PLAN PARTICIPATION AGREEMENT
(Blue Cross and Blue Shield - Federal Employee Program)
Blue Cross and Blue Shield of Missouri
This Plan Participation Agreement is made and entered into
between the Blue Cross and Blue Shield Association, an Illinois
not-for-profit corporation ("Association"), and Blue Cross and
Blue Shield of Missouri, a Missouri health services corporation
("Plan").
WHEREAS, the Plan has executed an agreement (identified as
"Exhibit A") authorizing the Association to obligate the Plan to
underwrite and administer benefits under Title 5, Chapter 89,
United States Code (hereinafter referred to as the "Federal
Employee Program" or "FEP"); and
WHEREAS, the Association has entered into Contract No. C.S.
1039 with the United States Office of Personnel Management
(hereinafter referred to as "OPM"), for the provision of health
care benefits under FEP (hereinafter referred to as the
"Contract"), on behalf of the undersigned Plan and other Blue
Cross and Blue Shield organizations (hereinafter referred to as
"Participating Plans"); and
WHEREAS, it is desirable to set forth more fully the
obligations and authorities of the Plan and the Association with
respect to FEP,
NOW, THEREFORE, in consideration of the mutual obligations
of the parties to this Agreement as hereinafter set forth, and in
consideration of the execution of identical Agreements (excluding
schedules specifying the areas to be serviced and underwritten by
the Participating Plans) by other Participating Plans, it is
agreed that:
1. Functions of the Association
The Association shall:
1.1. On behalf of the Plan, contract with the Office of
Personnel Management to underwrite and administer
health care benefits for FEP subscribers in
consideration of subscription charges which are
intended to maintain the sound financial condition of FEP.
1.2. Establish policies, practices, and procedures for
the administration of FEP.
1.3. Interpret the provisions of the Contract.
1.4. Provide the Plan (at reasonable intervals and no
less than annually) with financial reports reflecting
the financial condition of FEP.
1.5. Make determinations with respect to (i) the Plan's
FEP budget, (ii) resolution of issues arising from
audits of the Plan with respect to FEP, (iii) the
Plan's charges to the Contract, (iv) appeals from FEP
benefits determinations by the Plan, and (v) lawsuits
involving the Plan arising under the Contract.
1.6. Promptly provide to the Plan information needed to
permit it to perform its functions under FEP and assist
it in every reasonable way to administer its assigned
functions.
1.7. Maintain the confidentiality of all information
concerning the Plan which comes to the attention of the
Association in the course of FEP reviews and audits of
the Plan except as disclosure is required by law or is
necessary for the administration of the Contract, and
notify the Plan upon the Association's receipt of a
request for Plan records under the Freedom of
Information Act or upon receipt of a subpoena for such
records. This requirement will be satisfied, in
instances in which the Association discloses
information to consultants or subcontractors in the
administration of the Contract, if the consultant or
subcontractor agrees to maintain the confidentiality of
the information.
1.8. Perform central administrative services for FEP
directly or through an agent, including but no limited
to (a) receipt of subscription income, (b) maintenance
of central eligibility files, (c) advertising,
(d) retention, investment, use and distribution of the
Service Charge as specified in this Agreement,
(e) execution of contracts on behalf of Participating
Plans with vendors that are providing health care
services or supplies or other administrative services
for the Federal Employee Program on a national basis,
including a mail order prescription drug benefit and a
national retail prescription drug program, and
(f) arranging for the temporary underwriting and
servicing of FEP benefits (including marketing and
contracting with providers) in an area that is not
being serviced or underwritten by a Participation Plan,
giving priority to arranging for the provision of such
services through one or more Participating Plans.
2. Functions of the Plan
The Plan shall:
2.1. Underwrite and administer FEP benefits, in
accordance with the terms of the Contract and in the
manner set forth herein, as assigned pursuant to Schedule A.
