Title 5 — Government Organization and EmployeesRelease 119-73
§8902 Contracting authority
Title 5 › Part PART III— - EMPLOYEES › Subpart Subpart G— - Insurance and Annuities › Chapter CHAPTER 89— - HEALTH INSURANCE › § 8902
Summary
The Office of Personnel Management may hire health plan companies that offer the kinds of federal employee health plans the law describes. Contracts can skip normal competitive bidding rules. Each contract must last at least 1 year and can renew automatically unless one side gives notice to end it. A company that wants to offer a nationwide plan must be licensed to sell group health insurance in every State and in the District of Columbia. Contracts must spell out benefits, limits, exclusions, and payment rules. The Office can set minimum standards and must give notice and a chance for a hearing before it withdraws plan approval. The Office may end a carrier’s contract at the end of a term if the carrier never had 300 or more covered employees and annuitants in either of the two previous contract terms. Carriers may need to share risk with other firms or among affiliates under fair formulas approved by the Office. Plans cannot exclude people because of race, sex, health status, or, at first enrollment, age. If someone’s enrollment ends (except when they cancel), the plan must offer a temporary extension and the option to convert to an individual policy without proving good health; the person must pay the full cost. Those converted policies can’t be canceled except for fraud, over‑insurance, or nonpayment. Rates must fairly reflect costs and follow rules like those used for new large‑employer group plans; first‑term rates generally carry forward but can be adjusted in advance based on experience. Covered people must be able to get certain providers directly—such as clinical psychologists, qualified clinical social workers, optometrists, nurse midwives, nursing‑school clinics, and nurse practitioners—without a referral, and the carrier must pay as the contract allows. Contracts generally override state insurance rules, with limited exceptions for services in areas with severe primary care shortages (where 25 percent or more of the State’s people live in shortage areas). Contracts must include hospital cost‑control steps and incentives, must not cover items barred by the Assisted Suicide Funding Restriction Act of 1997, and must follow other federal health, ERISA, and tax rules that apply to group health plans.
Full Legal Text
Title 5, §8902
Government Organization and Employees — Source: USLM XML via OLRC
(a)The Office of Personnel Management may contract with qualified carriers offering plans described by section 8903 or 8903a of this title, without regard to section 6101(b) to (d) of title 41 or other statute requiring competitive bidding. Each contract shall be for a uniform term of at least 1 year, but may be made automatically renewable from term to term in the absence of notice of termination by either party.
(b)To be eligible as a carrier for the plan described by section 8903(2) of this title, a company must be licensed to issue group health insurance in all the States and the District of Columbia.
(c)A contract for a plan described by section 8903(1) or (2) of this title shall require the carrier—
(1)to reinsure with other companies which elect to participate, under an equitable formula based on the total amount of their group health insurance benefit payments in the United States during the latest year for which the information is available, to be determined by the carrier and approved by the Office; or
(2)to allocate its rights and obligations under the contract among its affiliates which elect to participate, under an equitable formula to be determined by the carrier and the affiliates and approved by the Office.
(d)Each contract under this chapter shall contain a detailed statement of benefits offered and shall include such maximums, limitations, exclusions, and other definitions of benefits as the Office considers necessary or desirable.
(e)The Office may prescribe reasonable minimum standards for health benefits plans described by section 8903 or 8903a of this title and for carriers offering the plans. Approval of a plan may be withdrawn only after notice and opportunity for hearing to the carrier concerned without regard to subchapter II of chapter 5 and chapter 7 of this title. The Office may terminate the contract of a carrier effective at the end of the contract term, if the Office finds that at no time during the preceding two contract terms did the carrier have 300 or more employees and annuitants, exclusive of family members, enrolled in the plan.
(f)A contract may not be made or a plan approved which excludes an individual because of race, sex, health status, or, at the time of the first opportunity to enroll, because of age.
(g)A contract may not be made or a plan approved which does not offer to each employee, annuitant, family member, former spouse, or person having continued coverage under section 8905a of this title whose enrollment in the plan is ended, except by a cancellation of enrollment, a temporary extension of coverage during which he may exercise the option to convert, without evidence of good health, to a nongroup contract providing health benefits. An employee, annuitant, family member, former spouse, or person having continued coverage under section 8905a of this title who exercises this option shall pay the full periodic charges of the nongroup contract.
