMINATION OF COVERAGE AND CONVERSION PRIVILEGES

2.5 SUBROGATION

2.6 COORDINATION OF BENEFITS (FEHBAR)

2.7 DEBARMENT AND OTHER SANCTIONS

2.8 FILING HEALTH BENEFIT CLAIMS/COURT REVIEW OF DISPUTED CLAIMS

2.9 PROTECTION OF MEMBERS AGAINST PROVIDER CLAIMS

2.10 INDEPENDENT LABORATORIES

2.11 CLAIMS PROCESSING

2.12 CALCULATION OF COST SHARING PROVISIONS

2.13 BENEFITS PAYMENTS WHEN MEDICARE IS PRIMARY

2.14 CONTINUING REQUIREMENTS AFTER TERMINATION OF THE CARRIER

*PART III - PAYMENTS, CHARGES*

*AND ACCOUNTING*

3.1 PAYMENTS (FEHBAR)

3.2 ACCOUNTING AND PRICE ADJUSTMENT (FEHBAR)

3.3 RATE REDUCTION FOR DEFECTIVE PRICING OR DEFECTIVE COST OR PRICING
DATA (FEHBAR)

3.4 CONTRACTOR RECORDS RETENTION (FEHBAR)

3.5 APPROVAL FOR THE ASSIGNMENT OF CLAIMS (FEHBAR)

3.6 DISCREPANCIES BETWEEN ENROLLMENT AND PAYMENTS TO CARRIER

3.7 SURVEY CHARGES

*PART IV - SPECIAL PROVISIONS*

4.1 ALTERATIONS IN CONTRACT (FAR)

*PART V - STANDARD CLAUSES*

This contract shall include all of the following standard clauses
required by the Federal Acquisition Regulation (FAR) or Federal
Employees Health Benefits Acquisition Regulation (FEHBAR).

5.1 DEFINITIONS

5.2 \[RESERVED\]

5.3 GRATUITIES

5.4 COVENANT AGAINST CONTINGENT FEES

5.5 ANTI-KICKBACK PROCEDURES

5.6 \[RESERVED\]

5.7 AUDIT AND RECORDS-NEGOTIATION

5.8 \[RESERVED\]

5.9 \[RESERVED\]

5.10 \[RESERVED\]

5.11 \[RESERVED\]

5.12 \[RESERVED\]

5.13 \[RESERVED\]

5.14 UTILIZATION OF SMALL~~, SMALL DISADVANTAGED AND WOMEN-OWNED~~ SMALL
BUSINESS CONCERNS

5.15 \[RESERVED\]

5.16 \[RESERVED\]

5.17 CONVICT LABOR

5.18 CONTRACT WORK HOURS AND SAFETY STANDARDS ACT-OVERTIME
COMPENSATION-GENERAL

5.19 EQUAL OPPORTUNITY

5.20 EQUAL OPPORTUNITY PREAWARD CLEARANCE OF SUBCONTRACTS

5.21 NOTIFICATION OF VISA DENIAL

5.22 AFFIRMATIVE ACTION FOR DISABLED VETERANS AND VETERANS OF THE
VIETNAM ERA VETERANS

5.23 AFFIRMATIVE ACTION FOR WORKERS WITH DISABILITIES

5.24 CLEAN AIR AND WATER

5.25 DRUG FREE WORKPLACE

5.26 FEDERAL, STATE, AND LOCAL TAXES

5.27 \[RESERVED\]

5.28 TAXES-CONTRACTS PERFORMED IN U.S. POSSESSIONS OR PUERTO RICO

5.29 \[RESERVED\]

5.30 COST ACCOUNTING STANDARDS

5.31 DISCLOSURE AND CONSISTENCY OF COST ACCOUNTING PRACTICES

5.32 ADMINISTRATION OF COST ACCOUNTING STANDARDS

5.33 DISCOUNTS FOR PROMPT PAYMENT

5.34 INTEREST (FEHBAR MODIFICATION OF FAR)

5.35 ASSIGNMENT OF CLAIMS

5.36 DISPUTES

5.37 \[RESERVED\]

5.38 CHANGES\--NEGOTIATED BENEFITS

CONTRACTS

5.39 \[RESERVED\]

5.40 GOVERNMENT PROPERTY

(NEGOTIATED BENEFITS

CONTRACTS)

5.41 \[RESERVED\]

5.42 PREFERENCE FOR U.S.-FLAG AIR CARRIERS

5.43 \[RESERVED\]

5.44 AUTHORIZED DEVIATIONS IN CLAUSES

5.45 LIMITATION ON PAYMENTS TO INFLUENCE CERTAIN FEDERAL TRANSACTIONS

5.46 \[RESERVED\]

5.47 PROTECTING THE GOVERNMENT\'S INTEREST WHEN SUBCONTRACTING WITH
CON­TRACTORS DEBARRED, SUSPENDED OR PROPOSED FOR

DEBARMENT

5.48 BANKRUPTCY

5.49 FEHBP TERMINATION FOR

CONVENIENCE OF THE

GOVERNMENT\--NEGOTIATED

BENEFITS CONTRACTS

5.50 FEHBP TERMINATION FOR DEFAULT\--NEGOTIATED BENEFITS CONTRACTS

5.51 \[RESERVED\]

5.52 \[RESERVED\]

5.53 NOTICE TO THE GOVERNMENT OF

> LABOR DISPUTES

5.54 \[RESERVED\]

5.55 EMPLOYMENT REPORTS ON DISABLED VETERANS AND VETERANS OF THE VIETNAM
ERA

5.56 AUTHORIZATION AND CONSENT

5.57 NOTICE AND ASSISTANCE REGARDING PATENT AND COPYRIGHT INFRINGEMENT

5.58 MANDATORY INFORMATION FOR ELECTRONIC FUNDS TRANSFER PAYMENT

~~5.59 CERTIFICATION OF NONSEGREGATED FACILITIES~~

5.59 **PROHIBITION OF SEGREGATED FACILITIES**

*PART VI \-- APPENDICES*

A- BROCHURE TEXT

B- SCHEDULE OF RATES, CHARGES AND LIMITATIONS

C- CONTRACT ADMINISTRATION DATA

D- (a) FEHBP SUPPLEMENTAL LITERATURE GUIDELINES JANUARY 1999; (b) RULES
GOVERNING ADVERTISEMENTS OF ACCIDENT AND SICKNESS INSURANCE WITH
INTERPRETIVE GUIDELINES, MODEL REGULATION SERVICE- JULY 1989, NATIONAL
ASSOCIATION OF INSURANCE COMMISSIONERS

E- ORDER OF BENEFIT DETERMINATION RULES, MODEL REGULATION
SERVICE-JANUARY 1996, NATIONAL ASSOCIATION OF INSURANCE COMMISSIONERS

PART I - GENERAL PROVISIONS

SECTION 1.1

DEFINITIONS OF FEHB TERMS (JAN 1997)

For purpose of this contract, the following definitions apply:

FEHBP: Federal Employees Health Benefits Program.

Enrollee: The Federal employee, annuitant, former spouse,
temporarily-covered former Federal employee or dependent, enrolled under
this contract.

Member: The Enrollee and/or an eligible dependent for benefit purposes,
and sometimes referred to as subscriber.

Act: The Federal Employees Health Benefits Act, as amended; chapter 89
of title 5, United States Code.

Regulations: (1) The Federal Employees Health Benefits Regulations; part
890, title 5, Code of Federal Regulations, and (2) chapters 1 and 16 of
title 48, Code of Federal Regulations.

Benefits: Covered services or payment for covered services set forth in
Appendix A, to which Members are entitled to the extent provided by this
contract.

Carrier: As defined by chapter 89 of title 5, United States Code, and
may be used interchangeably with the term Contractor.

Subcontractor:

Any supplier, distributor, vendor, or firm that furnishes supplies or
services to or for a prime contractor, or another subcontractor, except
for providers of direct medical services or supplies pursuant to the
Carrier\'s health benefits plan.

SECTION 1.2

ENTIRE CONTRACT (JAN 1996)

\(a\) This document as described in the *Table of Contents* constitutes
the entire contract between the parties. No oral statement of any person
shall modify or otherwise affect the terms, conditions, or
specifications stated in this contract. All modifications to the
contract must be made in writing by the duly authorized Contracting
Officer.

\(b\) All statements concerning coverage or benefits made by OPM, the
Carrier or by any individual covered under this policy shall be deemed
representations and not warranties. No such statement shall convey or
void any coverage, increase or reduce any benefits under this policy or
be used in the prosecution of or defense of a claim under this policy
unless it is contained in writing and a copy of the instrument
containing the statement is or has been furnished to the Member or to
the person making the claim.

SECTION 1.3

ORDER OF PRECEDENCE (JAN 1996)

Any inconsistency in this contract shall be resolved by giving
precedence in the following descending order: The Act, the regulations
in part 890, title 5, Code of Federal Regulations, the regulations in
chapters 1 and 16, title 48, Code of Federal Regulations, and this
contract.

SECTION 1.4

INCORPORATION OF LAWS AND REGULATIONS (JAN 1996)

\(a\) The applicable provisions of (1) chapter 89 of title 5, United
States Code; (2) OPM\'s regulations as contained in part 890, title 5,
Code of Federal Regulations; and (3) chapters 1 and 16 of title 48, Code
of Federal Regulations constitute a part of this contract as if fully
set forth herein, and the other provisions of this contract shall be
construed so as to comply therewith.

\(b\) If the Regulations are changed in a manner which would increase
the Carrier\'s liability under this contract, the change will be made
effective for the contract period subsequent to the period in which the
change is promulgated and, if the change is promulgated in November or
December, the change will not be effective until the second contract
year following the year in which the change is promulgated; unless (i)
The Carrier agrees to an earlier date or (ii) the change is ordered by
the Contracting Officer pursuant to the *Changes\--Negotiated Benefits
Contracts* clause of the contract.

SECTION 1.5

RECORDS AND INFORMATION TO BE FURNISHED BY OPM (JAN 1997)

\(a\) The OPM shall maintain or cause to be maintained records from
which may be determined the names and social security numbers of all
Enrollees. Such information shall be furnished to the Carrier by the
OPM, or other agencies of the Federal Government, at such times and in
such form and detail as will enable the Carrier to maintain a currently
accurate record of all Enrollees.

\(b\) The OPM shall direct the agencies to provide the Carrier, not less
often than quarterly, the names of Enrollees enrolled under the contract
by payroll office and the premium paid for those Enrollees for the
current pay cycle. The Carrier shall at least quarterly reconcile its
enrollment records with those provided by the Government.

\(c\) Neither clerical error (whether by the OPM, by any other
Government agency, or by the Carrier) in keeping any records pertaining
to coverage under this contract, nor delays in making entries thereon,
nor failure to make or account for any deduction of enrollment charges,
shall invalidate coverage otherwise validly in force or continue
coverage otherwise validly terminated. If any relevant facts pertaining
to any individual to whom coverage under this contract relates shall be
found to have been misstated, and if such misstatement affects the
existence or the amount or extent of coverage, the true facts shall be
used in determining whether coverage is in force under the terms of this
contract.

