The purpose of this amendment to Part 150 of he Cost of Living Council Regulations is to add Subpart M-Insurance, and Subpart -Proiders of Health Services.

On July 19, 1973, the Cost of Living Council stablished Part 150 and issued Subpart N in final form, 38 F.R. 19462 (July 20, 1973). On the same lay the Council issued a Notice of Proposed Rulenaking, 38 F.R. 19464 (July 20, 1973) setting out proposed Phase IV regulations, and inviting inerested persons to submit written data, views or arguments. On August 6, 1973, the Council issued Subparts A through K and P in final form, 38 F.R. 21592, (August 9, 1973).

The Council stated in the July 19 Notice of Proposed Rulemaking that all comments received before July 31, 1973, would be considered by the Council before taking action on the proposed regulations.

As in the case of comments on the subparts already issued in final form, copies of each comment on proposed Subparts M and O went to the attorney and the operations specialist or economic analyst who was responsible for the particular subpart. Staff officials of the Council conducted an Intensive reexamination of the regulations, independently as well as in light of the comments, in order to assure the maximum degree of clarity and consistency of the policy decisions that were made and of the regulations written to reflect these decisions. As a result of these efforts Subpart M in Ets final form contains numerous changes from the proposals that were published in proposed form on July 19, 1973. Most of the changes are editorial n nature. A few of them are substantive.

SUBPART M-INSURANCE

Subpart M sets forth the rules applicable to rate ncreases by insurers.

A paragraph (b) has been added to section 150.401 to clarify that this subpart is paramount to all other subparts with respect to insurance

matters.

Section 150.402 has been changed by amending the definitions of "covered earned premium", "prenotifier" and "rate" to clarify the intent and the definition of a "State" has been added to inIclude the District of Columbia.

Section 150.403 has been revised in several respects. Paragraph 150.403 (a) has been changed to refer to actual incurred costs rather than experience incurred on all actual costs to make it clear that insurers are permitted to reflect accurately all actual incurred costs. Paragraph 150.403 (b) has been amended to include a second sentence permitting factors used in established rating plans to continue to be used if they reflect physical conditions. Paragraph 150.403 (c) reflects one of the few substantive changes from the proposed version of Subpart M. The introductory paragraph has been expanded to include the definition of period of projection which is slightly changed from that proposed as paragraph 150.403 (b) and paragraph 150.403 (b) has been deleted. Additionally the final phrase of items (3), (4) and (5) has been rewritten to make it clear that the trend factors must be based upon the latest available data. The substantive change is found in item (6) which was changed to establish a base, below which, the restrictions in (3), (4) and (5) need not be applied.

Section 150.404 has been changed in two respects, first, § 150.404 (a) has been reworded to specify a change which "will not result in an overall rate increase" while the proposed regulations referred to a change which "will result in an overall premium level reduction". Second, § 150.404 (b) has been reworded to delete the specification of "no fault" legislation and to consider

all legislation or regulation promulgated in a particular jurisdiction as applying to this paragraph.

Section 150.405 (a) has been reworded for clarity; the portion regulating subsequent rate increases has been reworded to apply to a 12 month period instead of the same calendar year and addresses itself to subsequent rate increases affecting $1 million or more of aggregate annualized premium as opposed to any subsequent rate increase. Clarification of paragraph 150.405 (a) eliminated the need for paragraph 150.405 (c) which was deleted.

Section 150.408 has been modified to include in the 30 day period for taking action those prenotifications filed directly with the Cost Of Living Council under § 150.407.

Section 150.410 has been expanded to apply to a rating formula as well as a rate increase.

Section 150.411 has been revised to delete the requirement that the determination be made by the head of the State regulatory agency and now requires only agency approval. The determination to be made by the agency has been reworded to apply to a determination that a "rule, rating formula, formula use or application, data base, ratemaking procedure or technique or other element in the ratemaking process should be consistently applied so that warranted rate decreases as well as increases occur," and the agency shall so inform the Cost of Living Council.

Section 150.412 has been expanded to allow rating bureaus to furnish reports or parts of reports on behalf of individual insurers who have based their rates and filings on the aggregate statistics as compiled by such rating bureaus.

Paragraphs 150.412 (a) and (b) have been substantially revised and paragraph (c) has been added to expand the reporting requirements. The requirement for monthly reporting by certain health insurers has been replaced by a quarterly report.

In a related amendment to § 150.53 (b), enrollment fees, deductibles, coinsurance and other cost sharing required by State Medicaid agencies under § 208 of Public Law 92-603 are being added to the list of insurance premiums exempt from price controls.

SUBPART 0-PROVIDERS OF
HEALTH SERVICES

Subpart O continues the Phase II and Phase III rules applicable to institutional and noninstitu

tional providers of health services. This subpart merely serves to remove the price rules for providers of health from Part 130 and restate them in Part 150 without substantive change. New regulations governing providers of health services will be issued later this year in this subpart after completion of extensive consultation with the Health Industry Advisory Committee of the Cost of Living Council and other interested health care providers and consumers.

No other provisions of Part 150 apply to institutional and noninstitutional providers of health services except § 150.1, §150.2, § 150.3, and the definition of base period in § 150.31.

Pursuant to § 150.1, requests for exceptions or exemptions from the requirements of this part shall be submitted by providers of health services in accordance with the new procedures established in Part 155 of this chapter.

Section 150.2 provides that the procedures and remedies under Part 130 will remain in effect with respect to matters subject to that part before August 13, 1973 and that the procedures and remedies under Part 140 will remain in effect with respect to matters subject to that part before August 13, 1973.

