B-119033, MAR. 17, 1960

B-119033, MAR. 17, 1960

TO HONORABLE ROGER JONES, CHAIRMAN, UNITED STATES CIVIL SERVICE COMMISSION:

WE HAVE CONSIDERED THE REGULATION PROPOSED TO BE ISSUED BY THE CIVIL SERVICE COMMISSION UNDER THE AUTHORITY OF THE FEDERAL EMPLOYEES HEALTH BENEFITS ACT OF 1959, 73 STAT. 708, APPEARING ON PAGE 875, ET SEQ. OF THE FEDERAL REGISTER FOR FEBRUARY 2, 1960, WHICH WOULD AMEND 5 CFR BY ADDING A NEW PART ENTITLED "PART 89," AND WE OFFER THE FOLLOWING COMMENTS THEREON:

SECTION 89.3 (E). THIS SUBSECTION AUTHORIZES (1) AN EMPLOYEE ELIGIBLE TO REGISTER IN 1960 BUT WHO FAILS TO REGISTER DURING THE INITIAL REGISTRATION PERIOD TO REGISTER TO BE ENROLLED IN OCTOBER 1961, (2) AN EMPLOYEE OR ANNUITANT IF ENROLLED IN 1960 TO CHANGE HIS ENROLLMENT IN OCTOBER 1961, AND (3) AN EMPLOYEE APPOINTED ON OR AFTER JANUARY 1, 1961 BUT WHO FAILS TO REGISTER DURING THE INITIAL REGISTRATION PERIOD TO REGISTER IN OCTOBER OF THE CALENDAR YEAR FOLLOWING THE YEAR IN WHICH HE IS APPOINTED.

IF AN EMPLOYEE AGAIN FAILS TO REGISTER DURING THE OCTOBER REGISTRATION PERIOD OF THE YEAR FOLLOWING THE YEAR OF APPOINTMENT, HE NEVER AGAIN IS AFFORDED THE OPPORTUNITY TO REGISTER UNLESS A CHANGE IN HIS FAMILY STATUS OCCURS. WE SUGGEST THAT THE REGULATION BE CHANGED TO PROVIDE PERIODIC OPPORTUNITIES TO REGISTER TO BE ENROLLED OR TO CHANGE ENROLLMENT. THIS OPPORTUNITY COULD BE PERMITTED ONCE A YEAR OR AT SUCH OTHER INTERVAL THAT MAY BE PRESCRIBED.

WE ALSO SUGGEST THAT A NEW SUBSECTION BE INCLUDED IN SECTION 89.3 PERMITTING EACH ELIGIBLE EMPLOYEE A MINIMUM PERIOD OF AT LEAST 31 DAYS WITHIN WHICH TO REGISTER TO BE ENROLLED AFTER HIS APPOINTMENT. UNDER SUBSECTION (A) AS WRITTEN AN ELIGIBLE EMPLOYEE APPOINTED IN THE LATTER PART OF JUNE, 1960, WOULD HAVE TO REGISTER FOR ENROLLMENT BEFORE JULY 1, 1960. SIMILARLY, SUBSECTION (E) MIGHT BE CONSTRUED AS REQUIRING REGISTRATION BY JANUARY 1, 1961, EVEN THOUGH THE ELIGIBLE EMPLOYEE WAS APPOINTED DURING THE LATTER PART OF DECEMBER, 1960.

SECTION 89.3 (F). THE TERM "CHANGE IN FAMILY STATUS" AS USED IN THIS SUBSECTION IS NOT ENTIRELY CLEAR. WE ASSUME IT MEANS A CHANGE IN FAMILY MEMBERSHIP OR COMPOSITION. IF THIS IS THE INTENDED MEANING OF THE TERM WE SUGGEST THE USE OF LANGUAGE SUCH AS "CHANGE IN FAMILY MEMBERSHIP" OR "CHANGE IN FAMILY COMPOSITION" IN LIEU OF THE LANGUAGE "CHANGE IN FAMILY STATUS.' ON THE OTHER HAND, IF THE TERM "CHANGE IN FAMILY STATUS" WAS INTENDED TO INCLUDE CHANGES OTHER THAN THOSE RELATING TO FAMILY COMPOSITION WE THINK THE CHANGES SHOULD BE SPECIFICALLY ENUMERATED.

SECTION 89.3 (I). THE APPARENT PURPOSE OF THIS PROVISION IS TO INSURE THAT THE GOVERNMENT AND THE SOLE SURVIVOR ANNUITANT DO NOT CONTINUE TO MAKE CONTRIBUTIONS AT A FAMILY PLAN RATE WHEN ONLY INDIVIDUAL PROTECTION IS NEEDED. HOWEVER, THE PLACING UPON THE SURVIVOR ANNUITANT OF RESPONSIBILITY FOR REQUESTING REINSTATEMENT OF FAMILY COVERAGE WITH NO PROVISION REQUIRING THAT THE EMPLOYING OFFICE SPECIFICALLY NOTIFY THE SURVIVOR ANNUITANT OF THE REDUCTION IN COVERAGE AND WHAT HE MUST DO TO SECURE REINSTATEMENT OF FAMILY COVERAGE LIKELY WILL RESULT IN NUMEROUS INEQUITIES ESPECIALLY WHEN THE TIME WITHIN WHICH A SURVIVOR ANNUITANT MAY REQUEST REINSTATEMENT OF FAMILY COVERAGE IS LIMITED TO "31 DAYS AFTER THE FIRST INSTALLMENT OF ANNUITY IS PAID.'

