LETTER TO (SANITIZED) FROM HAROLD E. HUNSAKER

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP87-00868R000100080014-3
• Release Decision: RIPPUB
• Original Classification: K
• Document Page Count: 9
• Document Creation Date: December 22, 2016
• Document Release Date: August 28, 2009
• Sequence Number: 14
• Publication Date: October 31, 1961
• Content Type: LETTER

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ADDRESS REPLY TO
UNITED STATES CIVIL SERVICE COM M I - SION "U.S. CIVIL SERVICE COMMISSION"
AND REFER TO
BUREAU OF RETIREMENT AND INSURANCE FILE RH:HEH:aha
WASHINGTON 25, D.C.
OCT 31 1961
Government Employees Health Association, Inc.
P. 0. Box 463
Washington 4, D. C.
During the past year we have received Interim Accounting state-
ments on the operation of your plan under the Federal Employees
Health Benefits Act of 1959. As the first contract period is fast
coming to a close, it was felt that we should take this opportunity
to review some of the more significant points which must be con-
sidered in closing out the contract period.
The quarterly statements we have received from you have gener-
ally fulfilled our needs but the final accounting statement provided
for in your contract requires the most careful consideration in its
preparation. This final statement for the period July 1, 1960 through
October 31, 1961 is due in the Commission no later than February 1,
1962; however, we would appreciate receiving it at the earliest date
possible.
As stated in our letter of December 20, 1960, you do not have
to submit an interim statement as of September 30, 1961. With that
letter, we also provided you with Explanatory Notes Applicable to
Interim and Annual Accounting Statements as a guide to the prepara-
tion of the statements, supporting schedules, the accrual of sub-
scription charges, etc. An additional copy for your ready reference
is enclosed. We hope you will follow these guidelines carefully in
preparing the final annual statement.
The subscription charges transmitted to you during the period
July 1960 through October 1961 must be reported on line 1A "Subscrip-
tion Charges Received" of your Annual Accounting Statement as follows:
High Option $1,,457,965.15
Low Option 131,764.04
.s'
Total $1,589,729.19
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Subscription Charges received should reflect the amount of
subscription charges received by the Association regardless of the
date that the funds are received by the Underwriter. Because of
the importance to the plan that all income be made available
promptly for the payment of benefits and for investments, we urge
that the Association provide for immediate transmittal of the sub-
scription charges due the Underwriter as soon as received from the
Commission.
The accrual of subscription charges at the end of the first
contract year will be determined on the basis of the payments
(SF 1166a) made to you on November 9 and 24 and on December 11, 1961
showing "Collections for pay periods applicable to October 31 and
prior." Generally, this amount will also include subscription charges
for the pay period ending November 11, 1961,
Administrative expenses reported in the annual statement against
the contract must not exceed the amount of the percentage limitation
of total subscription charges provided in your contract for this item.
In support of this amount, we would appreciate a schedule or reproduc-
tion of work papers which summarizes the amount of expenses incurred
by type of service, such as salaries, rent, travel, supplies, etc.
The schedule may reflect all expenses incurred even though in excess
of the limitation amount reported on the statement. Where an over-
head item is added to the actual costs incurred against the contract,
the amount of overhead reported by the Schedule must be supported by
an analysis and justification. This schedule will be subject to
audit and should be supported by your books and records.
On page 3 of the Explanatory Notes we requested that Income on
Investments should be supported by an attached schedule. We would
appreciate complianre with this request.
If it has not been the policy during the past sixteen months
for the Underwriter to draw its Risk Charge currently from Subscrip-
tion Charge Income, "Income on Investments," Line 5B of the Schedule
may be reduced by the earnings of the Risk Charge which are for the
credit of the Underwriter rather than the contract. An acceptable
method of determining the Underwriter's share of the investment in-
come would be to:
1, determine the weighted average annual rate of investment
income earned (yield) on the basis of the net income re-
ceived and accrued from such investments under the pro-
gram; and,
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2. apply the average annual rate to one-half (mean) of
the amount of Risk Charge times 488/365. The balance
of the net income should be credited to the Special
Reserve.