(h)The benefits and coverage made available under subsection (g) of this section are noncancelable by the carrier except for fraud, over-insurance, or nonpayment of periodic charges.
(i)Rates charged under health benefits plans described by section 8903 or 8903a of this title shall reasonably and equitably reflect the cost of the benefits provided. Rates under health benefits plans described by section 8903(1) and (2) of this title shall be determined on a basis which, in the judgment of the Office, is consistent with the lowest schedule of basic rates generally charged for new group health benefit plans issued to large employers. The rates determined for the first contract term shall be continued for later contract terms, except that they may be readjusted for any later term, based on past experience and benefit adjustments under the later contract. Any readjustment in rates shall be made in advance of the contract term in which they will apply and on a basis which, in the judgment of the Office, is consistent with the general practice of carriers which issue group health benefit plans to large employers.
(j)Each contract under this chapter shall require the carrier to agree to pay for or provide a health service or supply in an individual case if the Office finds that the employee, annuitant, family member, former spouse, or person having continued coverage under section 8905a of this title is entitled thereto under the terms of the contract.
(k)(1)When a contract under this chapter requires payment or reimbursement for services which may be performed by a clinical psychologist, optometrist, nurse midwife, nursing school administered clinic, or nurse practitioner/clinical specialist, licensed or certified as such under Federal or State law, as applicable, or by a qualified clinical social worker as defined in section 8901(11), an employee, annuitant, family member, former spouse, or person having continued coverage under section 8905a of this title covered by the contract shall be free to select, and shall have direct access to, such a clinical psychologist, qualified clinical social worker, optometrist, nurse midwife, nursing school administered clinic, or nurse practitioner/nurse clinical specialist without supervision or referral by another health practitioner and shall be entitled under the contract to have payment or reimbursement made to him or on his behalf for the services performed.
(2)Nothing in this subsection shall be considered to preclude a health benefits plan from providing direct access or direct payment or reimbursement to a provider in a health care practice or profession other than a practice or profession listed in paragraph (1), if such provider is licensed or certified as such under Federal or State law.
(3)The provisions of this subsection shall not apply to comprehensive medical plans as described in section 8903(4) of this title.
(l)The Office shall contract under this chapter for a plan described in section 8903(4) of this title with any qualified health maintenance carrier which offers such a plan. For the purpose of this subsection, “qualified health maintenance carrier” means any qualified carrier which is a qualified health maintenance organization within the meaning of section 1310(d)(1) 11 See References in Text note below. of title XIII of the Public Health Service Act (42 U.S.C. 300c–9(d)).
(m)(1)The terms of any contract under this chapter which relate to the nature, provision, or extent of coverage or benefits (including payments with respect to benefits) shall supersede and preempt any State or local law, or any regulation issued thereunder, which relates to health insurance or plans.
(2)(A)Notwithstanding the provisions of paragraph (1) of this subsection, if a contract under this chapter provides for the provision of, the payment for, or the reimbursement of the cost of health services for the care and treatment of any particular health condition, the carrier shall provide, pay, or reimburse up to the limits of its contract for any such health service properly provided by any person licensed under State law to provide such service if such service is provided to an individual covered by such contract in a State where 25 percent or more of the population is located in primary medical care manpower shortage areas designated pursuant to section 332 of the Public Health Service Act (42 U.S.C. 254e).
(B)The provisions of subparagraph (A) shall not apply to contracts entered into providing prepayment plans described in section 8903(4) of this title.
(n)A contract for a plan described by section 8903(1), (2), or (3), or section 8903a, shall require the carrier—
(1)to implement hospitalization-cost-containment measures, such as measures—
(A)for verifying the medical necessity of any proposed treatment or surgery;
(B)for determining the feasibility or appropriateness of providing services on an outpatient rather than on an inpatient basis;
(C)for determining the appropriate length of stay (through concurrent review or otherwise) in cases involving inpatient care; and
(D)involving case management, if the circumstances so warrant; and
(2)to establish incentives to encourage compliance with measures under paragraph (1).