WE THINK A PREFERABLE PROCEDURE WOULD BE TO REQUIRE THE EMPLOYING OFFICE TO FORWARD THE SURVIVOR ANNUITANT A NEW REGISTRATION FORM--- TO BE EXECUTED AND RETURNED TO THE EMPLOYING OFFICE WITHIN A SPECIFIED TIME--- SHOWING THE TYPE OF COVERAGE (INDIVIDUAL OR FAMILY) SELECTED. UNTIL RECEIPT OF THE COMPLETED FORM BY THE EMPLOYING OFFICE OR THE EXPIRATION OF THE SPECIFIED TIME, WHICHEVER IS EARLIER, THE FAMILY COVERAGE PREVIOUSLY SELECTED BY THE DECEASED EMPLOYEE AND THE RELATED SUBSCRIPTION CHARGE WOULD CONTINUE.

SECTION 89.4 (B). IN GENERAL, THE EFFECT OF THIS SECTION WILL BE TO MAKE THE ENROLLMENT OF ELIGIBLE EMPLOYEES EFFECTIVE ON THE FIRST DAY OF THE SECOND PAY PERIOD FOLLOWING THEIR REGISTRATION. WE SUGGEST THAT CONSIDERATION BE GIVEN TO MAKING THE EFFECTIVE DATE OF AN ENROLLMENT THE FIRST DAY OF THE FIRST PAY PERIOD WHICH BEGINS FOLLOWING THE DATE OF REGISTRATION.

THE LANGUAGE "FIRST DAY OF THE FIRST PAY PERIOD IN WHICH THE EMPLOYEE IS IN A PAY OR ANNUITY STATUS" IS AMBIGUOUS. UNDER SUCH LANGUAGE IS AN ENROLLMENT EFFECTIVE IF THE EMPLOYEE IS IN A PAY STATUS FOR LESS THAN THE FULL PAY PERIOD? IS IT EFFECTIVE IF HE IS NOT IN A PAY STATUS ON THE FIRST DAY OF THE PAY PERIOD? IF THE ANSWER TO THE FIRST QUESTION IS IN THE AFFIRMATIVE, WOULD THE FACT THAT AN EMPLOYEE IS IN A PAY STATUS FOR ANY PART (EVEN FOR A PERIOD AS SHORT AS ONE HOUR) OF THE PAY PERIOD BE SUFFICIENT TO MAKE THE ENROLLMENT EFFECTIVE? WE SUGGEST THAT THE LANGUAGE BE CLARIFIED.

SECTION 89.5. THIS SECTION PROVIDES FOR THE CONTINUATION WITHOUT CHANGE OF THE ENROLLMENT OF A DECEASED EMPLOYEE OR ANNUITANT. SECTION 89.5 SHOULD BE REVISED TO COORDINATE IT WITH SECTION 89.3 (I), UNDER WHICH THE EMPLOYING OFFICE IS REQUIRED TO CHANGE FAMILY COVERAGE TO INDIVIDUAL COVERAGE WHEN ITS RECORDS INDICATE THAT THE SURVIVOR ANNUITANT IS THE SOLE SURVIVOR.

OUR COMMENTS UPON SECTION 89.3 (I) SHOULD ALSO BE CONSIDERED WHEN REVISING THIS SECTION.

SECTION 89.6. THIS SECTION PROVIDES THAT CANCELLATION WILL BE EFFECTIVE ON THE LAST DAY OF THE PAY PERIOD FOLLOWING THE PAY PERIOD IN WHICH THE EMPLOYEE REGISTERS TO CANCEL HIS ENROLLMENT. SINCE THERE APPEARS TO BE NO REASON WHY THE TERMINATION OF COVERAGE SHOULD BE DEFERRED, WE SUGGEST THAT CANCELLATION BE MADE EFFECTIVE ON THE LAST DAY OF THE PAY PERIOD IN WHICH THE EMPLOYEE REGISTERS TO CANCEL HIS ENROLLMENT.

