Affirmative Action and Nondiscrimination Obligations of Federal Contractors and Subcontractors: TRICARE and Certain Other Health Care Providers

Citation84 FR 59746
Record Number2019-23700
Published date06 November 2019
CourtFederal Contract Compliance Programs Office
Federal Register, Volume 84 Issue 215 (Wednesday, November 6, 2019)
[Federal Register Volume 84, Number 215 (Wednesday, November 6, 2019)]
                [Proposed Rules]
                [Pages 59746-59756]
                From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
                [FR Doc No: 2019-23700]
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                DEPARTMENT OF LABOR
                Office of Federal Contract Compliance Programs
                41 CFR Parts 60-1, 60-300, and 60-741
                RIN 1250-AA08
                Affirmative Action and Nondiscrimination Obligations of Federal
                Contractors and Subcontractors: TRICARE and Certain Other Health Care
                Providers
                AGENCY: Office of Federal Contract Compliance Programs, Labor.
                ACTION: Notice of proposed rulemaking.
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                SUMMARY: The Office of Federal Contract Compliance Programs (OFCCP) is
                proposing to amend its regulations pertaining to its authority over
                TRICARE health care providers. The proposed rule is intended to
                increase access to care for uniformed service members and veterans and
                to provide certainty for health care providers who serve beneficiaries
                of TRICARE. It is also believed that this proposed rule may result in
                cost savings to the health care system. In a reconsideration of its
                legal position, the proposed rule would provide that OFCCP lacks
                authority over Federal health care providers who participate in
                TRICARE. In the alternative, the proposed rule would establish a
                national interest exemption from Executive Order 11246, Section 503 of
                the Rehabilitation Act of 1973, and the Vietnam Era Veterans'
                Readjustment Assistance Act of 1974 for health care providers with
                agreements to furnish medical services and supplies to individuals
                participating in TRICARE (in the alternative to a reconsideration of
                OFCCP's authority over such providers). OFCCP would nevertheless have
                authority over health care providers participating in TRICARE if they
                hold a separate covered Federal contract or subcontract. Likewise,
                health care providers would remain subject to all other Federal, state,
                and local laws prohibiting discrimination and providing for equal
                employment opportunity. OFCCP has determined that special circumstances
                in the national interest justify proposing the exemption as it would
                improve uniformed service members' and veterans' access to medical
                care, more efficiently allocate OFCCP's limited resources for
                enforcement activities, and provide greater uniformity, certainty, and
                notice for health care providers participating in TRICARE.
                DATES: To be assured of consideration, comments must be received on or
                before December 6, 2019.
                ADDRESSES: Comments may be submitted, identified by Regulatory
                Information Number (RIN) 1250-AA08, by one of the following methods:
                 Electronically: The Federal eRulemaking portal at http://www.regulations.gov. Follow the instructions found on that website for
                submitting comments.
                 Mail, Hand Delivery, or Courier: Addressed to Harvey D.
                Fort, Deputy Director, Division of Policy and Program Development,
                Office of Federal Contract Compliance Programs, 200 Constitution Avenue
                NW, Room C-3325, Washington, DC 20210.
                 Instructions: Please submit one copy of your comments by only one
                method. Due to security concerns, postal delivery in Washington, DC,
                may be delayed. For faster submission, we encourage commenters to
                transmit their comment electronically via the http://www.regulations.gov website. All submissions must include OFCCP's name
                for identification.
                 Comments, including any personal information provided, become a
                matter of public record and will be posted on http://www.regulations.gov. Do not include any personally identifiable or
                confidential business information that you do not want publicly
                disclosed.
                 The Department will also make all the comments it receives
                available for public inspection during normal business hours at OFCCP
                at the above address. If you need assistance to review the comments,
                the Department will provide you with appropriate aids such as readers
                or print magnifiers. To schedule an appointment to review the comments
                and/or to obtain this notice of proposed rulemaking in an alternate
                [[Page 59747]]
                format, please contact OFCCP at the telephone numbers or address listed
                below.
                FOR FURTHER INFORMATION CONTACT: Harvey D. Fort, Deputy Director,
                Division of Policy and Program Development, Office of Federal Contract
                Compliance Programs, 200 Constitution Avenue NW, Room C-3325,
                Washington, DC 20210. Telephone: (202) 693-0104 (voice) or (202) 693-
                1337 (TTY). Copies of this document may be obtained in alternative
                formats (large print, braille, audio recording) by calling the numbers
                listed above.
                SUPPLEMENTARY INFORMATION:
                I. Legal Authority
                 Federal law requires Government contractors \1\ to refrain from
                discriminating on the basis of race, sex, and other grounds.
                Additionally, Government contractors must take affirmative action to
                ensure equal employment opportunity.\2\ OFCCP, situated in the
                Department of Labor (Department), enforces these contracting
                requirements. OFCCP requires Government contractors to furnish
                information about their affirmative action programs (AAPs) and related
                employment records and data so OFCCP can ascertain compliance with the
                laws it enforces.\3\
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                 \1\ As used in this preamble, the term contractor includes,
                unless otherwise indicated, Federal Government contractors and
                subcontractors. When used in reference to Executive Order 11246, it
                also includes federally assisted construction contractors and
                subcontractors.
                 \2\ See E.O. 11246, section 202(1); 29 U.S.C. 793(a); 38 U.S.C.
                4212(a)(1); 41 CFR 60-1.40, 60-2.1 through 60-2.17; id. Sec. Sec.
                60-300.40 through 60-300.45; id. Sec. Sec. 60-741.40 through 60-
                741.47.
                 \3\ E.O. 11246, section 202(6); 41 CFR 60-1.4(a)(6), 60-1.43;
                id. Sec. Sec. 60-300.40(d), 60-300.81; id. Sec. Sec. 60-741.40(d),
                60-741.81; see also Chrysler Corp. v. Brown, 441 U.S. 281, 286
                (1979).
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                 OFCCP enforces three nondiscrimination and equal employment
                opportunity laws that apply to covered Federal contractors: Executive
                Order (E.O.) 11246, as amended,\4\ Section 503 of the Rehabilitation
                Act of 1973, as amended (Section 503),\5\ and the Vietnam Era Veterans'
                Readjustment Assistance Act of 1974, as amended (VEVRAA).\6\ In 1965,
                President Lyndon B. Johnson signed E.O. 11246, which (as amended)
                prohibits discrimination on the basis of race, color, religion, sex,
                sexual orientation, gender identity, and national origin, as well as
                discrimination against applicants or employees because they inquire
                about, discuss, or disclose their compensation or that of others,
                subject to certain limitations. Six years after President Johnson
                signed E.O. 11246, Congress added disability as a protected class
                through Section 503 of the Rehabilitation Act.\7\ And in 1974, Congress
                also covered veterans through the Vietnam Era Veterans' Readjustment
                Assistance Act, which prohibits discrimination on the basis of veteran
                status. All three laws also require Federal contractors to take
                affirmative steps to ensure equal employment opportunity in their
                employment practices.
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                 \4\ E.O. 11246, 30 FR 12319 (Sept. 24, 1965).
                 \5\ 29 U.S.C. 793.
                 \6\ 38 U.S.C. 4212.
                 \7\ 29 U.S.C. 793(a).
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                 OFCCP has rulemaking authority under all three laws.\8\
                Additionally, OFCCP has authority to exempt a contract from E.O. 11246,
                VEVRAA, and Section 503 if the Director of OFCCP determines that
                special circumstances in the national interest require doing so.\9\
                OFCCP's regulations allow the Director to grant national interest
                exemptions to groups or categories of contracts where he finds it
                impracticable to act upon each request for an exemption individually or
                where the exemption will substantially contribute to convenience in the
                administration of the laws.\10\ These categorical exemptions follow the
                principle that an agency, whenever permitted, need not ``continually .
                . . relitigate issues that may be established fairly and efficiently in
                a single rulemaking proceeding'' that ``could invite favoritism,
                disunity, and inconsistency.'' \11\ These long-standing regulatory
                provisions allowing for categorical national interest exemptions are
                owed deference.\12\ The provision permitting categorical exemption from
                E.O. 11246 was part of the original notice-and-comment regulation that
                implemented the Order, and has been in place for over fifty years.\13\
                The provisions permitting categorical exemptions from VEVRAA and
                Section 503 are patterned similarly and have been in place for decades
                as well.\14\ Additionally, E.O. 11246's predecessor, E.O. 10925,
                contained a similarly worded exemption provision which was implemented
                through a regulation providing a substantially similar categorical
                exemption.\15\ OFCCP has granted categorical exemptions in the national
                interest in the past.\16\ OFCCP also may exercise prosecutorial
                discretion in determining its enforcement priorities.\17\ OFCCP
                proposes this rule pursuant to all these authorities.
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                 \8\ E.O. 11246, section 201; 38 U.S.C. 4212(a)(2); 29 U.S.C.
                793(a); E.O. 11758, section 2; Sec'y Order 7-2009, 74 FR 58834 (Nov.
                13, 2009).