(o)A contract may not be made or a plan approved which includes coverage for any benefit, item, or service for which funds may not be used under the Assisted Suicide Funding Restriction Act of 1997.
(p)Each contract under this chapter shall require the carrier to comply with requirements described in the provisions of section 2799A–1, 2799A–2, and 2799A–7 of the Public Health Service Act, section 716, 717, and 722 of the Employee Retirement Income Security Act of 1974, and section 9816, 9817, and 9822 of the Internal Revenue Code of 1986 (as applicable) in the same manner as such provisions apply to a group health plan or health insurance issuer offering group or individual health insurance coverage, as described in such sections. The provisions of section 2799B–1, 2799B–2, 2799B–3, and 2799B–5 of the Public Health Service Act shall apply to a health care provider and facility and an air ambulance provider described in such respective sections with respect to an enrollee in a health benefits plan under this chapter in the same manner as such provisions apply to such a provider and facility with respect to an enrollee in a group health plan or group or individual health insurance coverage offered by a health insurance issuer, as described in such sections.
Legislative History
Notes & Related Subsidiaries
Historical and Revision Notes
DerivationU.S. CodeRevised Statutes andStatutes at Large 5 U.S.C. 3005.Sept. 28, 1959, Pub. L. 86–382, § 6, 73 Stat. 712. Mar. 17, 1964, Pub. L. 88–284, § 1(7)–(9), 78 Stat. 165. Standard changes are made to conform with the definitions applicable and the style of this title as outlined in the preface to the report.
Editorial Notes
References in Text
section 1310(d)(1) of title XIII of the Public Health Service Act (42 U.S.C. 300c–9(d)), referred to in subsec. (l), probably is intended as a reference to section 300e–9(d) of Title 42, The Public Health and Welfare. section 300e–9(d) of Title 42 was redesignated section 300e–9(c) of Title 42 by Pub. L. 100–517, § 7(b), Oct. 24, 1988, 102 Stat. 2580. The Assisted Suicide Funding Restriction Act of 1997, referred to in subsec. (o), is Pub. L. 105–12, Apr. 30, 1997, 111 Stat. 23, which is classified principally to chapter 138 (§ 14401 et seq.) of Title 42, The Public Health and Welfare. For complete classification of this Act to the Code, see
Short Title
note set out under section 14401 of Title 42 and Tables. section 2799A–1, 2799A–2, 2799A–7, 2799B–1, 2799B–2, 2799B–3, and 2799B–5 of the Public Health Service Act, referred to in subsec. (p), are classified to section 300gg–111, 300gg–112, 300gg–117, 300gg–131, 300gg–132, 300gg–133, and 300gg–135, respectively, of Title 42, The Public Health and Welfare. section 716, 717, and 722 of the Employee Retirement Income Security Act of 1974, referred to in subsec. (p), are classified to section 1185e, 1185f, and 1185k, respectively, of Title 29, Labor. section 9816, 9817, and 9822 of the Internal Revenue Code of 1986, referred to in subsec. (p), are classified to section 9816, 9817, and 9822, respectively, of Title 26, Internal Revenue Code. Codification Another section 1 of title IV of Pub. L. 101–509, 104 Stat. 1416, enacted sections 2701 to 2706 of Title 44, Public Printing and Documents, and provisions set out as a note under section 2102 of Title 44.