SECTION 1.6

CONFIDENTIALITY OF RECORDS (JAN 1991) (FEHBAR 1652.224-70)

\(a\) The Carrier shall use the personal data on employees and
annuitants that is provided by agencies and OPM, including social
security numbers, for only those routine uses stipulated for the data
and published annually in the *Federal Register* as part of OPM\'s
notice of systems of records.

\(b\) The Carrier shall also hold all medical records, and information
relating thereto, of Federal subscribers confidential except as follows:

\(1\) As may be reasonably necessary for the administration of this
contract;

\(2\) As authorized by the patient or his or her guardian;

\(3\) As disclosure is necessary to permit Government officials having
authority to investigate and prosecute alleged civil or criminal
actions;

\(4\) As necessary to audit the contract;

\(5\) As necessary to carry out the coordination of benefit provisions
of this contract; and

\(6\) For bona fide medical research or educational purposes. Release of
information for medical research or educational purposes shall be
limited to aggregated information of a statistical nature that does not
identify any individual by name, social security number, or any other
identifier unique to an individual.

\(c\) If the Carrier uses medical records for the administration of the
contract, or for bona fide research or educational purposes, it shall so
state in the Plan\'s brochure.

SECTION 1.7

STATISTICS AND SPECIAL STUDIES (JAN 1999)

\(a\) The Carrier shall maintain or cause to be maintained statistical
records of its operations under the contract and shall furnish OPM, in
the form prescribed by the Contracting Officer, the statistical reports
reasonably necessary for the OPM to carry out its functions under
Section 1308 and Chapter 89 of title 5, United States Code.

\(b\) The Carrier shall furnish such other reasonable statistical data
and reports of special studies as the Contracting Officer may from time
to time request for the purpose of carrying out its functions under
Chapter 89 of title 5, United States Code.

\(c\) The Carrier shall furnish the routine reports in the required
number of copies to the addresses specified in Appendix C, *Contract
Administration Data.*

\(d\) The Carrier shall notify the OPM Contract Representative
immediately upon a change in the name or address of the Carrier\'s
contract administrator(s).

SECTION 1.8

NOTICE (JAN 1991)

Where the contract requires that notice be given to the other party,
such notice shall be given in writing to the address specified in
Appendix C, *Contract Administration Data.*

SECTION 1.9

FEHB QUALITY ASSURANCE (JAN 1999)

\(a\) The Carrier shall develop and apply a quality assurance program
specifying procedures for assuring contract quality. At a minimum the
program must include procedures to address:

\(1\) Accuracy of Payments.

\(i\) Processing Accuracy - the number of FEHB claims processed
accurately divided by the total number of FEHB claims processed for the
given time period, expressed as a percentage.

[required standard]{.smallcaps}: An average of 95 percent of FEHB claims
must be processed accurately.

\(ii\) COB Processing - the Carrier must demonstrate that a
statistically valid sampling technique is routinely used to identify
FEHB claims prior to or after processing that require(d) coordination of
benefits (COB) with a third party payer. As an alternative, the Carrier
may provide evidence that it pursues all claims for COB.

\(2\) Timeliness of Payments to Members or Providers

\(i\) Average Processing Time (All FEHB Claims) - the average number of
working days from the date an FEHB claim is received to the date it is
adjudicated (paid, denied or a request for further information is sent
out), for the given time period, expressed as a cumula­tive percentage.

[required standard]{.smallcaps}:

\(A\) An average of 60 percent of FEHB claims received over the given
time period are adjudicated within 20 working days (28 calen­dar days).

\(B\) An average of 80 percent of FEHB claims received over the given
time period are adjudicated within 30 working days (42 calen­dar days).

\(C\) An average of 95 percent of FEHB claims received over the given
time period are adjudicated within 60 working days (84 calen­dar days).

\(3\) Quality of Services and Responsive­ness to Members

\(i\) Member Inquiries - the number of working days taken to respond to
an FEHB member\'s written inquiry, expressed as a cumulative percentage
for the given time period.

[required standard]{.smallcaps}:

\(A\) An average of 60 percent of FEHB member written inquiries are
responded to within 10 working days (14 calendar days).

\(B\) An average of 90 percent of FEHB member written inquiries are
responded to within 30 working days (42 calendar days).

\(ii\) Telephone Access - the Carrier shall report on the following
statistics concerning telephone access to the member services department
(or its equivalent) for the given time period. *Except that,* if the
Carrier does not have a computerized phone system, report results of
periodic surveys on telephone access.

\(A\) Telephone Waiting Time - the number of seconds elapsed before a
member\'s telephone call is connected to a Carrier

representative.

[required standard]{.smallcaps}: On average, no more than 1.5 minutes
elapse before a member\'s telephone call is connected to a Carrier
representative.

\(B\) Telephone Blockage Rate - the percentage of time that callers
receive a busy signal when calling the Carrier.

[required standard]{.smallcaps}: On average, callers receive a busy
signal no more than 10 percent of the time.

\(C\) Telephone Abandonment Rate - the number of calls attempted but not
completed (presumably because callers tired of waiting to be connected
to a Carrier representative) divided by the total number of calls
attempted (both completed and not completed), expressed as a percentage.

[required standard]{.smallcaps}: On average, no more than 8 percent of
calls are abandoned.

\(4\) Responsiveness to FEHB Member Requests for Reconsideration.

[required standard]{.smallcaps}: For 100 percent of written FEHB
disputed claim requests received for the given time period, within 30
days after receipt by the Carrier, the Carrier must affirm the denial in
writing to the FEHB member, pay the claim, provide the service, or
request addi­tional information reasonably necessary to make a
determination.

\(5\) Quality Assurance Plan - the Carrier must demonstrate that a
statistically valid sampling technique is routinely used prior to or
after processing to randomly sample FEHB claims against Carrier quality
assurance and abuse prevention standards.

\(6\) Physician Credentialing - the Carrier must demonstrate that it
requires the follow­ing credential checks of all of its physicians, both
during the initial hiring process and during periodic re-credentialing.
As an alternative, the Carrier may demonstrate that the following
credential checks are performed by a secondary source, such as a
hospital.

\(A\) Verification of medical school gradua­tion records.

\(B\) Routine check with local and/or state medical societies and/or
boards.

\(C\) Routine check of the Department of Health and Human Services
(DHHS) list of debarred providers.

\(D\) Routine check of the National Practitioner Data Bank.

\(7\) Appointments - All Health Maintenance Organization carriers must
meet the following standards for the given time period. *Except that,*
if this information is not routinely collected, report results from
periodic surveys.

[required standard]{.smallcaps}:

\(i\) Urgent appointments are available, on average, within 24 hours of
an authorized request for one.

\(ii\) Routine appointments are available, on average, within 1 month of
an authorized request for one.

\(iii\) Average office waiting times - on average, members who arrive on
time for a scheduled appointment wait no more than 30 minutes before
they are seen by the provider of the medical service.

*(NOTE: For the purpose of this standard (7), a simplified
classification system is used in which all appointments are classified
as either emergency, urgent or routine. Emer­gency appointments must be
seen immediate­ly to prevent health deterioration. Urgent appointments
are those for the sudden, acute onset of symptoms that must be seen
within 1 (one) day to prevent health deterioration. All other
appointments are considered routine.)*

\(8\) Assessing Quality of Health Care. The Carrier shall collect data
on the measures endorsed by the Foundation for Accountability (FACCT),
as requested by the OPM for services rendered through the Carrier\'s
Preferred Provider Organization and/or Point of Service networks.
Further, the Carrier shall provide statistical reports in accordance
with FACCT guidelines when requested by OPM. The Carrier may be asked to
collect data on one or more measures in a specified geographic locality.
In addition, the Carrier shall report on measures developed by the
National Committee for Quality Assurance as directed by OPM.

\(b\) The Carrier shall conduct a program to assess its vulnerability to
fraud and abuse and shall operate a system designed to detect and
eliminate fraud and abuse internally by Carrier employees and
subcontractors, by providers providing goods or services to FEHB
Members, and by individual FEHB Members.

\(c\) The Carrier shall keep complete records of its quality assurance
procedures and fraud program and the results of their implementation and
make them available to the Government as determined by OPM. If the
Carrier cannot separate FEHB claims from all other claims, the Carrier
may report compliance based on all claims and indicate this on the
report.

\(d\) The Contracting Officer may order the correction of a deficiency
in the Carrier\'s quality assurance program or fraud program. The
Carrier shall take the necessary action promptly to implement the
Contracting Officer\'s order.

\(e\) Assessing Member Services. In addition to any other means of
surveying Plan members that the Carrier may develop, the carrier shall
participate in either a National Committee for Quality Assurance (NCQA)
Health Plan Employer Data and Information Set (HEDIS) consumer survey or
an FEHB-specific consumer survey, to provide feedback to enrollees on
enrollee experience with the various FEHB plans. The Carrier shall take
into account the published results of the survey, or other results as
directed by OPM, in identifying areas for improvement as part of the
Carrier=s quality assurance program. Payment of survey charges will be
in accordance with Section 3.7.

SECTION 1.10

NOTICE OF SIGNIFICANT EVENTS (JAN 1997) (FEHBAR 1652.222-70)

\(a\) The Carrier agrees to notify the Contracting Officer of any
Significant Event within ten (10) working days after the Carrier becomes
aware of it. As used in this section, a Significant Event is any
occurrence or anticipated occurrence that might reasonably be expected
to have a material effect upon the Carrier\'s ability to meet its
obligations under this contract, including, but not limited to, any of
the following:

\(1\) Disposal of major assets;

\(2\) Loss of 15% or more of the Carrier\'s overall membership;

\(3\) Termination or modification of any

contract or subcontract if such termination or modification might have a
material effect on the Carrier\'s obligations under this contract;

\(4\) Addition or termination of provider agreements;

\(5\) Any changes in underwriters, reinsurers or participating plans;

\(6\) The imposition of, or notice of the intent to impose, a
receivership, conserva­torship, or special regulatory monitoring;

\(7\) The withdrawal of, or notice of intent to withdraw State
licensing, HHS qualification, or any other status under Federal or State
law;

\(8\) Default on a loan or other financial obligation;

\(9\) Any actual or potential labor dispute that delays or threatens to
delay timely performance or substantially impairs the functioning of the
Carrier\'s facilities or facilities used by the Carrier in the
performance of the contract;

\(10\) Any change in its charter, constitution, or by-laws which affects
any provision of this contract or the Carrier\'s participation in the
Federal Employees Health Benefits Program;

\(11\) Any significant changes in policies and procedures or
interpretations of the contract or brochure which would affect the
benefits available under the contract or the costs charged to the
contract;

\(12\) Any fraud, embezzlement or misappropriation of FEHB funds; or

\(13\) Any written exceptions, reservations or qualifications expressed
by the independent accounting firm (which ascribes to the standards of
the American Institute of Certified Public Accountants) contracted with
by the Carrier to provide an opinion on its annual financial statements.