2.2. Comply with the policies, practices, and
procedures adopted by the Association for the
administration and provision of benefits under FEP,
including timely submission of the certification with
respect to the Plan's data reflected in the Annual
Accounting Statement to be submitted to OPM.
2.3. Comply with the Association's interpretations of the Contract.
2.4. Comply with the Association's determinations with
respect to (i) questions involving the Plan's FEP
budget, (ii) issues arising from audits of the Plan
with respect to FEP, (iii) the Plan's charges to the
Contract, (iv) appeals from FEP benefits
determinations, and (v) lawsuits involving the Plan
arising under the Contract.
2.5. Comply with the terms, provisions and conditions
of the Contract, the Federal Employees Health Benefits
Act [5 U.S.C. Ch. 89] and regulations issued
thereunder, the Federal Acquisition Regulation [48 C.F.R.],
and the Federal Employees Health Benefits
Acquisition Regulation [48 C.F.R. Ch. 16].
2.6. Conform to all reasonable requests of the
Association in connection with the administration of
FEP, including providing OPM and the Association access
to all of the Plan's records and other information
relating to FEP.
2.7. Notify the Association of any occurrence or
anticipated occurrence that might reasonably be
expected to materially affect the Plan's ability to
meet its obligations under the Contract.
2.8. Hold harmless and indemnify the officers, board of
directors, Board of Managers of FEP, employees, and
agents of the Association for all judgments, awards,
liabilities, settlements, or other costs, including
court costs, and taxes, interest and penalties, which
are not the direct consequence of their gross
negligence or criminal misconduct, incurred by the
aforementioned individuals in the performance of the
obligations or duties of the Association, pursuant to
this Agreement.
3. Finances
3.1. Claims Expense
The Plan shall be reimbursed currently (to the
extent funds are available) for the cost of health care
benefits chargeable to the Contract, net of any
refunds, rebates, allowances or other credits (such as
provider discounts and rebates, hospital year-end
settlements, and other credits specified by regulation
as reducing the cost of the Contract).
3.2. Administrative Expense
3.2.1. The Association's Administrative Expense.
3.2.1.1. The Association (including
administrative agencies selected by the
Association to perform functions under FEP, such
as the Operations Center) shall be reimbursed
currently for chargeable FEP administrative
expenses estimated to be incurred by it for the
contract year.
3.2.1.2. The actual administrative expenses
incurred by the Association for the contract year,
which are chargeable under FEP, shall be
determined following the close of the contract year.
3.2.1.3. The amounts determined under
3.2.1.2. shall be compared to the amounts paid
under 3.2.1.1., and the Association or FEP shall
be credited with the balance as appropriate.
3.2.1.4. The Association shall be reimbursed
for non-chargeable FEP expenses, from the Service
Charge, to the extent authorized by the Board of
Managers of FEP.
3.2.2. The Plan's Administrative Expense.
3.2.2.1. The Plan shall be reimbursed
currently for its estimated administrative costs
chargeable to the Contract for the contract year,
as determined by the Association, taking into
account the Plan's FEP budget and any limitations
on amounts payable under the Contract.
3.2.2.2. The administrative costs of the Plan
for the contract year will be those costs approved
by the Association pursuant to the budget process
and chargeable under the terms of the Contract,
provided, however, that those administrative costs
shall not exceed an amount which the Association
determines would, together with payments subject
to the administrative expense limitation under the
Contract, cause the administrative expenses
subject to limitation under the Contract to exceed
that limitation.
3.2.2.3. The amounts reimbursed to the Plan
under 3.2.2.1. shall be compared to the
administrative costs determined under 3.2.2.2.,
and the Plan or FEP shall be credited with the
balance, as appropriate.
3.3. Mandatory, Statutory Reserve Payments
The mandatory, statutory reserve payments incurred
by the Plan for the contract year with respect to FEP
claims allocated to the Plan pursuant to Section 5.2
hereof, which are in excess of the Plan's share of the
Service Charge for the contract year and are chargeable
under the terms of the Contract, shall be determined by
the Association and paid to the Plan. If the statutory
reserve is no longer required for the purpose for which
it was created, and these funds become available for
the general use of the Plan, a pro rata share based
upon FEP's contribution to the Plan's total statutory
reserves shall be returned to FEP in accordance with 48
C.F.R. section 31.201-5.