                 \9\ E.O. 11246, section 204; E.O. 11758 sections 2-3, as
                amended; 29 U.S.C. 793(c)(1); 41 CFR 60-300.4(b)(1). E.O. 11246
                refers to an ``exemption'' while VEVRAA and Section 503 use the term
                ``waiver.'' This proposed rule uses the term ``exemption'' to refer
                to both.
                 \10\ 41 CFR 60-1.5(b)(1), 60-300.4(b)(1), 60-741.4(b)(1).
                 \11\ Heckler v. Campbell, 461 U.S. 458, 467 (1983); see also
                Lopez v. Davis, 531 U.S. 230, 243-44 (2001); Am. Hosp. Ass'n v.
                NLRB, 499 U.S. 606, 612 (1991) (``[E]ven if a statutory scheme
                requires individualized determinations, the decision maker has the
                authority to rely on rulemaking to resolve certain issues of general
                applicability unless Congress clearly expresses an intent to
                withhold that authority.'' (discussing Campbell, 461 U.S. at 467;
                FPC v. Texaco, Inc., 377 U.S. 33, 41-44 (1964); United States v.
                Storer Broad. Co., 351 U.S. 192, 205 (1956)).
                 \12\ Cf., e.g., United States v. Cleveland Indians Baseball Co.,
                532 U.S. 200, 220 (2001) (``We do not resist according such
                deference in reviewing an agency's steady interpretation of its own
                61-year-old regulation implementing a 62-year-old statute. Treasury
                regulations and interpretations long continued without substantial
                change, applying to unamended or substantially reenacted statutes,
                are deemed to have received congressional approval and have the
                effect of law.'') (quoting Cottage Sav. Ass'n v. Commissioner, 499
                U.S. 554, 561 (1991))
                 \13\ See 33 FR 7804, 7807 (May 28, 1968); see also 33 FR 3000,
                3003 (Feb. 15, 1968) (notice of proposed rulemaking).
                 \14\ See 39 FR 20566, 20568 (June 11, 1974); 41 FR 26386, 26387
                (June 25, 1976).
                 \15\ See E.O. 10925, section 303; 41 CFR 60-1.3(b)(1) (1962).
                 \16\ See OFCCP, Hurricane Recovery National Interest Exemptions,
                https://www.dol.gov/ofccp/hurricanerecovery.htm.
                 \17\ See 5 U.S.C. 701(a)(2); Heckler v. Chaney, 470 U.S. 821,
                831 (1985); Andrews v. Consol. Rail Corp., 831 F.2d 678, 687 (7th
                Cir. 1987); Clementson v. Brock, 806 F.2d 1402, 1404-05 (9th Cir.
                1986); Carroll v. Office of Fed. Contract Compliance Programs, U.S.
                Dep't of Labor, 235 F. Supp. 3d 79, 84 (D.D.C. 2017).
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                II. Introduction
                 OFCCP is proposing a rule that would clarify the scope of OFCCP's
                authority \18\ and, to dispel any legal uncertainty, also further the
                national interest by explicitly exempting certain health care providers
                from OFCCP's enforcement activities. Specifically, in the E.O. 11246,
                VEVRAA, and Section 503 regulations, OFCCP would revise its definition
                of ``subcontractor''--meaning subcontractors regulated by OFCCP--to
                exclude health care providers with agreements to furnish medical
                services and supplies to individuals participating in TRICARE.
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                 \18\ OFCCP often refers to the scope of its authority to enforce
                equal employment opportunity requirements as its jurisdiction. For
                this proposed rulemaking, OFCCP believes the word authority is more
                precise, since OFCCP does not have adjudicative power.
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                 OFCCP is concerned about differences in understanding among TRICARE
                health care providers regarding the scope of OFCCP's authority, and
                also about the potential that OFCCP's recent assertions of authority
                may be affecting
                [[Page 59748]]
                uniformed service members' and veterans' access to health care.\19\
                OFCCP has also recently established a moratorium on enforcing the
                affirmative action obligations for health care providers deemed to be
                putative TRICARE subcontractors. OFCCP is accordingly proposing these
                changes to provide greater clarity to, and solicit feedback from,
                health care providers and other stakeholders before the expiration of
                the moratorium on May 7, 2021. OFCCP has reexamined its position that
                health care providers participating in TRICARE are among those Congress
                intended to be regulated and, for the reasons discussed below, now
                believes they are not. Given the decade of confusion that has
                accompanied this question, OFCCP also believes that lasting certainty
                for the health care field and Government health care program serving
                current and retired members of the armed services and their families is
                highly desirable. Therefore, OFCCP is also proposing, in the
                alternative, an exemption for health care providers under TRICARE.
                OFCCP believes the exemption is justified by special circumstances in
                the national interest. The exemption is expected to improve uniformed
                service members' and veterans' access to medical care and more
                efficiently allocate OFCCP's limited resources for enforcement
                activities, and provide greater uniformity, certainty, and notice for
                health care providers participating in TRICARE. Whether under the
                rationale of a lack of authority or via an exemption from that
                authority, the change proposed to OFCCP's regulatory text is the same:
                A revision of OFCCP's definition of ``subcontractor'' (i.e.,
                subcontractors regulated by OFCCP) to exclude health care providers who
                only participate as providers in TRICARE.
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                 \19\ See OFCCP, Directive 2014-01, TRICARE Subcontractor
                Enforcement Activities (May 7, 2014); OFCCP, Directive 2018-02,
                TRICARE Subcontractor Enforcement Activities (May 18, 2018).
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                 The proposed rule is an E.O. 13771 deregulatory action because it
                is expected to reduce compliance costs and potentially the cost of
                litigation for regulated entities.
                III. Administrative and Regulatory Background
                A. Overview of OFCCP's Areas of Authority
                 E.O. 11246, VEVRAA, and Section 503 apply to entities holding
                covered Government contracts and subcontracts.\20\ OFCCP has authority
                to enforce the requirements of these three laws and their implementing
                regulations. Contractors agree to those requirements in the equal
                opportunity clauses included in their contracts with the Federal
                Government, clauses which also require contractors to ``flow down''
                these requirements to any subcontractors. The text of these clauses is
                set forth in E.O. 11246 section 202 and the implementing regulations
                for all three programs, and is also found in part 52 of title 48 of the
                Code of Federal Regulations, which contains the Federal Acquisition
                Regulation's standard contract clauses.\21\ Federal law provides that
                these clauses ``shall be considered to be part of every contract and
                subcontract required by [law] to include such a clause.'' \22\ This is
                true ``whether or not the [equal opportunity clause] is physically
                incorporated in such contracts.'' \23\ Persons who have no contractual
                (or subcontractual) relationships with the Federal Government, however,
                have no obligation to adhere to OFCCP's substantive requirements.\24\
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                 \20\ See E.O. 11246, section 202; 29 U.S.C. 793(a); 38 U.S.C.
                4212(a)(1).
                 \21\ See 48 CFR 52.222-26, 52.222-35, 52.222-36.
                 \22\ 41 CFR 60-14(e), 60-741.5(e), 60-250.5(e).
                 \23\ Id.
                 \24\ See 41 CFR 60-1.1 (``The regulations in this part apply to
                all contracting agencies of the Government and to contractors and
                subcontractors who perform under Government contracts, to the extent
                set forth in this part.''); see also id. Sec. Sec. 60-300.1(b), 60-
                741.1(b).
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                 OFCCP's regulations define ``Government contract'' as any agreement
                or modification thereof between a department or agency of the Federal
                Government and any person for the purchase, sale or use of personal
                property or nonpersonal services.\25\ Agreements pertaining to programs
                or activities receiving Federal financial assistance, however, are not
                considered covered contracts,\26\ nor are other noncontract Government
                programs or activities. Federally assisted construction contracts,
                however, do come within OFCCP's authority under E.O. 11246.\27\
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                 \25\ Id. Sec. Sec. 60-1.3, 60-300.2(n), 60-741.2(k).
                 \26\ See id. Sec. Sec. 60-1.1, 60-300.1(b), 60-741.4(a).
                Programs and activities receiving Federal financial assistance must
                comply with various other nondiscrimination laws, including Title VI
                of the Civil Rights Act of 1964 (prohibiting discrimination on the
                basis of race, color, or national origin) and Section 504 of the
                Rehabilitation Act of 1973 (prohibiting discrimination on the basis
                of disability).
                 \27\ 41 CFR 60-1.1.
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                 As defined in regulation, a covered ``contract'' includes a
                ``contract or a subcontract.'' \28\ A prime contract is an agreement
                with the Federal Government agency itself. A ``subcontract'' is any
                agreement or arrangement between a contractor and any person (in which
                the parties do not stand in the relationship of an employer and an
                employee): (1) For the purchase, sale or use of personal property or
                nonpersonal services which, in whole or in part, is necessary to the
                performance of any one or more contracts; or (2) Under which any
                portion of the contractor's obligation under any one or more contracts
                is performed, undertaken or assumed.\29\
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                 \28\ Id. Sec. Sec. 60-1.3, 60-300.2, 60-741.2.