\(b\) Upon learning of a Significant Event OPM may institute action, in
proportion to the seriousness of the event, to protect the interest of
Members, including, but not limited to\--

\(1\) Directing the Carrier to take corrective action;

\(2\) Suspending new enrollments under this contract;

\(3\) Advising Enrollees of the Significant Event and providing them an
opportunity to transfer to another plan;

\(4\) Withholding payment of subscription income or restricting access
to the Carrier\'s Letter of Credit account;

\(5\) Terminating the enrollment of those Enrollees who, in the judgment
of OPM, would be adversely affected by he Significant Event; or

\(6\) Terminating this contract pursuant to Section 1.15, *Renewal and
Withdrawal of Approval.*

\(c\) Prior to taking action as described in paragraph (b) of this
clause, the OPM will notify the Carrier and offer an opportunity to
respond.

\(d\) The Carrier shall insert this clause in any subcontract or
subcontract modification if both the amount of the subcontract or
modification charged to the FEHBP (or, in the case of a community-rated
carrier, applicable to the FEHBP) exceeds \$100,000 and the amount of
the subcontract or modification to be charged to the FEHBP (or, in the
case of a community-rated carrier, applicable to the FEHBP) exceeds 25
percent of the total cost of the subcontract or modification. If the
Carrier is an HMO, it shall also insert this clause in all provider
agreements over \$25,000. If the Carrier is not an HMO, it shall also
insert this clause in the contract with its underwriter, if any. The
Carrier shall substitute \"Contractor\" or other appropriate reference
for the term \"Carrier.\"

SECTION 1.11

FEHB INSPECTION (JAN 1991) (FEHBAR 1652.246-70)

\(a\) The Government or its agent has the right to inspect and evaluate
the work performed or being performed under the contract, and the
premises where the work is being performed, at all reasonable times and
in a manner that will not unduly delay the work. If the Government or
its agent performs inspection or evaluation on the premises of the
Carrier or a subcontractor, the Carrier shall furnish and require the
subcontractor to furnish all reasonable facilities and assistance for
the safe and convenient performance of these duties.

\(b\) The Carrier shall insert this clause in all subcontracts for
underwriting and administrative services and shall substitute
\"Contractor\" or other appropriate reference for the term \"Carrier.\"

SECTION 1.12

CORRECTION OF DEFICIENCIES (JAN 1997)

\(a\) The Carrier shall maintain sufficient financial resources,
facilities, providers, staff and other necessary resources to meet its
obligations under this contract. If the OPM determines that the Carrier
does not demonstrate the ability to meet its obligations under this
contract, the OPM shall notify the Carrier of the asserted deficiencies.
The Carrier agrees that, within ten (10) working days following
notification, it shall present detailed plans for correcting the
deficiencies. These plans shall be presented in a form prescribed by the
OPM. Pending submission or implementation of plans required under this
Section, the OPM may institute action as it deems necessary to protect
the interests of Members, including, but not limited to:

\(1\) Suspending new enrollments under this contract;

\(2\) Advising Enrollees of the asserted deficiencies and providing them
an opportunity to transfer to another plan;

\(3\) Withholding payment of subscription income or restricting access
to the Carrier\'s Letter of Credit account; or

\(4\) Terminating the enrollment of those Enrollees who, in the judgment
of OPM, would be adversely affected by the deficiency.

\(b\) The Carrier agrees that failure to submit or to diligently
implement plans which are required under this Section shall constitute
sufficient grounds for termination of this contract pursuant to Section
1.15, *Renewal and Withdrawal of Approval.*

\(c\) Prior to taking action as described in paragraph (a) the OPM shall
notify the Carrier and offer an opportunity to respond.

\(d\) The Carrier shall include the substance of this clause in the
contract with its underwriter and substitute an appropriate term for
\"Carrier.\"

SECTION 1.13

INFORMATION AND MARKETING MATERIALS (JAN 1999)

\(a\) OPM and the Carrier shall agree upon language setting forth the
benefits, exclusions and other language of the Plan. OPM in its sole
discretion, may order the Carrier to print and distribute the agreed
upon brochure text in a format and quantity approved by OPM, including
an electronic brochure version for OPM=s World Wide Web Site. This
formatted document is referred to as the FEHB brochure. The Carrier
shall distribute the FEHB brochure to all Federal employees, annuitants,
former spouses and former employees and dependents enrolled in the Plan.
The Carrier shall also distribute the document(s) to Federal agencies to
be made available to such individuals who are eligible to enroll under
this contract. At the direction of OPM, the Carrier shall produce and
distribute an audio cassette version of the approved language. The
Carrier may print additional FEHB brochures for distribution or its own
use, but only in the approved format and at its own expense.

\(b\) Supplemental material. Only marketing materials or other
supplemental literature prepared in accordance with FEHBAR 1625.203-70
(Section 1.14 of this contract) may be distributed or displayed at or
through Federal facilities.

\(c\) The Carrier shall reflect the statement of benefits in the agreed
upon brochure text included at Appendix A of this contract, verbatim, in
the FEHB brochure.

\(d\) OPM may order the Carrier to prepare an addendum or reissue the
FEHB brochure or any piece(s) of supplemental marketing material at no
expense to the Government if it is found to not conform to the agreed
upon brochure text and/or supplemental marketing materials preparations
described in paragraphs (a), (b) and (c) of this section.

SECTION 1.14

MISLEADING, DECEPTIVE OR UNFAIR ADVERTISING (JAN 1991)(FEHBAR
1652.203-70)

\(a\) The Carrier agrees that any advertising material, including that
labeled promotional material, marketing material, or supplemental
literature, shall be truthful and not misleading.

\(b\) Criteria to assess compliance with paragraph (a) of this clause
are available in the *FEHB Supplemental Literature Guidelines* which are
developed by OPM and should be used, along with the additional
guidelines set forth in FEHBAR 1603.702, as the primary guide in
preparing material; further guidance is provided in the NAIC *Rules
Governing Advertising of Accident and Sickness Insurance With
Interpretive Guidelines.* Guidelines are periodically updated and
provided to the Carrier by OPM.

\(c\) Failure to conform to paragraph (a) of

this clause may result in a reduction in the service charge, if
appropriate, and corrective action to protect the interest of Federal
Members. Corrective action will be appropriate to the circumstances and
may include, but is not limited to the following actions by OPM:

\(1\) Directing the Carrier to cease and desist distribution,
publication, or broadcast of the material;

\(2\) Directing the Carrier to issue corrections at the Carrier\'s
expense and in the same manner and media as the original material was
made; and

\(3\) Directing the Carrier to provide, at the Carrier\'s expense, the
correction in writing by certified mail to all enrollees of the Plan(s)
that had been the subject of the original material.

\(d\) Egregious or repeated offenses may result in the following action
by OPM:

\(1\) Suspending new enrollments in the Carrier\'s Plan(s);

\(2\) Providing Enrollees an opportunity to transfer to another plan;
and

\(3\) Terminating the contract in accordance with Section 1.15, *Renewal
and Withdrawal of Approval.*

\(e\) Prior to taking action as described in paragraphs (c) and (d) of
this clause, the OPM will notify the Carrier and offer an opportunity to
respond.

\(f\) The Carrier shall incorporate this clause in subcontracts with its
underwriter, if any, and other subcontractors directly involved in the
preparation or distribution of such advertising material and shall
substitute \"Contractor\" or other appropriate reference for the term
\"Carrier.\"

SECTION 1.15

RENEWAL AND WITHDRAWAL OF APPROVAL (JAN 1991) (FEHBAR 1652.249-70)

\(a\) The contract renews automatically for a term of one (1) year each
January first, unless written notice of non-renewal is given either by
OPM or the Carrier not less than 60 calendar days before the renewal
date, or unless modified by mutual agreement.

\(b\) This contract also may be terminated at other times by order of
OPM pursuant to 5 U.S.C. 8902(e). After OPM notifies the Carrier of its
intent to terminate the contract, OPM may take action as it deems
necessary to protect the interests of Members, including but not limited
to\--

\(1\) Suspending new enrollments under the contract;

\(2\) Advising Enrollees of the asserted deficiencies; and

\(3\) Providing Enrollees an opportunity to transfer to another plan.

\(c\) OPM may, after proper notice, terminate the contract at the end of
the contract term if it finds that the Carrier did not have at least 300
Enrollees enrolled in its Plan at any time during the two preceding
contract terms.

SECTION 1.16

\[RESERVED\]

SECTION 1.17

NOVATION AGREEMENT (JAN 1996)

The agreement at FEHBAR 1642.1204 shall be submitted for approval to OPM
when the Carrier\'s assets or the entire portion of the assets pertinent
to the performance of this contract, as determined by the Government,
are transferred.

SECTION 1.18

AGREEMENT TO RECOGNIZE CARRIER\'S CHANGE OF NAME (JAN 1996)

The agreement at FEHBAR 1642.1205 shall be submitted for approval to OPM
when the Carrier changes its name and the Government\'s and
Contractor\'s rights and obligations remain unaffected.

SECTION 1.19

CERTIFICATION UNDER P.L. 104-191 (HEALTH INSURANCE PORTABILITY AND
ACCOUNTABILITY ACT OF 1996) (JAN 1998)

The Carrier shall issue a certification of coverage for enrollees in
accordance with the regulations issued by the Health Care Financing
Administration.

SECTION 1.20

PATIENT BILL OF RIGHTS (JAN 1999)

\(a\) The Carrier shall implement the recommendations in the Health Care
Consumer Bill of Rights and Responsibilities (APatient Bill of Rights@)
in accordance with OPM guidance.

\(b\) During the Carrier=s provider contract renewal process, the
Carrier shall make any necessary modifications to such provider
contracts to comply with the recommendations of the Patient Bill of
Rights in accordance with OPM guidance. All new provider contracts with
the Carrier shall comply with the recommendations of the Patient Bill of
Rights in accordance with OPM guidance.

SECTION 1.21

YEAR 2000 COMPLIANCE (JAN ~~1999~~ **2000**)

\(a\) The Carrier shall ensure that the hardware, software, firmware,
**and medical equipment** **containing embedded chip technology** it
uses in the performance of its FEHB Program contract will accurately
process date/time data (including, but not limited to, calculating,
comparing and sequencing) involving dates later than December 31, 1999,
including leap year calculations. ~~On May 31, 1999, the Carrier shall
either notify the Contracting Officer that the system will be compliant
or provide the Contracting Officer with a contingency plan that will
detail how the system will remain operational after December 31, 1999.~~

\(b\) When acquiring information technology that will be required to
perform date/time processing involving dates later than December 31,
1999, the Carrier shall ensure that solicitations and contracts~~: (1)~~
require the information technology to be Year 2000 compliant ~~; or (2)
require that non-compliant information technology be upgraded to be Year
2000 compliant prior to the earlier of (i) the earliest date on which
the information technology may be required to perform date/time
processing involving dates later than December 31, 1999, or (ii)
December 31, 1999.~~

~~(c) Not later than May 31, 1999, the Carrier shall submit a copy of
its company purchase policy that the hardware, software, and firmware it
either contracts for or purchases is Year 2000 compliant.~~

~~(d)~~ **(c)** AYear 2000 compliant@ means that the information
technology accurately processes date/time data (including, but not
limited to, calculating, comparing, and sequencing) involving dates
later than December 31, 1999, including leap year calculations, to the
extent that other information technology used in combination with the
information technology being acquired, properly exchanges date/time data
with it.

