[Federal Register Volume 89, Number 88 (Monday, May 6, 2024)]
[Rules and Regulations]
[Pages 37061-37079]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-09565]



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 Rules and Regulations
                                                 Federal Register
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 This section of the FEDERAL REGISTER contains regulatory documents 
 having general applicability and legal effect, most of which are keyed 
 to and codified in the Code of Federal Regulations, which is published 
 under 50 titles pursuant to 44 U.S.C. 1510.
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  Federal Register / Vol. 89, No. 88 / Monday, May 6, 2024 / Rules and 
Regulations  

[[Page 37061]]



OFFICE OF PERSONNEL MANAGEMENT

5 CFR Part 890

48 CFR Parts 1602 and 1609

RIN 3206-AO43


Postal Service Reform Act; Establishment of the Postal Service 
Health Benefits Program

AGENCY: Office of Personnel Management.

ACTION: Final rule.

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SUMMARY: This rule finalizes an interim final rule that established the 
Postal Service Health Benefits (PSHB) Program for Postal Service 
employees, Postal Service annuitants, and their eligible family 
members, pursuant to the Postal Service Reform Act of 2022. This 
Program will include health benefits plans available to United States 
Postal Service (Postal Service) employees, Postal Service annuitants, 
and their eligible family members starting January 1, 2025. For these 
individuals, eligibility for enrollment or coverage in FEHB plans based 
on Postal Service employment will end on December 31, 2024, and they 
will be able to enroll in or be covered only by PSHB plans after that 
time. Open Season for enrollee selection of PSHB plans will occur from 
November 11 through December 9, 2024. OPM will publish the negotiated 
PSHB plan rates and benefits for the 2025 plan year in September 2024. 
This rule adopts the provisions of the interim final rule with minor 
clarifications on the Office of Personnel Management's (OPM) 
implementation of the PSHB Program.

DATES: Effective July 5, 2024.

FOR FURTHER INFORMATION CONTACT: Louise Dyer Yinug, Senior Policy 
Analyst, at (202) 972-0913.

SUPPLEMENTARY INFORMATION: 