SECTION 89.7 (A) (5). WE HAVE SOME DOUBT WHETHER THIS PROVISION IN ITS PRESENT FORM CARRIES OUT THE INTENT OF THE CONGRESS IN ENACTING SECTION 7 (B) OF THE FEDERAL EMPLOYEES HEALTH BENEFITS ACT OF 1959. SECTION 7 (B) PROVIDES THAT "AN EMPLOYEE ENROLLED IN A HEALTH BENEFITS PLAN * * * WHO IS PLACED IN A LEAVE WITHOUT PAY STATUS MAY HAVE HIS COVERAGE * * * CONTINUED * * * FOR A PERIOD NOT TO EXCEED ONE YEAR IN ACCORDANCE WITH REGULATIONS PRESCRIBED BY THE COMMISSION. SUCH REGULATIONS MAY PROVIDE FOR THE WAIVING OF CONTRIBUTIONS BY THE EMPLOYEE AND THE GOVERNMENT.'

THE NONPAY STATUS OF AN EMPLOYEE MAY ARISE IN A VARIETY OF WAYS. FOR INSTANCE, IN ONE CASE AN EMPLOYEE MAY BE GRANTED LEAVE WITHOUT PAY FOR THE PURPOSE OF RECEIVING AUTHORIZED TRAINING IN A NON-GOVERNMENT FACILITY WITH A VIEW TOWARD INCREASING HIS VALUE TO THE GOVERNMENT AS AN EMPLOYEE, WHILE IN ANOTHER CASE LEAVE WITHOUT PAY MAY BE GRANTED AT THE REQUEST OF AND SOLELY FOR THE CONVENIENCE OF THE EMPLOYEE. IN STILL ANOTHER SITUATION THE NONPAY STATUS MAY ARISE BY REASON OF AN EMPLOYEE'S FAILURE TO REPORT FOR DUTY, THAT IS, ABSENCE WITHOUT LEAVE.

APPARENTLY, THE CONGRESS RECOGNIZED THE VARIATION IN EQUITIES IN THE DIFFERENT SITUATIONS GIVING RISE TO A NONPAY STATUS AND DETERMINED THAT THE FLEXIBILITY REQUIRED TO PROTECT THE VARIOUS INTERESTS CONCERNED (THAT OF THE GOVERNMENT, THE EMPLOYEE IN A NONPAY STATUS, AND THE OTHER MEMBERS OF THE PLAN IN WHICH HE IS ENROLLED) BEST COULD BE ATTAINED IF THE MATTER WERE LEFT TO THE REGULATORY AUTHORITY OF THE COMMISSION. WE THINK THAT IF THE CONGRESS HAD DESIRED TO CONFER IN EVERY CASE AN ABSOLUTE RIGHT TO CONTINUED ENROLLMENT FOR A FULL YEAR THAT AN EMPLOYEE MAY BE CONTINUOUSLY IN A NONPAY STATUS, WITHOUT CONTRIBUTION EITHER BY THE EMPLOYEE OR THE GOVERNMENT, IT WOULD HAVE DONE SO BY A SPECIFIC PROVISION IN THE LAW. HOWEVER, THE CONGRESS DID NOT DO SO. ON THE CONTRARY, IN ORDER TO PROVIDE SUFFICIENT LEEWAY FOR THE COMMISSION TO REGULATE APPROPRIATELY AS THE CIRCUMSTANCES WARRANT, THE CONGRESS LEFT TO THE DISCRETION OF THE COMMISSION THE MATTER OF DETERMINING THE LENGTH OF TIME ENROLLMENT WOULD CONTINUE WHILE AN EMPLOYEE IS IN A NONPAY STATUS--- SUBJECT TO THE LIMITATION OF ONE YEAR -- AS WELL AS THE DETERMINATION WHETHER CONTRIBUTION WOULD BE REQUIRED FROM THE GOVERNMENT AND THE EMPLOYEE. APPEARS TO US THAT A GENERAL REGULATION THAT DISREGARDS THE CIRCUMSTANCES IN INDIVIDUAL CASES INVOLVING NONPAY SITUATIONS, SUCH AS THAT APPEARING IN SECTION 89.7 (A) (5), AVOIDS THE RESPONSIBILITY THE CONGRESS INTENDED THE COMMISSION TO EXERCISE.

VIEWED IN ITS WORST LIGHT THE REGULATION WOULD REQUIRE CONTINUATION OF ENROLLMENT, WITHOUT CONTRIBUTION BY THE GOVERNMENT OR BY THE EMPLOYEE, DURING A CONTINUOUS NONPAY STATUS EXTENDING FOR A PERIOD AS LONG AS ONE YEAR, EVEN THOUGH THE NONPAY STATUS RESULTED FROM A WILFUL NEGLECT OF DUTY ON THE PART OF THE EMPLOYEE. UNDER THE SUBSECTION SUCH AN EMPLOYEE--- AT THE EXPENSE OF OTHER MEMBERS OF THE PLAN--- WOULD BE ACCORDED EXACTLY THE SAME BENEFITS AS AN EMPLOYEE WHO IS IN NONPAY STATUS BECAUSE OF ILLNESS OR INJURY AFTER HAVING FIRST EXHAUSTED ALL OF HIS SICK AND ANNUAL LEAVE. CERTAINLY EQUITY REQUIRES THAT THESE TWO EMPLOYEES BE ACCORDED DIFFERENT TREATMENT.

