EXHIBIT 10-27
AGREEMENT
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(Xxxxx Xxxxxxxxxxx Xx. X-00000 to OPM Contract No. CS 1146)
THIS AGREEMENT is made and entered into by and among the NATIONAL
POSTAL MAIL HANDLERS UNION, A DIVISION OF THE LABORERS INTERNATIONAL
UNION OF NORTH AMERICA, AFL-CIO, an unincorporated association having
its principal place of business in Washington, D.C. (herein called "Mail
Handlers Union"), FIRST HEALTH LIFE AND HEALTH INSURANCE COMPANY ("First
Health Life"), a Texas corporation having its principal place of business
in Downers Grove, IL, CAMBRIDGE LIFE INSURANCE COMPANY ("Cambridge Life"),
a Missouri corporation having its principal place of business in Downers
Grove, IL, and FEDERAL EMPLOYEE PLANS, INC. ("FEPI"), a Delaware corporation
having its principal place of business in Downers Grove, IL (FEPI, First
Health Life and Cambridge Life are sometimes collectively called "Company").
In consideration of the mutual agreements between the Mail Handlers
Union and the Company, and in consideration of the payment of the
subscription charges specified in paragraph six (6) hereof, it is agreed
as follows:
1. This Agreement is entered into pursuant to the Act and Regulations
(as both terms are defined in Section 1.1 of the Prime Contract) and is
incorporated in its entirety into, and made a part of, Contract for Federal
Employees Health Benefits No. CS 1146, as amended (herein called "Prime
Contract"), between the Mail Handlers Union, as carrier of the Mail Handlers
Benefit Plan (herein called "Plan"), and the United States Office of
Personnel Management (herein called "OPM") pursuant to Section 1.19 thereof.
In the event of an inconsistency between the terms of the Prime Contract and
the terms of this Agreement, the terms of the Prime Contract will prevail.
The Mail Handlers Union and the Company recognize that they have formed a
contractor team arrangement as described in Subpart 9.6 of the Federal
Acquisition Regulation ("FAR").
2. The Company shall provide the services and benefits of the Plan
described in this Agreement on behalf of all Members (as defined in Section
1.1 of the Prime Contract) who enroll for coverage in and, subject to the
provisions of the Act and Regulations, are eligible for coverage under the
Plan. Amounts to be paid by the Company hereunder on behalf of the Plan to,
or on behalf of, Members as a result of entitlement to benefits provided
under the Plan shall be determined in the manner, and to the extent, set
forth in the Prime Contract and the brochure authorized for distribution by
OPM entitled "Mail Handlers Benefit Plan, RI 71-07," as revised for each
contract term (herein sometimes called "Plan year"), a certified copy
of which brochure is incorporated by reference in the Prime Contract as
Appendix A thereto (herein called "Plan brochure"). The Union delegates to
the Company its Carrier rights and responsibilities stated in Part II of the
Prime Contract. Claims for benefits shall be submitted in the manner and
within the time limits established by OPM. The rules for review of denied
claims, duplicate coverage, subrogation, and coordination of benefits shall
be as established by OPM (and supplemented as necessary and appropriate
by Company administrative practices). The Company is vested with full
discretion to compromise or waive the Plan's subrogation and overpayment
recovery rights as established in the Prime Contract.
3. The Company shall provide OPM on behalf of the Mail Handlers Union
with such reports and information as may be necessary for the Mail Handlers
Union as carrier of the Plan under the Act and Regulations to comply with
Sections 1.7, 1.9, 3.2 and 3.3 of the Prime Contract. In order to maintain
the Plan's competitive position, the Mail Handlers Union and the Company
agree not to release any such reports and information to any party or entity
other than OPM prior to written notification to, and discussion with, the
other party.
