[Federal Register: March 28, 2008 (Volume 73, Number 61)]
[Proposed Rules]               
[Page 16612-16614]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr28mr08-24]                         

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DEPARTMENT OF DEFENSE

Office of the Secretary

32 CFR Part 199

[DoD-2007-HA-0078; RIN 0720-AB17]

 
TRICARE; Relationship Between the TRICARE Program and Employer-
Sponsored Group Health Plans

AGENCY: Office of the Secretary, Department of Defense.

ACTION: Proposed Rule.

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SUMMARY: This proposed rule implements Section 1097c of Title 10, 
United States Code. This law prohibits employers from offering 
incentives to TRICARE-eligible employees to not enroll, or to terminate 
enrollment, in an employer-offered Group Health Plan (GHP) that is or 
would be primary to TRICARE. Cafeteria plans that comport with section 
125 of the Internal Revenue Code will be permissible so long as the 
plan treats all employees the same and does not illegally take TRICARE 
eligibility into account.

DATES: Written comments received at the address indicated below by May 
27, 2008 will be accepted.

ADDRESSES: You may submit comments, identified by docket number and/or 
RIN number and title, by any of the following methods:
     Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
     Mail: Federal Docket Management System Office, 1160 
Defense Pentagon, Washington, DC 20301-1160.
    Instructions: All submissions received must include the agency name 
and docket number or Regulatory Information Number (RIN) for this 
Federal Register document. The general policy for comments and other 
submissions from members of the public is to make these submissions 
available for public viewing on the Internet at http://regulations.gov 
as they are received without change, including any personal identifiers 
or contact information.

FOR FURTHER INFORMATION CONTACT: Anne Giese, TRICARE Policy and 
Operations, TRICARE Management Activity, 5111 Leesburg Pike, Suite 810, 
Falls Church, VA, 22041, telephone (703) 681-0039.

SUPPLEMENTARY INFORMATION:

I. Background

    Section 707 of the John Warner National Defense Authorization Act 
for Fiscal Year 2007 (Pub. L. 109-364) added Section 1097c to Title 10, 
United States Code. Section 1097c prohibits employers from offering 
financial or other incentives to certain TRICARE-eligible employees 
(essentially retirees and their family members) to not enroll in an 
employer-offered GHP in the same manner as employers are currently 
prohibited from offering incentives to Medicare-eligible employees 
under section 1862(b)(3)(C) of the Social Security Act (42 U.S.C. 
1395y(b)(3)(C)). Many employers, including state and local governments, 
have begun to offer their employees who are TRICARE-eligible a TRICARE 
supplemental insurance as an incentive not to enroll in the employer's 
primary GHP. These actions shift thousands of dollars of annual health 
costs per employee to the Defense Department, draining resources from 
higher national security priorities. TRICARE, as is Medicare, is a 
secondary payer to employer-provided health insurance. In all instances 
where a TRICARE beneficiary is employed by a public or private entity 
and elects to participate in a GHP, reimbursements for TRICARE claims 
will be paid as a secondary payer to the TRICARE beneficiary's 
employer-sponsored GHP. TRICARE is not responsible for paying first as 
it relates to reimbursements for a TRICARE beneficiary's health care 
and the coordination of benefits with employer-sponsored GHPs.
    An identified employer-sponsored health insurance plan will be the 
primary payer and TRICARE will be the secondary payer. TRICARE will 
generally pay no more than the amount it would have paid if there were 
no employer GHP. As applicable to both the Medicare and TRICARE 
secondary payer programs, the term ``group health plan'' means a plan 
(including a self-insured plan) of, or contributed to by, an employer 
(including a self-employed person) or employee organization to provide 
health care (directly or otherwise) to the employees, former employees, 
the employer, others associated or formerly associated with the 
employer in a business relationship, or their families. It should be 
noted that by including any plan of an employer to provide health care 
to the employees, this definition is very broad. It should also be 
noted that Section 1097c also reaches to any other plan that would be 
primary to TRICARE.
    Prohibition on incentives not to enroll in employer-sponsored GHPs 
is to prevent employers from shifting their responsibility for their 
employees onto the Federal taxpayers. Certain common employer benefits 
programs do not constitute improper incentives under the law. For 
example, supplemental insurance offered under an employer's cafeteria 
plan which comports with section 125 of the Internal Revenue Code would 
not be considered improper incentive, as long as it is not a TRICARE-
exclusive plan.
    A cafeteria plan is defined by the Internal Revenue Code, 26 U.S.C. 
125(d), as a written plan under which all participants are employees 
and the participants may choose among two or more benefits consisting 
of cash and qualified benefits. Employers who adhere to the 
requirements of section 125 and offer all employees without regard to 
TRICARE eligibility a choice between health insurance and cash payment 
equivalents are not considered in violation of 42 U.S.C. 
1395y(b)(3)(C). Therefore, if a TRICARE beneficiary elects the cash 
payment option as a benefit offered under the employer's cafeteria 
plan, one which meets section 125 requirements, then the employer would 
not be in violation of these provisions.
    10 U.S.C. 1097c prohibits TRICARE supplemental insurance plans as 
an option for health coverage under an employer-sponsored GHP to 
TRICARE-eligible beneficiaries. Such plans cannot be included in 
cafeteria plans because they are not open to all employees, and 
constitute an improper incentive targeted only at TRICARE beneficiaries 
for not enrolling in the employer's main health plan option or options. 
Section 1097c does not impact TRICARE supplemental insurance plans that 
are not offered by an employer; but are sold by an insurer and/or 
beneficiary association working in conjunction with an insurer. Such 
non-employer-sponsored TRICARE supplemental insurance will continue to 
be expressly excluded as double coverage under 32 CFR 199.2(b) and 
199.8(b)(4)(ii), so that TRICARE is the primary payer and the TRICARE 
Supplemental plan is the secondary payer. These plans have been sold by 
beneficiary associations or insurers.
    Cafeteria plans. Cafeteria plans that comport with section 125 of 
the Internal Revenue Code are permissible. Additional requirements of 
any plan

