Federal Employees Health Benefits Program (FEHB)

On Thursday, March 22, the U.S. Office of Personnel Management (OPM) and America’s Health Insurance Plans (AHIP) hosted the annual Federal Employees Health Benefits (FEHB) Program Carrier Conference. The conference featured OPM’s policy and contracting priorities for the FEHB Program for 2018. It followed and discussed OPM’s FEHB Program Call Letter (available here), which provides a high-level outline of its intentions for contract negotiations for plan year 2019.

This year’s Carrier Conference included three key highlights for FEHB carriers:

  1. OPM will re-open the Indemnity Benefit Plan to contract with either a nationwide carrier or a consortium of carriers to begin offering coverage in 2020.
  2. OPM is seeking legislative changes to apply the Anti-Kickback Statute to the FEHB Program.
  3. OPM is interested in Plans improving value by offering Accountable Care Organization or other innovative models

Continue Reading Federal Employees Health Benefits Program 2018 Carrier Conference Highlights

The U.S. Supreme Court unanimously decided, in Coventry Health Care of Missouri, Inc. v. Nevils, that the Federal Employees Health Benefits Act (FEHBA) preempts state laws that prohibit subrogation recovery by health insurance carriers.

FEHBA expressly preempts state law. Specifically, “[t]he terms of any contract under this chapter [5 U.S.C. § 8901, et seq.] which relate to nature, provision, or extent of coverage or benefits (including payments with respect to benefits)” preempt state health insurance laws and regulations. Contracts between the Office of Personnel Management (OPM) and a health insurance carrier under the Federal Employees Health Benefits Program (FEHBP) each include a provision requiring the carrier to subrogate and pursue reimbursement of FEHB claims and to condition benefits on the carrier’s rights to subrogation and reimbursement.

The plaintiff in this case, a former federal employee, was injured in an automobile accident and received medical treatment covered under his FEHBP plan. He then sued and recovered a settlement award based on the accident. His FEHBP carrier asserted a lien against his settlement award and recovered the costs of his medical treatment pursuant to its FEHBP contract. The plaintiff then sued the carrier, alleging that its recovery of the costs of his medical treatment was prohibited by Missouri state law.

The Court first discussed whether FEHBA’s preemption provision preempts state laws that would prohibit a carrier’s right to recover subrogation, and then discussed whether such preemption is prohibited by the Supremacy Clause.

According to the Court, the language of FEHBA’s preemption clause unambiguously covers the contractual subrogation provision. The decision briefly acknowledges the presumption against preemption of state law, which the Missouri Supreme Court decision on appeal had applied to find no preemption of state law. In addition, the Court points to regulations at 5 C.F.R. § 890.106 promulgated by OPM in 2015 that specifically call for the contract provisions requiring subrogation and reimbursement. But the Court declined to analyze the presumption or the regulations in depth, finding that the statutory language unambiguously requires preemption and is reinforced by FEHBA’s context and purpose. The decision distinguishes its decision from dicta in Empire HealthChoice Assurance, Inc. v. McVeigh, 547 U.S. 677 (2006), in which the Court saw two plausible readings of the FEHBA preemption clause. The Court noted that its decision in that case turned on jurisdiction, not on choice of law, and the case did not require the Court to evaluate different readings of the provision.

After finding that FEHBA’s preemption clause covered the contractual provision requiring subrogation and reimbursement, the Court turned to the constitutional question of whether the Supremacy Clause allows preemption based on the terms of federal contracts. The Court held that preemption is constitutional because it is FEHBA—not the contract—that preempts state law. The decision dismisses the counterargument that FEHBA’s preemption provision (uniquely among preemption clauses) calls for the “terms of any contract” to supersede and preempt state law whereas the Supremacy Clause provides that only federal laws can preempt state laws. The Court characterized this argument as elevating “semantics over substance” because the language manifests the same Congressional intent to preempt.

By holding that FEHBA preempts state law, and that such preemption is constitutionally permissible, this decision ends a series of disputes between private litigants and FEHBP carriers over whether state subrogation prohibitions applied to health benefits covered under the FEHBP. Soon after its decision in Nevils, the Court denied certiorari for two other cases dealing with FEHBA preemption of state subrogation prohibitions, Bell v. Blue Cross and Blue Shield of Oklahoma, and Kobold v. Aetna Life Insurance Co.