4. This Agreement shall take effect as of January 1, 2003, 12:01
a.m., Standard Time, Washington, D.C., and will continue in force until
December 31, 2007, 11:59 p.m. The Agreement will automatically renew at the
end of the initial term for additional four year terms thereafter, subject
to initial OPM approval of this Agreement, and subsequent annual OPM
approvals of proposed Plan benefit and/or rate changes, unless the Mail
Handlers Union or the Company gives timely notice to the other, with a copy
to OPM, of its intent not to renew this Agreement as of the end of the then-
current term. In addition, if for a reason not within the control of the
Company, the cost containment programs related only to utilization of
hospital and physician preferred provider organizations are no longer
provided by the Company's affiliates, then the Company may give timely
notice of its intent to terminate this Agreement effective at the end of the
current Plan year. The Mail Handlers Union's notice shall be timely if it
is given at least forty (40) days before the date on which, pursuant to a
call letter issued by OPM, the initial submission is due to OPM regarding
either benefits or rates, whichever is issued first, for the Plan year
following the last Plan year of the then-current term. The Company's notice
shall be timely if it is given at least forty (40) days before such date,
subject to the condition that within three (3) business days of receiving
OPM's call letter for that Plan year's benefits and/or rates, the Company
must have given the Mail Handlers Union notice that it may exercise such
nonrenewal option. In the event that the Company gives notice of its intent
not to renew this Agreement, it will assist the Mail Handlers Union in
locating a successor underwriter. In the event that either party gives
notice of its intent not to renew this Agreement, the confidentiality
obligation that paragraph 3 above imposes on the parties shall terminate.
5. The effective dates of eligibility for coverage by the Plan and
the rights of Members enrolled in the Plan to its benefits shall be as
provided in the Act and Regulations. Members may be added to the Plan at
such times and under such conditions as may be specified by the Act and
Regulations. Termination of eligibility for benefits shall be in accordance
with the Act and Regulations. Members may obtain temporary continuation
coverage and/or convert to the OPM-approved conversion policy offered by the
Plan and underwritten by First Health Life or Cambridge Life in accordance
with the Act and Regulations.
6. The biweekly subscription charges during the period this Agreement
is in effect shall be as provided for in the applicable Prime Contract for
the respective Plan year and are listed in Attachment A hereto for 2003.
The Company, subject to adjustment for error or fraud, will accept from
OPM, in full payment the total subscription charges under this Agreement
received by the Employees Health Benefits Fund (herein called "the Fund")
plus any payments made by OPM from the Contingency Reserve, less the amounts
necessary to fund the Mail Handlers Union administrative expenses and less
the amounts set aside by OPM for the Contingency Reserve and for the
administrative reserves held by OPM.
In the event the Prime Contract is terminated as of a date other
than the end of a Member's then current pay period, the effective date of
termination as to the Member shall be deferred to the end of such pay period
or as otherwise provided for in OPM Regulations. The Company is entitled to
receive all subscription charges due for the period of time such coverage is
provided.
7. The Mail Handlers Union shall designate to OPM, on behalf of
First Health Life, a financial institution at which First Health Life shall
establish an account to receive subscription charges drawn from the Plan's
Letter of Credit (LOC) account to pay health benefit charges incurred and
administrative expenses chargeable under the contract pursuant to the FAR.
Any notice received by the Mail Handlers Union of funds deposited into the
Plan's LOC account shall be transmitted promptly to First Health Life. All
requests for withdrawals or drawdowns of funds from the Plan's LOC account
for allowable administrative expenses for the Mail Handlers Union shall
be made to, and through, First Health Life. First Health Life shall be
entitled as necessary to apply to the Plan's LOC account for a withdrawal
or drawdown of funds deposited therein for the payment of claims filed under
the Plan and/or its allowable administrative expenses and Service Charge
(as such term is defined in Attachment B). Drawdowns from the Plan's LOC
account must be made on a "checks presented basis" which means that the
drawdowns must not occur until a demand for payment is made upon the
financial institution designated by First Health Life. Concurrently with
the withdrawal of any Service Charge, First Health Life will remit the Mail
Handler Union's portion of the Service Charge (if any) as calculated in
accordance with Attachment B. First Health Life shall be under no
obligation to reimburse the Plan's LOC account for unrecouped benefit
overpayments made erroneously but in good faith provided that it administers
an overpayment recovery program that complies with Section 2.3(g) of the
Prime Contract as implemented by FEPI's overpayment recovery procedures.