**(d) A system failure caused by the failure of hardware, software,
firmware, or medical equipment** **containing embedded chip technology
that results in the Carrier=s inability to deliver benefits and services
to FEHB Program enrollees is a significant event under Section 1.10 of
this contract, Notice of Significant Events, and must be reported
promptly to OPM.**

SECTION 1.22

HIPAA COMPLIANCE (JAN 1998)

\(a\) The Carrier shall comply with and shall take all steps reasonably
necessary to ensure that its affiliates, subcontractors, and agents
comply with the guaranteed availability provisions of the Health
Insurance Portability and Accountability Act of 1996 (HIPAA) and
implementing regulations. AGuaranteed availability@ means the Carrier,
affiliates, subcontractors, and agents do not engage in practices
that: 1) decline to offer health insurance coverage (as defined in
section 2791(b)(1) of the Public Health Service Act Athe Act@ ) to, or
deny enrollment of an eligible individual (as defined in section 2741(b)
of the Act); or, 2) impose any preexisting condition exclusion (as
defined in section 2701(b)(1)(A) of the Act), with respect to such
coverage.

\(b\) A State or Federal enforcement action as the result of
noncompliance with the requirements of HIPAA is a significant event
under Section 1.10 of this contract, Notice of Significant Events. If
the Carrier, or any affiliate, subcontractor, or agent, is notified of
any enforcement action by any Federal or State authority with regard to
HIPAA compliance, the Carrier must notify OPM within ten working days of
learning of the action.

**SECTION 1.23**

**NOTICE TO ENROLLEES ON TERMINATION OF FEHBP OR PROVIDER CONTRACT (JAN
2000)**

**(a) Enrollees who are undergoing treatment for a chronic or disabling
condition or who are in the second or third trimester of pregnancy at
the time a carrier (1) terminates all or part of its FEHBP contract, or
(2) terminates the enrollee=s specialty provider contract for reasons
other than cause, may be able to continue to see their specialty
provider for up to 90 days or through their postpartum care.**

**(b) The Carrier shall notify its enrollees in writing of its intent to
terminate all or part of its FEHBP contract, including service area
reductions, or the enrollees= specialty provider contract, for reasons
other than cause in order to allow sufficient time for the enrollees to
arrange for continued care after the 90-day period. The Carrier shall
send the notice in time to ensure it is received by the enrollees no
less than 90 days prior to the date it terminates the contract, unless
the Carrier demonstrates it was prevented from doing so for reasons
beyond its control. The Carrier=s prompt notice will ensure that the
notification period and transitional care period run concurrently.**

**SECTION 1.24**

**TRANSITIONAL CARE (JAN 2000)**

**(a) ATransitional care@ is specialized care provided for up to 90 days
or through the postpartum period to an enrollee undergoing treatment for
a chronic or disabling condition or who is in the second or third
trimester of pregnancy when his or her carrier (1) terminates all or
part of its FEHBP contract, or (2) terminates the enrollee=s specialty
provider contract for reasons other than cause. The 90-day period begins
the earlier of the date the enrollee receives the notice required under
Section 1.23, Notice to Enrollees on Termination of FEHBP or Provider
Contract, or the date the Carrier=s or the provider=s contract ends.**

**(b) Beginning January 1, 2000, the Carrier shall ensure the
following:**

**(1) *If it terminates its FEHBP contract or a specialty provider*
*contract* other than for cause, it allows enrollees who are undergoing
treatment for a chronic or disabling condition or who are in the second
or third trimester of pregnancy to continue treatment under the
specialty provider for up to 90 days, or through their postpartum
period;**

**(2) *If it enrolls a new member who involuntarily changed carriers
because the enrollee=s former carrier was no longer available in the
FEHB Program*, it provides for the transitional care under the same
terms and conditions the enrollee had under the prior carrier; and,**

**(3) *For the Carrier=s non-transitional care enrollees who remain in
the plan after a provider change*, the enrollee is subject to the same
benefit provisions as all other members. There will be no vesting of
benefits;**

**(c) In addition, the Carrier shall (1) pay for or provide the
transitional care required under this clause at no additional cost to
enrollees;**

**(2) require the specialty provider to promptly transfer all medical
records to the designated new provider during or upon completion of the
transition period, as authorized by the patient;**

**(3) provide assistance to enrollees who want to obtain records from
the specialty provider and/or request that the provider amend or allow
them to append a record they believe is inaccurate, irrelevant, or
incomplete; and,**

**(4) require the specialty provider to give all necessary information
to the Carrier for quality assurance purposes.**

PART II - BENEFITS

SECTION 2.1

ENROLLMENT ELIGIBILITY AND EVIDENCE OF ENROLLMENT (JAN 1999)

\(a\) Enrollment.

\(1\) Each eligible individual who wishes to be enrolled in the plan
offered by this Carrier shall, as a prerequisite to such enrollment,
complete a Health Benefits Election Form or use an electronic or
telephonic method approved by OPM, within the time and under the
conditions specified in 5 CFR Part 890. The Government personnel office
having cognizance over the Enrollee shall promptly furnish notification
of such election to the Carrier.

\(2\) A person\'s eligibility for coverage, effective date of
enrollment, the level of benefits (option), the effective date of
termination or cancellation of a person\'s coverage, the date any
extension of a person\'s coverage ceases, and any continuance of
benefits beyond a period of enrollment and the date any such continuance
ceases, shall all be determined in accordance with regulations or
directions of OPM given pursuant to chapter 89, title 5, United States
Code.

\(b\) The Carrier shall, subject to the approval of the Contracting
Officer, define an area from which it will accept enrollments. The
Carrier may limit enrollment to individuals residing or employed inside
the approved area.

\(c\) The Carrier shall issue evidence of the Enrollee\'s coverage and
furnish to the Enrollee copies of any claim forms as necessary.

SECTION 2.2

BENEFITS PROVIDED (JAN 1999)

\(a\) The Carrier shall provide the benefits as described in the agreed
upon brochure text found in Appendix A.

\(1\) Benefits offered under this contract may be modified by the
Carrier to permit methods of treatment not expressly provided for, but
not prohibited by law, rule or Federal policy, if otherwise
contractually appropriate, and if such treatment is medically necessary
and is as cost effective as providing benefits to which the Member may
otherwise be entitled.

\(2\) The Carrier may pay for or provide a health service or supply in
an individual case which does not come within the specific benefit
provisions of the contract, if the Carrier determines the benefit is
within the intent of the contract, and the Carrier determines that the
provision of such benefit is in the best interests of the Federal
Employees Health Benefits Program.

\(3\) In individual cases, the Carrier, after consultation with and
concurrence by the Member and provider(s), may offer a benefit
alternative not ordinarily covered under this contract which will result
in equally effective medical treatment at no greater cost. The decision
to offer an alternative benefit is solely the Carrier\'s and is not
subject to OPM review under the disputed claims process.

\(b\) In each case when the Carrier provides a benefit in accordance
with the authority of (a)(1), (2) or (3) the Carrier shall document in
writing prior to the provision of such benefit the reasons and
justification for its determination. Such payment or provision of
services or supplies shall not be considered to be a precedent in the
disposition of similar cases.

\(c\) Except as provided for in (a) above, the Carrier shall provide
benefits for services or supplies in accordance with Appendix A.

\(d\) The Carrier, subject to (e) below, shall determine whether in its
judgment a service or supply is medically necessary or payable under
this contract.

\(e\) The Carrier agrees to pay for or provide a health service or
supply in an individual case if OPM finds that the Member is entitled
thereto under the terms of the contract.

SECTION 2.3

PAYMENT OF BENEFITS AND PROVISION OF SERVICES AND SUPPLIES (JAN 1996)

\(a\) By enrolling or accepting services under this contract, Members
are obligated to all terms, conditions, and provisions of this contract.
The Carrier may request Members to complete reasonable forms or provide
information which the Carrier may reasonably request; *provided*,
however, that the Carrier shall not require Members to complete any form
as a precondition of receiving benefits unless the form has first been
approved for use by OPM. Notwithstanding Section 2.11 *Claims
Processing,* forms requiring specific approval do not include claim
forms and other forms necessary to receive payment of individual claims.

\(b\) When members are required to file claims for covered benefits,
benefits shall be paid (with appropriate documentation of payment)
within a reasonable time after receipt of reasonable proof covering the
occurrence, character, and extent of the event for which the claim is
made. The claimant shall furnish satisfactory evidence that all services
or supplies for which expenses are claimed are covered services or
supplies within the meaning of the contract.

\(c\) The procedures and time period for receiving benefits and filing
claims shall be as specified in the agreed upon brochure text *(Appendix
A)*. However, failure to file a claim within the time required shall not
in itself invalidate or reduce any claim where timely filing was
prevented by administrative operations of Government or legal
incapacitation, provided the claim was submitted as soon as reasonably
possible.

\(d\) The Carrier may request a Member to submit to one or more medical
examinations to determine whether benefits applied for are for services
and supplies necessary for the diagnosis or treatment of an illness or
injury or covered condition. The examinations shall be made at the
expense of the Carrier.

\(e\) As a condition precedent to the provision of benefits hereunder,
the Carrier, to the extent reasonable and necessary and consistent with
Federal law, shall be entitled to obtain from any person, organization
or Government agency, including the Office of Personnel Management, all
information and records relating to visits or examination of, or
treatment rendered or supplies furnished to, a Member as the Carrier
requires in the administration of such benefits. The Carrier may obtain
from any insurance company or other organization or person any
information, with respect to any Member, which it has determined is
reasonably necessary to:

\(1\) identify enrollment in a plan,

\(2\) verify eligibility for payment of a claim for health benefits, and

\(3\) carry out the provisions of the contract, such as subrogation,
recovery of payments made in error, workers compensation, and
coordination of benefits.

\(f\) When claim filing is required, benefits are payable to the
Enrollee in the Plan or his or her assignees. However, under the
following circumstances different payment arrangements are allowed:

\(1\) Reimbursement Payments for the Enrollee. If benefits become
payable to the estate of an Enrollee or an Enrollee is a minor, or an
Enrollee is physically or mentally not competent to give a valid
release, the Carrier may either pay such benefits directly to a hospital
or other provider of services or pay such benefits to any relative by
blood or connection by marriage of the Enrollee determined by the
Carrier to be equitably entitled thereto.

\(2\) Reimbursement Payments for a minor child. If a child is covered as
a family member under the Enrollee\'s self and family enrollment and is
in the custody of a person other than the Enrollee, and if that other
person certifies to the Carrier that he or she has custody of and
financial responsibility for the dependent child, then the Carrier may
issue an identification card for the dependent child(ren) to that person
and, when claim filing is required, may reimburse that person for any
covered medical service or supply.

\(3\) Reimbursement Payments to family members covered under the
Enrollee\'s self and family enrollment. If a covered child is legally
responsible, or if a covered spouse is legally separated, and if the
covered person does not reside with the Enrollee and certifies such
conditions to the Carrier, then the Carrier may issue an identification
card to the person and when claim filing is required, the Carrier may
reimburse that person for any covered medical service or supply.

\(4\) Any payments made in good faith in accordance with paragraphs
(f)(1) through (f)(3) shall fully discharge the Carrier to the extent of
such payment.