                 \29\ Id. Sec. Sec. 60-1.3, 60-300.2(x), 60-741.2(x).
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                 Although, in general, organizations holding a contract or
                subcontract as defined are covered under E.O. 11246, Section 503, and
                VEVRAA, some exemptions apply. Contractors that only hold contracts
                below OFCCP's basic monetary thresholds are exempt.\30\ Certain
                affirmative action requirements only apply depending on the type and
                dollar value of the contract held as well as the contractor's number of
                employees.\31\ The regulations also exempt some categories of contracts
                under certain circumstances or for limited purposes, including those
                involving work performed outside the United States; certain contracts
                with state or local governments; contracts with religious corporations,
                associations, educational institutions or societies; educational
                institutions owned in whole or in part by a particular religion or
                religious organization; and contracts involving work on or near an
                Indian reservation.\32\
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                 \30\ Id. Sec. Sec. 60-1.5(a)(1), 60-300.4(a)(1), 60-
                741.4(a)(1). E.O. 11246's basic obligations apply to businesses
                holding a Government contract in excess of $10,000, or Government
                contracts which have, or can reasonably be expected to have, an
                aggregate total value exceeding $10,000 in a 12-month period. E.O.
                11246 also applies to government bills of lading, depositories of
                Federal funds in any amount, and to financial institutions that are
                issuing and paying agents for U.S. Savings Bonds. Section 503
                applies to Federal contractors and subcontractors with contracts in
                excess of $15,000. VEVRAA applies to Federal contractors and
                subcontractors with contracts of $150,000 or more. The coverage
                thresholds under Section 503 and VEVRAA increased from those listed
                in the statutes and OFCCP's regulations in accordance with the
                inflationary adjustment requirements in 41 U.S.C. 1908. See 80 FR
                38293 (July 2, 2015); 75 FR 53129 (Aug. 30, 2010).
                 \31\ 41 CFR 60-1.40, 60-300.40, 60-741.40.
                 \32\ See id. Sec. Sec. 60-1.5, 60-300.4, 60-741.4.
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                 Additionally, as discussed earlier in this NPRM, OFCCP has
                authority to exempt entities and categories of entities from E.O.
                11246, VEVRAA and Section 503 if the Director of OFCCP determines that
                special circumstances in the national interest require doing so.\33\
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                 \33\ E.O. 11246, section 204; 29 U.S.C. 793(c)(1); 41 CFR 60-
                300.4(b)(1).
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                [[Page 59749]]
                B. Overview of Prior Treatment of Health Care Providers Participating
                in TRICARE
                 OFCCP has routinely audited health care providers who are
                Government contractors, and it would continue to do so under this
                proposal.\34\ Provided below is a brief overview of TRICARE and
                developments regarding OFCCP's interpretations and practice regarding
                its authority over health care providers participating in TRICARE.
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                 \34\ As noted throughout this proposal, health care providers
                who are prime government contractors, or who hold subcontracts apart
                from their provider relationship to a government health care
                program, included in this rule, would remain under OFCCP's
                authority.
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                1. TRICARE
                 TRICARE is the Federal health care program serving uniformed
                service members, retirees, and their families.\35\ TRICARE is managed
                by the Defense Health Agency, which contracts with managed care support
                contractors to administer each TRICARE region. The managed care support
                contractors enter into agreements with individual and institutional
                health care providers in order to create provider networks for fee-for-
                service, preferred-provider, and health maintenance organization (HMO)-
                like programs. Fee-for-service plans reimburse beneficiaries or the
                health care provider for the cost of covered services. The TRICARE HMO-
                like program involves beneficiaries generally agreeing to use military
                treatment facilities and designated civilian providers and to follow
                certain managed care rules and procedures to obtain covered services.
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                 \35\ See 32 CFR 199.17(a).
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                2. OFCCP and Health Care Providers Participating in TRICARE
                 In 2007, OFCCP for the first time in litigation asserted
                enforcement authority over a health care provider based solely on the
                hospital's delivery of medical care to TRICARE beneficiaries. The
                provider in this case, a hospital in Florida, disagreed with OFCCP's
                view, and OFCCP initiated enforcement proceedings in 2008 under the
                caption OFCCP v. Florida Hospital of Orlando. In 2010, an
                administrative law judge (ALJ) found for the agency.\36\
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                 \36\ OFCCP v. Fla. Hosp. of Orlando, No. 2009-OFC-00002, 2010 WL
                8453896 (ALJ Oct. 18, 2010).
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                 In December 2010--soon after the ALJ's decision in Florida
                Hospital--OFCCP issued a new directive on health care providers that
                superseded previous directives.\37\ Directive 293 asserted that OFCCP
                had authority over certain health care providers participating in
                TRICARE and other Government health care programs.
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                 \37\ See OFCCP, Directive 293, Coverage of Health Care Providers
                and Insurers (Dec. 16, 2010) (rescinded Apr. 25, 2012).
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                 Congress responded the next year. The National Defense
                Authorization Act for Fiscal Year 2012 (NDAA) included a provision
                addressing the maintenance of the adequacy of provider networks under
                the TRICARE program and TRICARE health care providers as purported
                Government subcontractors. Sec. 715of the NDAA provided that, for the
                purpose of determining whether network providers under TRICARE provider
                network agreements are Government subcontractors, 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.\38\ In April 2012, 16 months after it
                had been issued, OFCCP formally rescinded Directive 293.\39\
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                 \38\ Public Law 112-81, section 715, 125 Stat. 1298, 1477
                (2011), codified at 10 U.S.C. 1097b(a)(3).
                 \39\ See Notice of Rescission No. 301 (Apr. 25, 2012).
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                 Meanwhile, the Florida Hospital litigation continued. Six months
                after OFCCP formally rescinded Directive 293, in October 2012, the
                Department's Administrative Review Board (ARB or Board) held that the
                NDAA's amendment to the TRICARE statute precluded OFCCP from asserting
                authority over the Florida hospital.\40\ The Board dismissed OFCCP's
                administrative complaint against the hospital. Four of the five judges
                agreed that the hospital did not satisfy the second prong of OFCCP's
                regulatory definition of ``subcontract.'' Two judges, Judge Corchado
                and Judge Royce, would have found for the agency on the basis of the
                first prong of the regulatory definition of ``subcontract.'' \41\
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                 \40\ OFCCP v. FLA. Hosp. of Orlando, No. 11-011, 2012 WL 5391420
                (ARB Oct. 19, 2012).
                 \41\ Judge Brown concluded that the question about the first
                prong was not properly before the Board.
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                 The Board subsequently granted OFCCP's request for reconsideration.
                This time, a three-judge majority ruled for the agency. In July 2013,
                the Board concluded that the Florida hospital at issue satisfied the
                first prong of the agency's regulatory definition of ``subcontract.''
                \42\ The Department's ARB remanded to the ALJ, however, to determine
                whether TRICARE constituted Federal financial assistance outside
                OFCCP's jurisdiction. Judge Igasaki and Judge Edwards dissented on the
                basis of their original opinion in the Board's first decision. They
                concluded that ``the enactment of Section 715 of the NDAA removes
                OFCCP's jurisdiction under either Prong One or Prong Two based on the
                specific contract at issue in this case.'' \43\
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                 \42\ OFCCP v. Fla. Hosp. of Orlando, No. 11-011, 2013 WL 3981196
                (ARB July 22, 2013).
                 \43\ Id. at *25 (Igasaki & Edwards, JJ., dissenting).
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                 While the remand of Florida Hospital was pending, Congress
                introduced legislation to exempt all health care providers from OFCCP's
                enforcement activities and held a hearing regarding OFCCP's enforcement
                activities.\44\ The Secretary of Labor at the time, in a letter to the
                leaders of the House Committee on Education and the Workforce and the
                Subcommittee on Workforce Protection, stated that the leaders ``ha[d]
                made clear that, in [their] judgment, Congress intended to eliminate
                entirely OFCCP's jurisdiction over TRICARE subcontractors.'' \45\ The
                Secretary's letter proposed that ``in lieu of legislative action,''
                OFCCP would ``exercise prosecutorial discretion over the next five
                years to limit its enforcement activities with regard to TRICARE
                subcontractors.'' \46\
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                 \44\ H.R. 3633, Protecting Health Care Providers from Increased
                Administrative Burdens Act, Hearing Before the Subcomm. On Workforce
                Protections of the H. Comm. on Educ. & the Workforce, 113th Cong.
                (Mar. 13, 2014) [hereinafter ``2014 Hearing''].
                 \45\ Id. at 3-5 (Sec'y of Labor Thomas E. Perez, Letter to
                Congressional Leaders, Mar. 11, 2014).
                 \46\ Id. at 4.
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                 In May 2014, OFCCP issued Directive 2014-01, establishing a five-
                year moratorium on enforcement of affirmative action obligations for
                health care providers deemed to be TRICARE subcontractors.\47\ OFCCP
                also administratively closed its open compliance reviews of contractors
                covered by the moratorium, which resulted in the dismissal of the
                Florida Hospital case.\48\
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                 \47\ OFCCP, Directive 2014-01, TRICARE Subcontractor Enforcement
                Activities (May 7, 2014).