If upon liquidation of all claims incurred, or three years from the
date of discontinuance of this Agreement, whichever is earlier, there
remains a balance in First Health Life's account attributable to the
discontinued Agreement, such balance, including any interest earned thereon,
shall be paid to the Mail Handlers Union for deposit to the Plan's reserves.
8. As of any date on which this Agreement is in effect, the
cumulative gain on operations under the Plan as represented by the current
balance in the Plan's LOC account, adjusted by necessary accruals, shall
constitute carrier held reserves within the meaning of the Act and
Regulations.
9. During the term of this Agreement, the Mail Handlers Union shall
request from OPM, if requested by First Health Life, a special transfer
from the Contingency Reserve, pursuant to the requirements of the Act and
Regulations. In all such instances in which the Mail Handlers requests a
special transfer from the Contingency Reserve, First Health Life, through
the Mail Handlers Union, shall provide to OPM Cash Flow Statements, current
Balance Sheet information and the pertinent claims data in support of such
a Special Contingency Reserve transfer.
10. Should this Agreement be discontinued for any reason, First Health
Life shall be entitled to receive from the Plan's LOC account an amount
equal to the carrier held reserves on the date of discontinuance (including
any subscription income subsequently deposited in such account that is
attributable to the Plan's operation while First Health Life served as the
Plan's underwriter under this Agreement, including its predecessors) to
the extent such funds are necessary (1) to discharge First Health Life's or
Cambridge Life's liability for the incurred but unpaid claims at the date
of discontinuance and (2) to pay the Company's allowable administrative
expenses incurred in the payment of such claims and for other contract costs
pursuant to the FAR.. Such administrative expenses shall be subject to an
amount separately negotiated with OPM from the limitation set forth in
Attachment B to this Agreement or Appendix B to the Prime Contract. The
Company also shall be entitled, if such is necessary to discharge its
liability for (1) and (2) above, to the balance held in the Contingency
Reserve as of the effective date of discontinuance of this Agreement.
11. The Company shall supply enrollees of the Plan with identification
cards and forms, as provided in the Plan brochure, for the filing of claims
for benefits under the Plan. Claims, with supporting proof, shall be
submitted as provided in the Plan brochure and other applicable provisions
of the Prime Contract. Payment of claims will be made as provided in the
Plan brochure and other applicable provisions of the Prime Contract.
12. The Company shall void all checks issued in payment of benefits
which have been outstanding for two (2) years on a quarterly basis. The
amounts represented by such voided checks then shall be credited to the
Plan's LOC account. For this purpose, the term "check" shall include any
written instrument to pay or reimburse the payment of benefits under the
Plan, including by way of illustration but not limitation, drafts, money
orders, and checks.
13(a) FEPI hereby agrees to perform for the Mail Handlers Union all
administrative services necessary to the operation of the Plan, including,
but not limited to,
(i) the maintenance of files to determine, and the determination
of, enrollment and eligibility for payment of benefits under
the Plan;
(ii) the prompt investigation, adjudication and payment of claims
for benefits under the Plan, including (A) the performance of
reconsideration of denied claims as required by the Act and
Regulations, (B) the provision of a defense to any litigation
arising from claims under the Plan, which obligation shall
include retaining or causing to be retained local counsel,
paying or causing to be paid the legal fees of local counsel
in connection therewith and paying or causing to be paid any
settlements or judgments arising therefrom, and (C) the
undertaking of reasonably diligent efforts to recoup benefit
overpayments and (through its designee) to enforce the Plan's
subrogation rights; and
(iii) the preparation and maintenance of financial and
statistical data and/or reports reflecting the operation
of the Plan as required by law, and the establishment and
maintenance of a quality assurance program in accordance with
Section 1.9 of the Prime Contract.