\(g\) Overpayments. If the Carrier or OPM determines that a Member\'s
claim has been paid in error for any reason, the Carrier shall make a
diligent effort to recover an overpayment to the member from the member
or, if to the provider, from the provider. Diligent effort to recover
overpayments means that upon discovering that an overpayment exists, the
Carrier shall\--

\(1\) Send a written notice of overpayment to the member or provider
that provides: (A) an explanation of when and how the overpayment
occurred, (B) when applicable, cite the appropriate contractual benefit
provision, (C) the exact identifying information (i.e., dollar amount
overpaid, date paid, check number, date of service and provider name),
(D) a request for payment of the debt in full, and (E) an explanation of
what may occur should the debt not be paid, including possible offset to
future benefits. The notice may also offer an installment option. In
addition, the Carrier shall provide the debtor with an opportunity to
dispute the existence and amount of the debt before proceeding with
collection activities;

\(2\) After confirming that the debt does exist and in the appropriate
amount, send follow-up notices to the member or the provider at 30, 60
and 90 day intervals, if the debt remains unpaid and undisputed;

\(3\) The Carrier may off-set future benefits payable to the member or
to a provider on behalf of the member to satisfy a debt due under the
FEHBP if the debt remains unpaid and undisputed for 120 days after the
first notice.

\(4\) After applying the first three steps, refer cases to a collection
attorney or a collection agency if the debt is not recovered;

\(5\) Make diligent effort to recover overpayments until the debt is
paid in full or determined to be uncollectible by the Carrier because it
is no longer cost effective to pursue further collection efforts or it
would be against equity and good conscience to continue collection
efforts.

\(6\) Suspend recovery efforts for a debt which is based upon a claim
that has been appealed as a disputed claim under Section 2.8, until the
appeal has been resolved;

\(7\) Maintain records that document individual unrecovered overpayment
collection activities for audit or future reference.

SECTION 2.4

TERMINATION OF COVERAGE AND CONVERSION PRIVILEGES (JAN 1996)

\(a\) A Member\'s coverage is terminated as specified in regulations
issued by the OPM. Benefits after termination of coverage are as
specified in the regulations.

\(b\) A Member is entitled to a temporary continuation of coverage or an
extension of coverage under the conditions and to the extent specified
in the regulations.

\(c\) A Member whose coverage hereunder has terminated is entitled, upon
application within the times and under the conditions specified in
regulations, to a non-group contract regularly offered for the purpose
of conversion from the contract or similar contracts. The conversion
contract shall be in compliance with 5 U.S.C., chapter 89, and
regulations issued thereunder.

\(d\) Costs associated with writing or providing benefits under
conversion contracts shall not be an allowable cost of this contract.

\(e\) The Carrier shall maintain on file with OPM copies of the
conversion policies offered to persons whose coverage under this
contract terminates and advise OPM promptly of any changes in the
policies. The Contracting Officer may waive this requirement where
because of the large number of different conversion policies offered by
the Carrier it would be impractical to maintain a complete up-to-date
file of all policies. In this case the Carrier shall submit a
representative sample of the general types of policies offered and
provide copies of specific policies on demand.

SECTION 2.5

SUBROGATION (JAN 1998)

\(a\) The Carrier shall subrogate FEHB claims in the same manner in
which it subrogates claims for non-FEHB members, according to the
following rules:

\(1\) The Carrier shall subrogate FEHB claims if it is doing business in
a State in which subrogation is permitted, and in which the Carrier
subrogates for non-FEHB members;

\(2\) The Carrier shall subrogate FEHB claims if it is doing business in
a State in which subrogation is prohibited, but in which the Carrier
subrogates for at least one plan covered under the Employee Retirement
Income Security Act of 1974 (ERISA);

\(3\) The Carrier shall not subrogate if it is doing business in a State
that prohibits subrogation, and in which the Carrier does not subrogate
for any plan covered under ERISA;

\(4\) For Carriers doing business in more than one State, the Carrier
shall apply the rules in (1) through (3) of this subsection according to
the rule applicable to the State in which the subrogation would take
place.

\(b\) The Carrier\'s subrogation procedures and policies shall be shown
in the agreed upon brochure text or made available to the enrollees upon
request.

SECTION 2.6

COORDINATION OF BENEFITS (JAN 1991) (FEHBAR 1652.204-71)

\(a\) The Carrier shall coordinate the payment of benefits under this
contract with the payment of benefits under Medicare, other group health
benefits coverages, and the payment of medical and hospital costs under
no-fault or other automobile insurance that pays benefits without regard
to fault.

\(b\) The Carrier shall not pay benefits under this contract until it
has determined whether it is the primary carrier or unless permitted to
do so by the Contracting Officer.

\(c\) In coordinating benefits between plans, the Carrier shall follow
the order of precedence established by the NAIC Model Guidelines for
Coordination of Benefits (COB) as specified by OPM.

\(d\) Where (1) the Carrier makes payments under this contract which are
subject to COB provisions; (2) the payments are erroneous, not in
accordance with the terms of the contract, or in excess of the
limitations applicable under this contract; and (3) the Carrier is
unable to recover such COB overpayments from the Member or the providers
of services or supplies, the Contracting Officer may allow such amounts
to be charged to the contract; the Carrier must be prepared to
demonstrate that it has made a diligent effort to recover such COB
overpayments.

\(e\) COB savings shall be reported by experience-rated carriers each
year along with the Carrier\'s annual accounting statement in a form
specified by OPM.

\(f\) Changes in the order of precedence established by the NAIC Model
Guidelines implemented after January 1 of any given year shall be
required no earlier than the beginning of the following contract term.

> *\[NOTE: Subsection 2.6(b) will not be applied to this community-rated
> carrier. When there is double coverage for covered benefits, other
> than emergency services from non-Plan providers, the Health
> Maintenance Organization Carrier will continue to provide benefits in
> full, but will seek payment for the services and supplies provided, to
> the extent that the services and supplies are covered by the other
> coverage, no-fault automobile insurance or other primary plan.
> Likewise, Subsection 2.6(d) is not applicable to community-rated
> carriers.\]*

SECTION 2.7

DEBARMENT AND OTHER SANCTIONS (JAN 1999)

\(a\) Notwithstanding 5 U.S.C. 8902(j) or any other provision of the law
and regulations, if, under 5 U.S.C. 8902a, 5 CFR 970, or Public Law
103-123 (or other applicable appropriations law), a provider is barred
from participating in the Program under 5 U.S.C. or the provider\'s
services under 5 U.S.C. are excluded, the Carrier agrees that no payment
shall be made by the Carrier pursuant to any contract under 5 U.S.C.
(either to such provider or by reimbursement) for any service or supply
furnished by such provider during the period of the debarment, except as
provided in 5 CFR 970.200(b).

\(b\) The OPM shall notify the Carrier when a provider is barred from
the FEHBP.

SECTION 2.8

FILING HEALTH BENEFIT CLAIMS/COURT REVIEW OF DISPUTED CLAIMS (MAR 1995)
(FEHBAR 1652.204-72)

\(a\) General. (1) The Carrier resolves claims filed under the Plan. All
health benefit claims must be submitted initially to the Carrier. If the
Carrier denies a claim, (or a portion of a claim), the covered
individual may ask the Carrier to reconsider its denial. If the Carrier
affirms its denial or fails to respond as required by paragraph (b) of
this clause, the covered individual may ask OPM to review the claim. A
covered individual must exhaust both the Carrier and OPM review
processes specified in this clause before seeking judicial review of the
denied claim.

\(2\) This clause applies to covered individuals and to other
individuals or entities who are acting on the behalf of a covered
individual and who have the covered individual\'s specific written
consent to pursue payment of the disputed claim.

\(b\) Time limits for reconsidering a claim. (1) The covered individual
has 6 months from the date of the notice to the covered individual that
a claim (or a portion of a claim) was denied by the Carrier in which to
submit a written request for reconsideration to the Carrier. The time
limit for requesting reconsideration may be extended when the covered
individual shows that he or she was prevented by circumstances beyond
his or her control from making the request within the time limit.

\(2\) The Carrier has 30 days after the date of receipt of a
timely-filed request for reconsideration to:

\(i\) Affirm the denial in writing to the covered individual;

\(ii\) Pay the bill or provide the service; or

\(iii\) Request from the covered individual or provider additional
information needed to make a decision on the claim. The Carrier must
simultaneously notify the covered individual of the information
requested if it requests additional information from a provider. The
Carrier has 30 days after the date the information is received to affirm
the denial in writing to the covered individual or pay the bill or
provide the service. The Carrier must make its decision based on the
evidence it has if the covered individual or provider does not respond
within 60 days after the date of the Carrier\'s notice requesting
additional information. The Carrier must then send written notice to the
covered individual of its decision on the claim. The covered individual
may request OPM review as provided in paragraph (b)(3) of this clause if
the Carrier fails to act within the time limit set forth in this
paragraph.

\(3\) The covered individual may write to OPM and request that OPM
review the Carrier\'s decision if the Carrier either affirms its denial
of a claim or fails to respond to a covered individual\'s written
request for reconsideration within the time limit set forth in paragraph
(b)(2) of this clause. The covered individual must submit the request
for OPM review within the time limit specified in paragraph (e)(1) of
this clause.

\(4\) The Carrier may extend the time limit for a covered individual\'s
submission of additional information to the Carrier when the covered
individual shows he or she was not notified of the time limit or was
prevented by circumstances beyond his or her control from submitting the
additional information.

\(c\) Information required to process requests for reconsideration. (1)
The covered individual must put the request to the Carrier to reconsider
a claim in writing and give the reasons, in terms of applicable brochure
provisions, that the denied claim should have been approved.

\(2\) If the Carrier needs additional information from the covered
individual to make a decision, it must:

\(i\) Specifically identify the information needed;

\(ii\) State the reason the information is required to make a decision
on the claim;

\(iii\) Specify the time limit (60 days after the date of the Carrier\'s
request) for submitting the information; and

\(iv\) State the consequences of failure to respond within the time
limit specified, as set out in paragraph (b)(2) of this section.

\(d\) Carrier determinations. The Carrier must provide written notice to
the covered individual of its determination. If the Carrier affirms the
initial denial, the notice must inform the covered individual of:

\(1\) The specific and detailed reasons for the denial;

\(2\) The covered individual\'s right to request a review by OPM; and

\(3\) The requirement that requests for OPM review must be received
within 90 days after the date of the Carrier\'s denial notice and
include a copy of the denial notice as well as documents to support the
covered individual\'s position.

\(e\) OPM review. (1) If the covered individual seeks further review of
the denied claim, the covered individual must make a request to OPM to
review the Carrier\'s decision. Such a request to OPM must be made:

\(i\) Within 90 days after the date of the Carrier\'s notice to the
covered individual that the denial was affirmed; or

\(ii\) If the Carrier fails to respond to the covered individual as
provided in paragraph (b)(2) of this clause, within 120 days after the
date of the covered individual\'s timely request for reconsideration by
the Carrier; or

\(iii\) Within 120 days after the date the Carrier requests additional
information from the covered individual, or the date the covered
individual is notified that the Carrier is requesting additional
information from a provider. OPM may extend the time limit for a covered
individual\'s request for OPM review when the covered individual shows
he or she was not notified of the time limit or was prevented by
circumstances beyond his or her control from submitting the request for
OPM review within the time limit.

