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12/21/81 National Federation of v. Donald J. Devine

December 21, 1981

NATIONAL FEDERATION OF FEDERAL EMPLOYEES

v.

DONALD J. DEVINE, DIRECTOR, OFFICE OF PERSONNEL MANAGEMENT, ET AL., APPELLANTS; GROUP HEALTH ASSOCIATION OF

GOVERNMENT EMPLOYEES, AFL-CIO

v.

DONALD J. DEVINE, DIRECTOR, OFFICE OF



Before TAMM, MacKINNON and ROBB, Circuit Judges.

UNITED STATES COURT OF APPEALS, DISTRICT OF COLUMBIA CIRCUIT

America, Intervenor; AMERICAN FEDERATION OF

Personnel Management, Appellant, Group Health

Association of

America,

Intervenor.

Nos. 81-2184, 81-2187 1981.CDC.324

Appeal from the United States District Court for the District of Columbia (D.C. Civil Action Nos. 81-2580 and 21-2617).

APPELLATE PANEL:

Opinion PER CURIAM.

The American Federation of Government Employees and the National Federation of Federal Employees , also referred to as the "Plans," separately complain of the action of the Office of Personnel Management in ordering a 6.5% reduction in the contribution by the government for payment of premiums for employee health insurance offered by all carriers at a late stage in the negotiations of the contracts for 1982. The district court sustained the Plans' complaints and issued preliminary injunctions restraining OPM from imposing said 6.5% reduction and ordering OPM to "enter into a health benefits plan contract" with AFGE and NFFE "containing the level of benefits (allegedly) agreed upon by the parties (i.e., the plans and OPM) as of 5:00 p.m. Oct. 20, 1981" with informational brochures to issue in due course. (App. 1-4.)

In arriving at its decision the district court concluded that OPM did not properly consider providing maximum health benefits to government employees at the lowest possible costs and that this constituted an abuse of discretion. (App. 13.) The court's Memorandum Opinion states there is nothing in the record to indicate that OPM ever considered the impact its benefit reduction order would have on the health benefits available to government employees and that in ordering the reduction in benefits complained of the government only considered the cost savings that would result to the government. The clear implication in this statement is that OPM did not consider factors that might protect the interests of government employees but relied solely on cost to the government. We cannot agree that there is substantial evidence in the record to justify this inference. On the contrary, the whole history of OPM's handling of this matter indicates that it gave extensive consideration to both the benefits that would be available to government employees as well as to the costs that would be incurred by the government. It must also be recognized that OPM necessarily had the opportunity to evaluate the benefits after the plans submitted their modifications following the 6.5 percent order. We conclude that OPM in ordering the October 21, 1981 6.5% reductions acted within its authority and in a reasonable manner in light of the serious projected budget deficit caused by unpredicted increases in costs in the health benefits field and in light of the pressing statutory deadlines requiring it to complete negotiations with the health carriers.

A decision requires a review of OPM's reduction orders and the surrounding circumstances and exigencies that necessitated such actions. One of the difficulties here was caused by the fact that the budget allowance for the 1982 contracts was determined by the outgoing administration but bound the incoming administration upon whom fell the ultimate obligation to approve the health benefit contracts. OPM's consideration in 1981 of renewal of health benefit contracts for the next year began well before March 30, 1981 when it sent the initial "call letters" *fn1 to the health insurers. In the months that followed approximately 120 plans, including AFGE and NFFE, submitted their proposals for 1982 contracts. In that process OPM and the insurers fully considered all contracts, all benefits thereunder, and the rates and costs therefor. Some tentative conclusions were reached at various times as evidenced by OPM's sending of galley proofs of employee informational brochures to the health carriers.

After the 120 plans had submitted their premium rate proposals by the July 31, 1981 deadline, OPM during August conducted an analysis of all submitted plans. This study indicated that the $2.2 billion budget figure for fiscal year 1982 submitted to Congress-which contained a ten percent increase for the government's increase over the allocation for the previous fiscal year, to adjust for the effects of inflation-would prove to be $500 million short of the amount required to pay the government's contribution share to the health benefit plans if OPM approved the 1982 plans as submitted. *fn2 In ...


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