One or more of the Company's affiliates will directly contract with the
Mail Handlers Union for cost containment programs such as utilization of
hospital and physician preferred provider organizations.
(b) The Company agrees that any advertising material, including
promotional and marketing material and supplemental literature that it
prepares or causes to be prepared for the Plan, shall be truthful, not
misleading, and consistent with the guidelines set forth in the Prime
Contract and the Regulations.
14. The Company's expense charges and Service Charge for the
performance of the underwriting and the administrative functions (including
administrative functions delegated to FEPI) set forth in Section 13(a) of
this Agreement shall be as provided for in the applicable Prime Contract for
the respective Plan year and are listed in Attachment B hereto for 2003.
15(a) First Health Life, on its behalf and on the behalf of
Cambridge Life and FEPI, shall, if requested, submit, actually or by
specific identification in writing if actual submission of the data is
impracticable, to the Mail Handlers Union cost or pricing data prior to the
Mail Handlers Union's execution of this Agreement, which shall be
accomplished during the benefit and rate negotiations with OPM, and prior to
the pricing of any modification to this Agreement which involves aggregate
increases or decreases in costs, plus applicable profits, expected to exceed
$550,000.00, except where the price or price modification is for the
acquisition of commercial items or is based on adequate price competition or
prices set by law or regulation.
(b) First Health Life, on its behalf and on the behalf of
Cambridge Life and FEPI, shall certify in writing to the Mail Handlers
Union that to the best of its knowledge and belief the cost or pricing data
submitted under subparagraph (a) above is accurate, complete and current
as of the date of agreement on the negotiated price of this Agreement or
modification thereto. First Health Life shall make this certification by
using the following form:
Certificate of Current Cost or Pricing Data
This is to certify that, to the best of my knowledge and belief,
cost or pricing data, submitted in writing, or specifically
identified in writing if actual submission of the data is
impracticable, to the Mail Handlers Union in support of the
[insert description] are accurate, complete and current as of
[insert date].
First Health Life and Health
Insurance Company
By ________________________
Its ________________________
_________________
Date of Execution
(c) First Health Life shall insert the substance of subparagraph
(b), including this subparagraph (c), in each subcontract hereunder which
exceeds $550,000.00 when entered into except where the subcontract price
thereof is for the acquisition of commercial items, or based on adequate
price competition or prices set by law or regulation.
16(a) The Company undertakes to indemnify the Mail Handlers Union
from any and all liability, loss, costs, and expenses, including attorneys'
fees (hereafter "indemnifiable losses"), which the Mail Handlers Union may
incur or sustain as a result of the occurrence of any one of the following
acts:
(i) First Health Life, pursuant to paragraph 15 of this
Agreement, furnished the Mail Handlers Union with cost
or pricing data which was not accurate, complete and
current as certified in First Health Life's Certificate
of Current Cost or Pricing Data; or
(ii) First Health Life furnished the Mail Handlers Union with
cost or pricing data which was required to be accurate,
complete and current and to be submitted to support a
subcontract cost estimate furnished by the Mail Handlers
Union but which was not accurate, complete and current
as of the date certified in the Mail Handlers Union's
Certificate of Current Cost or Pricing Data; or
(iii) First Health Life furnished the Mail Handlers Union
with any data, not within (i) or (ii) above, which was
not accurate as submitted; or
(iv) Any act or omission of an employee or agent of First
Health Life or one of its subcontractors at any tier
which results in a cost or expense charged against
the Prime Contract, that is deemed by OPM or other
responsible Government authority to have been
unallowable or improper pursuant to applicable law; or
(v) Any intentionally wrongful or negligent act or omission
of an employee or agent of the Company or one of its
subcontractors at any tier related to the performance of
any function for which the Company is responsible under
this Agreement provided that the indemnifiable loss
resulting therefrom is not an allowable charge against
the Prime Contract.
