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contains regulatory documents having general

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are keyed to and codified in the Code of

Federal Regulations, which is published under

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REGISTER issue of each week.

Rules and Regulations Federal Register

19521 

Vol. 77, No. 63 

Monday, April 2, 2012 

OFFICE OF PERSONNEL 

MANAGEMENT 

5 CFR Part 532 

RIN 3206–AM50 

Prevailing Rate Systems; Redefinition 

of the Austin, TX and Waco, TX, 

Appropriated Fund Federal Wage 

System Wage Areas 

AGENCY: U.S. Office of Personnel 

Management. 

ACTION: Final rule. 

SUMMARY: The U.S. Office of Personnel 

Management is issuing a final rule to 

redefine the geographic boundaries of 

the Austin, TX, and Waco, TX, 

appropriated fund Federal Wage System 

(FWS) wage areas. The final rule 

redefines Burleson and Lampasas 

Counties, TX, from the Austin wage area 

to the Waco wage area. These changes 

are based on recent consensus 

recommendations of the Federal 

Prevailing Rate Advisory Committee to 

best match the counties proposed for 

redefinition to a nearby FWS survey 

area. This final rule makes an additional 

correction to add the entire SyracuseUtica-Rome, NY, wage area to Appendix 

C to Subpart B of Part 532— 

Appropriated Fund Wage and Survey 

Areas, which was inadvertently deleted 

when the CFR was published in January 

2004. 

DATES: This regulation is effective on 

May 2, 2012. 

FOR FURTHER INFORMATION CONTACT: 

Madeline Gonzalez, (202) 606–2838; 

email pay-performancepolicy@opm.gov; or Fax: (202) 606– 

4264. 

SUPPLEMENTARY INFORMATION: On 

November 14, 2011, the U.S. Office of 

Personnel Management (OPM) issued a 

proposed rule (76 FR 70365) to redefine 

Burleson and Lampasas Counties, TX, 

from the Austin wage area to the Waco 

wage area. These changes are based on 

recent consensus recommendations of 

the Federal Prevailing Rate Advisory 

Committee (FPRAC) to best match the 

above counties to a nearby FWS survey 

area. FPRAC did not recommend other 

changes for the Austin and Waco wage 

areas at this time. In addition, this final 

rule adds the entire Syracuse-UticaRome, NY, FWS wage area to Appendix 

C to Subpart B of Part 532— 

Appropriated Fund Wage and Survey 

Areas. The Syracuse-Utica-Rome wage 

area was inadvertently deleted when the 

CFR was published in January 2004. 

This correction does not affect the pay 

of any FWS employees. The proposed 

rule had a 30-day comment period 

during which OPM received no 

comments. 

Regulatory Flexibility Act 

I certify that these regulations will not 

have a significant economic impact on 

a substantial number of small entities 

because they will affect only Federal 

agencies and employees. 

List of Subjects in 5 CFR Part 532 

Administrative practice and 

procedure, Freedom of information, 

Government employees, Reporting and 

recordkeeping requirements, Wages. 

U.S. Office of Personnel Management. 

John Berry, 

Director. 

Accordingly, the U.S. Office of 

Personnel Management amends 5 CFR 

part 532 as follows: 

PART 532—PREVAILING RATE 

SYSTEMS 

■ 1. The authority citation for part 532 

continues to read as follows: 

Authority: 5 U.S.C. 5343, 5346; § 532.707 

also issued under 5 U.S.C. 552. 

■ 2. Appendix C to subpart B is 

amended for the State of New York by 

adding ‘‘Syracuse-Utica-Rome’’ and its 

constituent counties after ‘‘Rochester’’ 

and revising for the State of Texas the 

wage area listings of the Austin, TX, and 

Waco, TX, wage areas to read as follows: 

Appendix C to Subpart B of Part 532— 

Appropriated Fund Wage and Survey 

Areas 

* * * * * 

NEW YORK 

* * * * * 

Syracuse-Utica-Rome 

Survey Area 

New York: 

Herkimer 

Madison 

Oneida 

Onondaga 

Oswego 

* * * * * 

Area of Application. Survey area plus: 

New York: 

Broome 

Cayuga 

Chenango 

Cortland 

Hamilton 

Otsego 

Tioga 

Tompkins 

* * * * * 

TEXAS 

Austin 

Survey Area 

Texas: 

Hays 

Milam 

Travis 

Williamson 

Area of Application. Survey area plus: 

Texas: 

Bastrop 

Blanco 

Burnet 

Caldwell 

Fayette 

Lee 

Llano 

Mason 

San Saba 

* * * * * 

Waco 

Survey Area 

Texas: 

Bell 

Coryell 

McLennan 

Area of Application. Survey area plus: 

Texas: 

Anderson 

Bosque 

Brazos 

Burleson 

Falls 

Freestone 

Hamilton 

Hill 

Lampasas 

Leon 

Limestone 


sroberts on DSK5SPTVN1PROD with RULES
19522 Federal Register / Vol. 77, No. 63 / Monday, April 2, 2012 / Rules and Regulations 

Mills 

Robertson 

* * * * * 

[FR Doc. 2012–7728 Filed 3–30–12; 8:45 am] 

BILLING CODE 6325–39–P 

OFFICE OF PERSONNEL 

MANAGEMENT 

5 CFR Part 890 

48 CFR Parts 1602, 1615, 1632, and 

1652 

RIN 3206–AM39 

Federal Employees Health Benefits 

Program: New Premium Rating Method 

for Most Community Rated Plans 

AGENCY: U.S. Office of Personnel 

Management. 

ACTION: Final rule. 

