OFCCP Exempts TRICARE Participants from Affirmative Action Obligations

Finally, some good news in 2020! 

On Thursday, July 2, 2020, the Office of Federal Contract Compliance Programs (“OFCCP”), published its final rule explicitly exempting certain health care providers from the OFCCP’s enforcement activities as they relate to affirmative action. 

Specifically, the final rule exempts TRICARE health care providers from the requirements of the three affirmative action laws (Executive Order 11246, Section 503 of the Rehabilitation Act of 1973 (Section 503), and the Vietnam Era Veterans’ Readjustment Assistance Act of 1974 (VEVRAA)). Importantly, however, the OFCCP retains authority over TRICARE providers if they hold a separate covered federal contract or subcontract.

How Did We (Finally) Get Here?

As you may know, health care employers who receive TRICARE dollars have long suffered through the back and forth about whether or not their TRICARE contracts bring it under OFCCP jurisdiction. See our June 2018 Newsletter articlefor more history.

On May 7, 2014, the OFCCP published Directive 2014-01, which established a five-year moratorium on its enforcement of obligations related to affirmative action programs and recordkeeping under Executive Order 11246, Section 503, and VEVRAA. On May 18, 2018, the OFCCP extended that moratorium for an additional two years until 2021.

On November 6, 2019, the OFCCP published a proposed rule that would formalize, once and for all, the current OFCCP’s position that it “lacks authority over Federal health care providers who participate in TRICARE.”

The final rule does just that, and now specifically changes the definition of “subcontract” so that it:

(2) Does not include an agreement between a health care provider and a health organization under which the health care provider agrees to provide health care services or supplies to natural persons who are beneficiaries under TRICARE.

(i) An agreement means a relationship between a health care provider and a health organization under which the health care provider agrees to provide health care services or supplies to natural persons who are beneficiaries under TRICARE.

(ii) A health care provider is a physician, hospital, or other individual or entity that furnishes health care services or supplies.

(iii) A health organization is a voluntary association, corporation, partnership, managed care support contractor, or other nongovernmental organization that is lawfully engaged in providing, paying for, insuring, or reimbursing the cost of health care services or supplies under group insurance policies or contracts, medical or hospital service agreements, membership or subscription contracts, network agreements, health benefits plans duly sponsored or underwritten by an employee organization or association of organizations and health maintenance organizations, or other similar arrangements, in consideration of premiums or other periodic charges or payments payable to the health organization.

What Now?

Before you throw your affirmative action plans out the window, remember that this rule only affects those with TRICARE contracts, and no others. If your health care institution has any other federal contracts or subcontracts in excess of the monetary threshold, affirmative action compliance would still be required.

With this in mind, health care institutions should closely review their current contracts to determine whether any other revenue may qualify as a federal contract or subcontract, thus requiring continued compliance.