                 \48\ OFCCP v. Fla. Hosp. of Orlando, No. 2009-OFC-00002 (ALJ
                Apr. 1, 2014).
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                 On May 18, 2018, OFCCP issued Directive 2018-02, a two-year
                extension of the previous moratorium.\49\ Pursuant to this Directive,
                the moratorium will expire on May 7, 2021. OFCCP explained that it
                extended the moratorium out of concern that the approaching expiration
                of the moratorium and accompanying uncertainty over the applicability
                of the laws OFCCP enforces might contribute to the difficulties
                veterans and uniformed service members face when accessing health care.
                The Directive also explained that the extension would provide
                additional time to receive
                [[Page 59750]]
                feedback from stakeholders. The Directive extended the scope of the
                moratorium to cover providers participating in the Department of
                Veterans Affairs' health benefits programs.\50\
                ---------------------------------------------------------------------------
                 \49\ OFCCP, Directive 2018-02, TRICARE Subcontractor Enforcement
                Activities (May 18, 2018).
                 \50\ Id. at 1 n.1.
                ---------------------------------------------------------------------------
                IV. Proposal To Reconsider OFCCP's Authority Over TRICARE
                 Since bringing the Florida Hospital case over a decade ago, and as
                reiterated in its 2014 and 2018 moratoria, OFCCP has consistently held
                the position that it holds authority over TRICARE providers.\51\ In
                preparing this proposed rulemaking, OFCCP has carefully examined the
                authorities it administers, its legal position as stated in litigation
                and repeated public statements and guidance, the decisions in Florida
                Hospital, and Congress's recent actions. OFCCP has concluded that its
                recent assertions of authority over TRICARE providers warrant
                reconsideration. For the reasons below, OFCCP now believes it does not
                have authority over these providers simply because these providers
                choose to participate in TRICARE.
                ---------------------------------------------------------------------------
                 \51\ See, e.g., OFCCP, Frequently Asked Questions: TRICARE
                Subcontractor Enforcement Activities (Q. ``Our hospital participates
                in the Federal Employees Health Benefits Program, but not TRICARE.
                Are we covered by the Moratorium?'' A. ``No. If your hospital does
                not participate in TRICARE, it is not covered by the Moratorium.''),
                https://www.dol.gov/ofccp/regs/compliance/faqs/tricare_faq.htm.
                ---------------------------------------------------------------------------
                 When OFCCP issued Directive 293, asserting authority over these
                health care providers, Congress reacted quickly by enacting Section 715
                of the 2012 NDAA. ``Where an agency's statutory construction has been
                fully brought to the attention of the public and the Congress, and the
                latter has not sought to alter that interpretation although it has
                amended the statute in other respects, then presumably the legislative
                intent has been correctly discerned.'' N. Haven Bd. of Ed. v. Bell, 456
                U.S. 512, 535 (1982) (internal quotation marks omitted). OFCCP's
                history in this area shows the opposite with regard to TRICARE
                providers.
                 Regarding section 715 itself, it was clearly intended, both by its
                text and by the surrounding context, to reverse OFCCP's assertion of
                authority over TRICARE providers. The section states, ``For the purpose
                of determining whether network providers''--e.g., hospitals and
                physicians--``are subcontractors . . . , 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 on the basis of such
                requirement.'' The ARB held in Florida Hospital that it could
                nonetheless deem a health care provider a subcontractor where the
                TRICARE regional administrator could not ``fulfill its contract to
                create an integrated health delivery system without the services from
                network providers like Florida Hospital.'' \52\ But, upon
                reconsideration, OFCCP now believes the dissenting opinion in Florida
                Hospital gave the better reading of the statute. The dissent explained
                that because the ``managed care prime contract . . . includes the
                requirement to maintain a network of providers, OFCCP's jurisdiction is
                removed. Under Section 715, the subcontract is no longer a
                `subcontract' under [OFCCP's regulatory definition] because the element
                of the contract that is `necessary to the performance of any one or
                more contracts' involves the provisions of health care network provider
                services to TRICARE beneficiaries.'' \53\ The dissent's reading would
                prevent the statute from becoming a nullity--since the purpose of
                creating a provider network is to provide health care.
                ---------------------------------------------------------------------------
                 \52\ Fla. Hosp., 2013 WL 3981196, at *19.
                 \53\ Id. at *29.
                ---------------------------------------------------------------------------
                 For this reason, after careful consideration, OFCCP has
                reconsidered its position and now believes it does not have
                jurisdiction over TRICARE providers.
                V. Proposal To Establish a National Interest Exemption for Health Care
                Providers Participating in TRICARE
                 OFCCP believes that lasting certainty for TRICARE health care
                providers and patients is highly desirable. Therefore, OFCCP is also
                proposing, as an alternative, an exemption from E.O. 11246, Section
                503, and VEVRAA for health care providers with agreements to furnish
                medical services and supplies to individuals participating in TRICARE.
                Nothing in the proposed action is intended to interfere with OFCCP's
                vital mission of enforcing equal employment opportunity in
                organizations that contract with the Government. OFCCP would retain
                authority over a health care provider participating in such a network
                or arrangement if the health care provider holds a separate covered
                Federal contract or subcontract. But as explained below, OFCCP believes
                that there are several reasons why special circumstances in the
                national interest warrant an exemption for TRICARE health care
                providers who do not hold such separate contracts.
                 First, OFCCP is concerned that the prospect of exercising authority
                over TRICARE providers is affecting or will affect the Government's
                ability to provide health care to uniformed service members, veterans,
                and their families. Congressional inquiries and testimony, as well as
                amicus filings in the Florida Hospital litigation, have brought to
                OFCCP's attention the risk that health care providers may be declining
                to participate in Federal health care programs that serve members of
                the military and veterans because of the presumed costs of compliance
                with OFCCP's regulations.\54\ The former president of a TRICARE managed
                care support contractor testified that he feared they would lose
                smaller providers in their network because of the administrative costs
                and burdens associated with OFCCP's requirements, and he predicted that
                it would make it ``much more difficult to build and retain provider
                networks.'' \55\ TRICARE managed care support contractors similarly
                stated in an amicus brief that subjecting TRICARE providers to OFCCP's
                requirements would ``make the already difficult task of finding health
                care professionals willing to act as network providers even more
                difficult.'' \56\ A partner of a law firm testified that he has seen
                health care provider clients choose not to participate in TRICARE and
                in other programs because of the costs of compliance.\57\ The American
                Hospital Association also testified that some hospitals may decline to
                participate out
                [[Page 59751]]
                of concern that they could be found to be Federal contractors.\58\
                ---------------------------------------------------------------------------
                 \54\ 2014 Hearing, supra note 44; Examining Recent Actions by
                the Office of Federal Contract Compliance Programs, Hearing Before
                the Subcomm. on Workforce Protections of the H. Comm. on Education
                and the Workforce, 113th Cong. (2013) [hereinafter 2013 Hearing];
                Reviewing the Impact of the Office of Federal Contract Compliance
                Programs' Regulatory and Enforcement Actions, Hearing Before the
                Subcomm. on Health, Emp't, Labor & Pensions of the H. Comm. on Educ.
                & the Workforce, 112th Cong. (2012).
                 \55\ 2014 Hearing, supra note 44, at 24-26, 46-47, 149 (Prepared
                Statement and Testimony of Thomas Carrato, President, Health Net
                Federal Services).
                 \56\ Amicus Brief of Humana Military Health Services, Inc.,
                Health Net Federal Services, LLC, and TriWest Healthcare Alliance
                dated May 2, 2012, at 9, Fla. Hosp., 2013 WL 3981196; see also
                Amicus Brief of Human Military Health Services, Inc., Health Net
                Federal Services, LLC, and TriWest Healthcare Alliance dated
                December 29, 2010, at 2, Fla. Hosp., 2013 WL 3981196 (``Subjecting
                the network providers to Federal Affirmative action requirements
                will make it more difficult for the [TRICARE managed care support]
                contractors to find and retain providers willing to sign network
                agreements due to the added compliance requirements.'').
                 \57\ 2014 Hearing, supra note 44, at 34-35, 47 (Statement and
                Testimony of David Goldstein, Shareholder, Littler Mendelson P.C.).
                 \58\ Id. at 17-18 (Prepared Statement of the American Hospital
                Association); 2013 Hearing, supra note 54, at 139 (Testimony of Curt
                Kirschner, Partner, Jones Day, on behalf of the American Hospital
                Association).
                ---------------------------------------------------------------------------
                 Providers' decisions not to participate may exacerbate the well-
                documented difficulties that uniformed service members, veterans, and
                their families have accessing health care.\59\ The unique nature of the
                health care system heightens OFCCP's concern about the refusal of
                providers to participate in health care programs for uniformed service
                members and veterans. Creating adequate networks of providers is a
                critical component of ensuring access to health care. These networks
                need to offer comprehensive services and cover all geographical areas
                where beneficiaries reside. An inadequate network may mean that
                beneficiaries are unable to obtain urgent and life-saving treatment.