Beginning January 1, 2016, the Federal Employees Health Benefits Program (FEHBP) will include a self plus one enrollment option for its members. For 2015 and previous years, federal employees and annuitants enrolling in FEHBP plans had only two options, self only or self and family. The change was initially mandated by the 2013 Bipartisan Budget Act, and the U.S. Office of Personnel Management (OPM) published regulations on September 17, 2015 finalizing implementation of the self plus one enrollment type.

The new self plus one option will allow FEHBP members with one eligible dependent to enroll in a potentially less-expensive plan option than self and family. The rule does not impact eligibility for FEHBP benefits, either for employees and annuitants or for dependents, nor does it generally change the processes for members to enroll in coverage or modify coverage during the year. Premium conversion members—that is, FEHBP members whose shares of premiums are paid with pre-tax dollars, including most active employees—may enroll and change enrollment either during the open season in November and December of each year or upon the occurrence of a Qualifying Life Event (QLE). Like newly enrolling or changing from one plan to another, switching a covered family member will be permitted only during open enrollment or following a QLE. In addition to during open season and after QLEs, non-premium conversion members, including annuitants, may decrease enrollment type at any time by moving from self and family to self plus one or self only or from self plus one to self only. To address the novelty of the self plus one enrollment type and mitigate the effects of member confusion, in early 2016, OPM will allow a special “limited enrollment period” that will allow premium conversion members to decrease coverage from self and family to self plus one.

Continue Reading OPM Finalizes Regulations Implementing Self Plus One Enrollment Type for FEHBP and Addresses Carriers’ Cost Concerns

This week, the U.S. Office of Personnel Management (“OPM”) published three notices of proposed rulemaking (“NPRMs”) regarding the administration of the Federal Employees Health Benefits (“FEHB”) Program. The FEHB Program provides for coverage of federal employees and annuitants and their dependents. 5 U.S.C. § 8901, et seq. These three NPRMs address subrogation and reimbursement recovery, enrollment after termination of a plan or plan option, and rate setting for community-rated plans.

Subrogation and Reimbursement Recovery

OPM’s proposed rule on subrogation and reimbursement recovery would ensure that FEHB Program carriers may seek reimbursement or subrogation recoveries in all states. 80 Fed. Reg. 931 (Jan. 7, 2015) (available here). The supplementary materials to this regulation reiterate the position the government has consistently taken—“that a covered individual’s entitlement to FEHB benefits and benefit payments is conditioned upon, and limited by, a carrier’s entitlement to subrogation and reimbursement recoveries pursuant to a subrogation or reimbursement clause in the FEHB contract.” 80 Fed. Reg. at 931.

These regulations would add a new section, 5 C.F.R. § 890.106, to FEHB Act implementing regulations. Section 890.106 would do the following:

  • Require that all FEHB contracts provide for subrogation and reimbursement by carriers;
  • Condition Program benefits and benefit payments to covered individuals on the carriers’ rights to subrogation and reimbursement, and require FEHB brochures (official statements of benefits) to explain this condition;
  • Set forth the two requisite circumstances that trigger a carrier’s right to subrogation or reimbursement: receipt of benefits or benefit payments by a covered individual as a result of an illness or injury, and the individual’s recovery or right to recovery from a third party based on the same illness or injury;
  • State that a carrier’s claim for subrogation or reimbursement is not subject to OPM’s administrative disputed claims process outlined at 5 C.F.R. § 890.105; and
  • Establishes procedural rules for carriers’ recoveries.

Continue Reading OPM Proposes New FEHB Rules on Subrogation, Post Termination Enrollment, and Rate Setting for Community-Rated Plans

On Monday, December 15, the Office of Personnel Management (OPM) published a notice of proposed rulemaking that would modify the framework within which OPM evaluates Federal Employees Health Benefits (FEHB) plan performance. For both experience-rated and community-rated plans, plan performance significantly impacts FEHB carriers’ profits. OPM describes the proposed framework as more consistent, objective, and transparent than the current framework. The proposed rule can be found here.

Currently, under the FEHB Acquisition Regulation (FEHBAR), OPM evaluates experience-rated plans and community-rated plans using different frameworks. Experience-rated plans are evaluated based on six categories of factors used to determine the amount of the service charge paid to the carrier: contractor performance, contract cost, federal socioeconomic programs, cost control, independent development, and capital investments. Community-rated plans are evaluated based on two performance elements that may lead to OPM withholding a percentage of plan premiums: customer service and contract compliance requirements.