Section 150.3 further provides that any firm which has been authorized to adjust its base period profit margin pursuant to an exception granted prior to August 13, 1973 may continue to calculate its base period profit margin pursuant to that exception.

The use of the base period definition in § 150.31 continues the same definition of base period that was in effect during Phase III for providers of health services. Finally, § 150.502 explicitly adopts Form S-52 (Revised July, 1973) and Schedule A (July, 1973) which replaced certain Price Commission forms during Phase III.

In consideration of the foregoing, Part 150 of Title 6 of the Code of Federal Regulations is amended as set forth below, effective August 13, 1973.

(Economic Stabilization Act of 1970, as amended, Pub. L. 92-210, 85 Stat. 743; Pub. L. 93-28, 87 Stat. 27; E.O. 11695, 38 F.R. 1473, E.0. 11730, 38 F.R. 19345, Cost of Living Council Order No. 14, 38 F.R. 1489).

Issued in Washington, D.C. on August 9, 1973.

JOHN T. DUNLOP, Director, Cost of Living Council.

Parts 140 and 150 are amended to extend the freeze on prices charged for crude petroleum, natural gas liquids and refined petroleum products including gasoline, kerosene and fuel oil until 11:59 p.m., e.s.t., August 19, 1973. Sections 140.1(a) and 150.1(b), the scope sections of the freeze and Phase IV regulations, are revised to accomplish this result. The products covered by this extension are described in the 1972 edition of the Standard Industrial Classification Manual, Industrial Codes 1311 (except natural gas), 1321, and 2911.

The Cost of Living Council has found that this limited extension of the freeze is necessary in order to adequately consider the volume of comments which the Council received on the proposed Phase IV regulations affecting petroleum. The Council received 272 comments on Subpart L of the proposed Phase IV regulations. This number includes 110 comments which were received after July 31, 1973.

Although the basic policy decisions have been made, a careful review of the methods of implementing these policies is necessary. The ex

treme complexity of this industry prevents issuance of final Phase IV regulations in time for them to be effective August 13, 1973. Thus, the Council has extended the freeze for one week to provide time to write the Subpart L regulations in final form.

Because the purpose of these amendments is to provide immediate guidance and information with respect to the decisions of the Council, the Council finds that publication in accordance with normal rule making procedure is impracticable and that good cause exists for making these amendments effective in less than 30 days.

(Economic Stabilization Act of 1970, as amended, Pub. L. 92-210, 85 Stat 743; Pub. L. 93-28, 87 Stat 27; E.O. 11730, 38 FR 19345; Cost of Living Council Order No. 14, 38 FR 1489)

In consideration of the foregoing Chapter I of Title 6 of the Code of Federal Regulations is amended as follows, effective August 10, 1973. Issued in Washington, D.C., on August 10, 1973. JOHN T. DUNLOP,

Director, Cost of Living Council.

The purpose of these amendments is to correct typographical and other errors and to clarify certain of the Phase IV price regulations.

Section 150.1 (f) is amended to change the cross reference to Cost of Living Council procedural regulations. A new Part 155 has been added to replace the procedural regulations which were formerly included in Part 105.

Section 150.10 (a) is amended to make clear that the highest of the three prices, base price, adjusted freeze price, or other price authorized under this part, is the price which a firm may not exceed under the general rule. Section 150.10 (b) which sets forth the general rules for purchasers is also amended in the same manner.

A new rule governing profit margin overages of a firm which sells both custom and non-custom products is added to § 150.11 (f). The new rule applies only to firms which would not be in violation of the profit margin limitation except for the charging of a price for a custom product. With respect to those firms, the Council will excuse a profit margin overage to the extent that the firm can demonstrate that the profit margins on those custom products or custom services does not exceed the base period profit margin of the firm.

Other changes are made in the Phase IV definitions. "Base period profit margin" is revised to clarify that revenues which are not included in annual sales or revenues as defined in § 150.31 are not to be included in measuring the base period profit margin. "Price increase" is corrected to indicate that the decrease in quantity of an item will also be regarded as a price increase. "Public utility" is amended to exclude mass transportation systems which are subject to special controls under Subpart P.

Section 150.54 (f) (2) is amended to make clear that sales of property by State and local governments are exempt. The rule excluding certain firms

from the requirement that they submit quarterly reports is also changed. A new exclusion is created which applies to a firm that has both 90% of its annual sales or revenues from exempt items and less than $50 million in annual sales or revenues from non-exempt items. The amendment is similar to the exclusion from the profit margin limitations which appears at § 150.11 (3).

A mistake in § 150.205(d) is corrected by inserting "customary initial percentage markup” in lieu of "allowable costs".

Section 150.303 is amended to provide alternate methods of computing customary initial percentage markup and gross margin. This change merely allows firms to continue to use their customary accounting practices and was inadvertently omitted. Section 150.306 (a) (3) is also changed to require firms to state which option they have selected for the computation of their customary initial percentage markups or gross margins. Finally, the cross reference in § 150.310 is corrected to read § 150.306 (a) instead of § 150.307(a).

Because the purpose of these amendments is to provide immediate guidance and information with respect to the Phase IV price regulations, the Council finds that publication in accordance with normal rule making procedure is impracticable and that good cause exists for making this amendment effective in less than 30 days.

(Economic Stabilization Act of 1970, as amended, Pub. L. 92-210, 85 Stat. 743; Pub. L. 93-28, 87 Stat. 27; E.0. 11730, 38 FR 19345; Cost of Living Council Order No. 14, 38 FR 1489)

In consideration of the foregoing, Part 150 of Chapter I of Title 6 of the Code of Federal Regulations is amended as follows effective 11:59 p.m.. e.s.t., August 12, 1973.