\(2\) In reviewing a claim denied by the Carrier, OPM may

\(i\) Request that the covered individual submit additional information;

\(ii\) Obtain an advisory opinion from an independent physician;

\(iii\) Obtain any other information as may in its judgment be required
to make a determination; or

\(iv\) Make its decision based solely on the information the covered
individual provided with his or her request for review.

\(3\) When OPM requests information from the Carrier, the Carrier must
release the information within 30 days after the date of OPM\'s written
request unless a different time limit is specified by OPM in its
request.

\(4\) Within 90 days after receipt of the request for review, OPM will
either:

\(i\) Give a written notice of its decision to the covered individual
and the Carrier; or

\(ii\) Notify the individual of the status of the review. If OPM does
not receive requested evidence within 15 days after expiration of the
applicable time limit in paragraph (e)(3) of this clause, OPM may make
its decision based solely on information available to it at that time
and give a written notice of its decision to the covered individual and
to the Carrier.

\(f\) OPM, upon its own motion, may reopen its review if it receives
evidence that was unavailable at the time of its original decision.

\(g\) Court review. (1) A suit to compel enrollment under \' 890.102 of
Title 5, Code of Federal Regulations, must be brought against the
employing office that made the enrollment decision.

\(2\) A suit to review the legality of OPM\'s regulations under this
part must be brought against the Office of Personnel Management.

\(3\) Federal Employees Health Benefits (FEHB) carriers resolve FEHB
claims under authority of Federal statute (chapter 89, title 5, United
States Code). A covered individual may seek judicial review of OPM\'s
final action on the denial of a health benefits claim. A legal action to
review final action by OPM involving such denial of health benefits must
be brought against OPM and not against the Carrier or the Carrier\'s
subcontractors. The recovery in such a suit shall be limited to a court
order directing OPM to require the Carrier to pay the amount of benefits
in dispute.

\(4\) An action under paragraph (3) of this clause to recover on a claim
for health benefits:

\(i\) May not be brought prior to exhaustion of the administrative
remedies provided in paragraphs (a) through (f) of this clause;

\(ii\) May not be brought later than December 31 of the 3rd year after
the year in which the care or service was provided; and

\(iii\) Will be limited to the record that was before OPM when it
rendered its decision affirming the Carrier\'s denial of benefits.

SECTION 2.9

PROTECTION OF MEMBERS AGAINST PROVIDER CLAIMS (JAN 1996)

\(a\) The Carrier shall provide the Contracting Officer with evidence
that its contracts with providers (hospitals and physicians) contain a
provision that, in the event of Carrier insolvency, or inability to pay
expenses for any reason, the providers shall not look to Members for
payment. The Carrier agrees that over 90 percent of the total benefit
cost under this contract will be provided under such contracts with
providers; or

\(b\) In lieu of subsection (a) above, the Contracting Officer may
accept such other combinations of coverage which provide protection of
Members against provider claims as defined in the NAIC (National
Association of Insurance Commissioners) Model HMO Act, as amended; or

\(c\) The Carrier shall provide the Contracting Officer with
documentation that it has such other appropriate combinations of
coverage which would provide protection of Members against provider
claims in the event of Carrier insolvency, or inability to pay expenses
for any reason.

\(d\) The Carrier shall notify the Contracting Officer as soon as it is
aware that it will not be able to satisfy the requirements stated in
subsections (a), (b), or (c) above.

SECTION 2.10

INDEPENDENT LABORATORIES (JAN 1991)

In order to assure a minimum standard of quality for laboratory
services, the Carrier agrees that it will not use independent
laboratories which do not comply with Medicare or similar standards.

SECTION 2.11

CLAIMS PROCESSING (JAN 1998)

A standardized claims filing process shall be used by all FEHB carriers.
The Carrier shall apply procedures for using the standard claims
process. At a minimum the Carrier\'s program must achieve the following
objectives:

\(1\) By the year 2000, the majority of provider claims should be
submitted electronically;

\(2\) All physicians shall be notified that future claims must be
submitted electronically or on the Health Care Financing Administration
1500 form;

\(3\) The Carrier shall not use any unique physician claim form(s) for
such FEHB member claims;

\(4\) The Carrier should reject all such claims submitted on forms other
than the HCFA 1500 form and shall explain the reason on the Explanation
of Benefits form; and

\(5\) The Carrier shall advise OPM of its progress in implementing this
policy as directed by the Contracting Officer.

SECTION 2.12 CALCULATION OF COST SHARING PROVISIONS (JAN 1996)

When the Member is required to pay a specified percentage of the cost of
covered services, the Member\'s obligation for covered services shall be
based on the amount the provider has agreed to accept as full payment,
including future discounts that are known and that can be accurately
calculated at the time the claim is processed. This includes for
example, prompt pay discounts as well as other discounts granted for
various business reasons.

SECTION 2.13

BENEFITS PAYMENTS WHEN MEDICARE IS PRIMARY (JAN 1998)

When a Member who is covered by Medicare Part A, Part B, or Parts A and
B on a fee-for-service basis (a) receives services that generally are
eligible for coverage by Medicare (regardless of whether or not benefits
are paid by Medicare) and are covered by the Carrier, and (b) Medicare
is the primary payer and the Carrier is the secondary payer for the
Member under the order of benefit determination rules stated in Appendix
A of this contract, then the Carrier shall limit its payment to an
amount that supplements the benefits payable by Medicare (regardless of
whether or not Medicare benefits are paid). When emergency services have
been provided by a Medicare nonparticipating institutional provider and
the provider is not reimbursed by Medicare, the Carrier shall pay its
primary benefits. Payments that supplement Medicare include amounts
necessary to reimburse the Member for Medicare deductibles, coinsurance,
and the balance between the Medicare approved amount and the Medicare
limiting charge made by non-participating providers. This provision does
not apply to debarred providers (see Section 2.7).

**SECTION 2.14**

**CONTINUING REQUIREMENTS AFTER TERMINATION OF THE CARRIER (JAN 2000)**

**(a) The Carrier shall fulfill all of the requirements agreed to under
the contract that continue after termination.**

**(b) Contract requirements that extend beyond the date of the Carrier=s
termination include, but are not limited to, offering conversion
contracts to enrollees during the 31-day extension of coverage for
conversion, providing benefits to the enrollee until the effective date
of the new enrollment, and processing and paying claims incurred prior
to the termination date.**

PART III - PAYMENTS, CHARGES AND ACCOUNTING

SECTION 3.1

PAYMENTS (JAN 1999) (FEHBAR 1652.232-70)

\(a\) 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), 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).

\(c\) The specific subscription rates, charges, allowances and
limitations applicable to the contract are set forth in Appendix B.

\(d\) Recurring payments from premiums shall be due and payable not
later than thirty days after receipt by the Fund. The Contracting
Officer may authorize special nonrecurring payments from the Contingency
Reserve in accordance with OPM\'s regulations.

\(e\) In the event this contract between the Carrier and OPM is
terminated or not renewed in accordance with General Provision 1.15,
Renewal and Withdrawal of Approval, the Contingency Reserve of the
Carrier held by OPM shall be available to the Carrier to pay the
necessary and proper charges against this contract to the extent that
the reserves held by the Carrier are insufficient for that purpose.

> *\[NOTE: The adjustment for error or fraud referenced in paragraph (a)
> and the necessary and proper charges against this contract if the
> contract is terminated or not renewed, referenced in subsection (d),
> shall be limited to the subscription rate and any contingency reserve
> payment otherwise provided for in this contract and shall not include
> claim charges or other expenses attributable to individual Members.
> Further, FEHBAR 1652.216-70, Accounting and Price Adjustment, applies
> if any adjustment to the contract price is determined.\]*

SECTION 3.2

ACCOUNTING AND PRICE ADJUSTMENT (JAN ~~1998~~ **2000**) (FEHBAR
1652.216-70)

\(a\) *Annual Accounting Statement*. The Carrier, not later than 90 days
after the end of each contract period, shall furnish to OPM for that
contract period an accounting of its operations under the contract.
~~The accounting shall be in the form prescribed by OPM.~~ **The Carrier
shall follow the OPM prescribed accounting format.**

\(b\) *Adjustment.* (1) This contract is community rated as defined in
FEHBAR 1602.170-2.

\(2\) The subscription rates agreed to in this contract shall be
equivalent to the subscription rates given to the Carrier\'s similarly
sized subscriber groups (SSSGs) as defined in FEHBAR \'1602.170-13.

\(3\) If, at the time of the rate reconciliation, **the Carrier or OPM
find** the subscription rates ~~are found~~ to be lower than the
equivalent rates for the lower of the two SSSGs, the Carrier may include
an adjustment to the Federal group\'s rates for the next contract
period.

\(4\) If, at the time of the rate reconciliation, **the Carrier or OPM
find** the subscription rates to be higher than the equivalent rates for
the lower of the two SSSGs, the Carrier shall reimburse the Fund, for
example, by reducing the FEHB rates for the next contract term to
reflect the difference between the estimated rates and the rates which
are derived using the methodology of the lower rated SSSG.

\(5\) **The Government shall not allow or consider and the Carrier shall
not make any** ~~No~~ upward adjustment in the rate established for this
contract ~~will be allowed or considered by the Government or will be
made by the Carrier~~ in this or in any other contract period on the
basis of actual costs incurred, actual benefits provided, or actual size
or composition of the FEHBP group during this contract period.

\(6\) In the event this contract is not renewed, neither the Government
nor the Carrier shall be entitled to any adjustment or claim for the
difference between the subscription rates prior to rate reconciliation
and the actual subscription rates.

**(c) *[Exception for the 3-Year DoD Demonstration Project (10 U.S.C.
1108).]{.underline}* Similarly sized subscriber group (SSSG) rating
methodologies shall not be used to determine the reasonableness of the
Carrier=s demonstration project premium rates. The Carrier=s rates shall
not be adjusted for equivalency with SSSG rating methodologies. The
Carrier shall benchmark premiums against adjusted community rates if
available, Medigap offerings, or other similar products.**

(End of Clause)

SECTION 3.3

RATE REDUCTION FOR DEFECTIVE PRICING OR DEFECTIVE COST OR PRICING DATA
(JAN ~~1998~~ **2000**) (FEHBAR 1652.215-70)

\(a\) If **the Carrier increased** any rate established in connection
with this contract ~~was increased~~ because **it** (1) ~~the Carrier~~
submitted, or kept in its files in support of the FEHBP rate, cost or
pricing data that were not complete, accurate, or current as certified
in the Certificate of Accurate Cost or Pricing Data (FEHBAR
1615.804-70); (2) ~~the Carrier~~ submitted, or kept in its files in
support of the FEHBP rate, cost or pricing data that were not accurate
as represented in the rate proposal documents; (3) ~~the Carrier~~
developed FEHBP rates with a rating methodology and structure
inconsistent with that used to develop rates for similarly sized
subscriber groups (see FEHBAR \'1602.170-13) as certified in the
Certificate of Accurate Cost or Pricing Data for Community Rated
Carriers; or (4) ~~the Carrier~~ submitted or, or kept in its files in
support of the FEHBP rate, data or information of any description that
were not complete, accurate, and current\--then, the ~~rate shall be
reduced~~ **Carrier shall reduce the rate** in the amount by which the
price was increased because of the defective data or information.