[[Page 16613]]

offered by the employer are permissible so long as the plan treats all 
employees the same and does not illegally take TRICARE eligibility into 
account. The Conference Report accompanying the enactment of section 
1097c made clear that supplemental insurance offered by employers 
through cafeteria plans are permissible under 1097c only if they are 
``non-TRICARE exclusive employer-provider health care incentives.'' 
TRICARE-exclusive plans even if offered under cafeteria plans, are not 
allowed. However, an employer incentive not to enroll in the employer's 
Group Health plan does not violate this new law if the incentive is 
available to and can be used by all employees, and not limited to 
employees who are also TRICARE beneficiaries. For example, non-TRICARE 
exclusive employer-provided health care incentives offered under an 
otherwise proper employer-sponsored Cafeteria Plan would not be a 
violation. Similarly, cash payments or other bona fide fringe benefits 
may properly be offered under the Services Contract Act in lieu of 
health care coverage so long as the employer does not consider TRICARE 
eligibility when formulating the cash payment or fringe benefits 
options for an employee.
    It has been determined that the regulation is economically 
significant. An economic analysis has been completed.

II. Regulatory Enforcement

    Enforcement of this prohibition is afforded through the authority 
provided by section 1097c: civil monetary penalties not to exceed $5000 
for each violation, investigative authorities of the Department of 
Defense Inspector General, recourse under the Debt Collection 
Improvement Act, 31 U.S.C. 3701 et seq., and any other authority 
provided by law. Procedures for civil monetary penalties will be 
considered with reference to section 1097c(a)(2)(B), which authorizes 
agreements between DoD and the Department of Health and Human Services.

III. Regulatory Procedures

Executive Order 12866, ``Regulatory Planning and Review'' and Public 
Law 96-354, ``Regulatory Flexibility Act'' (5 U.S.C. 601)

    Executive Order 12866 requires that a comprehensive regulatory 
impact analysis be performed on any economically significant regulatory 
action, defined as one that would result in an annual effect of $100 
million or more on the national economy or which would have other 
substantial impacts. This rule is an economically significant 
regulatory action. The Regulatory Flexibility Act (RFA) requires that 
each Federal agency prepare, and make available for public comment, a 
regulatory flexibility analysis when the agency issues a regulation 
which would have a significant impact on a substantial number of small 
entities. This rule will not have a significant impact on a substantial 
number of small entities for purposes of the RFA. This proposed rule is 
subject to an economic analysis.

Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3511)

    This rule will not impose additional information collection 
requirements on the public under the Paperwork Reduction Act of 1995 
(44 U.S.C. 3501-3511).

Executive Order 13132, ``Federalism''

    We have examined the impact(s) of the proposed rule under Executive 
Order 13132 and it does not have policies that have federalism 
implications that would have substantial direct effects on the States, 
on the relationship between the national government and the States, or 
on the distribution of power and responsibilities among the various 
levels of government, therefore, consultation with State and local 
officials is not required.

Section 202, Public Law 104-4, ``Unfunded Mandates Reform Act''

    This rule does not contain unfunded mandates. It does not contain a 
Federal mandate that may result in the expenditure by State, local and 
tribunal governments, in aggregate, or by the private sector, of $100 
million or more in any one year.

List of Subjects in 32 CFR Part 199

    Claims, Health care, Health Insurance, Military personnel.

    Accordingly, 32 CFR part 199 is proposed to be amended as follows:

PART 199--CIVILIAN HEALTH AND MEDICAL PROGRAM OF THE UNIFORMED 
SERVICES (CHAMPUS) [AMENDED]

    1. The authority citation for part 199 continues to read as 
follows:

    Authority: 5 U.S.C. 301; 10 U.S.C. chapter 55.

    2. Section 199.8 is amended by adding a new paragraph (d)(6) to 
read as follows:


Sec.  199.8  Double coverage.

* * * * *
    (d) * * *
    (6) Prohibition against financial and other incentives not to 
enroll in a group health plan--(i) General rule. An employer or other 
entity is prohibited from offering TRICARE beneficiaries financial or 
other benefits as incentives not to enroll in, or to terminate 
enrollment in, a group health plan that is, or would be, primary to 
TRICARE. This prohibition applies in the same manner as section 
1862(b)(3)(C) of the Social Security Act applies to incentives for a 
Medicare-eligible employee not to enroll in a group health plan that is 
or would be primary to Medicare. This prohibition precludes offering to 
TRICARE beneficiaries an alternative to the employer primary plan 
unless:
    (A) The beneficiary has primary coverage other than TRICARE; or
    (B) The benefit is a Cafeteria Plan offered under Section 125 of 
the Internal Revenue Code and is offered to all employees, including 
non-TRICARE eligible employees.
    (ii) Remedies and penalties. (A) Remedies for violation include, 
but are not limited to, remedies under the Federal Claims Collection 
Act, 31 U.S.C. 3701 et seq.
    (B) Penalties for violation include a civil money penalty of up to 
$5000 for each violation. The provisions of Section 1128A of the Social 
Security Act, 42 U.S.C. 1320a-7a, (other than subsections (a) and (b)) 
apply to the civil money penalty in the same manner as the provisions 
apply to a penalty or proceeding under Section 1128A.
    (iii) Definitions. For the purposes of this paragraph (d)(6):
    (A) The term `employer' includes any State or unit of local 
government and any employer that employs at least 20 employees.
    (B) The term `group health plan' means a group health plan (as that 
term is defined in section 5000(b)(1) of the Internal Revenue Code of 
1986 without regard to section 5000(d) of the Internal Revenue Code of 
1986).
    (C) The term `TRICARE-eligible employee' means a covered 
beneficiary under section 1086 of title 10, United States Code, Chapter 
55, entitled to health care benefits under the TRICARE program.
    (iv) Procedures. The Departments of Defense and Health and Human 
Services are authorized to enter into agreements to further carry out 
this section.
* * * * *


[[Page 16614]]


    Dated: March 21, 2008.
L.M. Bynum,
Alternate OSD Federal Register Liaison Officer, Department of Defense.
[FR Doc. E8-6419 Filed 3-27-08; 8:45 am]

BILLING CODE 5001-06-P