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January 06, 2012
TRICARE Providers Not Considered Federal Contractors Under NDAA

On December 31, 2011, President Obama signed the National Defense Authorization Act (NDAA) into law. Section 715 of the law exempts TRICARE providers from coverage as federal contractors. TRICARE is the federal government’s healthcare program for active duty and retired military members and their families.

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Background. In 2010, an Administrative Law Judge at the U.S. Department of Labor (DOL) held that a hospital that subcontracted to provide medical services to TRICARE beneficiaries was a federal subcontractor subject to the affirmative action laws.

In December, 2010, OFCCP issued Directive 293, taking the position that “contractor (or subcontractor) obligations mandated by OFCCP programs cannot be altered, limited, or defeated by the inclusion in the contract of provisions contrary to such obligations.” Contrary to what was widely believed, OFCCP stated its position that certain arrangements with TRICARE constituted government contracts that created OFCCP jurisdiction. The Directive then provided guidance for assessing when healthcare providers and insurers were federal contractors or subcontractors.

NDAA reverses decision. In spite of the OFCCP’s position, Congress recently approved a conference report on the National Defense Authorization Act for Fiscal Year 2012 (NDAA), which states that healthcare providers operating as part of a TRICARE managed care network of providers will not be considered federal contractors or sub-contractors. In Section 715 of the new law it is also stated unequivocally that “for the purpose of determining whether network providers under such provider network agreements are subcontractors for purposes of the Federal Acquisition Regulation or any other law [e.g. federal contractors subject to OFCCP jurisdiction], 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.”

Congress passed the NDAA on December 15, 2011 and President Obama signed it on New Year’s Eve.

Advice to employers. This is good news for healthcare systems with contracts and  subcontracts to provide services or benefits to federal employees under TRICARE. Now healthcare employers can rest assured that OFCCP cannot successfully invoke its jurisdiction to enforce federal equal employment and affirmative action obligations.

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