[Federal Register Volume 60, Number 236 (Friday, December 8, 1995)]
[Rules and Regulations]
[Pages 62987-62988]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-29882]



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Rules and Regulations
                                                Federal Register
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to and codified in the Code of Federal Regulations, which is published 
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Federal Register / Vol. 60, No. 236 / Friday, December 8, 1995 / 
Rules and Regulations

[[Page 62987]]


OFFICE OF PERSONNEL MANAGEMENT

5 CFR Part 890

RIN 3206-AG40


Federal Employees Health Benefits Program; HMO Plan Applications

AGENCY: Office of Personnel Management.

ACTION: Final rule.

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SUMMARY: The Office of Personnel Management (OPM) is issuing final 
regulations to clarify the policy under which it invites applications 
from comprehensive medical plans (CMP's), commonly referred to as 
Health Maintenance Organizations (HMO's), to participate in the Federal 
Employees Health Benefits (FEHB) Program. This clarification is 
necessary in order to ensure that OPM and the CMP's (HMO's) are 
providing the best possible service to FEHB enrollees.

EFFECTIVE DATE: February 6, 1996.

FOR FURTHER INFORMATION CONTACT: Faith M. Hannon, (202) 606-0004.

SUPPLEMENTARY INFORMATION: On December 5, 1994, OPM published an 
interim regulation in the Federal Register (59 FR 62283) to clarify the 
policy under which it invites applications from comprehensive medical 
plans (CMP's), commonly referred to as Health Maintenance Organizations 
(HMO's), to participate in the FEHB Program. OPM made a determination 
not to invite new plan applications, with a limited exception, for 
contract year 1996. In addition, OPM decided neither to accept benefit 
change proposals from plans already in the FEHB Program nor to print 
new plan brochures or a comparison guide for contract year 1996.
    OPM received 15 written comments and numerous phone calls 
concerning the regulation. All of the commenters objected that OPM did 
not give HMO's sufficient notice of its determination not to accept 
applications and benefit change proposals for the 1996 contract year. 
Among other issues, they contended that many HMO's had already expended 
a substantial amount of time preparing applications or developing plan 
benefit designs and that OPM's decision, therefore, caused them undue 
hardship. In addition, some commenters disagreed with OPM's position 
that this regulation clarified existing policy and that the Director of 
OPM had authority to determine when plan applications would be 
accepted.
    After careful consideration of the comments received, OPM concluded 
that its time frames had, in fact, been too compressed to allow for a 
thorough review of all the consequences of the decision not to accept 
applications and that it had not allowed sufficient time for comments. 
As a result, OPM decided to accept applications and benefit change 
proposals for contract year 1996 and to provide the public with a 
longer comment period.
    Therefore, OPM published a notice in the Federal Register on March 
13, 1995, (60 FR 13491), which stated that OPM would accept 
applications from new HMO's for participation in the FEHB Program, and 
benefit change proposals from plans currently participating, for 
contract year 1996. In this notice, OPM extended the deadline for 
submission of the completed applications from January 31 to March 31, 
1995, and allowed for a second extension if OPM requested additional 
information from the applicants. OPM also published the clarification 
of the policy under which it invites applications from HMO's as a 
proposed regulation in the Federal Register, (60 FR 15074), on March 
22, 1995. This issuance was in response to those commenters who 
objected to the length of the comment period of the interim regulation 
and other alleged publication technicalities under the Administrative 
Procedure Act (APA).
    OPM received seven written responses to the proposed regulation. 
The primary issues mentioned by most commenters were that closing the 
FEHB Program for an unlimited period of time would limit health plan 
choices for Federal employees, and would restrict competition within 
the FEHB Program. Both features are considered to be hallmarks of the 
Program. Some commenters also opined that this regulation contravenes 
OPM's obligation to contract with federally qualified HMO's and the 
related HMO dual choice mandate. These comments may have originated 
from a misunderstanding of the extent of the regulation. It was never 
OPM's intention to close the FEHB Program to new HMO's for unlimited 
periods of time. Because this misconception appears to be widespread, 
the final rule states that it is OPM's intention to accept new HMO 
applications on an annual basis except in those rare instances when the 
Director decides it is not in the best interest of the Federal 
enrollees and the FEHB Program. If this should occur, sufficient 
advance notice would be given to the HMO industry, i.e., an entry in 
the Federal Register at least seven months prior to the date 
applications would be due for the contract year for which applications 
will not be accepted, allowing for a comment period of sixty days. 
Generally, there is eleven months lead time between when applications 
are due on January 31, and the start of the contract year for which the 
applications are being accepted.
    Several commenters stated that it is their belief that the Federal 
Employees Health Benefits Act (FEHBA) does not grant the Director of 
OPM the authority to determine when it is beneficial to the FEHB 
Program to accept applications from HMO's for participation in the 
Program. It was, and is, the conclusion of OPM that the Director has 
always had this authority and that this regulation simply clarifies the 
policy under which this authority is administered. The final rule 
states this conclusion.
    Many commenters offered to assist OPM in streamlining the 
application process so that OPM might utilize its resources in the most 
effective way to benefit Program enrollees. OPM is appreciative of 
these offers and is working closely with representatives of the 
industry and other knowledgeable organizations to improve the 
application process.
    This Final Rule is also updating the mailing address of the Office 
of Insurance Programs listed in the final sentence of 
Sec. 890.203(a)(5).