(b) On such indemnification amounts, if any, the Company, if
required by the Act or Regulations, agrees to pay the Mail Handlers Union
interest at the rate at which the Company is required by the Act and
Regulations to credit interest on investment income to the FEHBP, unless
another rate is prescribed by federal law.
(c) As a condition to indemnification hereunder, the Mail
Handlers Union promptly shall notify the Company in writing of the
commencement of any judicial or administrative action that may give rise to
an indemnifiable loss, must give the Company an opportunity to arrange and
direct the defense of the matter, and shall provide the Company with all
information and assistance necessary for such defense.
(d) These provisions (16(a)-(d)) shall survive the expiration of
this Agreement.
17. All provisions or clauses of the Prime Contract, including
without limitation, the provisions listed below, that are required to be
incorporated herein are so incorporated by reference thereto. The following
provisions of the Prime Contract, effective January 1, 2003, specifically
are incorporated herein by reference and shall be binding on the Company:
Section 1.6 Confidentiality of Records
Section 1.9 FEHB Quality Assurance
Section 1.10 Notice of Significant Events
Section 1.11 FEHB Inspection
Section 1.12 Correction of Deficiencies
Section 1.13 Information and Marketing Materials
Section 1.14 Misleading, Deceptive, or Unfair Advertising
Section 1.16 Subcontracts
Section 1.21 Patients' Xxxx of Rights
Section 1.22 Administrative Simplification - HIPAA
Section 1.23 HIPAA Compliance
Section 1.24 Notice to Enrollees on Termination of FEHBP or
Provider Contract
Section 1.25 Transitional Care
Section 2.9 Claims Processing
Section 2.10 Calculation of Cost Sharing Provisions
Section 2.12 Continuing Requirements after Termination of the
Carrier
Section 3.4 Investment Income
Section 3.5 Non-Commingling of Funds
Section 3.8 Contractor Records Retention
Section 3.10 Audit, Financial and Other Information
Section 3.13 Taxpayer Identification Number
Section 4.1(c) Participation in the DoD/FEHBP Demonstration Project
Section 5.5 Anti-Kickback Procedures
Section 5.7 Audit and Records - Negotiation
Section 5.14 Utilization of Small Business Concerns
Section 5.18 Contract Work Hours and Safety Standards Act-Overtime
Compensation - General
Section 5.19 Equal Opportunity
Section 5.22 Affirmative Action for Disabled Veterans and Veterans
of the Vietnam Era
Section 5.23 Affirmative Action for Workers with Disabilities
Section 5.41 Limitation of Liability-Services
Section 5.45 Limitation on Payments to Influence Certain Federal
Transactions
Section 5.51 Pension Adjustments and Asset Reversions
Section 5.52 Reversion of Adjustment of Plans for Post Retirement
Benefits Other Than Pensions (PRB)
Section 5.55 Employment Reports on Disabled Veterans and Veterans
of the Vietnam Era
Section 5.56 Authorization and Consent
Section 5.57 Notice and Assistance Regarding Patent and Copyright
Infringement
Section 5.59 Prohibition of Segregated Facilities
Section 5.60 Subcontracts for Commercial Items and Commercial
Components
For purposes of this Agreement, all references in the foregoing
provisions of the Prime Contract to the "contractor" or "carrier" shall be
treated as references to the Company, and all references to the "contract"
or "prime contract" therein shall be treated as references to this
Agreement.
18. The Company, in its sole discretion, shall have the right of
indirect appeal to the Armed Services Board of Contract Appeals or any
applicable court with respect to any final decision rendered by an OPM
Contracting Officer pursuant to the Disputes clause of the Prime Contract
(Section 5.36, FAR S 52.233-1). Indirect appeal means assertion and
prosecution by the Company of the Mail Handlers Union's right to such
appeal. In the event that the Company exercises such right of indirect
appeal, any unallowable expenses of such appeal shall be borne by the
Company.
