Information contained in this publication is intended for informational purposes only and does not constitute legal advice or opinion, nor is it a substitute for the professional judgment of an attorney.
On July 2, 2020, the Office of Federal Contract Compliance Programs (OFCCP) issued a final rule1 amending its regulations to confirm the agency lacks jurisdiction over health care providers whose sole government contract is based on the providers’ participation in TRICARE, ending 13 years of controversy and uncertainty over this issue.
OFCCP is the agency within the U.S. Department of Labor that is responsible for enforcing Executive Order 11246, Section 503 of the Rehabilitation Act of 1973, and the Vietnam Era Veterans Readjustment Assistance Act of 1974, laws that require federal contractors and subcontractors to implement and maintain affirmative action programs for women, minorities, individuals with disabilities, and protected veterans.
TRICARE is the Department of Defense (DOD) program that pays for the medical benefits of active duty and retired military personnel and their families. The DOD has various direct contractors that administer the TRICARE program: Humana Military Health System; International SOS; Health Net; Express Scripts, United Concordia, Wisconsin Physicians Service, and US Family Health Plan.2 These direct contractors, in turn, enter into agreements with hospitals and other medical providers to supply medical care and supplies to military personnel and their family members covered by TRICARE.
During the Obama administration, OFCCP began to assert jurisdiction over health care providers based on their participation in TRICARE. Health care providers objected to OFCCP’s assertion of jurisdiction, resulting in litigation. Although Congress attempted to resolve the issue in 2011 by including a provision in the National Defense Authorization Act (NDAA) for Fiscal Year 2012 barring OFCCP from asserting jurisdiction over a health care provider based on TRICARE participation, OFCCP continued its enforcement efforts.
Litigation over OFCCP’s jurisdiction continued until 2014, when, faced with the prospect of further congressional action, OFCCP closed pending audits against TRICARE providers and agreed to a five-year moratorium on TRICARE audits, which it extended for two more years in 2018. The moratorium did not, however, resolve the jurisdictional issue; it merely left health care providers in an extended state of uncertainty.
OFCCP Relinquishes all Claims to Jurisdiction based on TRICARE Participation
In the July 2, 2020 edition of the Federal Register, OFCCP ended this state of uncertainty with the publication of a Final Rule, “Affirmative Action and Nondiscrimination Obligations of Federal Contractors and Subcontractors: TRICARE Providers.”
In its discussion of the Final Rule, OFCCP reviews the history of the agency’s efforts to establish jurisdiction over TRICARE participants, including the congressional response, discusses the legal arguments, recognizes the strain OFCCP’s regulations place on health care providers, and, in light of all of these considerations, amends the applicable rules to establish that health care providers that participate in TRICARE but do not otherwise hold federal contracts are not subject to OFCCP’s jurisdiction.3
The National Interest Exemption
In relinquishing all claims to jurisdiction over TRICARE participants, OFCCP has not only relied on the language of the NDAA, but has also chosen to invoke the agency’s authority to establish a national interest exemption.
OFCCP’s director has authority to exempt an agency or any person from requiring the inclusion of any or all of the equal opportunity clause in any specific contract or subcontract when the director deems that special circumstances in the national interest so require. This authority has been invoked on a few occasions in the past, generally in the context of a national disaster to permit private entities to enter into relatively short-term contracts to provide assistance during the emergency without becoming subject to all of the requirements that ordinarily apply to federal contractors under OFCCP’s rules.
In invoking the exemption in this context, OFCCP is honoring the DOD’s long-held position that OFCCP’s assertion of jurisdiction over TRICARE participants makes it impossible to provide affordable health care to our nation’s active duty and retired military members and their families. In the context of the NDAA, the special concerns that arise in keeping our country’s commitments to the men and women who serve in our armed forces, and the DOD’s concerns, the application of the exemption here does not seem unreasonable. Nevertheless, this type of broad exemption from the requirements of the laws that OFCCP enforces is unprecedented. It will be interesting to see how the agency will seek to distinguish its invocation of the exemption in this instance should it receive requests in the future for exemptions in other contexts.
Relevance of the Rule’s Discussion of Other Situations Involving Agreements with the Government to Provide Health Care
In the Final Rule’s discussion of public comments, OFCCP took the opportunity to address several other situations involving agreements between health care providers and the federal government.
First, OFCCP considered the status of health care providers that enter into Veterans Care Agreements (VCAs) with the U.S. Department of Veterans Affairs (VA).
The background for these agreements is the 2018 VA MISSION Act, which was intended to provide veterans with better access to health care. One provision of the Act authorizes the VA to enter into agreements with health care providers to provide services that are not otherwise available within the current VA provider networks. Because OFCCP only has jurisdiction over employers with government “contracts” and the VA MISSION Act specifically provides that VCAs are not “contracts,” it has been widely understood that entering into such agreements does not subject the provider to OFCCP jurisdiction.
Surprisingly, however, OFCCP specifically declined to adopt this view, noting that another provision of the Act provides that VCAs remain subject to “all laws that protect against employment discrimination or that otherwise ensure equal employment opportunities.”4 Providers that have entered into or that are considering entering into a VCA are now on notice of OFCCP’s position that such agreements do result in OFCCP jurisdiction.
Second, OFCCP noted that its earlier Notice of Proposed Rulemaking (NPRM) had requested comments on whether health care providers contracting with the U.S. Office of Personnel Management to provide health care services through the Federal Employees Health Benefits Program (FEHBP) to federal employees and their families “should not be covered by OFCCP's authority.”5 This request for comments was somewhat surprising as the law on this issue has been well settled. The Administrative Review Board has made it clear that OFCCP does 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 does have authority over a health care provider's agreement to provide services pursuant to a FEHBP HMO plan.6
In its discussion of the Final Rule, OFCCP observes that, because none of the comments it received in response to the NPRM “identified a legal basis to retain or disclaim jurisdiction over FEHBP providers,”7 it would not adopt any regulatory changes at this time.
Nevertheless, OFCCP noted that it would continue to consider the comments it received “regarding the benefits of a uniform approach to all government health care plans and will consider additional sub-regulatory guidance as necessary.” This promise of further consideration could be very significant in light of the agency’s apparent willingness to invoke the national interest exemption in the health care context.
Accordingly, Littler will continue to monitor both OFCCP’s activities in this area as well as any oversight activity by the Congress, and will continue to make sure that contractors’ reasonable concerns are heard and duly considered.8
1 85 Fed. Reg. 39834 (July 2, 2020)
2 TRICARE: Partners, https://www.tricare.mil/About/Partners (last visited July 5, 2020).
3 As the Federal Register discussion makes clear, TRICARE providers with a separate federal contract or subcontract that meets the thresholds reflected in OFCCP’s laws and regulations will remain under OFCCP’s enforcement authority.
4 85 Fed. Reg. at 39841.
5 85 Fed. Reg. at 39840.
6 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).
7 The equivalence placed on the absence of comments either supporting or denying a legal basis for jurisdiction seems odd as the basis for jurisdiction is clearly established and has not been a source of controversy.
8 The testimony before Congress of one of the authors of this article regarding health care providers’ decision not to participate in TRICARE because of the costs of compliance was cited in both the NPRM and the Final Rule (85 Fed. Reg. fn 59), demonstrating the importance of carefully creating a record to support contractors’ reasonable concerns regarding OFCCP’s interpretation and enforcement of the law.