                The willingness of health care providers to participate in TRICARE is
                thus especially important.
                ---------------------------------------------------------------------------
                 \59\ See, e.g., Government Accountability Office Report, GAO-18-
                361, TRICARE Surveys Indicate Nonenrolled Beneficiaries' Access to
                Care Has Generally Improved (Mar. 2018), available at https://www.gao.gov/assets/700/690964.pdf. The GAO found that, although
                there has been a slight improvement in TRICARE beneficiaries' access
                to care, 29 percent of nonenrolled beneficiaries still reported that
                they experienced problems finding a civilian provider. Nonenrolled
                beneficiaries are those that have not enrolled in TRICARE Prime,
                which is a managed care option that that mostly relies on military
                hospitals and clinics to provide care.
                ---------------------------------------------------------------------------
                 OFCCP requests comments from stakeholders that will help it to more
                thoroughly evaluate the potential impact of OFCCP compliance on
                uniformed service members' and veterans' health care provider networks.
                Particularly, OFCCP seeks comments from health care providers regarding
                the impact of potential Federal subcontractor status on their decision
                to participate in health care programs for uniformed service members
                and veterans.
                 Second, OFCCP believes that an exemption is in the national
                interest because pursuing enforcement efforts against TRICARE providers
                is not the best use of its and providers' resources were it to,
                consistent with its public position until the issuance of this NPRM,
                attempt to exercise authority over those providers. Given the history
                in this area, such attempts--which would occur in the absence of this
                NPRM--could again meet with protracted litigation and unclear ultimate
                results: The Florida Hospital case proceeded for seven years and would
                have continued for some time into the future had it not been
                voluntarily dismissed. OFCCP believes its limited resources are better
                spent elsewhere, and it would be unreasonable to impose substantial
                compliance costs on health care providers when the legal justification
                for doing so would be open to challenge in light of the language in the
                NDAA and the question left unresolved in Florida Hospital as to whether
                TRICARE constitutes Federal financial assistance.
                 Third, OFCCP believes an exemption would be in the national
                interest because it would provide uniformity and certainty in the
                health care community with regard to legal obligations concerning
                participation in TRICARE. OFCCP conducts a case-by-case inquiry as to
                whether a particular entity is a covered subcontractor. The proposed
                exemption would dispense with an agreement-by-agreement analysis and
                the attendant uncertainty, legal costs, and litigation risk. Providers
                could choose to furnish medical services to beneficiaries of different
                types of TRICARE programs without hiring costly lawyers and performing
                time-intensive contract analysis to determine, as best they can,
                whether they are a subcontractor or simply a provider.
                 This exception would also harmonize OFCCP's approach with that of
                the Department of Defense. OFCCP is the office charged with
                administering and enforcing its authorities, but comity between
                agencies is desirable whenever possible, reduces confusion for the
                public, and helps ensure evenhanded and efficient administration of the
                law. The Department of Defense stated in the Florida Hospital
                litigation that ``it would be impossible to achieve the TRICARE mission
                of providing affordable health care for our nation's active duty and
                retired military members and their families'' if all TRICARE providers
                were subject to OFCCP's requirements.\60\ The Department of Defense
                also classifies TRICARE as Federal financial assistance in DoD
                Directive 1020.1.\61\ A unified approach should reduce confusion for
                the public and assist coordination in regulating Government contracts
                in the health care field.\62\
                ---------------------------------------------------------------------------
                 \60\ OFCCP v. Fla. Hosp. of Orlando, No. 2009-OFC-002, 2010 WL
                8453896, at *2 (ALJ Oct. 18, 2010).
                 \61\ See Dep't of Defense, Directive 1020.1, Nondiscrimination
                on the Basis of Handicap in Programs and Activities Assisted or
                Conducted by the Department of Defense, ] E1.1.2.21 (Mar. 31, 1982).
                 \62\ Note that this regulation would not affect health care
                entities' obligations under Title VII of the Civil Rights Act or
                other civil rights laws enforced by other agencies.
                ---------------------------------------------------------------------------
                 As noted earlier, of course, the uniformed service members and
                veterans' health care providers discussed here would still be subject
                to OFCCP's authority if they are prime contractors or have a covered
                subcontract with a Government contractor. For example, a teaching
                hospital that participates as a TRICARE provider but that also has a
                research contract with the Federal Government would still be considered
                a covered contractor subject to OFCCP authority.
                 For all of these reasons, the Director of OFCCP has determined that
                the proposed exemption would be justified by special circumstances in
                the national interest because it would increase access to care for
                uniformed service members and veterans and allow OFCCP to better
                allocate its resources, and provide uniformity and certainty for the
                Government and for health care providers. The Director of OFCCP is also
                proposing that the requirements would be met for granting an exemption
                to a group or category of contracts. Since there are tens of thousands
                of providers that may be eligible for the exemption, it would be
                impracticable for OFCCP to act upon each provider's request
                individually and issuing a group exemption would substantially
                contribute to convenience in the administration of the laws.\63\ OFCCP
                requests comments from stakeholders on the proposed exemption.
                ---------------------------------------------------------------------------
                 \63\ 41 CFR 60-1.5(b)(1), 60-300.4(b)(1), 60-741.4(b)(1).
                 \64\ FEHBP is the Federal health care program serving civilian
                Federal employees, annuitants, and their dependents. 5 U.S.C. 8901
                et seq. The program is administered by the U.S. Office of Personnel
                Management. FEHBP offers two general types of plans: Fee-for-service
                plans and HMO plans. The Department's Administrative Review Board
                held OFCCP did not have authority over a health care provider based
                on a reimbursement agreement with a health insurance carrier
                offering a fee-for-service FEHBP plan, but did have authority over a
                health care provider's agreement to provide services pursuant to a
                FEHBP HMO plan. See OFCCP v. UPMC Braddock, No. 08-048, 2009 WL
                1542298 (ARB May 29, 2009), aff'd, UPMC Braddock v. Harris, 934 F.
                Supp. 2d 238 (D.D.C. 2013), vacated as moot, UPMC Braddock v. Perez,
                584 F. App'x 1 (D.C. Cir. 2014); In re Bridgeport Hosp., No. 00-023,
                2003 WL 244810 (ARB Jan. 31, 2003).
                ---------------------------------------------------------------------------
                 OFCCP is also considering and requests comments on whether health
                care providers participating in the Federal Employees Health Benefits
                Program (FEHBP) \64\ should not be covered by OFCCP's authority. OFCCP
                is interested in comments from stakeholders and health care providers
                that participate in other Government health care programs, such as
                FEHBP, about the impact of OFCCP's requirements, if there is difficulty
                attracting and retaining participating providers, and whether a uniform
                rule
                [[Page 59752]]
                is needed to avoid legal uncertainty. Some stakeholders have indicated
                that other Government health care programs may face difficulties
                similar to TRICARE.\65\
                ---------------------------------------------------------------------------
                 \65\ 2014 Hearing, supra note 44, at 17-18 (Prepared Statement
                of the American Hospital Association), 25-26, 46-47 (Prepared
                Statement and Testimony of Thomas Carrato, President, Health Net
                Federal Services), 34-35, 39-40 (Statement and Testimony of David
                Goldstein, Shareholder, Littler Mendelson P.C.); 2013 Hearing, supra
                note 54, at 67-68, 139 (Statement and Testimony of Curt Kirschner,
                Partner, Jones Day, on behalf of the American Hospital Association).
                ---------------------------------------------------------------------------
                VI. Section-by-Section Analysis
                Section 60-1.3 Definitions
                 OFCCP proposes adding a paragraph to the definition of subcontract
                in the E.O. 11246 regulations noting that a subcontract does not
                include an agreement between a health care provider and health
                organization pursuant to which the health care provider agrees to
                furnish health care services or supplies to beneficiaries of TRICARE.
                OFCCP also proposes adding definitions of ``agreement,'' ``health care
                provider,'' and ``health organization.''
                Section 60-300.2 Definitions
                 OFCCP proposes adding a paragraph to the definition of subcontract
                in the VEVRAA regulations noting that a subcontract does not include an
                agreement between a health care provider and health organization
                pursuant to which the health care provider agrees to furnish health
                care services or supplies to beneficiaries of TRICARE. OFCCP also
                proposes adding definitions of ``agreement,'' ``health care provider,''
                and ``health organization.''
                Section 60-741.2 Definitions
                 OFCCP proposes adding a paragraph to the definition of subcontract
                in the Section 503 regulations noting that a subcontract does not
                include an agreement between a health care provider and health
                organization pursuant to which the health care provider agrees to
                furnish health care services or supplies to beneficiaries of TRICARE.
                OFCCP also proposes adding definitions of ``agreement,'' ``health care
                provider,'' and ``health organization.''