LYING BETWEEN THESE TWO EXTREME CASES IS ONE IN WHICH LEAVE WITHOUT PAY IS GRANTED AT AN EMPLOYEE'S REQUEST FOR A PERIOD DURING WHICH HE ENGAGES IN AN ACTIVITY OR PROJECT WHICH, WHILE APART FROM HIS OFFICIAL DUTIES, IS OF INTEREST TO THE GOVERNMENT--- A COURSE OF STUDY OR PARTICIPATION IN A RESEARCH PROJECT UNDER A ROCKEFELLER AWARD, FOR EXAMPLE. THEN AGAIN, AN EMPLOYEE MIGHT BE GRANTED LEAVE WITHOUT PAY EXCLUSIVELY FOR HIS OWN CONVENIENCE AND BENEFIT.

WE DIRECT THESE SITUATIONS TO YOUR ATTENTION, NOT WITH THE IDEA OF SUBSTITUTING OUR JUDGMENT FOR YOURS CONCERNING WHAT TREATMENT MAY BE REGARDED AS EQUITABLE, REASONABLE, AND APPROPRIATE, BUT WITH THE RECOMMENDATION THAT EACH SITUATION BE TREATED SEPARATELY IN YOUR REGULATION AND THAT A REASONABLE AND APPROPRIATE INSTRUCTION BE PROMULGATED CONCERNING EACH.

IF SEPARATE PERIODS ARE PRESCRIBED IN YOUR REGULATION DURING WHICH ENROLLMENT WILL CONTINUE IN VARIOUS CATEGORIES OF CASES, EMPLOYING AGENCIES SHOULD BE CHARGED WITH THE RESPONSIBILITY OF PROMPTLY NOTIFYING RESPECTIVE CARRIERS OF THE NAMES OF EMPLOYEES GRANTED LEAVE OF ABSENCE WITHOUT PAY AND THE NAMES OF THOSE WHOSE ABSENCE IS UNAUTHORIZED, TOGETHER WITH THE COMMENCING DATE OF ABSENCES AND THE LENGTH OF TIME THAT ENROLLMENT WILL CONTINUE FOR EACH SUCH EMPLOYEE. IN ANY CASE IN WHICH AN ADMINISTRATIVE DETERMINATION WHETHER TO GRANT LEAVE WITHOUT PAY OR TO CHARGE THE ABSENCE AS UNAUTHORIZED IS NOT PROMPTLY MADE, THE EMPLOYING OFFICE SHOULD ADVISE THE CARRIER OF SUCH FACT AND CAUTION THE CARRIER NOT TO MAKE PAYMENT UPON ANY CLAIM FOR SERVICES RENDERED TO SUCH EMPLOYEE OR MEMBERS OF HIS FAMILY WITHOUT FIRST CONSULTING WITH THE EMPLOYING OFFICE WHICH SHALL THEN MAKE THE NECESSARY DETERMINATION CONCERNING ENROLLMENT.

FINALLY, IT OCCURS TO US THAT AGENCIES WOULD TEND TO EXERCISE GREATER DISCRETION IN THE MATTER OF AUTHORIZING EXTENDED LEAVE WITHOUT PAY IF YOUR REGULATION WERE TO REQUIRE THAT GOVERNMENT CONTRIBUTIONS TO THE FUND ARE TO CONTINUE DURING LEAVE WITHOUT PAY PERIODS. THEREFORE, WE SUGGEST THAT YOU GIVE CONSIDERATION TO MODIFYING YOUR REGULATION TO SO REQUIRE.

SECTION 89.8. SECTION 6 (F) OF THE FEDERAL EMPLOYEES HEALTH BENEFITS ACT OF 1959, PROVIDES THAT NO CONTRACT SHALL BE MADE OR PLAN APPROVED WHICH DOES NOT OFFER A TEMPORARY EXTENSION OF COVERAGE TO EACH EMPLOYEE OR ANNUITANT WHOSE ENROLLMENT IS TERMINATED OTHER THAN BY CANCELLATION, DURING WHICH EXTENSION PERIOD HE MAY CONVERT TO A NON GROUP PLAN. THE LANGUAGE OF THE LAW DOES NOT REQUIRE THE EXTENSION OF THE SAME PRIVILEGE TO A MEMBER OF THE FAMILY WHO IS NOT HIMSELF ENROLLED, BUT WHO MAY BE ENTITLED TO BENEFITS AS A MEMBER OF THE FAMILY OF AN ENROLLED EMPLOYEE OR ANNUITANT AND WE THINK THERE IS SOME DOUBT WHETHER THE CONGRESS CONTEMPLATED EXTENDING THE PRIVILEGE TO FAMILY MEMBERS IN THE MANNER PROVIDED FOR IN THIS SECTION OF THE REGULATIONS. MOREOVER, AS A PRACTICAL MATTER, (EVEN IF THERE WERE A LEGAL BASIS FOR THE REGULATION) IF ELIGIBILITY OF A MEMBER OF A FAMILY TERMINATES BECAUSE OF ATTAINMENT OF AGE 19 OR DIVORCE, THERE USUALLY WILL BE SUFFICIENT TIME TO PURCHASE HEALTH INSURANCE OR ENROLL IN A GROUP PLAN OUTSIDE THE GOVERNMENT PROGRAM AND THERE APPEARS TO BE LITTLE JUSTIFICATION FOR BURDENING THE PROGRAM WITH THE COST OF AN ADDITIONAL 31 DAYS COVERAGE FOR THESE PERSONS WHO ARE NEITHER EMPLOYEES NOR ANNUITANTS.