Amendments
2020—Subsec. (p). Pub. L. 116–260 added subsec. (p). 2011—Subsec. (a). Pub. L. 111–350 substituted “section 6101(b) to (d) of title 41” for “section 5 of title 41”. 1998—Subsec. (k)(2), (3). Pub. L. 105–266, § 8, added par. (2) and redesignated former par. (2) as (3). Subsec. (m)(1). Pub. L. 105–266, § 3(c), added par. (1) and struck out former par. (1) which read as follows: “The provisions of any contract under this chapter which relate to the nature or extent of coverage or benefits (including payments with respect to benefits) shall supersede and preempt any State or local law, or any regulation issued thereunder, which relates to health insurance or plans to the extent that such law or regulation is inconsistent with such contractual provisions.” 1997—Subsec. (o). Pub. L. 105–12 added subsec. (o). 1992—Pub. L. 102–393 amended subsec. (k) generally. Prior to amendment, subsec. (k) read as follows: “(1) When a contract under this chapter requires payment or reimbursement for services which may be performed by a clinical psychologist, optometrist, nurse midwife, or nurse practitioner/clinical specialist, licensed or certified as such under Federal or State law, as applicable, or by a qualified clinical social worker as defined in section 8901(11), an employee, annuitant, family member, former spouse, or person having continued coverage under section 8905a of this title covered by the contract shall be free to select, and shall have direct access to, such a clinical psychologist, qualified clinical social worker, optometrist, nurse midwife, or nurse practitioner/nurse clinical specialist without supervision or referral by another health practitioner and shall be entitled under the contract to have payment or reimbursement made to him or on his behalf for the services performed. “(2) The provisions of this subsection shall not apply to group practice prepayment plans.” 1990—Subsec. (k)(1). Pub. L. 101–509 substituted “performed by a clinical psychologist, optometrist, nurse midwife, or nurse practitioner/clinical specialist” for “performed by a clinical psychologist or optometrist” and “qualified clinical social worker, optometrist, nurse midwife, or nurse practitioner/nurse clinical specialist” for “qualified clinical social worker or optometrist”. Subsec. (n). Pub. L. 101–508 added subsec. (n). 1988—Subsecs. (g), (j), (k)(1). Pub. L. 100–654 substituted “former spouse, or person having continued coverage under section 8905a of this title” for “or former spouse” wherever appearing. 1987—Subsec. (k)(1). Pub. L. 100–202, § 101(m) [title VI, § 626(1), (2)], inserted “or by a qualified clinical social worker as defined in section 8901(11),” after “as applicable,”, and “, qualified clinical social worker” after “such a clinical psychologist”. Subsec. (k)(2), (3). Pub. L. 100–202, § 101(m) [title VI, § 626(3)], redesignated par. (3) as (2) and struck out former par. (2) which read as follows: “When a contract under this chapter requires payment or reimbursement for services which may be performed by a qualified clinical social worker, an employee, annuitant, family member, or former spouse covered by the contract shall be entitled under the contract to have payment or reimbursement made to him or on his behalf for the services performed. As a condition for the payment or reimbursement, the contract— “(A) may require that the services be performed pursuant to a referral by a psychiatrist; but “(B) may not require that the services be performed under the supervision of a psychiatrist or other health practitioner.” Subsec. (m)(2)(A). Pub. L. 100–202, § 101(m) [title VI, § 626(4)], struck out “This paragraph shall apply with respect to a qualified clinical social worker covered by subsection (k)(2) of this section without regard to whether such contract contains the requirement authorized by clause (i) of the second sentence of subparagraph (A) of such subsection (k)(2).” 1986—Subsec. (k). Pub. L. 99–251, § 105(b), designated existing provisions as par. (1), struck out last sentence providing that the provisions of this subsection shall not apply to group practice prepayment plans, and added pars. (2) and (3). Subsec. (m)(2)(A). Pub. L. 99–251, § 106(a)(3), inserted last sentence relating to applicability of this paragraph with respect to a qualified clinical social worker covered by subsection (k)(2) of this section. 1985—Subsecs. (a), (e), (i). Pub. L. 99–53 inserted reference to section 8903a of this title. 1984—Subsec. (g). Pub. L. 98–615, § 3(2)(A), substituted “employee, annuitant, family member, or former spouse” for “employee or annuitant” in two places. Subsecs. (j), (k). Pub. L. 98–615, § 3(2)(B), substituted “family member, or former spouse” for “or family member”. 1980—Subsec. (m)(2)(A). Pub. L. 96–179 substituted “in a State where 25 percent or more of the population is located in primary medical care manpower shortage areas designated pursuant to section 332 of the Public Health Service Act (42 U.S.C. 254e)” for “who is a member of a medically underserved population (within the meaning of section 1302(7) of the Public Health Service Act (42 U.S.C. 300e–17))”. 1978—Subsecs. (a), (c) to (e), (i), (j), (l). Pub. L. 95–454 substituted “Office of Personnel Management” for “Civil Service Commission” and “Office” for “Commission” wherever appearing. Subsec. (m). Pub. L. 95–368 added subsec. (m). 1976—Subsec. (l). Pub. L. 94–460 added subsec. (l). 1975—Subsecs. (j), (k). Pub. L. 94–183 redesignated subsec. (j), added by Pub. L. 93–363 and relating to services performed by a clinical psychologist or optometrist, as (k). 1974—Subsec. (j). Pub. L. 93–363 added subsec. (j) covering services performed by a clinical psychologist or optometrist. Pub. L. 93–246 added subsec. (j) requiring the carrier to pay for or provide a health service or supply in specified cases.