                VII. Regulatory Analysis
                E.O. 12866 (Regulatory Planning and Review), E.O. 13563 (Improving
                Regulation and Regulatory Review), and E.O. 13771 (Reducing Regulation
                and Controlling Regulatory Costs)
                 Under E.O. 12866, the U.S. Office of Management and Budget's
                (OMB's) Office of Information and Regulatory Affairs (OIRA) determines
                whether a regulatory action is significant and, therefore, subject to
                the requirements of E.O. 12866 and OMB review. Section 3(f) of E.O.
                12866 defines a ``significant regulatory action'' as an action that is
                likely to result in a rule that: (1) Has an annual effect on the
                economy of $100 million or more, or adversely affects in a material way
                a sector of the economy, productivity, competition, jobs, the
                environment, public health or safety, or State, local or tribal
                governments or communities (also referred to as economically
                significant); (2) creates serious inconsistency or otherwise interferes
                with an action taken or planned by another agency; (3) materially
                alters the budgetary impacts of entitlement grants, user fees, or loan
                programs, or the rights and obligations of recipients thereof; or (4)
                raises novel legal or policy issues arising out of legal mandates, the
                President's priorities, or the principles set forth in E.O. 12866. The
                Office of Management and Budget has determined that this proposed rule
                is a significant action under E.O. 12866 and has reviewed the proposed
                rule.
                 E.O. 13563 directs agencies to propose or adopt a regulation only
                upon a reasoned determination that its benefits justify its costs;
                tailor the regulation to impose the least burden on society, consistent
                with obtaining the regulatory objectives; and in choosing among
                alternative regulatory approaches, select those approaches that
                maximize net benefits. E.O. 13563 recognizes that some benefits are
                difficult to quantify and provides that, where appropriate and
                permitted by law, agencies may consider and discuss qualitatively
                values that are difficult or impossible to quantify, including equity,
                human dignity, fairness, and distributive impacts.
                 This proposed rule is expected to be an E.O. 13771 deregulatory
                action.
                The Need for the Regulation
                 The proposed regulatory changes are needed to provide clarity
                regarding OFCCP's authority over health care providers that provide
                services and supplies under TRICARE, improve uniformed service members'
                and veterans' access to medical care, more efficiently allocate OFCCP's
                limited resources for enforcement activities, and provide greater
                uniformity, certainty, and notice for health care providers
                participating in TRICARE. The proposed rule is intended to address
                concerns regarding the risk that health care providers may be declining
                to participate in TRICARE, which reduces the availability of medical
                services for uniformed service members, veterans, and their families.
                OFCCP is proposing to exempt health care providers with agreements to
                furnish medical services and supplies to individuals participating in
                TRICARE from E.O. 11246, Section 503, and VEVRAA.
                Discussion of Impacts
                 In this section, the Department presents a summary of the costs and
                savings associated with the changes proposed in this notice of proposed
                rulemaking. The estimated labor cost to contractors is reflected in
                Table 1, below. The mean hourly wage of Management Analysts (SOC 13-
                1111) is $45.38 and Human Resources Managers (SOC 11-3121) is
                $60.91.\66\ The Department adjusted these wage rates to reflect fringe
                benefits such as health insurance and retirement benefits, as well as
                overhead costs such as rent, utilities, and office equipment. The
                Department used a fringe benefits rate of 46 percent \67\ and an
                overhead rate of 17 percent,\68\ resulting in fully loaded hourly
                compensation rates for Management Analysts of $73.97 ($45.38 + ($45.38
                x 46%) + ($45.38 x 17%)) and Human Resources Managers of $99.28 ($60.91
                + ($60.91 x 46%) + ($60.91 x 17%)).
                ---------------------------------------------------------------------------
                 \66\ BLS, Occupational Employment Statistics, Occupational
                Employment and Wages, May 2018, https://www.bls.gov/oes/current/oes_nat.htm.
                 \67\ BLS, Employer Costs for Employee Compensation, https://www.bls.gov/ncs/data.htm. Wages and salaries averaged $24.86 per
                hour worked in 2018, while benefit costs averaged $11.52, which is a
                benefits rate of 46%.
                 \68\ Cody Rice, U.S. Environmental Protection Agency, ``Wage
                Rates for Economic Analyses of the Toxics Release Inventory
                Program,'' (June 10, 2002), https://www.regulations.gov/document?D=EPA-HQ-OPPT-2014-0650-0005.
                [[Page 59753]]
                 Table 1--Labor Cost
                ----------------------------------------------------------------------------------------------------------------
                 Fully loaded
                 Major occupational groups Mean hourly Fringe benefit Overhead rate hourly
                 wage rate compensation
                ----------------------------------------------------------------------------------------------------------------
                Management Analysts............................. $45.38 46% 17% $73.97
                Human Resources Managers........................ $60.91 46% 17% $99.28
                ----------------------------------------------------------------------------------------------------------------
                 The Department estimates that 48 percent of the burden hours will
                be associated with Management Analysts and 52 percent for Human
                Resources Managers. Thus, the average hourly rate is estimated at
                $87.13 per hour (($73.97 x .48) + (99.28 x .52)).
                Cost of Regulatory Familiarization
                 The Department acknowledges that 5 CFR 1320.3(b)(1)(i) requires
                agencies to include in the burden analysis for new information
                collection requirements the estimated time it takes for contractors to
                review and understand the instructions for compliance. To minimize the
                burden, OFCCP will publish compliance assistance materials including,
                fact sheets and responses to ``Frequently Asked Questions.'' OFCCP may
                also host webinars for the contractor community that will describe the
                new requirements and conduct listening sessions to identify any
                specific challenges contractors believe they face, or may face, when
                complying with the requirements.
                 The Department believes that human resource personnel (human
                resource managers and management analysts) at each health care
                contractor establishment or firm within its authority will be
                responsible for understanding or becoming familiar with the new
                requirements. Therefore, the Department estimates that it will take a
                minimum of 30 minutes for a human resource professional at each TRICARE
                contractor establishment to either read the proposed rule, read the
                compliance assistance materials provided by OFCCP, or participate in an
                OFCCP webinar to learn more about the new requirements. Consequently,
                the estimated burden for rule familiarization is 42,309 hours (84,617
                establishments x \1/2\ hour).\69\ The Department calculates the total
                estimated cost of rule familiarization as $3,686,383 (42,309 hours x
                $87.13/hour) in the first year. The Department seeks public comments
                regarding the estimated number of establishments that would review this
                rule, the estimated time to review the rule, and whether management
                analysts and human resource managers would be the most likely staff
                members to review the rule. Table 2, below, reflects the estimated
                regulatory familiarization costs for the proposed rule.
                 Table 2--Regulatory Familiarization Cost
                ------------------------------------------------------------------------
                
                ------------------------------------------------------------------------
                Total number of health care contractor 84,617.
                 establishments.
                Time to review rule...................... 30 minutes.
                Management Analysts and Human Resources $87.13.
                 Managers fully loaded hourly
                 compensation (weighted 52 percent and 48
                 percent, respectively).
                Regulatory familiarization cost in the $3,686,383.
                 first year.
                ------------------------------------------------------------------------
                Cost Savings
                 While the proposed rule does not include any additional costs, it
                may result in cost savings as it reconsiders OFCCP's authority over
                health care providers with agreements to furnish medical services and
                supplies to individuals participating in TRICARE, and in the
                alternative, proposes a national interest exemption from E.O. 11246,
                VEVRAA, and Section 503 for these health care providers, thus
                eliminating any requirements associated with developing, updating, and
                maintaining AAPs.
                 To fully estimate the associated cost savings, the Department could
                use various data and information, only some of which are currently
                available. The partial analysis that follows sets forth relevant
                evidence and other helpful data that could be used to produce a more
                robust cost savings estimate to be used in the final rule.
                 To estimate the number of Federal contractors potentially impacted
                by the proposed rule, the Department identified the number of health
                care providers participating in TRICARE.\70\ The Department further
                refined this universe to those entities with 50 or more employees,
                since the greatest burdens associated with the E.O. 11246, VEVRAA, and
                Section 503 requirements are associated with developing, updating, and
                maintaining AAPs.\71\ The Department then determined the rate of
                compliance using OFCCP's compliance evaluation data from Fiscal Years
                2012 through June 2019. The data showed that approximately 95 percent
                of health care providers scheduled for an OFCCP compliance evaluation
                during that period submitted their AAPs when requested and the
                remaining 5 percent submitted their AAPs after receiving a show cause
                notice. The scheduled health care providers included contractors
                ranging from 50 to more than 501 employees.
                ---------------------------------------------------------------------------
                 \69\ The determination of the estimated number of health care
                contractor establishments is discussed under Cost Savings, below.
                 \70\ OFCCP considered using its most recent EEO-1 numbers to
                conduct this analysis, but the reporting requirements are limited to
                prime contractors and first tier subcontractors. However, OFCCP's
                universe includes all tiers of subcontractors that meet the
                jurisdictional thresholds. Using EEO-1 data would underestimate the
                impact of the proposed rule. Thus, OFCCP relied upon the analysis
                described herein.
                 \71\ The requirement to develop AAPs is based on employing 50 or
                more employees and having a contract that meets specific thresholds.