3.4. [Reserved]
3.5. Service Charge
3.5.1. The Service Charge shall be allocated to
Plans in the following manner:
3.5.1.1. One-half of the Service Charge
remaining after an appropriation made pursuant to
3.5.2 will be allocated among the Participating
Plans in the ratio of each Plan's contract months
for the current contract year to the total FEP
contract months for the contract year, as
determined by the Association.
3.5.1.2. One-half of the Service Charge
remaining after an appropriation made pursuant to
3.5.2 will be allocated among the Participating
Plans based on each Participating Plan's relative
performance for that contract year, determined on
the basis of performance measurement criteria
approved by the Board of Managers and applied by
the Association.
3.5.2. In its discretion, the Association
may appropriate up to 50 percent of the Service
Charge for purposes which it determines are in the
best interest of FEP. The Director of FEP may
exercise that authority with respect to amounts
not in excess of $50,000 which in the aggregate do
not exceed 1% of the Service Charge for the
contract year, but appropriations in excess of
those limits must be approved by the Board of
Managers. The amounts appropriated by the
Association will be subtracted from the Service
Charge that is to be distributed to the
Participating Plans.
3.5.3. In general, the Plan's share of the
unappropriated Service Charge shall be paid to the
Plan at a time when the Association determines to
distribute the unappropriated Service Charge for
that year to all Plans. Any amount of
appropriated Service Charge and interest not
expended on the FEP shall be paid to the Plans, at
a time determined by the Association, in
accordance with section 3.5.1. In its discretion, the
Association may withhold payment of the Plan's
share of the Service Charge if the Plan has not
supplied the certification referred to in section 2.2.
3.6. Accounting
3.6.1. The income and expenses of FEP
shall be determined for the contract year as follows:
3.6.2. The income shall include subscription income
(including payments from the Contingency Reserve
for each contract year) and investment income.
3.6.3. The expenses for each contract year shall
include incurred claims, chargeable administrative
expenses, the Service Charge, and mandatory, statutory
reserve payments. Adjustments in the expenses which
are made after the submission of the Annual Accounting
Statement to OPM for a contract year shall be reflected
in the expenses for the year in which the adjustment
becomes final.
3.6.4. The net gain or loss for a contract
year shall be the difference between the amounts
specified in 3.6.2. and 3.6.3.
3.6.5. The gain or loss specified in
3.6.4. for a contract year shall be added to or
subtracted from the Special Reserve balance as of
the beginning of that contract year and the result
shall be the Special Reserve balance at the end of
that contract year.
3.6.6. Solely for the purpose of
determining the Plan's share of a negative balance
in the Special Reserve under this Section 3.6.6,
the balance in the Contingency Reserve in the U.S.
Treasury Department for the Government-wide
Service Benefit Plan as of the end of the contract
year shall be allocated to the Special Reserve,
and the Special Reserve shall be reduced by a
reasonable estimate of the administrative costs of
paying incurred claims which are unpaid as of the
end of the contract year. If the Special Reserve
is negative after the Contingency Reserve balance
is allocated, the Plan's liability at the end of
the contract year shall be determined in the
following manner:
3.6.6.1. A portion of the negative
balance shall be allocated to the Plan in an
amount which bears the same ratio to the total
negative balance that the claims expense allocated
to the Plan pursuant to Section 5.2. hereof for
the current contract year and the four preceding
contract years bears to the total claims expenses
of all Plans for the current contract year and the
four preceding contract years.