SECTION 89.11. NONE OF THE MINIMUM STANDARDS FOR HEALTH BENEFIT PLANS PRESCRIBED IN THIS SECTION ENUMERATE EITHER THE MANDATORY CATEGORIES OF BENEFITS WHICH SHALL BE INCLUDED IN ALL SUCH PLANS OR MINIMUM LEVELS OF BENEFITS WHICH MUST BE PROVIDED IN EACH SUCH CATEGORY.

SECTION 6 (D) OF THE FEDERAL EMPLOYEES HEALTH BENEFITS ACT OF 1959, AUTHORIZES THE COMMISSION ,* * * TO PRESCRIBE REGULATIONS FIXING REASONABLE MINIMUM STANDARDS FOR HEALTH BENEFIT PLANS * * *.' WHILE THAT SECTION DOES NOT EXPRESSLY REQUIRE THE PRESCRIBING OF STANDARDS OF BENEFITS, WE CONSIDER THAT THE REGULATIONS WOULD BE MORE IN KEEPING WITH THE SPIRIT OF THE SECTION IF MINIMUM BENEFIT STANDARDS WERE SPECIFICALLY ENUMERATED. IN SUCH CONNECTION WE NOTE THAT WHILE SECTION 5 OF THE ACT ENUMERATES VARIOUS CATEGORIES OF BENEFITS THAT MAY BE PROVIDED UNDER A SERVICE BENEFIT PLAN AND AN INDEMNITY BENEFIT PLAN THAT SECTION IS PERMISSIVE ONLY AND LEAVES TO THE DISCRETION OF THE COMMISSION THOSE CATEGORIES OF BENEFITS WHICH ARE TO BE PROVIDED. FOR THIS REASON IT SEEMS EVEN MORE APPROPRIATE THAT THE COMMISSION ESTABLISH MINIMUM STANDARDS ENUMERATING CATEGORIES OF BENEFITS REQUIRED TO BE OFFERED UNDER EACH PLAN. MOREOVER, SINCE THE MERE ENUMERATION OF CATEGORIES ALONE WOULD LEAVE THE REGULATIONS FAR TOO GENERAL TO AFFORD ANY REAL GUIDELINES, WE SUGGEST THAT SUCH REGULATIONS ALSO PROVIDE MINIMUMS FOR SPECIFIC BENEFITS SUCH AS MINIMUM DAYS OF HOSPITAL CARE, OTHER HOSPITAL SERVICES, DOCTORS' FEES, HOME CARE, MEDICAL SUPPLIES, AND OTHER COVERED CATEGORIES OF BENEFITS.

OF PARTICULAR INTEREST IS THE FOLLOWING STATEMENT APPEARING ON PAGE 4 OF SENATE REPORT NO. 468, JULY 2, 1959: "THE COMMITTEE INTENDS THAT IN PROVIDING FEDERAL EMPLOYEES WITH HEALTH BENEFITS IT SHALL FOSTER THE TYPES OF HEALTH BENEFITS PROGRAMS THAT ENCOURAGES PREVENTION AND DISCOURAGES UNNECESSARY USE OF EXPENSIVE FACILITIES AND SERVICES.' IN KEEPING WITH THE COMMITTEE'S INTENT AS EXPRESSED IN THE QUOTED STATEMENT, WE CONSIDER THAT STANDARDS SHOULD BE PRESCRIBED FOR THE DEFINITE PURPOSE OF DISCOURAGING UNNECESSARY USE OF HEALTH SERVICES OR FACILITIES. OUR VIEW IS THAT THERE SHOULD BE INCLUDED AMONG SUCH STANDARDS ONE THAT, IN GENERAL, WOULD INSURE THAT WHEN HEALTH BENEFITS ARE PROVIDED FOR A PARTICULAR SERVICE WHEN A PATIENT IS HOSPITALIZED, SIMILAR BENEFITS FOR SUCH SERVICE WOULD BE PROVIDED WHEN THE SERVICE IS PERFORMED OTHER THAN IN A HOSPITAL.