                OFCCP does not have information regarding the value of the contracts
                or financial agreements. Thus, the estimated number of
                establishments may be overstated as it may include establishments
                that have contracts of less than $50,000 (E.O. 11246 and section
                503) or have contracts of less than $150,000 (VEVRAA).
                ---------------------------------------------------------------------------
                 The Department identified the number of health care providers in
                the U.S. Census Bureau's Statistics of U.S. Businesses, using North
                American Industry Classification System (NAICS) 621, 622, and 623.
                There are 707,634 health care providers of which 28.3 percent or
                200,260 have 50 or more employees.\72\
                ---------------------------------------------------------------------------
                 \72\ Number of Firms, Number of Establishments, Employment, and
                Annual Payroll by Enterprise Employment Size for the United States,
                All Industries: 2016, https://www2.census.gov/programs-surveys/susb/tables/2016/us_6digitnaics_2016.xlsx?# (last accessed February 24,
                2019).
                ---------------------------------------------------------------------------
                [[Page 59754]]
                 The Department of Defense annual report to Congress reported that
                there were 155,500 TRICARE Primary Care Network Providers and 143,500
                TRICARE Specialist Network Providers in FY2018.\73\ The Department
                estimates that 28.3 percent of these providers have 50 or more
                employees. The Department believes that 84,617 providers ((155,500 +
                143,500) x 28.3%)) are potentially impacted by the proposed rule.
                ---------------------------------------------------------------------------
                 \73\ Evaluation of TRICARE Programs, Fiscal Year 2019, Report to
                Congress, https://www.health.mil/Military-Health-Topics/Access-Cost-Quality-and-Safety/Health-Care-Program-Evaluation/Annual-Evaluation-of-the-TRICARE-Program (last accessed September 17, 2019).
                ---------------------------------------------------------------------------
                 Calculating cost savings is made more difficult because the savings
                may depend on whether the health care provider is still obligated to
                maintain an AAP under other contracts. Such obligations may come from
                many additional sources. For example, if the providers would qualify as
                Federal contractors due to activities outside what is covered by this
                proposed rule; or if they contract with states that mandate AAPs for
                certain employers.\74\ Therefore, the estimate of affected TRICARE
                providers may overstate the number of entities that would actually
                realize cost savings as a result of this proposed rule. The Department
                requests comments that may assist refinement of the analysis,
                including: How often are health care providers subject to AAP rules
                imposed by states, and how similar are the state-level requirements to
                the provisions being rescinded by this proposed rule?
                ---------------------------------------------------------------------------
                 \74\ https://ballotpedia.org/Federal_and_state_affirmative_action_and_anti-discrimination_laws.
                ---------------------------------------------------------------------------
                 The rule proposes to amend Sec. 60-1.3 to note that a subcontract
                does not include an agreement between a health care provider and a
                health organization pursuant to which the health care provider agrees
                to furnish services to beneficiaries of TRICARE. The clarification and
                amendment would result in a cost savings, as some affected contractors
                would no longer be required to comply with E.O. 11246 requirements and
                to engage in such activities as creating, updating, or maintaining AAPs
                or providing notifications to employees, subcontractors, or unions. The
                Department's current OMB approved Information Collection Request (ICR)
                for its supply and service program (1250-0003), ICR Reference No:
                201811-1250-001, estimates an average of 91.44 hours per contractor to
                comply with the E.O. 11246 requirements.
                 The rule proposes to amend Sec. 60-300.2 to note that a
                subcontract does not include an agreement between a health care
                provider and a health organization pursuant to which the health care
                provider agrees to furnish services to beneficiaries of TRICARE. The
                clarification and amendment would result in a cost savings, as some
                affected contractors would no longer be required to comply with VEVRAA
                requirements and to engage in such activities as creating, updating, or
                maintaining AAPs, listing job opportunity notices with the local or
                state employment service delivery systems, or providing notifications
                to employees, subcontractors, or unions. The Department's current OMB
                approved ICR for its VEVRAA requirements (1250-0004), ICR Reference No:
                201610-1250-001, estimates an average of 16.86 hours per contractor to
                comply with the VEVRAA requirements.
                 The rule also proposes to amend Sec. 60-741.2 to note that a
                subcontract does not include an agreement between a health care
                provider and a health organization pursuant to which the health care
                provider agrees to furnish services to beneficiaries of TRICARE. The
                clarification and amendment would result in a cost savings, as some
                affected contractors would no longer be required to comply with Section
                503 requirements and to engage in such activities as creating,
                updating, or maintaining AAPs, or providing notifications to employees,
                subcontractors, or unions. OFCCP's current OMB approved ICR for its
                Section 503 requirements (1250-0005), ICR Reference No: 201610-1250-
                002, estimates an average of 7.92 hours per contractor to comply with
                the Section 503 requirements.
                Summary of Costs and Cost Savings
                 The Department estimates the annualized costs of the proposed rule
                for rule familiarization at $419,569 at a discount rate of 3 percent or
                $490,522 at a discount rate of 7 percent.
                 The Department invites comments regarding the assumptions, data
                sources, and methodologies used to estimate the impacts of this
                proposed rule. Additionally, the Department solicits comments from
                health care providers on their current costs of compliance that would
                be mitigated by this rulemaking. Finally, the Department requests
                comments on any available data that would indicate the extent to which
                health care providers, who are not otherwise required due to separate
                Federal contracts or subcontracts, have an expectation of compliance or
                have complied with current requirements.
                Summary of Transfer and Benefits
                 E.O. 13563 recognizes that some rules have benefits that are
                difficult to quantify or monetize but are nevertheless important, and
                states that agencies may consider such benefits. This rule has equity
                and fairness benefits, which are explicitly recognized in E.O. 13563.
                 The proposed rule is designed to achieve these benefits by
                providing clear guidance to contractors, and increasing contractor
                understanding of OFCCP's authority as it relates to heath care
                providers. If the proposed rule decreases the confusion of Federal
                contractors, this impact most likely represents a transfer of value to
                taxpayers (if contractor fees decrease because they do not need to
                engage third party representatives to interpret OFCCP's requirements).
                Alternative Discussion
                 In proposing this rule, the Department considered a non-regulatory
                alternative. This alternative was to continue issuing moratoria or
                other sub regulatory guidance in which OFCCP would exercise enforcement
                discretion and not schedule compliance evaluations of certain health
                care providers. The Department rejected this alternative, as it would
                result in much greater uncertainty among the regulated entities. The
                Department requests comments on any regulatory alternatives it might
                consider.
                Regulatory Flexibility Act and E.O. 13272 (Consideration of Small
                Entities)
                 The Regulatory Flexibility Act of 1980 (RFA), 5 U.S.C. 601 et seq.,
                establishes ``as a principle of regulatory issuance that agencies shall
                endeavor, consistent with the objectives of the rule and applicable
                statutes, to fit regulatory and informational requirements to the scale
                of the business organizations and governmental jurisdictions subject to
                regulation.'' Public Law 96-354. The Act requires the consideration for
                the impact of a proposed regulation on a wide-range of small entities
                including small businesses, not-for-profit organizations, and small
                governmental jurisdictions.
                 Agencies must perform a review to determine whether a proposed or
                final rule would have a significant economic impact on a substantial
                number of small entities.\75\ If the determination is that it would,
                then the agency must prepare a regulatory flexibility analysis as
                described in the RFA.\76\
                ---------------------------------------------------------------------------
                 \75\ See 5 U.S.C. 603.
                 \76\ Id.
                ---------------------------------------------------------------------------
                [[Page 59755]]
                 However, if an agency determines that a proposed or final rule is
                not expected to have a significant economic impact on a substantial
                number of small entities, section 605(b) of the RFA provides that the
                head of the agency may so certify and a regulatory flexibility analysis
                is not required. See 5 U.S.C. 605. The certification must include a
                statement providing the factual basis for this determination and the
                reasoning should be clear. The Department does not expect this rule to
                have a significant economic impact on a substantial number of small
                entities. The annualized cost at a discount rate of 7 percent for rule
                familiarization is $5.80 per entity ($43.57 in the first year) which is
                far less than 1 percent of the annual revenue of the smallest of the
                small entities affected by this proposed rule. Therefore, the
                Department certifies that this proposed rule will not have a
                significant impact on a substantial number of small affected entities.
                Paperwork Reduction Act
                 The Paperwork Reduction Act of 1995 (44 U.S.C. 3507(d)) requires
                that the Department consider the impact of paperwork and other
                information collection burdens imposed on the public. According to the
                1995 amendments to the Paperwork Reduction Act (5 CFR
                1320.5(b)(2)(vi)), an agency may not collect or sponsor the collection
                of information or impose an information collection requirement unless
                the information collection instrument displays a currently valid OMB
                control number. The Department has determined that there is no new
                requirement for information collection associated with this proposed
                rule. The information collection requirements contained in the existing
                E.O. 11246, VEVRAA and Section 503 regulations are currently approved
                under OMB Control No. 1250-0003 (OFCCP Recordkeeping and Reporting
                Requirements--Supply and Service), OMB Control No. 1250-0004 (OFCCP
                Recordkeeping and Reporting Requirements--38 U.S.C. 4212, Vietnam Era
                Veterans' Readjustment Assistance Act of 1974, as amended), and OMB
                Control No. 1250-0005 (OFCCP Recordkeeping and Reporting Requirements--
                Section 503 of the Rehabilitation Act of 1973, as amended, 29 U.S.C.