3.6.6.2. In the event a Plan ceases to
be a Participating Plan at a time when the Special
Reserve balance is negative, the Plan's liability
in subsequent contract years shall be determined
as follows:
3.6.6.2.1 If a negative balance in
the Special Reserve at the end of a subsequent
contract year equals or exceeds the negative
balance at the end of the contract year in which
the Plan ceased to be a Participating Plan, the
Plan's share of the liability shall be the amount
of its liability determined for the contract year
in which the Plan ceased to share responsibility
unless that liability is reduced by reason of
Section 3.6.6.2.2. or 3.6.6.2.3.
3.6.6.2.2 If a negative balance in
the Special Reserve at the end of a subsequent
contract year is less than the negative balance at
the end of the contract year in which the Plan
ceased to be a Participating Plan, the Plan's
liability shall be an amount which bears the same
ratio to the negative balance in that subsequent
year that the portion of the negative balance
allocated to the Plan under Section 3.6.6.1. did
bear to the negative balance at the end of the
contract year in which the Plan ceased to be a
Participating Plan. If a Plan's liability
decreases by reason of this Section 3.6.6.2.2., it
shall not thereafter increase except by reason of
an allocation of liability under Section 3.6.6.1.
in the event the Participating Plan resumes
participation.
3.6.6.2.3 If the balance in the
Special Reserve is positive at the end of a
contract year following the year in which a Plan
ceases to be a Participating Plan, the Plan shall
have no further liability with respect to FEP
unless it resumes its status as a Participating Plan.
3.6.6.3. In the event a Participating
Plan is discharged by a court of competent
jurisdiction from its obligation to pay all or
part of its share of the liability reflected by a
negative Special Reserve, that amount shall be
reallocated to the remaining Plans in proportion
to their liabilities under the Plan Participation
Agreement.
3.7. Special Reserve
3.7.1. A positive balance in the FEP
Special Reserve shall be available to offset
subsequent losses and to increase benefits.
3.7.2. A deficit in the Special Reserve
shall be recovered from the FEP Special Reserve in
future years to the extent funds are available.
3.7.3. Upon termination of the Contract
and satisfaction of all Contract liabilities, a
positive balance in the FEP Special Reserve shall
be paid to the Office of Personnel Management for
credit to the Federal Employees Health Benefits Fund.
3.7.4. Upon termination of the Contract
and failure to satisfy all Contract liabilities
after exhaustion of all FEP reserves, the deficit
shall be allocated in accordance with the
provisions of section 3.6.6.
3.8. FEP liabilities of an insolvent Participating Plan.
3.8.1. In the event a Participating Plan
is discharged by a court of competent jurisdiction
from its obligation to pay all or part of a FEP
liability and the liability is not chargeable to
the FEP contract, that amount shall be reallocated
to the remaining Plans in proportion to their
liabilities under the Plan Participation Agreement
at the time the court order becomes final.
3.8.2. The FEP liability reallocated to
the remaining Plans, pursuant to section 3.8.1, shall be
paid promptly to the Special Reserve by those Plans.
3.8.3. Notwithstanding the above, payment
of a reallocated portion of the remaining
liability pursuant to section 3.8.2 shall not be
construed as an admission by the Plan of liability
for another Participating Plan's non-FEP
liability, but is paid only in recognition of the
unique nature of the Federal Employee Program and
the contractual obligations agreed to hereunder.
4. Taxes Not Chargeable to the Contract
The Plan shall be liable for its proportionate share of any
taxes, interest and penalties imposed on the Federal
Employee Program which amounts are not chargeable to the
Contract. The Plan shall share in any such liability in the
same proportion that the claims expense allocated to the
Plan pursuant to Section 5.2 bears to the total claims
expense allocated to all Plans for the year with respect to
which the liability is incurred.
5. Areas of Responsibility for Claims Payments and Participation
5.1. The undersigned Plan shall underwrite FEP benefits
as specified in Schedule A to this Agreement.
Schedule A may be revised by the parties from time
to time, without reexecution of this Agreement.