PERHAPS ONE OF THE MOST SIGNIFICANT PROVISIONS OF THE ACT, WHICH IN OUR OPINION, SHOULD BE THE SUBJECT OF A MINIMUM BENEFIT STANDARD IS THAT DEALING WITH MAJOR OR CATASTROPHIC ILLNESSES. SECTION 5 (4) OF THE ACT REQUIRES THAT "ALL PLANS CONTRACTED FOR UNDER PARAGRAPHS (1) AND (2) SHALL INCLUDE BENEFITS BOTH FOR COSTS ASSOCIATED WITH CARE IN A GENERAL HOSPITAL AND FOR OTHER HEALTH SERVICE COSTS OF A CATASTROPHIC NATURE.'

HOUSE REPORT NO. 957, AUGUST 20, 1959, CONTAINS SEVERAL STATEMENTS INDICATING A CLEAR INTENT THAT EMPHASIS SHOULD BE PLACED UPON PROTECTION AGAINST "HEALTH SERVICE COSTS OF A CATASTROPHIC NATURE.' AMONG SUCH STATEMENTS IS ONE APPEARING ON PAGE 3 OF THE REPORT WHICH READS AS FOLLOWS:

"IT IS INTENDED THAT EACH OF THE FOREGOING PLANS WILL PROVIDE A WIDE RANGE OF HOSPITAL, SURGICAL, MEDICAL, AND RELATED BENEFITS DESIGNED TO AFFORD THE EMPLOYEES FULL OR SUBSTANTIALLY FULL PROTECTION AGAINST EXPENSES OF BOTH COMMON AND CATASTROPHIC ILLNESS OR INJURY.'

OUR VIEW IS THAT IN ADDITION TO ENUMERATING "HEALTH SERVICE COSTS OF A CATASTROPHIC NATURE" AS ONE OF THE CATEGORIES OF BENEFITS TO BE PROVIDED UNDER EACH PLAN, THE REGULATIONS SHOULD SPECIFY CERTAIN MINIMUM HEALTH SERVICE COSTS OF A CATASTROPHIC NATURE WHICH MUST BE PROVIDED FOR UNDER EACH PLAN.

SECTION 89.11 (A) (5) (I). THIS SECTION PROVIDES THAT PERSONS WHO ARE HOSPITALIZED ON THE 31ST DAY OF THE TEMPORARY EXTENSION OF COVERAGE SHALL BE GRANTED CONTINUATION OF BENEFITS DURING THE CONTINUANCE OF THE CONFINEMENT, NOT TO EXCEED 60 DAYS.

THE CARRIER IS REQUIRED BY SECTION 89.11 (A) (4) TO PROVIDE FOR CONVERSION TO A CONTRACT FOR HEALTH BENEFITS TO BE EFFECTIVE AFTER THE 31ST DAY OF THE TEMPORARY EXTENSION. IN OUR OPINION, BENEFITS PAST THE 31ST DAY SHOULD BE PROVIDED UNDER THIS CONTRACT AND THE GOVERNMENT PROGRAM RELIEVED OF THE COSTS OF SUCH BENEFITS.

SECTION 89.11 (A) (9). THE LANGUAGE "SPECIAL RESERVE NOT TO EXCEED THE LATEST THREE CALENDAR MONTHS INCOME FROM THE FUND" IS NOT CLEAR. INCOME CAN HAVE MORE THAN ONE MEANING, DEPENDING ON HOW THE WORD IS USED. APPARENTLY, IN THIS INSTANCE, THE WORD "INCOME" REFERS TO A CARRIER'S ,RECEIPTS" FROM THE EMPLOYEES HEALTH BENEFITS FUND. IF SUCH IS THE CASE, WE SUGGEST THAT THE WORD "INCOME" BE CHANGED TO THE WORD "RECEIPTS.' THE PROVISION FOR A SPECIAL RESERVE TO BE HELD BY CARRIERS CAUSES CONCERN BECAUSE THE GREATER THE AMOUNT IN THE RESERVE THE LESS WILL BE THE RISK OF THE CARRIER. IN FACT, PERMITTING THE RESERVE TO REACH THE PROPOSED MAXIMUM LEVEL MAY, WHEN THE RESERVE REACHES THAT MAXIMUM, HAVE THE EFFECT OF MINIMIZING THE CARRIER'S RISK TO A DEGREE THAT IT WILL BE VIRTUALLY ELIMINATED--- THE SPECIAL RESERVE CONSTITUTING A GUARANTEE AGAINST RISK. AS COSTS RISE AND CAUSE SOME DEPLETION OF THE RESERVE, THE CARRIERS AND THE COMMISSION COULD NEGOTIATE NEW CONTRACT RATES SO AS TO AVOID FURTHER IMPAIRMENT OF THE RESERVE. WHILE THE REGULATIONS DO NOT PRESCRIBE ANY MAXIMUM AUTHORIZED RISK CHARGE, WE URGE THAT CAREFUL CONSIDERATION BE GIVEN TO REDUCING THE ALLOWABLE SPECIAL RESERVE AND TO GIVE PROPER WEIGHT TO THE LIMITATION ON THE SPECIAL RESERVE IN NEGOTIATING THE STANDARD RISK CHARGE PAYABLE TO ALL CARRIERS.

