More than 5 million served

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The National Finance Center, command central for federal workers' electronic paychecks and retirement accounts, is developing a computerized clearinghouse to verify health insurance coverage for workers and their families. NFC officials plan to make it easier to check on health coverage for workers, which is now a labor-intensive task for health providers and government payroll offices.

Still in development, the Centralized Enrollment Clearinghouse Project will store, combine and compare data from government payroll offices with the enrollment data from carriers. By next summer, NFC will manage more than 5 million accounts. And in the process, it is expected to save the federal government millions of dollars in administrative costs.

"The goal is to provide the services that serve the em.ployee from payroll to retirement," said John Ortego, director of the New Orleans-based center. "There is a need for a uniform personnel record."

The project is the latest service from the Agriculture Department's NFC as it builds the foundation for a one-stop shopping center for financial services. NFC's efforts might serve as a model for interagency programs.

But the future of such programs is uncertain, thanks to a proposed rule unveiled July 2 by the Office of Management and Budget's Office of Federal Procurement Policy. The rule would open all Inter-Service Support Agreements to commercial competition every three to five years.

Renny DiPentima, president of SRA International Inc.'s consulting and systems integration unit, said NFC and similar federal programs work only if the government can provide services better than private industry can.

"If the government can run a competitive operation like the NFC, that's good," he said. "I would prefer to see private industry do it at lower cost." Created in the 1960s to process payroll checks for the USDA, NFC is a showcase for centralized government services. It handles the payroll for 125 government agencies every two weeks and the retirement accounts of 2.48 million civilian workers who deposit savings into a $100 billion fund. NFC also collects the premiums for health benefits and handles other financial management services with a budget of $150 million that is provided by fees for services.

In January, 2.3 million military personnel will be able to participate in its retirement savings program. And in March, the new clearinghouse will be up and running.

"NFC has a long track record of providing high-quality, efficiently priced services," said Alan Balutis, executive director of the Federation of Government Information Processing Councils, which helped the Commerce Department become the first Cabinet-level agency to use the payroll service in 1983.

It costs a federal agency $102 a year per em.ployee to use NFC's payroll system, compared with $250 per employee when an agency handles its payroll internally, according to some industry experts. And the Office of Personnel Management expects to save $20 million to $40 million a year when health care coverage is verified in one place.

"If every agency tried to do their payroll, it would not be very efficient. But if the NFC says, "We're going to do this for many agencies across government, we can do it in a way that's efficient and lower-cost,' then they have a right to compete for and do that work," DiPentima said.

Still, not every agency is on board. Six years ago, NASA developed its own payroll system for its 18,500 workers and has no plans to change it.

Nevertheless, the idea of centralizing common functions and sharing resources across government is taking hold. The General Services Administration, for example, has centralized telecommunications contracts to get better deals and is selling excess government property for all agencies.

But the task is much bigger when the information flows from multiple agencies to a central location in New Orleans, and the traffic is then funneled to countless end servers, such as electronic banking systems and the Internal Revenue Service.

"Much to the credit of NFC, they have been very successful," said Roger Baker, former chief information officer at Commerce. "There are only a certain number of ways to do paychecks in the federal government. And having a central facility to do that makes sense, decreasing the cost through volume."

The enrollment clearinghouse, NFC's latest project, will use a Web-based system to check health care coverage for 2 million federal employees and their family members. The system will run Microsoft Corp.'s Active Server Page technology on multiple Windows-based application servers. The application servers will access an IBM Corp. mainframe computer used as a database server, which will house an IBM DB2 database containing the clearinghouse data.

The data will be protected by firewalls, and NFC will allow access only at the request of OPM officials. Users will be granted access to information according to their access profiles, and user IDs and passwords will not be transmitted via the Internet unless they are encrypted, according to NFC's security plan.

A pilot program is scheduled to start in December, and OPM has ordered every federal agency to begin using the program next year. NFC received a $2.25 million contract from OPM to develop the program, which will cost $2.5 million a year. Computer Associates International Inc. was awarded a $135,000 contract to design the system. And although health insurance companies will pay development and operating costs, they are supportive of the project.

"It reduces our manpower efforts. This is automation and making it simpler," said Carolyn Hicks, director of legislative and regulatory affairs for Blue Cross and Blue Shield's federal program, which covers 49 percent of federal employees.

When it is fully operational, the clearinghouse's 8 million records will include information about enrollees, coverage options and data that carriers need to complete transactions.

"There have been occasional discrepancies between the number of enrollees in a plan that get reported," an OPM spokesman said. "There's a possibility that some plans are getting more money in terms of premiums. Some plans get less."

In addition, federal employees who opt for coverage from health maintenance organizations also pay a 1 percent charge to help offset shortfalls. Whether the new technology will result in lower premiums or deferred increases remains to be seen, according to the spokesman.

And officials at NFC have many other ideas on the drawing board. They include hosting Web sites for customers, providing secure electronic communications, maintaining official employee records for OPM and becoming the recordkeeper for the Social Security Administration if a privatization program becomes a reality.

But NFC may be walking a fine line between what government should be doing and what it should leave to private companies.

"In today's world, the most important thing is for government agencies to be able to find the best value services they can find," said Bill Piatt, director of e-government strategy at Booz-Allen & Hamilton Inc. and former CIO at GSA.

But Piatt said NFC officials needn't worry about competition from the private sector. "I think NFC can be very competitive."