Under the proposed framework, both experience-rated and community-rated plans would be evaluated using the same set of “profit analysis factors”—clinical quality, customer service, resource use, and contract oversight. The proposed regulatory text briefly describes each factor:

  1. Clinical quality would include elements like preventive care, chronic disease management, medication use, and behavioral health.
  2. Customer service would include communication, access, claims, and member experience.
  3. Resource use would include utilization management, administrative, and cost trends.
  4. Contract oversight would capture audit findings, fraud, waste, and abuse, responsiveness to OPM, benefits and network management, contract compliance, technology management, data security, and federal socioeconomic programs.

Continue Reading OPM Proposes Changes to Evaluation of FEHB Plan Performance

Managed Care Lawsuit Watch is Crowell & Moring’s summary of key litigation affecting managed care. The latest issue covers a broad range of lawsuits, including: Medicare’s preemption of state common law negligence claims; arbitration clauses in provider agreements; the right of a Medicare Advantage plan to assert a lien on a deceased beneficiary’s negligence settlement; preemption under the Federal Employees Health Benefits Program; and mental health parity. For a full summary of the cases in this issue, please click here.

On August 7, 2013, the Office of Personnel Management (OPM) released a proposed rule on federal employee health benefits for members of Congress and congressional staff. The Affordable Care Act (ACA) contains a provision requiring Congress and their staff to obtain health insurance coverage via an Affordable Insurance Exchange or a health plan created by the ACA, instead of through the Federal Employee Health Benefits (FEHB) Program. The proposed rule implements this requirement, requiring Congress and its staff to obtain Exchange coverage beginning January 1, 2014. Under the proposed rule, Congress will designate which employees are eligible for FEHB coverage by October of the year before the coverage year, and this designation is effective for the entire calendar year that the employee works for that Member of Congress. The proposed rule is available here.

On April 10th, 2013, the U.S. Office of Personnel Management (OPM) Director of Healthcare and Insurance released an FEHB Program Carrier Letter outlining the ACA MLR procedures for FEHB insurance carriers and related entities. The Carrier Letter may be found here.

Under the ACA, all health insurance issuers—including FEHBP carriers—must submit MLR calculations to the Department of Health and Human Services (HHS) by June 1st. If an issuer does not satisfy the MLR requirements, that is, the percentage of premiums spent on reimbursement for clinical services and activities that improve health care quality does not meet the minimum standards for a given plan year, then it must issue rebates to policyholders by August 1st each year. OPM is the policyholder for FEHB plans.

Notice of MLR Calculation and Rebate to OPM

By June 1st, all FEHB carriers must provide notice to OPM’s Office of the Actuary about whether their ACA MLR calculation shows they may owe a rebate to OPM. Carriers must include ACA MLR rebates from subcontractors or other legal entities providing services under the FEHB contract. Carriers should notify OPM through the 2014 Rating Proposal, which includes a question about MLR rebates. If a carrier owes an MLR rebate, it must follow the instructions on the ACA MLR Submission Template, attached to the Carrier Letter as Attachment A.

If a carrier owes an ACA MLR rebate to OPM, it must issue one check for each plan option that fails to meet the ACA MLR threshold. Carriers are responsible for coordinating with their contractors and subcontractors to ensure OPM receives the ACA MLR information and any rebates owed by August 1st.

Starting with the 2015 reporting of 2014 plan information, the ACA MLR filing date will change from June 1st to July 31st and the ACA MLR rebate date will change from August 1st to September 30th to accommodate the premium stabilization program. For the 2013 and 2014 reporting, the deadlines described above will apply.

Errors in MLR Calculations

If a carrier discovers an error in its ACA MLR calculation that results in a rebate owed to OPM after June 1st and before August 1st, the carrier must immediately alert the Office of the Actuary via email and follow the Attachment A instructions to submit its rebate. If a carrier discovers an ACA MLR calculation error after August 1st, it must follow the same procedure.

Enrollee Notice

The Carrier Letter also contains a recommended cover letter for carriers to send to enrollees about how the ACA MLR rebate will apply to the FEHB program as Attachment B. Carriers are to send this letter along with the standard rebate notice to enrollees.