5.2. For the purpose of determining the undersigned
Plan's share, if any, of any negative balance in the
Special Reserve or of any unsatisfied liabilities,
determined in accordance with 3.6 hereof, the total FEP
claims allocated to the Plan for a contract year shall
be the total benefits underwritten by the Plan as
provided in Schedule A.
5.3. The Association, acting pursuant to a performance
evaluation program adopted by the Board of Managers and
applicable to all Plans participating in FEP, is
authorized to reassign all or part of one or both of
the following functions from the Plan to another Plan:
(a) claims processing or, (b) subscriber servicing.
Any reassigned function will be administered in keeping
with service area limitations on the use of the Blue
Cross and Blue Shield marks.
6. Delegation of Authority
6.1. The Association
The Association may delegate its functions under
this Agreement, and references herein to the
Association shall be applicable to said delegate or
delegates, but said delegation shall not release the
Association of its obligations under this Agreement.
6.2. The Plan
6.2.1. Only Blue Cross and Blue Shield
Plans or their wholly-owned affiliates are
authorized to perform the functions set forth in
this Agreement. However, no such Plan or
affiliate may perform such functions without the
express written authority of the Association
acting on behalf of all Participating Plans.
Execution of this Agreement by the Association
constitutes such authority with respect to the
undersigned Plan or affiliate.
6.2.2. The rights and duties of the Plan
set forth in this Agreement may not be delegated,
assigned or transferred by the Plan in any manner
whatsoever without the express written approval of
the Association acting on behalf of all
Participating Plans.
7. Definitions
Terms used in this Agreement shall have the same meaning
that they have in the Contract. The term "Board of
Managers" refers to the Standing Committee of the Board of
Directors of the Association which has been assigned the
responsibility delegated to the Association by this
Agreement, or the successor to said Committee, and the term
"Service Charge", as used hereafter in this Agreement,
refers to the sum of other Service Charge and the interest
income earned on the Service Charge.
8. Integration
This Agreement, together with its Schedule A and Exhibit A
to the Contract with OPM, constitutes the entire agreement
between the parties with respect to the underwriting and
administration of benefits under the FEP. This Agreement is
subject to the terms of a validly executed and effective
License Agreement(s) pertaining to the Plan's right to use
the Blue Cross or Blue Shield licensed mark(s) and name(s)
(hereafter, "License Agreement(s)") and shall be construed
in accordance with such terms.
9. Amendment of Agreement
9.1. This Agreement may be amended by the mutual
agreement of the parties.
9.2. The Agreement may be amended by the following process:
9.2.1. The Association or the Plan, with
the approval of the Board of Managers, may propose
an amendment for adoption by all Participating Plans.
9.2.2. The Association shall notify all
Participating Plans, by first class mail, when it
has received executed amendments from three-
fourths of the Participating Plans.
9.2.3. If the Association fails to obtain
such executed amendments within three months from
the date of the proposal, the Association shall
notify all Participating Plans, by first class
mail, that the proposal has been recalled.
9.2.4. Upon receipt of executed amendments
from three-fourths of the Participating Plans
before a recall specified in Section 9.2.3, the
amendment will become effective with respect to
the Plan, if it did not execute the amendment,
unless the Plan notifies the Association in
writing, within 30 days of receipt of the mailing
of the notice referenced in Section 9.2.2, that it
elects to not be bound by the amendment.
9.2.5. The effective date of the amendment
with respect to the Plan, if it has executed the
amendment or has not given timely notice of its
election to not be bound by the amendment as
required by Section 9.2.4, will be the first day
of the second month following the mailing of the
notice referred to in Section 9.2.2.
9.2.6. This Agreement will terminate with
respect to the Plan pursuant to Section 10.3 of
this Agreement if the Plan elects not to be bound
by an amendment adopted pursuant this Section 9.2.