Executive Summary

    On April 6, 2023, OPM issued an interim final rule (88 FR 20383) to 
establish the Postal Service Health Benefits (PSHB) Program within the 
Federal Employees Health Benefits (FEHB) Program as required by the 
Postal Service Reform Act of 2022 (PSRA), Public Law 117-108. The 
interim final rule amended subparts A, C, and E of 5 CFR part 890 
related to the FEHB Program and 48 CFR chapter 16, the OPM Federal 
Employees Health Benefits Acquisition Regulation (FEHBAR). The interim 
final rule also added a new subpart P to 5 CFR part 890 regulating the 
new PSHB Program within the FEHB Program.
    OPM is making several changes between the interim final rule and 
this final rule:
     In Sec.  890.1604, OPM is clarifying the requirements to 
enroll in Medicare Part B by expressly providing that the exceptions 
referring to events occurring ``as of January 1, 2025'' includes events 
that occur on January 1, 2025.
     Section 890.1604(c) is reserved in anticipation of future 
rulemaking.
     In Sec.  890.1604(e), OPM is clarifying that a Postal 
Service annuitant or their family member who is required to be enrolled 
in Medicare Part B must promptly notify OPM or the Postal Service, in 
writing, if they choose not to enroll in or to disenroll from Medicare 
Part B.
     In Sec.  890.1604, OPM is removing reference to the Postal 
Service as the entity to receive documentation of overseas residency to 
qualify for an exception to the Part B enrollment requirement.
     In Sec.  890.1606(e), OPM is correcting a typographical 
error by removing the word ``the'' before ``January 1 of the next 
year.''
    These changes do not affect OPM's estimation of the regulatory 
impact of the PSHB Program.
    To the greatest extent possible, OPM aligned the rules pertaining 
to PSHB plans with the regulations governing FEHB plans. Where there 
was no existing rule applicable to FEHB plans, OPM implemented rules to 
provide the greatest flexibility for Postal Service employees, Postal 
Service annuitants, and their family members. An example of this is the 
rules pertaining to disenrollment from PSHB for Medicare eligible 
annuitants who are not enrolled in Medicare Part B despite the 
requirement to be so enrolled. OPM is defining such a circumstance as a 
termination of coverage, with rights to a temporary extension of 
coverage and conversion rights, rather than a cancellation of coverage.
    The PSHB Program includes health benefits plans available to Postal 
Service employees, Postal Service annuitants, and their eligible family 
members starting January 1, 2025. For these individuals, eligibility 
for enrollment or coverage in FEHB plans based on Postal Service 
employment will end after December 31, 2024, and they will be able to 
enroll in or be covered only by PSHB plans starting January 1, 2025. 
Subject to limited exceptions, Postal Service annuitants who retire and 
become entitled to Medicare Part A after January 1, 2025, and their 
family members who are entitled to Medicare Part A will be required to 
enroll in Medicare Part B as a condition of eligibility to enroll in 
the PSHB Program.
    The exceptions to the Medicare Part B enrollment requirement for 
PSHB enrollment described at Sec.  890.1604 are:
     Individuals who are Postal Service annuitants on or before 
January 1, 2025, and who are not both entitled to Medicare Part A and 
enrolled in Medicare Part B on January 1, 2025;
     Individuals who, on January 1, 2025, are Postal Service 
employees and are aged 64 and over;
     Postal Service annuitants and family members residing 
outside the United States and its territories who demonstrate their 
residency;
     Postal Service annuitants and their family members 
enrolled in certain Department of Veterans Affairs (VA) health care 
benefits. This exemption is derived from 5 U.S.C. 
8903c(e)(3)(A)(iv)(II), which refers to individuals ``enrolled in 
health care benefits provided by the VA under subchapter II of chapter 
17 of title 38, United States Code.'' Subchapter II of chapter 17 of 
title 38, U.S.C. governs who is eligible for various VA health care 
benefits, including eligibility for VA hospital care and medical 
services. There is a limited class of veterans who are not required to 
enroll in the system of patient enrollment referred to in 38 U.S.C. 
1705(a) in order to receive VA benefits described in subchapter II of 
chapter 17 of title 38, United States

[[Page 37062]]

Code. As such, this regulation is drafted to include all veterans 
described in 38 U.S.C. 1710, including those who are not required to 
enroll in the VA's system of patient enrollment referred to in 38 
U.S.C. 1705(a);
     Postal Service annuitants and family members eligible for 
health services provided by the Indian Health Service; and
     A family member of a Postal Service annuitant who is not 
required to enroll in Medicare Part B, based on a statutory exception, 
in order to be eligible for PSHB coverage.
    OPM will contract with carriers to offer two categories of health 
benefits plans through the broad umbrella of the FEHB Program, 
established under 5 U.S.C. 8901 et seq. OPM's authority to contract for 
FEHB plans and OPM's authority to contract for PSHB plans are in 
separate parts of the FEHB statute. First, pursuant to 5 U.S.C. 8902, 
OPM may contract with carriers to offer FEHB plans. Second, pursuant to 
5 U.S.C. 8903c, OPM may now contract with carriers to offer PSHB plans 
through the PSHB Program within the FEHB Program. The broad umbrella of 
the FEHB Program comprises both FEHB plans and PSHB plans. OPM started 
the process of approving carrier participation in the PSHB Program when 
the interim final rule became effective on June 5, 2023.
    This rule finalizes the interim final rule at 88 FR 20383 with 
minimal changes, as discussed further in the preamble, due to comments 
received during the 60-day comment period and a minor technical 
correction.