Section 5 of the statement must be prepared only as it relates
to the total column. The high and low option data are not applica-
ble and should not be computed. In determining the amount "Due
Health Benefits Fund" as a return of subscription charges, any re-
turn would be based, without regard to option, on the total sub-
scription charges paid from the Employee Health Benefits Fund in the
last three months of the contract period regardless of the pay
periods covered. The total subscription charges to be reported in
the first Memo line below item 5 and used in this computation are as
follows:
August
$106,710.35
September
107,135.86
October
1-07,1626.72
Total $3P_1,472.93
It would appear that no amount would be appropriate for report-
ing on line 5D.
Accounting Statements for the second contract year will be due
as follows:
"As of" Date of Report
Period to be Covered
Due in CSC
March 31, 1962
5 months
June 1, 1962
June 30, 1962
8 months
September 1, 1962
October 31, 1962
12 months
No later than
February 1, 1963
It has not been our intention to require financial reports just
for reports sake. We have tried to set our requirements to enable
the Commission to carry out its functions under the act and to achieve
a successful Employees Health Benefits Program.
We wish to express our appreciation for the cooperation accorded
us by you and your staff throughout the first contract period.
Enclosure
cc: Morman Conway
Mutual of Omaha
Sincerely yours
ze,
Harold E. Hunsaker
Assistant to the Director
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ITIWTAT CIVIL SERVICE COMM
BUREAU OF RETIREMENT AND INSURANCE
WA SON 25, D. C.
lavatory dotes Alicable to Interim and Annual
Accountixag Statements
Federal Employees Health Benefits Program
Puxpose of Statements
Financial reports with respect to operations under the contract are
necessary for the Commission's administration of the program. Experience
under the contract must be evaluated at selected intervals during the
contract period as well as at the end of the contract period.
Timing of Statements
Four statements are required for the first contract period. (Timing
of statements for future contract periods will be announced later).
"As of" Date of Report
Period to be Covered
December 31, 1960
6 months
March 31,
1961
9 months
June 30,
1961
12 months
October 31, 1961
16 months
Due in CSC
March 1, 1961
June 1, 1961
September 1, 1961
No later than
February 1, 1
The design of the accounting statement is determined by the provi-
sions of the contract. The carrier should follow the format provided or
make special arrangements for any deviation.
For the first contract period, "Beginning of the year," line items
are not applicable; however, include these line items in your statements
with zero (-o-) amounts.
Subscri. tion Charles
Item 1A, Subscription charges received shall agree with the cash re-
ceived in the calendar months covered by the statement. Checks received
'from the Employees Health Benefits Fund (hereinafter called Fund) dated
the 25th of the month for which the cumulative statement is prepared must
be included even though not deposited.
Revised 10/23/61
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Health benefits accrued represent charges and claims incurred for
which cash disbursements have not yet been made for benefits rendered.
This item will., be snorted by an attached schedule showing in detail
the Method by which the accrual is derived..
EMenses and Risk Guar es
Actual accred administrative char, representing charges in-
curred, both paid, and accrued, will be s aported by an attached schedule
or reproduction of workpapers as to type of service, such as salaries,
rent, travel plies, etc. If practicable, these expenses should also
be functio ,lined to such work areas as eligibility files, benefit pro-
cessing, accounting, statistics, management, etc. Administrative costs
may be prorated between"High Option" and "Low Option" in the ratio of the
respective subscription charges unless the cost of the various functions
should more appropriately be distributed on different ratios, i.e.,
eligibility files on the basis of enrollment, benefit processing on the
basis of claims processed., etc.
Actual accrued taxes, if applicable, as used in this statement mean
taxes or governmental fees based on subscription charges. Esployeras
share of payroll taxes, real estate, and similar taxes,, are to be classi-
fied as administrative expense.
Memo only items are to be placed in parenthesis ( } in the amount
columns and are not to be included in the subtotals. These items are
for comparison purposes.
indicates that the carrier should insert the percentage
appl,ica ao e item as shown in the current contract.
