[Federal Register Volume 79, Number 240 (Monday, December 15, 2014)]
[Proposed Rules]
[Pages 74054-74056]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-29224]


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OFFICE OF PERSONNEL MANAGEMENT

48 CFR Parts 1609, 1615, 1632, and 1652

RIN 3206-AN13


Federal Employees Health Benefits Program: FEHB Plan Performance 
Assessment System

AGENCY: Office of Personnel Management.

ACTION: Notice of proposed rulemaking.

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SUMMARY: The United States Office of Personnel Management (OPM) is 
issuing a proposed rule to amend the system for assessing the annual 
performance of health plans contracted under the Federal Employees 
Health Benefits (FEHB) Program. The purpose of this rule is to measure 
and assess all FEHB plan performance (experience-rated and community-
rated) through the use of a common, objective, and quantifiable 
performance assessment for the 2016 plan year.

DATES: OPM must receive comments on or before January 14, 2015.

ADDRESSES: Send written comments to Wenqiong Fu, Policy Analyst, 
Planning and Policy Analysis, U.S. Office of Personnel Management, Room 
4312, 1900 E Street NW., Washington, DC; or FAX to (202) 606-6010 Attn: 
Wenqiong Fu. You may also submit comments using the Federal eRulemaking 
Portal: http://www.regulations.gov. Follow the instructions for 
submitting comments.

FOR FURTHER INFORMATION CONTACT: Wenqiong Fu, Policy Analyst at (202) 
606-0004.

SUPPLEMENTARY INFORMATION:

FEHB Background

    The Federal Employees Health Benefits (FEHB) Program was 
established in 1960 and provides health insurance to over eight million 
Federal employees, annuitants, and their family members. Chapter 89 of 
Title 5 United States Code, which authorizes the FEHB Program, allows 
OPM to contract with health insurance carriers to provide coverage 
under certain types of plans.
    FEHB contracts are either community-rated or experience-rated. In 
community-rated contracts, the overall premium is based on the 
carrier's standard rating methodology, taking into account factors in 
the larger geographic area or ``community.'' In experience-rated 
contracts, the FEHB carrier considers actual ``experience'' or medical 
costs of the group of covered lives. The two types of contracts are 
regulated under different sections of the FEHB Acquisition Regulation 
(FEHBAR). Premiums are determined according to distinct processes and 
plan performance is rewarded differently.

Current Performance Assessment System

    Under current regulations, performance is assessed for experience-
rated plans based on profit analysis factors that are weighted to 
create a service charge that OPM pays to carriers. For community-rated 
plans, performance is assessed according to specific elements that can 
result in a percentage of premium withheld from payment to the carrier. 
Both of these performance frameworks are under the umbrella of the 
Federal Acquisition Regulation, which governs contracting government-
wide.
    In determining the level of the service charge (profit/risk margin) 
for experience-rated plans, Contracting Officers consider six 
categories of factors: Contractor performance, contract cost, federal 
socioeconomic programs, cost control, independent development, and 
capital investments. OPM Contracting Officers conduct the service 
charge analysis and rely heavily on the contractor performance factor. 
Contractor performance is weighted the highest, comprises a significant 
portion of the total service charge, and involves the largest amount of 
data.
    Community-rated plans have two performance elements that may lead 
to a percentage of premium being withheld: Customer service and 
critical contract compliance requirements.

Proposed FEHB Plan Assessment System

    To establish a consistent assessment system, create a more 
objective performance standard, and provide more transparency for 
enrollees, OPM is developing a framework that will utilize a discrete 
set of quantifiable measures examining key aspects of contract 
performance and specific criteria for performance factors which will 
then be linked to health plan premium disbursements.
    This regulation proposes to replace the current methods of plan 
assessment with a new framework, in which both experience-rated and 
community-rated plans utilize the same measurement criteria. For 
experience-rated plans, the performance-based service charge will be 
administered similarly to the current service charge process. For 
community-rated plans, the performance adjustment will be administered 
similarly to the current process using an adjustment to net-to-carrier 
premium payments made during the first quarter of the following