10. Termination of Agreement
10.1. This Agreement may be terminated without
cause by either party to this Agreement by giving
notice to the other party at least 120 days prior to
the last day of the then current contract term of the
FEP Contract between the Association and the Office of
Personnel Management. Termination pursuant to this
Section 10.1 will not affect the rights or obligations
of either party that have accrued under this Agreement
or the Contract, including the provisions of the
Contract relating to terminated costs.
10.2. The Association may terminate this Agreement
if the Plan's license(s) to use the Blue Cross or Blue
Shield licensed mark(s) and name(s) is terminated with
full legal force and effect. In the event the
Agreement is terminated pursuant to this paragraph, the
Association will issue a Notice of Termination to the
Plan specifying the termination date which shall be no
earlier than the effective date of the termination of
the Plan's License Agreement(s).
10.3. If the Plan elects, pursuant to Section
9.2.4, to not be bound by an amendment made pursuant to
Section 9.2, this Agreement will terminate. In the
event this Agreement is terminated pursuant to this
Section 10.3, the Association will issue a Notice of
Termination to the Plan specifying the termination date
which shall be no earlier than the last day prior to
the effective date of the amendment as specified in
Section 9.2.5.
10.4. The parties understand that it may be
necessary for the Plan to continue to perform
obligations undertaken under the this Agreement and the
Contract with OPM following the effective date of
termination of this Agreement. In those circumstances -
10.4.1. The Plan will implement procedures,
as directed by the Association, to close down its
operations pursuant to this Agreement. During the
period of closing down operations, the provisions
of this Agreement will continue to apply.
10.4.2. During the period of performance
subsequent to the effective date of termination,
the Plan will continue to perform the functions
specified in this Agreement except as directed by
the Association. The Association will fund the
continuing operations of the Plan in accordance
with the terms of this Agreement.
10.4.3. The Plan will cooperate fully with
the Association in the transfer of its functions
under this Agreement to another organization
specified by the Association.
10.5. Termination of this Agreement automatically
will terminate the power of attorney given to the
Association by the Plan, and referred to as Exhibit A
to the Contract with OPM, as of the effective date of
the termination of this Agreement.
11. Appeals
The Plan may appeal to the Board of Managers if it disagrees
with the Association's decision with respect to a matter
that the Association is authorized to decide under the terms
of the Agreement, and it may appeal to the Board of
Directors if it disagrees with the Board of Managers'
decision on appeal. This provision does not affect the
rights of the parties, under the License Agreement(s), with
respect to disputes resolution.
12. Partnership Not Intended
Nothing in this Agreement is intended, or shall be deemed,
to constitute a partnership or joint venture between the
parties or among the Plan and other Participating Plans.
13. Law Governing and Severability
This Agreement shall be governed by the laws of the state of
Illinois, both as to interpretation and performance. If any
provision of this Agreement is held invalid or
unenforceable, the invalidity or unenforceability shall not
affect any other provisions of this Agreement, and the
rights and obligations of the parties shall be construed and
enforced as if the Agreement did not contain the particular
provision held to be invalid.
14. Notices
Notices made pursuant to this Agreement shall be sent by
first class mail, postage prepaid, to the address of the
party specified below on the signature page of this
Agreement, unless written notice of a change of address has
been provided.
15. Force Majeure
Neither party shall be liable for damages due to delay or
failure to perform any obligation under this Agreement if
such delay or failure results directly or indirectly from
circumstances beyond the control of such party. Such
circumstances shall include, but shall not be limited to,
acts of God, acts of war, civil commotions, riots, strikes,
lockouts, acts of the government in either its sovereign or
contractual capacity, perturbation in telecommunications
transmissions, inability to obtain suitable equipment or
components, accident, fire, water damage, flood, earthquake,
or other natural catastrophe.
This Agreement may be executed in counterparts and shall be
effective as of the January 1, 1995.
BLUE CROSS AND BLUE SHIELD BLUE CROSS AND BLUE SHIELD OF
ASSOCIATION MISSOURI
By: By:
Print Name: Print Name:
Title: Vice President Title:
Federal Employee Program
Address: Address:
Date: Date:
