The Office of Federal Contract Compliance Programs has intensified its efforts to require medical providers to comply with various government contracting regulations, in particular affirmative action requirements.

As part of these efforts, the OFCCP has issued a new Directive providing guidance on when it believes healthcare providers and insurers qualify as federal contractors or subcontractors. Because of the wide variety of healthcare plans and service arrangements, the determination of whether a federal contract or subcontract exists must be made on a case by case basis.

According to the Directive, the following relationships are generally not covered government contracts or subcontracts (and, therefore, do not subject the employer to affirmative action obligations):

  • An insurance reimbursement agreement between a healthcare provider and a federal contractor insurer.
  • Reimbursement arrangements under Medicare Parts A and B or Medicaid.
  • Receipt of a grant or federal financial assistance. 

However, the following types of arrangements may create federal contractor or subcontractor relationships:

  • A contract to provide healthcare services to active duty and retired medical personnel under the TRICARE program.
  • A contract to provide health insurance for members and beneficiaries of TRICARE, Federal Employees Health Benefit Plan (FEHBP), Medicare Advantage (CMS) and Medicare Part D programs.
  • A contract with a healthcare plan for a Federal Program (TRICARE, FEHPB, Medicare Advantage, Medicare Part D) to provide healthcare services to the members and beneficiaries.
  • A contract with a healthcare provider to provide an HMO plan for the members and beneficiaries of a Federal program’s health plan.

The OFCCP’s Directive is based on recent decisions by administrative law judges and the Department of Labor’s Administrative Review Board. These decisions are currently under appeal. If these decisions are reversed on appeal, the impact of this Directive may change, but for now the OFCCP’s position remains intact.

Healthcare providers, insurers, and retail pharmacies should evaluate their connections to federal programs such as TRICARE, FEHPB, Medicare Advantage (CMS) and Medicare Part D to determine whether they may be subject to federal contractor and subcontractor obligations.