[[Page 74055]]

contract period. OPM proposes the new assessment system will impact 
service charge and performance adjustment premium disbursements made in 
2017.
    This proposed regulation includes four measurement categories for 
both experience-rated and community-rated plans aimed at improving 
standards of accountability and transparency. The following categories, 
defined in 48 CFR 1615.404-70, will be applied to both experience-rated 
and community-rated plans: (1) Clinical Quality, (2) Customer Service, 
(3) Resource Use, and (4) Contract Oversight.
    The new performance assessment structure is incorporated in 48 CFR, 
Subpart 1615.4, Contract pricing, which describes the profit factors 
and rewards for FEHB plans. Contract requirements will be amended to 
indicate required performance measures, and the scoring of measures 
within the assessment system will be based on plan performance relative 
to FEHB or national benchmarks, or with respect to the Contract 
Oversight category, the Contracting Officer's judgment. Each year, 
identified measures will be communicated to FEHB carriers through 
advance guidance and then incorporated as a part of the contract.
    Three of the performance areas, Clinical Quality, Customer Service, 
and Resource Use, will contain one or more domains that reflect 
priorities within each area, and each domain will be comprised of one 
or more performance areas. The fourth category, Contract Oversight, 
will be based upon the Contracting Officer's evaluation of contractor 
performance such as audit findings, fraud/waste/abuse, responsiveness 
to OPM, benefits/network management, contract compliance, technology 
management, data security, and Federal socio-economic programs.
    OPM expects to update the measures over time, and therefore the 
regulation lists representative examples of the domains and measures 
within each category. OPM will issue and periodically update technical 
guidance describing the measures and methods/formulae for performance 
scoring. FEHB carriers will receive technical guidance updating 
measures, methods and scoring in advance of their use in the plan 
assessment process.
    Plan performance on Clinical Quality, Customer Service, and 
Resource Use will be evaluated against national or FEHB benchmarks. 
OPM's goal is to build on current performance assessment practices so 
that we can formally link annual evaluations of FEHB plans with profit 
factors. The proposed measures will rely upon the evaluation of data 
from sources familiar to FEHB carriers such as:
    HEDIS--Healthcare Effectiveness Data and Information Set is a group 
of clinical measures developed by the National Committee for Quality 
Assurance (NCQA). HEDIS measures are widely used in U.S. health plan 
performance systems and have been collected by FEHB for more than ten 
years.
    CAHPS--Consumer Assessment of Healthcare Providers and Systems is a 
survey of health plan enrollees developed by the Agency for Healthcare 
Research and Quality (AHRQ). FEHB plans have participated in CAHPS and 
reported results to OPM since 2000.
    Plan administrative data--OPM collects data from health plans for 
contract oversight purposes. These may include data on financial 
management; claims payment timeliness; claims records and utilization 
data; enrollment reconciliation; surveillance for fraud, waste, and 
abuse; health information technology implementation; data security; and 
network adequacy.
    This regulatory change is intended to promote a comprehensive 
approach to health plan management by measuring key performance 
components.

Measurement

    The new performance assessment system will begin in 2016. OPM will 
announce the applicable categories, domains, measures and weights in 
FEHB Carrier guidance at a later time, well in advance of 
implementation so that FEHB carriers have the opportunity to provide 
feedback through established OPM channels. Prior to each contract year, 
OPM will identify the most recent available benchmarks for each measure 
which will be used in applying the new weighted guidelines to determine 
that year's service charge or performance adjustment for FEHB 
contracts. Following rate negotiations, for both experience-rated plans 
and community-rated plans, OPM Contracting Officers will inform FEHB 
plans of the performance scoring results used in determining each 
plan's service charge or performance adjustment.

Assessing Progress

    Specific domains, measures and weights will be provided in future 
technical guidance. While there will be continuity over time in many of 
the domains and measures, the plan assessment system must be dynamic to 
account for: (1) Changes in clinical guidelines and professional 
standards of care, (2) removal of measures where overall plan 
performance is at a consistently high level, and (3) the introduction 
of new measures that are deemed relevant to plan performance.

Regulatory Flexibility Act

    I certify that this regulation will not have a significant economic 
impact on a substantial number of small entities because the regulation 
affects only health insurance carriers under the Federal Employees 
Health Benefits Program.

Executive Orders 13563 and 12866, Regulatory Review

    This rule has been reviewed by the Office of Management and Budget 
in accordance with Executive Orders 13563 and 12866.

Federalism

    We have examined this rule in accordance with Executive Order 
13132, Federalism, and have determined that this rule will not have any 
negative impact on the rights, roles and responsibilities of State, 
local, or tribal governments.

List of Subjects in 48 CFR Parts 1615 and 1609

    Government employees, Government procurement, Health insurance.

    U.S. Office of Personnel Management.
Katherine Archuleta,
Director.
    For the reasons set forth in the preamble, OPM amends chapter 16 of 
title 48 CFR (FEHBAR) as follows:

PART 1609--CONTRACTOR QUALIFICATIONS

0
1. The authority citation for part 1609 continues to read as follows:

    Authority: 5 U.S.C. 8913; 40 U.S.C. 486(c); 48 CFR 1.301.

Subpart 1609.71--[Removed]

0
2. Remove subpart 1609.71.

PART 1615--CONTRACTING BY NEGOTIATION

0
3. The authority citation for part 1615 continues to read as follows:

    Authority: 5 U.S.C. 8913; 40 U.S.C. 486(c); 48 CFR 1.301.