SUMMARY: The U.S. Office of Personnel 

Management (OPM) is issuing a final 

regulation amending the Federal 

Employees Health Benefits (FEHB) 

regulations and also the Federal 

Employees Health Benefits Acquisition 

Regulation (FEHBAR). This final 

regulation makes minor changes to an 

interim final regulation on the same 

subject published June 29, 2011. The 

rule replaces the procedure by which 

premiums for community rated FEHB 

carriers are compared with the rates 

charged to a carrier’s similarly sized 

subscriber groups (SSSGs). The new 

procedure utilizes a medical loss ratio 

(MLR) threshold, analogous to that 

defined in both the Affordable Care Act 

(ACA), and in Department of Health and 

Human Services (HHS) regulations and 

replaces the outdated SSSG 

methodology with a more modern and 

transparent calculation while still 

ensuring that the FEHB Program is 

receiving a fair rate. This will result in 

a more streamlined process for plans 

and increased competition and plan 

choice for enrollees. The new process 

will apply to all community rated plans, 

except those required by their state to 

use traditional community rating (TCR). 

This new process will be phased in over 

two years, with optional participation 

for non-TCR plans in the first year. 

DATES: This final rule is effective May 2, 

2012. 

FOR FURTHER INFORMATION CONTACT: 

Louise Dyer, Senior Policy Analyst, 

(202) 606–0770. 

SUPPLEMENTARY INFORMATION: The Office 

of Personnel Management is issuing a 

final regulation to establish a new ratesetting procedure for most FEHB plans 

that are subject to community rating. 

This final rule makes minor changes to 

an interim final rule published June 29, 

2011 that replaced the current rate 

negotiation process with a requirement 

that most community rated plans meet 

an FEHB-specific medical loss ratio 

(MLR) target. Plans that are required to 

use traditional community rating (TCR) 

per their state regulator will be exempt 

from this new rate-setting procedure. 

This final rule makes several changes to 

the interim final rule published June 29, 

2011. First, OPM has removed a clause 

that said that the previous year’s MLR 

would have no effect on the current 

plan year. The change was added in 

response to public comments and is 

intended to give OPM appropriate 

flexibility to determine a fair and 

accurate MLR for each plan in each 

year. Second, OPM has laid out a 

deadline for publishing the FEHBspecific MLR threshold. Third, OPM 

made technical changes to a certificate 

attesting to accurate pricing in order to 

accommodate a change in timing. 

Fourth, clarifying language explains that 

OPM will substitute its own credibility 

adjustment for that defined by HHS. 

Analysis of and Responses to Public 

Comments 

We received two comment letters on 

the interim final rule from FEHB 

carriers and carrier groups. The 

comments and OPM’s responses are 

detailed below. 

Comment: A commenter noted that 

FEHB carriers will need as much 

advance notice of the MLR threshold for 

the following year as possible. This 

commenter recommended early notice 

by OPM, even in advance of the annual 

Call Letter, to allow carriers to plan for 

rating actions and complete filings. 

Response: For the first years of MLRbased rate negotiation, OPM will be 

gathering information about FEHB 

carrier MLRs which will aid in setting 

future MLR thresholds. OPM will make 

every effort to provide such advance 

notice as the rate negotiation 

methodology matures. This final 

regulation text states that OPM will 

make the MLR threshold public no later 

than twelve calendar months before 

plan years beginning with 2014. 

Comment: A commenter raised the 

need for clarity and consistency 

regarding the identification and 

allocation of costs and revenues for the 

MLR calculation. Specifically, the 

commenter asked for additional 

clarification on what can be included as 

expenses, such as fees and charges 

related to Affordable Care Act 

implementation. 

Response: As stated in the interim 

final regulation, OPM will adopt the 

HHS definition of MLR for purposes of 

MLR-based rate negotiation in FEHB. 

We anticipate that any clarifications 

around this calculation that are offered 

by HHS will be adopted by OPM. OPM 

will only allow costs for items that are 

allowed by the FEHB contract to be 

included in the MLR calculation. 

Comment: Both commenters raised 

concerns about the subsidization 

penalty reserve account. One 

commenter stated that using penalty 

funds to subsidize other plans is 

inconsistent with both the current 

similarly sized subscriber group (SSSG) 

methodology and the ACA MLR rebates. 

Another commenter stated that OPM 

needs to be sure that this reserve does 

not act as a disincentive for carriers to 

operate in the most efficient way 

possible. 

Response: OPM has intentionally 

structured the subsidization penalty 

differently from either the SSSG 

adjustments or the ACA MLR rebates. 

The subsidization penalties are to be 

shared among community rated plans in 

order to avoid a plan paying a penalty 

into an account from which it can solely 

benefit. 

In response to the concern about the 

subsidization penalty reserve acting as a 

disincentive to efficiency, OPM feels the 

penalty will encourage plans to offer a 

fair rate at the time of proposal and 

therefore will not act as a disincentive 

to efficiency. 

Comment: Both commenters 

expressed concern about OPM’s plan to 

calculate MLR using one year of data, as 

compared to a three year average for the 

HHS calculation. The commenters were 

concerned about large FEHB plans 

having to manage between the two 

methodologies. One commenter 

mentioned that an annual MLR 

calculation would not allow FEHB plans 

to mitigate variation when carriers 

engage in activities that entail large onetime start up costs. 

Response: Regarding the commenters 

concern about managing two 

methodologies, OPM feels applying an 

MLR calculation similar to the ACA 

required calculation, instead of the 

SSSG methodology, provides more 

consistency than there would have been 

without this regulatory change. 

OPM must balance its goal of 

negotiating the best rate for FEHB 

payers every year with the concerns of 

FEHB carriers about managing variation. 

For example, OPM may consider the 

MLR for one or more previous years 

when calculating the current year’s 

MLR. This allows OPM the flexibility to 

prevent carriers who have historically 

offered favorable rates from being overly 

penalized for an unusually low MLR in 


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