WE THINK ALSO THAT THE REGULATIONS SHOULD REQUIRE THE RETURN TO THE HEALTH BENEFITS FUND OF THE SPECIAL RESERVE HELD BY THE CARRIER/S) IN CASE APPROVAL OF THE CARRIER'S PLAN IS WITHDRAWN OR THE CARRIER ELECTS TO WITHDRAW. UNDER THIS SUBSECTION THE CARRIER IS ALLOWED TO ACCUMULATE THE SPECIAL RESERVE AS PROTECTION AGAINST ADVERSE OPERATING RESULTS THAT MAY OCCUR IN FUTURE YEARS. THAT BEING SO, AND SINCE THE CARRIER IS ALLOWED A "RISK CHARGE OR RETENTION," IT APPEARS THAT IN EQUITY ANY AMOUNT HELD IN THE SPECIAL RESERVE SHOULD NOT BECOME ADDITIONAL "PROFIT" TO THE CARRIER BUT SHOULD BE RETURNED TO THE FUND.

AS A MATTER OF EDITORIAL CLARIFICATION AND TO SIMPLIFY THE DETERMINATION OF THE MAXIMUM SIZE OF THE SPECIAL RESERVE, WE SUGGEST THAT THE ITEMS LISTED FOR DEDUCTION IN SUBPARAGRAPH (9) BE RESTATED AS FOLLOWS:

"* * * (1) BENEFIT PAYMENTS, (2) TAXES ATTRIBUTABLE TO THE PLAN, (3) OPERATING EXPENSES, (4) THE RISK CHARGE OR RETENTION AUTHORIZED BY THE COMMISSION FOR THE PLAN, AND (5) A SPECIAL RESERVE NOT TO EXCEED ONE QUARTER OF THE SUBSCRIPTION CHARGES RECEIVED BY THE CARRIER FROM THE HEALTH BENEFITS FUND IN THE PRECEDING CONTRACT YEAR.'

THIS SUBSECTION ALSO PROVIDES THAT "AMOUNTS RETAINED BY THE CARRIER AS RESERVES FOR THE PLAN MUST BE MAINTAINED AND ACCOUNTED FOR SEPARATELY FROM RESERVES MAINTAINED BY THE CARRIER FOR OTHER PLANS.' IT IS NOT CLEAR WHAT IS MEANT BY THE WORD "MAINTAINED.'

MOREOVER, THERE IS NO REQUIREMENT THAT THE RESERVE BE INVESTED OR THAT THE INCOME FROM INVESTMENT OF THE RESERVE BE RETURNED TO THE COMMISSION. SINCE THE REGULATIONS SPECIFICALLY ALLOW THE CARRIER A "RISK CHARGE OR RETENTION," ANY INCOME FROM INVESTMENT OF THE RESERVE SHOULD BE RETURNED TO THE FUND ADMINISTERED BY THE COMMISSION. WE SUGGEST THAT IN THE SENTENCE QUOTED ABOVE THE WORD "MAINTAINED" BE REPLACED BY THE WORD "INVESTED" AND THAT THE FOLLOWING SENTENCE BE ADDED "INCOME RECEIVED FROM INVESTMENT OF THE RESERVE SHALL BE RETURNED TO THE CIVIL SERVICE MMISSION.'

THE LAST SENTENCE OF THE SUBSECTION PROVIDES FOR "OTHER EQUITABLE AND PRACTICABLE RECORDING, ACCOUNTING, REPORTING, AND FINANCIAL PROCEDURES" FOR A CARRIER PROVIDING SERVICE BENEFITS. THERE IS NO REASON APPARENT WHY A SERVICE CARRIER SHOULD REQUIRE SPECIAL PROCEDURES AND WE CONSIDER THAT TO AVOID POSSIBLE CRITICISM, THE REGULATIONS SHOULD INCLUDE THE SPECIAL PROCEDURES DETERMINED TO BE APPLICABLE RATHER THAN MERELY PROVIDING THAT SUCH SPECIAL PROCEDURES MAYBE ESTABLISHED. IF SUBSTANTIAL REASONS WARRANTING THE USE OF SPECIAL PROCEDURES DO NOT EXIST, THEN THE SENTENCE SHOULD BE DELETED.