Statutory Notes and Related Subsidiaries
Effective Date
of 2020 Amendment Pub. L. 116–260, div. BB, title I, § 102(e), Dec. 27, 2020, 134 Stat. 2797, provided that: “The
Amendments
made by this section [enacting section 9816 and 9822 of Title 26, Internal Revenue Code, section 1185e and 1185k of Title 29, Labor, and section 300gg–111 and 300gg–117 of Title 42, The Public Health and Welfare, and amending this section, section 223 of Title 26, and section 300gg–19a, 300gg–21, 300gg–22, 300gg–23, and 18011 of Title 42] shall apply with respect to plan years (or, in the case of the amendment made by subsection (d)(1) [amending this section], with respect to contracts entered into or renewed for contract years) beginning on or after January 1, 2022.”
Effective Date
of 1997 AmendmentAmendment by Pub. L. 105–12 effective Apr. 30, 1997, and applicable to Federal payments made pursuant to obligations incurred after Apr. 30, 1997, for items and services provided on or after such date, subject to also being applicable with respect to contracts entered into, renewed, or extended after Apr. 30, 1997, as well as contracts entered into before Apr. 30, 1997, to the extent permitted under such contracts, see section 11 of Pub. L. 105–12, set out as an
Effective Date
note under section 14401 of Title 42, The Public Health and Welfare.
Effective Date
of 1992 Amendment Pub. L. 102–393, title V, § 537(c), Oct. 6, 1992, 106 Stat. 1765, provided that: “The
Amendments
made by this section [amending this section] shall be effective with respect to contract years beginning after the date of enactment of this Act [Oct. 6, 1992].”
Effective Date
of 1990 Amendment Pub. L. 101–508, title VII, § 7002(g), Nov. 5, 1990, 104 Stat. 1388–331, provided that: “Except as provided in subsection (f) [set out as a note under section 8904 of this title], the
Amendments
made by this section [amending this section, section 8904, 8909, and 8910 of this title, and provisions set out as a note under section 8906 of this title] shall apply with respect to contract years beginning on or after January 1, 1991.”
Effective Date
of 1988 Amendment Pub. L. 100–654, title II, § 203, Nov. 14, 1988, 102 Stat. 3845, provided that: “(a) In General.—The
Amendments
made by this title [enacting section 8905a of this title and amending this section and section 8903, 8905, and 8909 of this title] shall apply with respect to—“(1) any calendar year beginning, and contracts entered into or renewed for any calendar year beginning, after the end of the 9-month period beginning on the date of the enactment of this Act [Nov. 14, 1988]; and “(2) any qualifying event occurring on or after the first day of the first calendar year beginning after the end of the 9-month period referred to in paragraph (1). “(b) Definition.—For the purpose of this section, the term ‘qualifying event’ means any of the following events:“(1) A separation from Government service. “(2) A divorce, annulment, or legal separation. “(3) Any change in circumstances which causes an individual to become ineligible to be considered an unmarried dependent child under chapter 89 of such title [section 8901 et seq. of this title].”
