Accounting Standards Issue Resolved

Meanwhile, an issue that had caused Blue Cross/Blue Shield-which has about half of FEHB enrollees-to threaten to withdraw from the program has been resolved and the Blues will stay in the program. For the last several years, a special legislative provision has exempted the FEHB program from the cost accounting standards that apply in general to government contractors. However, language passed by the House earlier this year would remove that exemption, which essentially is a concern only to the Blues. In reaction, the Blues said they might withdraw, saying their accounting systems are basically set up for private sector enrollment and that switching to the government’s requirements would be too expensive and disruptive. OPM director Kay Coles James has instead granted an administrative waiver from using those standards in the program, which is effectively indefinitely although annual reports must be produced. Officials said that administrative waiver should settle the issue except in the unlikely event that Congress would enact specific language requiring that the standards be imposed.