(b)(1) If the Contracting Officer determines under paragraph (a) of this
clause that a price or cost reduction should be made, the Carrier agrees
not to raise the following matters as a defense: (i) The Carrier was a
sole source supplier or otherwise was in a superior bargaining position
and thus the price of the contract would not have been modified even if
accurate, complete, and current cost or pricing data had been submitted
or maintained and identified.

\(ii\) The Contracting Officer should have known that the cost or
pricing data in issue were defective even though the Carrier took no
affirmative action to bring the character of the data to the attention
of the Contracting Officer.

\(iii\) The contract was based on an agreement about the total cost of
the contract and there was no agreement about the cost of each item
procured under the contract.

\(iv\) The Carrier did not submit or keep in its files a Certificate of
Current Cost or Pricing Data.

(2)(i) Except as prohibited by subdivision (b)(2)(ii) of this clause,
**the Contracting Officer shall determine and allow an** **appropriate
offset** ~~an offset in an amount determined appropriate by the
Contracting Officer~~ based upon the facts ~~shall be allowed~~ against
the amount of a contract price reduction if\--

\(A\) The Carrier certifies to the Contracting Officer that, to the best
of the Carrier\'s knowledge and belief, the Carrier is entitled to the
offset in the amount requested; and

\(B\) The Carrier proves that the cost or pricing data were available
before the date of agreement on the price of the contract (or price of
the modification) and that the data were not submitted before such date.
(ii) ~~An offset shall not be allowed~~ **The Contracting Officer shall
not allow** **an offset** if\-- (A) The ~~understated data was known by
the Carrier~~ **Carrier knew the data** ~~to be~~ **was** understated
when the Certificate of Current Cost or Pricing Data was signed; or

\(B\) The Government proves ~~that~~ the facts demonstrate that the
contract price would not have increased in the amount to be offset even
if the available data had been submitted before the date of agreement on
price.

\(c\) When the Contracting Officer determines that the rates shall be
reduced and the Government is thereby entitled to a refund, the Carrier
shall be liable to and shall pay the FEHB Fund at the time the
overpayment is repaid\--

\(1\) Simple interest on the amount of the overpayment from the date the
~~overpayment was paid from the FEHB Fund to the Carrier~~ **Government
paid the Carrier the overpayment from the FEHB Fund** until the date the
**Carrier liquidates the** overcharge ~~is liquidated~~. In calculating
the amount of interest due, **the Carrier shall use** 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 **Carrier retained
the** overcharge ~~was retained by the Carrier shall be used~~; and,

\(2\) A penalty equal to the amount of overpayment, if the Carrier
knowingly submitted cost or pricing data which was incomplete,
inaccurate, or noncurrent.

**(d) *Exception for the DoD Demonstration Project.* Similarly sized
subscriber group (SSSG) rating methodologies shall not be used to
determine the reasonableness of the Carrier=s demonstration project
premium rates. The Carrier=s rates shall not be adjusted for equivalency
with SSSG rating methodologies.** **The Carrier shall benchmark premiums
against adjusted community rates if available, Medigap offerings, or
other similar products.**

(End of Clause)

SECTION 3.4

CONTRACTOR RECORDS RETENTION (JAN 1999) (FEHBAR 1652.204-70)

Notwithstanding the provisions of Section 5.7 (FAR 52.215-2(f)) *Audit
and Records - Negotiation* the Carrier shall retain and make available
all records applicable to a contract term that support the annual
statement of operations and, for contracts that exceed the threshold at
FAR 15.403-4(a)(1), the rate submission for that contract term for a
period of 5 years after the end of the contract term to which the
records relate, except that individual enrollee and/or patient claim
records shall be maintained for 3 years after the end of the contract
term to which the claim records relate.

SECTION 3.5

APPROVAL FOR ASSIGNMENT OF CLAIMS (JAN 1991) (FEHBAR 1652.232-73)

\(a\) Notwithstanding the provisions of Section 5.35 \[FAR 52.232-23\],
*Assignment of Claims*, the Carrier shall not make any assignment under
the Assignment of Claims Act without the prior written approval of the
Contracting Officer.

\(b\) Unless a different period is specified in the Contracting
Officer\'s written approval, an assignment shall be in force only for a
period of one year from the date of the Contracting Officer\'s approval.
However, assignments may be renewed upon their expiration.

SECTION 3.6

DISCREPANCIES BETWEEN ENROLLMENT AND PAYMENTS TO CARRIER (JAN 1999)

\(a\) The OPM and the Carrier recognize that the portion of subscription
payments under Section 3.1(a) forwarded by OPM to the Carrier for
Enrollees may not be consistent with the Carrier\'s reconciliation of
enrollment under Section 1.5. Therefore, the OPM and the Carrier agree:

\(1\) That any individual discrepancies discovered in the course of
reconciliation, in which the agency certifying officer and the Carrier
agree as to the enrollment status of the individual, shall be corrected
by the applicable agency to reflect the valid enrollment(s). If the
reconciliation indicates that the subscription payments were not made or
were made in error, appropriate adjustments shall be made by the agency
to the Fund pursuant to law. Any adjustment in the subscription charges
received by the Fund from the agency as a result of a reconciliation
shall be forwarded by OPM under Section 3.1(a); and

\(2\) That the rates in Appendix B include an adjustment to the
subscription charges equal to one percent in full resolution of all
discrepancies not corrected under Section 3.6(b)(1).

\(b\) In consideration of the adjustments in Section 3.6(a)(1) and (2),
the Carrier accepts the adjustment to the subscription charges in full
resolution of all obligations of the Government in connection with the
subscription payments as described in this section 3.6, and waives any
rights it may have to claims for subscription payments under Section
3.1(a).

\(c\) The OPM and the Carrier shall review the reconciliation process
and this provision for Contract Year 2001.

SECTION 3.7

SURVEY CHARGES (JAN 1999)

\(a\) If the Carrier contracts with a National Committee for Quality
Assurance (NCQA) certified vendor to conduct the annual consumer
assessment survey, paragraph (b) does not apply.

\(b\) If the Carrier participates in an FEHB-specific annual consumer
assessment survey, it shall pay OPM=s contractor a pro rata share of the
total cost of conducting the survey. The Carrier shall pay a separate
fee for each plan option and /or rating area. The Carrier agrees to pay
the contractor=s invoice within 30 days of the billing date. If the
Carrier does not remit payment to the survey contractor within 60 days
of the billing date, OPM shall withhold the amount due from the
Carrier=s subscription charges according to FEHBAR 1652.232-70,
PaymentsBcommunity-rated contracts, and forward payment to the survey
contractor.

PART IV \-- SPECIAL PROVISIONS

SECTION 4.1

ALTERATIONS IN CONTRACT (JAN 1998)

(FAR 52.252.4)

Portions of this contract are altered as follows:

\(a\) Sections 5.30, 5.31, 5.32. Cost Accounting Standards, part 30 of
the FAR, has not yet been implemented for the FEHBP community rated
contracts. Sections 5.30, 5.31 and 5.32 are not applicable to this
contract.

\(b\) Section 3.2. As required by Public Law 101-508, \' 8909 of title
5, U.S.C., and Section 3.2(b) of this contract are amended by the
following:

\(1\) No tax, fee, or other monetary payment may be imposed, directly or
indirectly, on a Carrier or an underwriting or plan administration
subcontractor of an approved health benefits plan by any State, the
District of Columbia, or the Commonwealth of Puerto Rico, or by any
political subdivision or other governmental authority thereof, with
respect to any payment made from the Fund.

\(2\) Paragraph (1) shall not be construed to exempt any Carrier or
subcontractor of an approved health benefits plan from the imposition,
payment, or collection of a tax, fee, or other monetary payment on the
net income or profit accruing to or realized by such Carrier or
underwriting or plan administration subcontractor from business
conducted under this Chapter, if that tax, fee, or payment is applicable
to a broad range of business activity.

**Proposed Year 2000 Amendments to the Standard Contract for**

**Community-Rated Carriers**

1\. Redate Section 1.21, YEAR 2000 COMPLIANCE, as JAN 2000 and update
and revise the clause as follows:

SECTION 1.21

YEAR 2000 COMPLIANCE (JAN ~~1999~~ **2000**)

\(a\) The Carrier shall ensure that the hardware, software, firmware,
**and medical equipment** **containing embedded chip technology** it
uses in the performance of its FEHB Program contract will accurately
process date/time data (including, but not limited to, calculating,
comparing and sequencing) involving dates later than December 31, 1999,
including leap year calculations. ~~On May 31, 1999, the Carrier shall
either notify the Contracting Officer that the system will be compliant
or provide the Contracting Officer with a contingency plan that will
detail how the system will remain operational after December 31, 1999.~~

\(b\) When acquiring information technology that will be required to
perform date/time processing involving dates later than December 31,
1999, the Carrier shall ensure that solicitations and contracts~~: (1)~~
require the information technology to be Year 2000 compliant ~~; or (2)
require that non-compliant information technology be upgraded to be Year
2000 compliant prior to the earlier of (i) the earliest date on which
the information technology may be required to perform date/time
processing involving dates later than December 31, 1999, or (ii)
December 31, 1999.~~

~~(c) Not later than May 31, 1999, the Carrier shall submit a copy of
its company purchase policy that the hardware, software, and firmware it
either contracts for or purchases is Year 2000 compliant.~~

~~(d)~~ **(c)** AYear 2000 compliant@ means that the information
technology accurately processes date/time data (including, but not
limited to, calculating, comparing, and sequencing) involving dates
later than December 31, 1999, including leap year calculations, to the
extent that other information technology used in combination with the
information technology being acquired, properly exchanges date/time data
with it.

