H.R. 1540 Signed into Law: Is President Obama Changing Course?

Since taking office in January of 2009, President Obama has made it very clear that he is committed to eliminating discrimination in the workplace. The first law signed by President Obama only 9 days after his assumption of office was the Lilly Ledbetter Fair Pay Act. This trend has been further expanded and strengthened by the Office of Federal Contract Compliance Programs ("OFCCP") under the leadership of Director Patricia Shiu. However, in a move that seems to conflict with this trend, President Obama signed into law on December 31st "H.R. 1540: National Defense Authorization Act for Fiscal Year 2012" ("H.R. 1540"). As described below, this bill - which can be found by clicking on this hyperlink - includes a provision that serves to potentially reduce the number of healthcare organizations that fall under the scrutiny of the OFCCP.

TRICARE

TRICARE is the Department of Defense ("DoD")’s health care program for active duty and retired military and their families. In a directive issued last December and signed by Patricia Shiu, the OFCCP clarified instances in which it believed health care providers and insurers are subject to be in compliance with the regulations of the OFCCP. As a general practice, the OFCCP’s position has been that certain arrangements with the Federal Employees Health Benefit Program (FEHBP) and TRICARE constitute government contracts that create OFCCP jurisdiction. However, in a conference report to H.R. 1540 published on December 13 and approved by the House and Senate, congress recognized that this was a thorny issue:

The conferees are aware that the Administration is currently undertaking a review with relevant agencies, including the Departments of Defense, Labor, and Justice, to clarify the coverage of health care providers under federal statutes applicable to contractors and subcontractors. The conferees agree that this is a complex issue which merits continued review from the Committees on Armed Services of the Senate and the House of Representatives and other committees of jurisdiction in the Senate and the House of Representatives.

To this point, the final signed law (which can be found in its entirety by clicking on this hyperlink) includes a new section 715, Maintenance of the adequacy of provider networks under the TRICARE program:

In establishing rates and procedures for reimbursement of providers and other administrative requirements, including those contained in provider network agreements, the Secretary shall, to the extent practicable, maintain adequate networks of providers, including institutional, professional, and pharmacy. For the purpose of determining whether network providers under such provider network agreements are subcontractors for purposes of the Federal Acquisition Regulation or any other law, a TRICARE managed care support contract that includes the requirement to establish, manage, or maintain a network of providers may not be considered to be a contract for the performance of health care services or supplies on the basis of such requirement.

Although the legislation appears to eliminate any question regarding coverage of TRICARE providers, OFCCP Director Patricia Shiu is reportedly assessing the agency's policies and has stated, "This isn't over yet." She claims that the H.R. 1540 provision is "likely to create confusion and will unfairly deny many workers the benefits and protections that our laws ensure."

For the time being, health care providers that were considered covered subcontractors only because of TRICARE network agreements should reassess their status as affirmative action employers. This new law does not affect other bases for coverage, such as contracts or subcontracts with any federal agencies. If you have questions about coverage, please contact your Pinnacle Project Manager. To receive additional information via email, please send your inquiry to Pinnacle's Vice President, Jeff Baker, at jeff.baker@pinnacle-aap.com

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New Round of CSAL Letters Sent

Several of our clients are in receipt of the latest wave of Corporate Scheduling Announcement Letters (CSALs) issued by the OFCCP. As the CSAL states, “the OFCCP is sending this letter to you as a courtesy to advise you that the listed establishment(s), found in the enclosure of this letter, have been identified for possible scheduling of a supply-and-service compliance evaluation during this scheduling cycle” (fiscal year/scheduling cycle ends September 30, 2012). The CSAL provides employers advance notice of locations that will likely be audited. Unless you receive a scheduling letter from the OFCCP initiating an audit, you do not have to submit any information to the OFCCP. The CSAL also states, “The enclosed list is not all-inclusive; therefore, it is possible that other establishments within your company will be selected”.

In the past, the CSAL was sent to the CEO or other designated official. The new CSALs appear to be addressed to the individual who certified the employer’s EEO-1 report. If you are not the individual who certified your company’s EEO-1 report, you may want to follow-up with that individual to see if a CSAL was received. In the past, the CSAL was sent to employers with multiple establishments that had two or more locations identified for possible review. However, the new CSALs are also being sent to employers with only one location identified for possible review.

If you are a Pinnacle client and have received a CSAL, please forward a copy of it to your Pinnacle Project Manager immediately. We want to ensure that we take advantage of this opportunity to closely re-review the results of your AAP with you again, prior to you receiving an audit scheduling letter from the OFCCP. Should you have any questions, please do not hesitate to contact your Pinnacle Project Manager immediately.