[Code of Federal Regulations]
[Title 48, Volume 6]
[Revised as of October 1, 2005]
From the U.S. Government Printing Office via GPO Access
[CITE: 48CFR1609.7001]

[Page 125-127]
 
            TITLE 48--FEDERAL ACQUISITION REGULATIONS SYSTEM
 
  CHAPTER 16--OFFICE OF PERSONNEL MANAGEMENT FEDERAL EMPLOYEES HEALTH 
                     BENEFITS ACQUISITION REGULATION
 
PART 1609_CONTRACTOR QUALIFICATIONS--Table of Contents
 
     Subpart 1609.70_Minimum Standards for Health Benefits Carriers
 
Sec. 1609.7001  Minimum standards for health benefits carriers.


    (a) The carrier of an approved health benefits plan shall meet the 
requirements of chapter 89 of title 5, United States Code; part 890 of 
title 5, Code of Federal Regulations; chapter 1 of title 48, Code of 
Federal Regulations, and the following standards. The carrier shall 
continue to meet the requirements of chapter 89 of title 5, United 
States Code, and the standards cited in this paragraph while under 
contract with OPM. Failure to meet these requirements and standards is 
cause for OPM's withdrawal of approval of the health benefits carrier 
and termination of the contract in accordance with 5 CFR 890.204.
    (1) It must be lawfully engaged in the business of supplying health 
benefits.
    (2) It must have, in the judgement of OPM, the financial resources 
and experience in the field of health benefits to carry out its 
obligations under the plan.
    (3) It must keep such reasonable financial and statistical records, 
and furnish such reasonable financial and statistical reports with 
respect to the plan, as may be requested by OPM.
    (4) It must permit representatives of OPM and of the General 
Accounting Office to audit and examine its records and accounts which 
pertain, directly or indirectly, to the plan at such reasonable times 
and places as may be designated by OPM or the General Accounting Office.
    (5) It must accept, subject to adjustment for error or fraud, in 
payment of its charges for health benefits for all enrollees in its 
plan, the enrollment charges received by the Employees Health Benefits 
(EHB) Fund less amounts set aside for the administrative and contingency 
reserves prescribed in 5 CFR 890.503. OPM makes available or pays the 
amounts within 30 days of receipt by the EHB Fund.
    (6) A carrier that is an employee organization must continue 
coverage, without requirement of membership, of

[[Page 126]]

any eligible survivor annuitants, former spouses continuing coverage 
with the carrier under 5 CFR 890.803, children temporarily continuing 
coverage with the carrier under 5 CFR 890.1103(a)(2), or former spouses 
temporarily continuing coverage with the carrier under 5 CFR 
890.1103(a)(3).
    (7) It must timely submit to OPM a properly completed and signed 
novation or change-of-name agreement in accordance with subpart 1642.12 
of this chapter.
    (b) In addition to the standards in paragraph (a) of this section, 
the carrier must perform the contract in accordance with prudent 
business practices. A carrier's sustained poor business practice in the 
management or administration of a health benefits plan is cause for 
OPM's withdrawal of approval of the health benefits carrier and 
termination of the carrier's contract. Prudent business practices 
include, but are not limited to, the following:
    (1) Timely compliance with OPM instructions and directives.
    (2) Legal and ethical business and health care practices.
    (3) Compliance with the terms of the FEHB contract, regulations and 
statutes.
    (4) Timely and accurate adjudication of claims or rendering of 
medical services.
    (5) A system for accounting for costs incurred under the contract, 
when required, which includes segregating and pricing FEHB medical 
utilization and allocating indirect and administrative costs in a 
reasonable and equitable manner.
    (6) Accurate accounting reports of actual, allowable, allocable, and 
reasonable costs incurred in the administration of the contract.
    (7) Application of performance standards for assuring contract 
quality as required by 1646.270(d).
    (8) Establishment and maintenance of a system of internal control 
that provides reasonable assurance that:
    (i) The provision and payments of benefits and other expenses are in 
compliance with legal, regulatory, and contractual guidelines;
    (ii) FEHB funds, property, and other assets are safeguarded against 
waste, loss, unauthorized use, or misappropriation; and,
    (iii) Data are accurately and fairly disclosed in all reports 
required by OPM.
    (c) The following types of activities are examples of poor business 
practices which adversely affect the health benefits carrier's 
responsibility under its contract. A pattern of poor conduct or evidence 
of misconduct in these areas is cause for OPM to withdraw approval of 
the carrier:
    (1) Presenting false claims by charging expenses to the contract 
which according to the contract terms are not chargeable to the 
contract;
    (2) Using fraudulent or unethical business or health care practices 
or otherwise displaying a lack of business integrity or honesty;
    (3) Repeatedly and knowingly providing false or misleading 
information in the rate setting process;
    (4) Repeated failure to comply with OPM instructions and directives;
    (5) Having an accounting system that is incapable of separately 
accounting for costs incurred under the contract and/or that lacks the 
internal controls necessary to fulfill the terms of the contract; and
    (6) Failure to assure that the plan provides properly paid or denied 
claims, or providing medical services which are inconsistent with 
standards of good medical practice.
    (7) Entering into contracts or employment agreements with providers, 
provider groups, or health care workers that include provisions or 
financial incentives that directly or indirectly create an inducement to 
limit or restrict communication about medically necessary services to 
any individual covered under the FEHB Program. Financial incentives are 
defined as bonuses, withholds, commissions, profit sharing or other 
similar adjustments to basic compensation (e.g., service fee, 
capitation, salary) which have the effect of limiting or reducing 
communication about appropriate medically necessary services. Providers, 
health care workers, or health plan sponsoring organizations are not 
required to discuss treatment options that they would not ordinarily 
discuss in their customary course of practice because such options

[[Page 127]]

are inconsistent with their professional judgment or ethical, moral or 
religious beliefs.
    (d) The Director or his or her designee will determine whether to 
propose withdrawal of approval and hold a hearing based on the 
seriousness of the carrier's actions and its proposed method to effect 
corrective action.

[57 FR 14359, Apr. 20, 1992. Redesignated and amended at 59 FR 14764, 
14765, Mar. 30, 1994; 63 FR 42586, Aug. 10, 1998]