                703). Consequently, this proposed rule does not require review by the
                Office of Management and Budget under the Paperwork Reduction Act of
                1995, 44 U.S.C. 3501 et seq.
                E.O. 13132 (Federalism)
                 The Department has reviewed this proposed rule in accordance with
                E.O. 13132 regarding federalism, and has determined that it does not
                have ``federalism implications''. This rule will not ``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.''
                E.O. 13175 (Consultation and Coordination With Indian Tribal
                Governments)
                 This proposed rule does not have tribal implications under E.O.
                13175 that requires a tribal summary impact statement. The proposed
                rule does not have substantial direct effects on one or more Indian
                tribes, on the relationship between the Federal Government and Indian
                tribes or on the distribution of power and responsibilities between the
                Federal Government and Indian tribes.
                List of Subjects
                41 CFR Part 60-1
                 Administrative practice and procedure, Equal employment
                opportunity, Government contracts, Reporting and recordkeeping
                requirements.
                41 CFR Part 60-300
                 Administrative practice and procedure, Civil rights, Employment,
                Equal employment opportunity, Government contracts, Government
                procurement, Individuals with disabilities, Investigations, Reporting
                and recordkeeping requirements, Veterans.
                41 CFR Part 60-741
                 Administrative practice and procedure, Civil rights, Employment,
                Equal employment opportunity, Government contracts, Government
                procurement, Individuals with disabilities, Investigations, Reporting
                and recordkeeping requirements.
                Craig E. Leen,
                Director, Office of Federal Contract Compliance Programs.
                 For the reasons set forth in the preamble, OFCCP proposes to amend
                41 CFR parts 60-1, 60-300, and 60-741 as follows:
                PART 60-1--OBLIGATIONS OF CONTRACTORS AND SUBCONTRACTORS
                0
                1. The authority citation for part 60-1 continues to read as follows:
                 Authority: Sec. 201, E.O. 11246, 30 FR 12319, 3 CFR, 1964-1965
                Comp., p. 339, as amended by E.O. 11375, 32 FR 14303, 3 CFR, 1966-
                1970 Comp., p. 684, E.O. 12086, 43 FR 46501, 3 CFR, 1978 Comp., p.
                230, E.O. 13279, 67 FR 77141, 3 CFR, 2002 Comp., p. 258 and E.O.
                13672, 79 FR 42971.
                Subpart A--Preliminary Matters; Equal Opportunity Clause;
                Compliance Reports
                0
                2. In Sec. 60-1.3, revise the definition of ``Subcontract'' to read as
                follows:
                Sec. 60-1.3 Definitions.
                * * * * *
                 Subcontract. (1) Means any agreement or arrangement between a
                contractor and any person (in which the parties do not stand in the
                relationship of an employer and an employee):
                 (i) For the purchase, sale or use of personal property or
                nonpersonal services which, in whole or in part, is necessary to the
                performance of any one or more contracts; or
                 (ii) Under which any portion of the contractor's obligation under
                any one or more contracts is performed, undertaken or assumed; and
                 (2) Does not include an agreement between a health care provider
                and a health organization under which the health care provider agrees
                to provide health care services or supplies to natural persons who are
                beneficiaries under TRICARE.
                 (i) An agreement means a relationship between a health care
                provider and a health organization under which the health care provider
                agrees to provide health care services or supplies to natural persons
                who are beneficiaries under TRICARE.
                 (ii) A health care provider is a physician, hospital, or other
                individual or entity that furnishes health care services or supplies.
                 (iii) A health organization is a voluntary association,
                corporation, partnership, managed care support contractor, or other
                nongovernmental organization that is lawfully engaged in providing,
                paying for, insuring, or reimbursing the cost of health care services
                or supplies under group insurance policies or contracts, medical or
                hospital service agreements, membership or subscription contracts,
                network agreements, health benefits plans duly sponsored or
                underwritten by an employee organization or association of
                organizations and health maintenance organizations, or other similar
                arrangements, in consideration of premiums or other periodic charges or
                payments payable to the health organization.
                * * * * *
                [[Page 59756]]
                PART 60-300--AFFIRMATIVE ACTION AND NONDISCRIMINATION OBLIGATIONS
                OF FEDERAL CONTRACTORS AND SUBCONTRACTORS REGARDING DISABLED
                VETERANS, RECENTLY SEPARATED VETERANS, ACTIVE DUTY WARTIME OR
                CAMPAIGN BADGE VETERANS, AND ARMED FORCES SERVICE MEDAL VETERANS
                0
                3. The authority citation for part 60-300 continues to read as follows:
                 Authority: 29 U.S.C. 793; 38 U.S.C. 4211 and 4212; E.O. 11758
                (3 CFR, 1971-1975 Comp., p. 841).
                Subpart A--Preliminary Matters, Equal Opportunity Clause
                0
                4. In Sec. 60-300.2, revise paragraph (x) to read as follows:
                Sec. 60-300.2 Definitions.
                * * * * *
                 (x) Subcontract. (1) Means any agreement or arrangement between a
                contractor and any person (in which the parties do not stand in the
                relationship of an employer and an employee):
                 (i) For the purchase, sale or use of personal property or
                nonpersonal services which, in whole or in part, is necessary to the
                performance of any one or more contracts; or
                 (ii) Under which any portion of the contractor's obligation under
                any one or more contracts is performed, undertaken or assumed; and
                 (2) Does not include an agreement between a health care provider
                and a health organization under which the health care provider agrees
                to provide health care services or supplies to natural persons who are
                beneficiaries under TRICARE.
                 (i) An agreement means a relationship between a health care
                provider and a health organization under which the health care provider
                agrees to provide health care services or supplies to natural persons
                who are beneficiaries under TRICARE.
                 (ii) A health care provider is a physician, hospital, or other
                individual or entity that furnishes health care services or supplies.
                 (iii) A health organization is a voluntary association,
                corporation, partnership, managed care support contractor, or other
                nongovernmental organization that is lawfully engaged in providing,
                paying for, insuring, or reimbursing the cost of health care services
                or supplies under group insurance policies or contracts, medical or
                hospital service agreements, membership or subscription contracts,
                network agreements, health benefits plans duly sponsored or
                underwritten by an employee organization or association of
                organizations and health maintenance organizations, or other similar
                arrangements, in consideration of premiums or other periodic charges or
                payments payable to the health organization.
                * * * * *
                PART 60-741--AFFIRMATIVE ACTION AND NONDISCRIMINATION OBLIGATIONS
                OF FEDERAL CONTRACTORS AND SUBCONTRACTORS REGARDING INDIVIDUALS
                WITH DISABILITIES
                0
                5. The authority citation for part 60-741 continues to read as follows:
                 Authority: 29 U.S.C. 705 and 793; E.O. 11758 (3 CFR, 1971-1975
                Comp., p. 841).
                Subpart A--Preliminary Matters, Equal Opportunity Clause
                0
                6. In Sec. 60-741.2, revise paragraph (x) to read as follows:
                Sec. 60-741.2 Definitions.
                * * * * *
                 (x) Subcontract. (1) Means any agreement or arrangement between a
                contractor and any person (in which the parties do not stand in the
                relationship of an employer and an employee):
                 (i) For the purchase, sale or use of personal property or
                nonpersonal services which, in whole or in part, is necessary to the
                performance of any one or more contracts; or
                 (ii) Under which any portion of the contractor's obligation under
                any one or more contracts is performed, undertaken or assumed; and
                 (2) Does not include an agreement between a health care provider
                and a health organization under which the health care provider agrees
                to provide health care services or supplies to natural persons who are
                beneficiaries under TRICARE.
                 (i) An agreement means a relationship between a health care
                provider and a health organization under which the health care provider
                agrees to provide health care services or supplies to natural persons
                who are beneficiaries under TRICARE.
                 (ii) A health care provider is a physician, hospital, or other
                individual or entity that furnishes health care services or supplies.
                 (iii) A health organization is a voluntary association,
                corporation, partnership, managed care support contractor, or other
                nongovernmental organization that is lawfully engaged in providing,
                paying for, insuring, or reimbursing the cost of health care services
                or supplies under group insurance policies or contracts, medical or
                hospital service agreements, membership or subscription contracts,
                network agreements, health benefits plans duly sponsored or
                underwritten by an employee organization or association of
                organizations and health maintenance organizations, or other similar
                arrangements, in consideration of premiums or other periodic charges or
                payments payable to the health organization.
                * * * * *
                [FR Doc. 2019-23700 Filed 11-5-19; 8:45 am]
                 BILLING CODE 4510-45-P
                

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