**(d) A system failure caused by the failure of hardware, software,
firmware, or medical equipment** **containing embedded chip technology
that results in the Carrier=s inability to deliver benefits and services
to FEHB Program enrollees is a significant event under Section 1.10 of
this contract, Notice of Significant Events, and must be reported
promptly to OPM.**

2\. Add new Sections 1.23, NOTICE TO ENROLLEES ON TERMINATION OF FEHBP
OR PROVIDER CONTRACT, and 1.24, TRANSITIONAL CARE, to implement the
continuity of care provisions of the Patient Bill of Rights, as follows:

**SECTION 1.23**

**NOTICE TO ENROLLEES ON TERMINATION OF FEHBP OR PROVIDER CONTRACT (JAN
2000)**

**(a) Enrollees who are undergoing treatment for a chronic or disabling
condition or who are in the second or third trimester of pregnancy at
the time a carrier (1) terminates all or part of its FEHBP contract, or
(2) terminates the enrollee's specialty provider contract for reasons
other than cause, may be able to continue to see their specialty
provider for up to 90 days or through their postpartum care.**

**(b) The Carrier shall notify its enrollees in writing of its intent to
terminate all or part of its FEHBP contract, including service area
reductions, or the enrollees' specialty provider contract, for reasons
other than cause in order to allow sufficient time for the enrollees to
arrange for continued care after the 90-day period. The Carrier shall
send the notice in time to ensure it is received by the enrollees no
less than 90 days prior to the date it terminates the contract, unless
the Carrier demonstrates it was prevented from doing so for reasons
beyond its control. The Carrier's prompt notice will ensure that the
notification period and transitional care period run concurrently.**

**SECTION 1.24**

**TRANSITIONAL CARE (JAN 2000)**

**(a) ATransitional care@ is specialized care provided for up to 90 days
or through the postpartum period to an enrollee undergoing treatment for
a chronic or disabling condition or who is in the second or third
trimester of pregnancy when his or her carrier (1) terminates all or
part of its FEHBP contract, or (2) terminates the enrollee=s specialty
provider contract for reasons other than cause. The 90-day period begins
the earlier of the date the enrollee receives the notice required under
Section 1.23, Notice to Enrollees on Termination of FEHBP or Provider
Contract, or the date the Carrier=s or the provider=s contract ends.**

**(b) Beginning January 1, 2000, the Carrier shall ensure the
following:**

**(1) *If it terminates a specialty provider* *contract* other than for
cause, it allows enrollees who are undergoing treatment for a chronic or
disabling condition or who are in the second or third trimester of
pregnancy to continue treatment under the specialty provider for up to
90 days, or through their postpartum period, under the same terms and
conditions that existed at the beginning of the transitional care
period; and**

**(2) *If it enrolls a new member who involuntarily changed carriers
because the enrollee=s former carrier was no longer available in the
FEHB Program*, it provides for the transitional care under the same
terms and conditions the enrollee had under the prior carrier.**

**(c) In addition, the Carrier shall (1) pay for or provide the
transitional care required under this clause at no additional cost to
enrollees;**

**(2) require the specialty provider to promptly transfer all medical
records to the designated new provider during or upon completion of the
transition period, as authorized by the patient;**

**(3) provide assistance to enrollees who want to obtain records from
the specialty provider and/or request that the provider amend or allow
them to append a record they believe is inaccurate, irrelevant, or
incomplete; and,**

**(4) require the specialty provider to give all necessary information
to the Carrier for quality assurance purposes.**

3\. Add a new Section 2.14, CONTINUING REQUIREMENTS AFTER TERMINATION OF
THE CARRIER, to reinforce certain contractual requirements as follows:

**SECTION 2.14**

**CONTINUING REQUIREMENTS AFTER TERMINATION OF THE CARRIER (JAN 2000)**

**(a) The Carrier shall fulfill all of the requirements agreed to under
the contract that continue after termination.**

**(b) Contract requirements that extend beyond the date of the Carrier=s
termination include, but are not limited to, offering conversion
contracts to enrollees during the 31-day extension of coverage for
conversion, providing benefits to the enrollee until the effective date
of the new enrollment, and processing and paying claims incurred prior
to the termination date.**

4\. Redate Section 3.2, ACCOUNTING AND

PRICE ADJUSTMENT, as JAN 2000; add a new paragraph (c) to implement the
DoD/FEHBP Demonstration Project authorized by 10 U.S.C. 1108; and make
clarifying changes as follows:

SECTION 3.2

ACCOUNTING AND PRICE ADJUSTMENT (JAN ~~1998~~ **2000**) (FEHBAR
1652.216-70)

\(a\) *Annual Accounting Statement*. The Carrier, not later than 90 days
after the end of each contract period, shall furnish to OPM for that
contract period an accounting of its operations under the contract.
~~The accounting shall be in the form prescribed by OPM.~~ **The Carrier
shall follow the OPM prescribed accounting format.**

\(b\) *Adjustment.* (1) This contract is community rated as defined in
FEHBAR 1602.170-2.

\(2\) The subscription rates agreed to in this contract shall be
equivalent to the subscription rates given to the Carrier\'s similarly
sized subscriber groups (SSSGs) as defined in FEHBAR \'1602.170-13.

\(3\) If, at the time of the rate reconciliation, **the Carrier or OPM
find** the subscription rates ~~are found~~ to be lower than the
equivalent rates for

the lower of the two SSSGs, the Carrier may include an adjustment to the
Federal group\'s rates for the next contract period.

\(4\) If, at the time of the rate reconciliation, **the Carrier or OPM
find** the subscription rates to be higher than the equivalent rates for
the lower of the two SSSGs, the Carrier shall reimburse the Fund, for
example, by reducing the FEHB rates for the next contract term to
reflect the difference between the estimated rates and the rates which
are derived using the methodology of the lower rated SSSG.

\(5\) **The Government shall not allow or consider and the Carrier shall
not make any** ~~No~~ upward adjustment in the rate established for this
contract ~~will be allowed or considered by the Government or will be
made by the Carrier~~ in this or in any other contract period on the
basis of actual costs incurred, actual benefits provided, or actual size
or composition of the FEHBP group during this contract period.

\(6\) In the event this contract is not renewed, neither the Government
nor the Carrier shall be entitled to any adjustment or claim for the
difference between the subscription rates prior to rate reconciliation
and the actual subscription rates.

**(c) *[Exception for the 3-Year DoD Demonstration Project (10 U.S.C.
1108).]{.underline}* Similarly sized subscriber group (SSSG) rating
methodologies shall not be used to determine the reasonableness of the
Carrier=s demonstration project premium rates. The Carrier=s rates shall
not be adjusted for equivalency with SSSG rating methodologies. The
Carrier shall benchmark premiums against adjusted community rates if
available, Medigap offerings, or other similar products.**

(End of Clause)

5\. Redate Section 3.3, RATE REDUCTION FOR DEFECTIVE PRICING OR
DEFECTIVE COST OR PRICING DATA (FEHBAR 1652.215-70), as JAN 2000; add a
new paragraph (d) to implement the DoD/FEHBP Demonstration Project
authorized by Public Law 105-261; and make clarifying changes as
follows:

SECTION 3.3

RATE REDUCTION FOR DEFECTIVE PRICING OR DEFECTIVE COST OR PRICING DATA
(JAN ~~1998~~ **2000**) (FEHBAR 1652.215-70)

\(a\) If **the Carrier increased** any rate established in connection
with this contract ~~was increased~~ because **it** (1) ~~the Carrier~~
submitted, or kept in its files in support of the FEHBP rate, cost or
pricing data that were not complete, accurate, or current as certified
in the Certificate of Accurate Cost or Pricing Data (FEHBAR
1615.804-70); (2) ~~the Carrier~~ submitted, or kept in its files in
support of the FEHBP rate, cost or pricing data that were not accurate
as represented in the rate proposal documents; (3) ~~the Carrier~~
developed FEHBP rates with a rating methodology and structure
inconsistent with that used to develop rates for similarly sized
subscriber groups (see FEHBAR \'1602.170-13) as certified in the
Certificate of Accurate Cost or Pricing Data for Community Rated
Carriers; or (4) ~~the Carrier~~ submitted or, or kept in its files in
support of the FEHBP rate, data or information of any description that
were not complete, accurate, and current\--then, the ~~rate shall be
reduced~~ **Carrier shall reduce the rate** in the amount by which the
price was increased because of the defective data or information.

(b)(1) If the Contracting Officer determines under paragraph (a) of this
clause that a price or cost reduction should be made, the Carrier agrees
not to raise the following matters as a defense: (i) The Carrier was a
sole source supplier or otherwise was in a superior bargaining position
and thus the price of the contract would not have been modified even if
accurate, complete, and current cost or pricing data had been submitted
or maintained and identified.

\(ii\) The Contracting Officer should have known that the cost or
pricing data in issue were defective even though the Carrier took no
affirmative action to bring the character of the data to the attention
of the Contracting Officer.

\(iii\) The contract was based on an agreement about the total cost of
the contract and there was no agreement about the cost of each item
procured under the contract.

\(iv\) The Carrier did not submit or keep in its files a Certificate of
Current Cost or Pricing Data.

(2)(i) Except as prohibited by subdivision (b)(2)(ii) of this clause,
**the Contracting Officer shall determine and allow an** **appropriate
offset** ~~an offset in an amount determined appropriate by the
Contracting Officer~~ based upon the facts ~~shall be allowed~~ against
the amount of a contract price reduction if\--

\(A\) The Carrier certifies to the Contracting Officer that, to the best
of the Carrier\'s knowledge and belief, the Carrier is entitled to the
offset in the amount requested; and

\(B\) The Carrier proves that the cost or pricing data were available
before the date of agreement on the price of the contract (or price of
the modification) and that the data were not submitted before such date.
(ii) ~~An offset shall not be allowed~~ **The Contracting Officer shall
not allow** **an offset** if\-- (A) The ~~understated data was known by
the Carrier~~ **Carrier knew the data** ~~to be~~ **was** understated
when the Certificate of Current Cost or Pricing Data was signed; or

\(B\) The Government proves ~~that~~ the facts demonstrate that the
contract price would not have increased in the amount to be offset even
if the available data had been submitted before the date of agreement on
price.

\(c\) When the Contracting Officer determines that the rates shall be
reduced and the Government is thereby entitled to a refund, the Carrier
shall be liable to and shall pay the FEHB Fund at the time the
overpayment is repaid\--

\(1\) Simple interest on the amount of the overpayment from the date the
~~overpayment was paid from the FEHB Fund to the Carrier~~ **Government
paid the Carrier the overpayment from the FEHB Fund** until the date the
**Carrier liquidates the** overcharge ~~is liquidated~~. In calculating
the amount of interest due, **the Carrier shall use** 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 **Carrier retained
the** overcharge ~~was retained by the Carrier shall be used~~; and,

\(2\) A penalty equal to the amount of overpayment, if the Carrier
knowingly submitted cost or pricing data which was incomplete,
inaccurate, or noncurrent.

**(d) *Exception for the DoD Demonstration Project.* Similarly sized
subscriber group (SSSG) rating methodologies shall not be used to
determine the reasonableness of the Carrier=s demonstration project
premium rates. The Carrier=s rates shall not be adjusted for equivalency
with SSSG rating methodologies.** **The Carrier shall benchmark premiums
against adjusted community rates if available, Medigap offerings, or
other similar products.**

(End of Clause)

6\. Update the introductory paragraph and paragraph (a)5. of Appendix
D-a to include website material under supplemental literature, as
follows:

APPENDIX D-a

FEHB SUPPLEMENTAL LITERATURE GUIDELINES

This is the primary guide a Carrier should use to assess whether the
Carrier\'s supple­mental marketing literature**, including website
material,** complies with FEHBAR 1603.70, Misleading, Deceptive or
Unfair Advertising. (Use the NAIC Guidelines for additional guidance
when needed.)

a\) 5. Under the FEHBP, the FEHB brochure is ~~based on text approved by
OPM and is a complete statement of benefits, limitations, and
exclusions~~ **the official statement of benefits**. Include the
follow­ing statement **(website material should include the statement as
a preface)** in all supplemental litera­ture which in any way discusses
Plan benefits:

\"*This is a summary \[or brief des­crip­tion\] of the features of the
\[insert Plan\'s name\]. Before making a final decision, please read the
Plan\'s Federal brochure (\[insert bro­chure number\]). All benefits are
subject to the definitions, limitations, and exclusions set forth in the
Federal brochure.\"*