SECTION 89.11 (B). THE STANDARDS INCLUDE NO PROVISION PRECLUDING CARRIERS FROM DENYING LIABILTIY FOR BENEFITS RECEIVED IN GOVERNMENT HOSPITALS FOR NON-SERVICE-CONNECTED ILLNESSES. THERE APPEARS TO BE LITTLE REASON WHY EMPLOYEES WHO ARE ENROLLED IN THE GOVERNMENT PROGRAM SHOULD SEEK ADMISSION IN VETERANS ADMINISTRATION AND OTHER GOVERNMENT HOSPITALS ON A GRATUITOUS BASIS FOR NON-SERVICE-CONNECTED HEALTH IMPAIRMENT CONDITIONS. IF, HOWEVER, SUCH ADMISSIONS ARE GRANTED IN EMERGENCY CIRCUMSTANCES, OUR OPINION IS, IN VIEW OF THE GOVERNMENT SUBSIDY OF FEDERAL HOSPITAL PROGRAMS, THAT CONTRACT BENEFITS SHOULD BE APPLICABLE TO CONFINEMENTS IN GOVERNMENT HOSPITALS UNLESS THE CONFINEMENT INVOLVES SERVICE CONNECTED CONDITIONS OR COVERAGE UNDER THE EMPLOYEES' COMPENSATION ACT. WE BELIEVE THAT THE INCLUSION OF A POSITIVE PROVISION FOR NON- SERVICE-CONNECTED BENEFITS UNDER THE FEDERAL EMPLOYEES' HEALTH PROGRAM IS DESIRABLE SINCE HEALTH INSURANCE POLICIES OFTEN BAR SUCH BENEFITS. INCLUSION OF THIS PROVISION WILL SERVE TO ASSIST THE VETERANS ADMINISTRATION IN LIMITING ADMISSIONS OF FEDERAL EMPLOYEES FOR NON-SERVICE -CONNECTED ILLNESSES, SINCE THESE EMPLOYEES WITH A FEDERAL HEALTH BENEFITS PLAN WILL NOT BE ABLE TO CLAIM INABILITY TO PAY. MOREOVER, NOW THAT A FEDERAL EMPLOYEE HEALTH PROGRAM IS TO BECOME OPERATIVE, IT SHOULD NOT BE SUPPLEMENTED BY A GRATUITOUS PROGRAM IN THE VETERANS ADMINISTRATION.

THE STANDARDS DO NOT PRECLUDE THE APPROVAL OF PLANS WHICH DISCRIMINATE BETWEEN CLASSES OF EMPLOYEES BASED UPON LEVEL OF INCOME. UNDER THE REGULATIONS AS WRITTEN A PLAN MIGHT PROVIDE FULL REIMBURSEMENT FOR SPECIFIED OPERATIONS OR OTHER SURGICAL PROCEDURES TO ENROLLEES HAVING INCOMES BELOW A SPECIFIED LEVEL BUT ONLY PARTIAL REIMBURSEMENT TO ENROLLEES WITH INCOMES ABOVE THAT LEVEL.

WE WONDER WHETHER THE COMMISSION AS A MATTER OF POLICY, WOULD WANT TO GIVE SANCTION TO SUCH DISCRIMINATORY PRACTICE BY APPROVAL OF PLANS UNDER WHICH SUCH PRACTICE WOULD BE PERMITTED.

SECTION 89.12 (D). THIS SUBSECTION PROVIDES FOR "* * * REPRESENTATIVES OF THE COMMISSION AND OF THE GENERAL ACCOUNTING OFFICE TO AUDIT ITS (THE CARRIERS) RECORDS AND ACCOUNTS REGARDING THE PLAN AT SUCH REASONABLE TIMES AND PLACES AS MAY BE DESIGNATED BY THE COMMISSION OR THE GENERAL ACCOUNTING OFFICE.'

IT APPEARS THAT IT MAY BE DESIRABLE, DURING THE AUDIT, TO COMPARE THE CLAIMS PAID UNDER GOVERNMENT PLANS WITH CLAIMS PAID FOR BY OTHER PLANS AND ALSO THAT IN AUDITING THE ALLOCATION OF VARIOUS OVERHEAD EXPENSES THAT ACCESS TO THE GENERAL BOOKS MAY BE NECESSARY. THE LIMITATION PLACED ON THE AVAILABILITY OF THE RECORDS BY THE WORDS "* * * WITH RESPECT TO THE PLAN * * *.' COULD CAUSE THE AUDIT TO BE INCOMPLETE. WE SUGGEST THAT THE WORDS BE DELETED.

SECTION 89.13 (B). THE REGULATIONS DO NOT SPECIFY A DATE ON WHICH CONTRACTS FOR HEALTH BENEFITS WILL TERMINATE. SINCE AGENCIES WILL BE PAYING THE GOVERNMENT CONTRIBUTION FROM APPROPRIATED FUNDS, IT APPEARS TO BE DESIRABLE FOR THE HEALTH BENEFITS CONTRACT YEAR TO MATCH THE GOVERNMENT'S FISCAL YEAR. SUCH A PROCEDURE WILL PLACE ANY RATE CHANGES AT THE START OF A FISCAL YEAR. A YEAR ENDING ON JUNE 30 WOULD ALSO ALLOW REPORTS AND STATISTICS REGARDING THE HEALTH BENEFITS PROGRAM TO COVER THE SAME PERIOD OF TIME AS IS COVERED BY OTHER FISCAL YEAR GOVERNMENT REPORTS.

WE URGE THAT THE REGULATIONS INCLUDE A PROVISION SETTING JUNE 30 AS THE TERMINATION DATE FOR ALL CONTRACTS FOR HEALTH BENEFITS.