During the term of this Agreement, the Company shall be entitled to
assert, on behalf of the Mail Handlers Union, the right to an equitable
adjustment under Section 5.38 of the Prime Contract, captioned "Changes -
Negotiated Benefits Contracts," as the Company deems necessary and
appropriate. In all such instances in which the Company requests an
equitable adjustment, the Company shall provide the Mail Handlers Union with
copies of any and all correspondence and information submitted to OPM in
support of such an equitable adjustment request.
19. Upon thirty days advance written notice, the Mail Handlers Union
may conduct an audit, during normal business hours, of the Company's records
relating to its obligations under this Agreement. The Company will have the
right to request a copy of audit results and will pay the reasonable copy
costs associated with such a request.
20. This Agreement and any rights or obligation arising out of any act
to be performed hereunder shall be governed exclusively by the laws of the
United States.
21. This Agreement may be amended by the parties in writing at any
time with the approval of OPM if so required.
22. Any notice provided for in this Agreement must be in writing, and
either must be delivered by facsimile with proof of delivery, personally
delivered or mailed by first class mail (registered or certified, return
receipt requested) to the following addressees:
For the Mail Handlers Union:
Xx. Xxxxxxx X. Xxxxx, National President
Xx. Xxxx X. Xxxxxxx, National Secretary-Treasurer
National Postal Mail Handlers Union
0000 Xxxxxxxxxxx Xxx, X.X., Xxxxx 000
Xxxxxxxxxx, X.X. 00000
Facsimile No.: (000) 000-0000
For the Company:
President, First Health Life and Health Insurance Company
President, Cambridge Life Insurance Company
President, Federal Employee Plans, Inc.
0000 Xxxxxxxx Xxxxxx
Xxxxxxx Xxxxx, XX 00000
Facsimile No.: (000) 000-0000
cc: Xxxxx X. Xxxxx
Vice President, General Counsel
Facsimile No.: (000) 000-0000
Except as otherwise provided in this Agreement, any notice shall be deemed
to have been given at the time of delivery.
23. This Agreement may be executed in several counterparts, each of
which shall be deemed an original but all of which shall constitute one and
the same Agreement. A facsimile or other reproductive type copy of this
Agreement, so long as signed by all parties, will be considered an original
and will be fully enforceable against all parties.
24. Each signatory hereto warrants that he has been duly authorized to
execute this Agreement on behalf of the party for whom he acts and that this
Agreement is a binding and valid obligation of such party.
IN WITNESS WHEREOF, this Agreement has been executed in quadruplicate
on this 15th day of April, 2002.
NATIONAL POSTAL MAIL HANDLERS UNION, A DIVISION OF THE LABORERS
INTERNATIONAL UNION OF NORTH AMERICA, AFL-CIO d/b/a MAIL HANDLERS
BENEFIT PLAN
By: _____________________________
Xx. Xxxxxxx X. Xxxxx
National President
Mail Handlers Benefit Plan
FIRST HEALTH LIFE AND HEALTH INSURANCE COMPANY
By: ____________________________
Xx. Xxxxxx X. Xxxxxxx
President
CAMBRIDGE LIFE INSURANCE COMPANY
By: ____________________________
Xx. Xxxxxx X. Xxxxxxx
Vice President and Secretary
FEDERAL EMPLOYEE PLANS, INC.
By: ____________________________
Xx. Xxxxxx X. Xxxxxxx
Acting President
Attachment A to Prime Subcontract No. L-35489
Effective January 1, 2003
(a) Biweekly net-to-carrier rates, with appropriate adjustments for
enrollees paid on other than a biweekly basis, are as follows(1):
FEHB PROGRAM DOD PROJECT
High Option Standard Option High Option Standard
------------ --------------- ----------- --------
Option
------
Self Only ------------ --------------- ----------- --------
Self and Family ------------ --------------- ----------- --------
(1) In the third quarter of 2002, the biweekly net-to-carrier rates for
2003 will be finalized by the Mail Handlers Union, the Company and OPM.
Attachment A will be amended with such finalized rates by written notice
sent to all parties.