Cumulative Cain or Loss-)
This section of the report is used to reflect the cumulative status
of the program.
I n c o m e on investments I c u r r e n t ea ?l should be supported by an
attached schedule of investments, date purchased,, dm purchase price, current
value, and any other pertinent information to support the income item
Due Health Benefits Fund, when shown on the format, represents the
amount to be paid to the U. S. Civil Service Commission as a return of
subscription charges if the amount determined by the formula is positive.
This line item is applicable to the annual statement only. Item 1A for
August, September, and October, covers the total subscription charges
paid from the Fund in the last three months of the contract period regard-
less of the pay periods covered.
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UN1 TATES CIVIL SERVICE CO 8SIOW
T MAU OF RETIRTUM AID INSURANCE
WASHINGTON 25, D. C.
EMla', 'Notes Applicable to Interim and Annual
Accounting Statements
Federal, loyees Health Benefits Program
Purpose of Statements
Financial reports with respect to operations under the contract are
necessary for the Commission's administration of the program. Experience
under the contract must be evaluated at selected intervals during the
contract period as well as at the end of the contract period.
Timing of Statements
Four statements are required for the first contract period. (Timing
of statements for future contract periods will be announced later).
"As of" Date of Report
Period to be Covered
Due in CSC
December 31, 1960 6 months
March 1, 1961
March 31,
1961
9 months
June 1, 1961
June 30,
1961
12 months
September 1, 1961
October 31, 1961 16 months
No later than
February 1, 1962
Format of Statements
The design of the accounting statement is determined by the provi-
sions of the contract. The carrier should follow the format provided or
make special arrangements for any deviation.
For the first contract period, "Beginning of the year," line items
are not applicable; however, include these line items in your statements
with zero (-0-) amounts.
Subscription Charges
Item 1A, Subscription charges received shall agree with the cash re-
ceived in the calendar months covered by the statement. Checks received
from the Employees Health Benefits Fund (hereinafter called Fund) dated
the 25th of the month for which the cumulative statement is prepared
be included even though not deposited.
Revised 10/23/61
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Health benefits accrued represent charges and claims incurred for
which cash disbursements have not yet been made for benefits rendered.
This item will be supported by an attached schedule showing in detail
the method by which the accrual is derived.
eases and Risk Or
Actual accrued anistrative charges, representing charges in-
curred, both paid and accrued, will be supported by an attached schedule
or reproduction of wor-apers as to =e of service, such as salaries,
rent, travel,, supplies, etc. If practicable, these expenses should also
be f nationalized to such work areas as eligibility files, benefit pro-
cessing, accounting, statistics, management, etc. Administrative costs
may be prorated between"High Option!` and "Low Option" in the ratio of the
respective subscription charges unless the cost of the various functions
should more appropriately be distributed on different ratios., i.e.,
eligibility files on the basis of enrollment, benefit processing on the
basis of claims processed, etc?
Actual accrued taxes, if applicable, as used in this statement mean
taxes or governmental fees based on subscription charges. Employer's
share of payroll taxes, real estate,, and similar taxes, are to be classi-
fied as administrative expense.
Memo oan3y items are to be placed in parenthesis ( ) in the amount
columns and are not to be included in the subtotals. These items are
for comparison purposes.
indicates that the carrier should insert the percentage
appl!.ca a e item as shown in the current contract.
Cumulative Gain (or Loss-I
This section of the report is used to reflect the cumulative status
of the program.
Income on investments current year) should be supported by an
attached schedule of investments, damchas
purchased
, purchase price? current
i
,
values and any other pertinent information to support the income item.
Dale Health Benefits end, when shown on the format, represents the
amount to be paid to the U. S. Civil Service Commission as a return of
subscription charges if the amount determined by the formula is positive.
This line item is applicable to the annual statement only. Item lA for
August, September, and October, covers the total subscription charges
paid from the end in the last three months of the contract period regard-
less of the pay periods covered.
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