Regulatory Flexibility Act

    I certify that these regulations will not have a significant 
economic impact on a substantial number of small entities 

[[Page 62988]]
because they primarily affect OPM's administrative procedures.

List of Subjects in 5 CFR Part 890

    Administrative practice and procedure, Government employees, Health 
facilities, Health insurance, Health professions, Hostages, Iraq, 
Kuwait, Lebanon, Reporting and recordkeeping requirements, Retirement.

    U.S. Office of Personnel Management.
James B. King,
Director.

    Accordingly, OPM is amending 5 CFR Part 890 as follows:

PART 890--FEDERAL EMPLOYEES HEALTH BENEFITS PROGRAM

    1. The authority citation for part 890 continues to read as 
follows:

    Authority: 5 U.S.C. 8913; Sec. 890.803 also issued under 50 
U.S.C. 403p, 22 U.S.C. 4069c and 4069c-1; Subpart L also issued 
under sec. 599C of Pub. L. 101-513, 104 Stat. 2064, as amended.

    2. In Sec. 890.203, paragraphs (a)(1) and (a)(2), and the last 
sentence in paragraph (a)(5) are revised to read as follows:


Sec. 890.203  Application for approval of, and proposal of amendments 
to, health benefits plans.

    (a) New plan applications. (1) The Director of OPM shall consider 
applications to participate in the FEHB Program from comprehensive 
medical plans (CMP's) at his or her discretion. CMP's are automatically 
invited to submit applications annually to participate in the FEHB 
Program unless otherwise notified by OPM. If the Director should 
determine that it is not beneficial to the enrollees and the Program to 
consider applications for a specific contract year, OPM will publish a 
notice with a 60 day comment period in the Federal Register no less 
than 7 months prior to the date applications would be due for the 
specific contract year for which applications will not be accepted.
    (2) When applications are considered, CMP's should apply for 
approval by writing to the Office of Personnel Management, Washington, 
DC 20415. Application letters must be accompanied by any descriptive 
material, financial data, or other documentation required by OPM. Plans 
must submit the letter and attachments in the OPM-specified format by 
January 31, or another date specified by OPM, of the year preceding the 
contract year for which applications are being accepted. Plans must 
submit evidence demonstrating they meet all requirements for approval 
by March 31 of the year preceding the contract year for which 
applications are being accepted. Plans that miss either deadline cannot 
be considered for participation in the next contract year. All newly 
approved plans must submit benefit and rate proposals to OPM by May 31 
of the year preceding the contract year for which applications are 
being accepted in order to be considered for participation in that 
contract year. OPM may make counter-proposals at any time.
* * * * *
    (5) * * * The extent of the data and documentation to be submitted 
by a plan so qualified by HHS, as well as by a non-qualified plan, for 
a particular review cycle may be obtained by writing directly to the 
Office of Insurance Programs, Retirement and Insurance Service, Office 
of Personnel Management, Washington, DC 20415.
* * * * *
[FR Doc. 95-29882 Filed 12-7-95; 8:45 am]
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