U.S. Office of Personnel Management - Ensuring the Federal Government has an effective civilian workforce

Cost Accounting Standards (CAS)

Overview

Background

• Full CAS would apply to our 18 largest experience rated carriers with contracts of at least $50 million, modified CAS would apply to the others.

• The Defense Authorization Act of 2000 gave agencies the authority to waive CAS. OPM worked with experience rated carriers to develop an approach acceptable to RIS, the IG, and the carriers.

• After learning an agency’s waiver authority did not permit modification of the CAS, BC/BS stated that their participation in the FEHBP was contingent on a full waiver.

• The CAS issue was made moot by a CAS exemption in OPM appropriations for Fiscal Years 2000, 2001, and 2002.

Current Status

• The CAS exemption was dropped from OPM’s ’03 appropriations bill when the House approved an amendment introduced by Rep. Dennis Kucinich, but it remains in the current Senate bill.

• BC/BS has reiterated and underscored that it will cease FEHB participation if CAS applies and has not closed benefit and rate negotiations for 2003 pending resolution.

• The Government contribution cannot be set, and Open Season printing cannot begin without final BC/BS rates and benefits.

• Legislative resolution of the CAS issue will be too late for a timely open season.

• DIRECTOR JAMES SIGNED THE WAIVER ON SEPTEMBER 11, 2002. In addition, OPM plans to propose an additional regulation that would propose further financial requirements on our contractors that are consistent with CAS principles but that use practices that are consistent with insurance company practices.

OPM Position

• RIS and the IG have consistently stated that current statutory, regulatory, and contractual provisions provide adequate financial safeguards.

• RIS has developed additional regulatory safeguards, patterned after relevant CAS provisions, that are acceptable to the IG and carriers.

• OPM’s immediate administrative waiver of CAS, combined with strengthened regulations, provides greater protections than a legislative exemption, avoids disruption of the open season, and avoids the political fallout of a Senate vote that, like the House, also drops the exemption.

• The prospect of a BC/BS withdrawal was real. As a practical matter OPM would have been forced to grant a one-year waiver to prepare for the relocation of more than 50% of the covered population.

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