Effective Date
of 1986 AmendmentAmendment by section 105(b) of Pub. L. 99–251 effective with respect to contracts entered into or renewed for calendar years beginning after Dec. 31, 1986, see section 105(c) of Pub. L. 99–251, set out as a note under section 8901 of this title. Pub. L. 99–251, title I, § 106(b), Feb. 27, 1986, 100 Stat. 16, provided that: “The
Amendments
made by subsection (a) [amending this section and provisions set out as notes under this section] shall take effect with respect to services provided after December 31, 1984.”
Effective Date
of 1984 AmendmentAmendment by Pub. L. 98–615 effective May 7, 1985, with enumerated exceptions, and applicable to any individual who is married to an employee or annuitant on or after that date, see section 4(a)(2) of Pub. L. 98–615, as amended, set out as a note under section 8341 of this title.
Effective Date
of 1980 Amendment Pub. L. 96–179, § 5(b), Jan. 2, 1980, 93 Stat. 1300, as amended by Pub. L. 99–251, title I, § 106(a)(2), Feb. 27, 1986, 100 Stat. 16, provided that: “The
Amendments
made by section 3 [amending this section] shall apply to services provided after
December 31, 1979, under any contract entered into or renewed after
December 31, 1979.”
Effective Date
of 1978
Amendments
Amendment by Pub. L. 95–454 effective 90 days after Oct. 13, 1978, see section 907 of Pub. L. 95–454, set out as a note under section 1101 of this title. Pub. L. 95–368, § 3, Sept. 17, 1978, 92 Stat. 606, as amended by Pub. L. 99–251, title I, § 106(a)(1), Feb. 27, 1986, 100 Stat. 16, provided that: “The provisions of section 8902(m)(2) of title 5, United States Code, as added by the first section of this Act, shall apply to services provided under any contract entered into or renewed after December 31, 1979.”
Effective Date
of 1976 AmendmentAmendment by Pub. L. 94–460 effective Oct. 8, 1976, see section 118 of Pub. L. 94–460, set out as a note under section 300e of Title 42, The Public Health and Welfare.
Effective Date
of 1974
Amendments
Pub. L. 93–363, § 2,
July 30, 1974, 88 Stat. 398, provided that: “The amendment made by this Act [amending this section] shall become effective with respect to any contract entered into or renewed on or after the date of enactment of this Act [
July 30, 1974].” Pub. L. 93–246, § 4(c), Jan. 31, 1974, 88 Stat. 4, provided that: “section 3 [amending this section] shall become effective with respect to any contract entered into or renewed on or after the date of enactment of this Act [Jan. 31, 1974].” Full Disclosure in Health Plan Contracts Pub. L. 105–266, § 5, Oct. 19, 1998, 112 Stat. 2368, provided that: “The Office of Personnel Management shall encourage carriers offering health benefits plans described by section 8903 or section 8903a of title 5, United States Code, with respect to contractual arrangements made by such carriers with any person for purposes of obtaining discounts from providers for health care services or supplies furnished to individuals enrolled in such plan, to seek assurance that the conditions for such discounts are fully disclosed to the providers who grant them.” Rate Reduction for Medicare Eligible Federal Annuitants Pub. L. 100–360, title IV, § 422,
July 1, 1988, 102 Stat. 810, which directed the Office of Personnel Management to reduce the rates charged medicare eligible individuals participating in health benefit plans by a prorated amount, was repealed by Pub. L. 101–234, title III, § 301(a), Dec. 13, 1989, 103 Stat. 1985. Authority of Carrier To Contract for Comprehensive Medical Services From a Group Practice Unit or Organization Pub. L. 91–515, title IV, § 401, Oct. 30, 1970, 84 Stat. 1309, authorized Secretary of Health, Education, and Welfare to permit any carrier which is a party to a contract entered into under this chapter or under the Retired Federal Employees Health Benefits Act, or which participates in carrying out of any such contract, to issue in any State contracts entitling any person as a beneficiary to receive comprehensive medical services from a group practice unit or organization with which such carrier has contracted or otherwise arranged for the provision of such services.
Reference
Citations & Metadata
Citation
5 U.S.C. § 8902
Title 5 — Government Organization and Employees
Last Updated
Apr 6, 2026
Release point: 119-73