0
4. In section 1615.404-4, paragraph (a) is revised to read as follows:


1615.404-4  Profit.

    (a) When the pricing of FEHB Program contracts is determined by 
cost analysis (experience-rated) or by a combination of cost and price 
analysis (community-rated), OPM will determine a performance based 
percentage of the price using a weighted guidelines

[[Page 74056]]

structured approach based on the profit analysis factors described in 
1615.404-70. For experience-rated plans, OPM will use the performance 
based percentage so determined to develop the profit or fee 
prenegotiation objective, which will be the total profit (service 
charge) negotiated for the contract. For community-rated plans, OPM 
will use the performance based percentage so determined to develop an 
adjustment to net-to-carrier premiums, (performance adjustment) to be 
made during the first quarter of the following contract period.
* * * * *
0
5. Section 1615.404-70 is revised as follows:


1615.404-70  Profit analysis factors.

    (a) OPM Contracting Officers will apply a weighted guidelines 
method in developing the performance based percentage for FEHB Program 
contracts. For experience-rated plans, the performance based percentage 
will be applied to projected incurred claims and allowable 
administrative expenses. For community-rated plans, the performance 
based percentage will be applied to subscription income and will be 
used to calculate a performance adjustment to net-to-carrier premiums, 
as described at 48 CFR 1632.170(a)(2), to be made during the first 
quarter of the following contract period. In the context of the factors 
outlined in FAR 15.404-4(d), OPM will assess performance of FEHB 
carriers according to four factors.
    (1) Clinical quality. OPM will consider elements within such 
domains as preventive care, chronic disease management, medication use, 
and behavioral health. This factor incorporates elements from the FAR 
factor ``contractor effort.''
    (2) Customer service. OPM will consider elements within such 
domains as communication, access, claims, and member experience/
engagement. This factor incorporates elements of the FAR factor 
``contractor effort.''
    (3) Resource use. OPM will consider elements within such domains as 
utilization management, administrative, and cost trends. This factor 
incorporates elements of the FAR factors ``contractor effort,'' 
``contract cost risk,'' and ``cost control and other past 
accomplishments.''
    (4) Contract oversight. OPM will consider an assessment of contract 
performance in specific areas such as audit findings, fraud/waste/
abuse, and responsiveness to OPM, benefits/network management, contract 
compliance, technology management, data security, and Federal socio-
economic programs. This factor could incorporate any of the FAR profit 
analysis factors listed at 15.404-4(d)(1)(i)-(vi).
    (b) The sum of the maximum scores for the profit analysis factors 
will be 1 percent.

PART 1632--CONTRACT FINANCING

0
6. The authority citation for part 1632 continues to read as follows:

    Authority: 5 U.S.C. 8913; 40 U.S.C. 486(c); 48 CFR 1.301.

0
7. In section 1632.170, paragraph (a)(2) is revised to read as follows:


1632.170  Recurring premium payments to carriers.

    (a) * * *
    (2) The difference between one percent and the performance based 
percentage of the contract price described at 1615.404-4 will be 
multiplied by the carrier's subscription income for the year of 
performance and the resulting amount (performance adjustment) will be 
withheld from the net-to-carrier premium disbursement during the first 
quarter of the following contract period unless an alternative payment 
arrangement is made with the carrier's Contracting Officer.
    Amounts withheld from a community rated plan's premium disbursement 
will be deposited into the plan's Contingency Reserve.
* * * * *

PART 1652--CONTRACT CLAUSES

0
8. The authority citation for part 1652 continues to read as follows:

    Authority: 5 U.S.C. 8913; 40 U.S.C. 486(c); 48 CFR 1.301.

0
9. In section 1652.232-70, revise the introductory text and paragraph 
(a) and remove paragraph (f).
    The revisions read as follows:


1652.232-70  Payments--Community-rated contracts.

    As prescribed in 1632.171, the following clause shall be inserted 
in all community-rated FEHBP contracts:

Payments

    (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 for obligations due pursuant 
to paragraph (b) of this clause and the performance adjustment 
described at 1615.404-4, plus any payments made by OPM from the 
Contingency Reserve.
* * * * *
0
10. In section 1652.232-71, revise the introductory text and paragraph 
(a) and remove paragraph (f).
    The revisions read as follows:


1652.232-71  Payments--experience-rated contracts.

    As prescribed in 1632.172, the following clause shall be inserted 
in all experience-rated FEHBP contracts:

    (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 for obligations due pursuant 
to paragraph (b) of this clause, and the performance-based service 
charge described at 1615.404-4, plus any payments made by OPM from 
the Contingency Reserve.
* * * * *
[FR Doc. 2014-29224 Filed 12-12-14; 8:45 am]
BILLING CODE 6325-63-P