Background

    Section 101 of the PSRA adds new section 8903c to 5 U.S.C. chapter 
89 and directs OPM to establish the PSHB Program within the FEHB 
Program for Postal Service employees, Postal Service annuitants, and 
their eligible family members. OPM will administer the PSHB Program in 
accordance with 5 U.S.C. chapter 89, and implementing regulations (5 
CFR parts 890 and 892 and 48 CFR chapter 16), including these amended 
regulations. In general, the provisions of the FEHB Program apply to 
the PSHB program; however, there are a number of provisions that are 
unique to the PSHB program. See 5 U.S.C. 8903c(c)(3).
    The PSHB Program was authorized under the Title I Postal Service 
Financial Reforms provisions in the PSRA in furtherance of Congress's 
objective to ``improve the financial position of the Postal Service 
while increasing transparency and accountability of the Postal 
Service's operations, finances, and performance.'' \1\ OPM issued an 
interim final rule to set forth standards to implement section 101 of 
the PSRA to establish the PSHB Program. The first Open Season for the 
PSHB Program will begin on November 11, 2024, and run through December 
9, 2024, and the first contract year will begin January 2025.
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    \1\ H. Rept. 117-89- Postal Service Reform Act of 2021, 
H.Rept.117-89, 117th Cong. (2023), https://www.congress.gov/congressional-report/117th-congress/house-report/89/1.
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    Section 102 of the PSRA (``The USPS Fairness Act'') amends 5 U.S.C. 
8909a, which was established in the Postal Accountability and 
Enhancement Act of 2006 (Pub. L. 109-435), and required the Postal 
Service to pre-fund health benefits costs for its retirees. Section 102 
of the PSRA repeals the requirement to pay actuarially determined 
normal cost and amortization payments into the Postal Service Retiree 
Health Benefits Fund (PSRHBF) established at 5 U.S.C. 8909a, and 
cancels any unpaid amounts previously required to be paid under section 
8909a.\2\ Section 102(b) requires OPM to calculate an amount that the 
Postal Service will pay annually into the PSRHBF using a formula set 
forth at 8909a(d)(1). This amount will be calculated by June 30 of each 
year beginning in 2026.
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    \2\ The requirement for pre-funding payments into the PSRHBF was 
established by the 2006 Postal Accountability and Enhancement Act 
(Pub. L. 109-435) and required the Postal Service to pre-fund future 
health benefits costs for its retirees through fixed payments from 
2007 and 2016. Pursuant to the Postal Accountability and Enhancement 
Act, these fixed payments ended in 2016 and were replaced with 
annual normal costs payments and amortization payments for the 
estimated unfunded liability.
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A. Legislative Requirements for Establishing the PSHB Program

    Section 101 of Title I of the PSRA directs OPM to ``establish the 
Postal Service Health Benefits Program within the Federal Employees 
Health Benefits Program'' under 5 U.S.C. chapter 89. The PSRA specifies 
that ``[e]xcept as otherwise provided . . . any [PSHB] contract . . . 
shall be consistent with the requirements of this chapter for contracts 
under section 8902 with carriers to offer health benefits plans.'' 
Therefore, generally, the requirements of the FEHB Program will apply 
to the PSHB Program, unless otherwise set forth in the PSRA or in 5 CFR 
part 890.
    The PSHB Program is required by statute to begin in January 2025 
and will be the health benefits program available to Postal Service 
employees, Postal Service annuitants, and their eligible family 
members. Further, Medicare-eligible Postal Service annuitants and their 
Medicare-eligible family members will be required to enroll in Medicare 
Part B as a condition of enrollment in PSHB. There are several 
statutory exceptions to the Medicare Part B enrollment requirement, 
including current Postal Service annuitants and their family members 
who are not enrolled in Part B, Postal Service employees who have 
reached the age of 64 and their family members, Postal Service 
annuitants and their family members residing abroad, and Postal Service 
annuitants and their family members eligible for VA health care or 
Indian Health Service services.
    The PSRA requires OPM to direct PSHB Carriers to coordinate PSHB 
coverage with Medicare for enrollees and their family members covered 
by Medicare. This coordination must include Part D prescription drug 
coverage for Medicare Part D-eligible individuals. In the initial 
contract year, the PSRA requires OPM to contract with health insurance 
carriers to provide coverage with benefits and cost-sharing equivalent 
to FEHB plans offered by the same carrier, except to the extent needed 
to integrate Medicare Part D prescription drug benefits.
    The PSRA requires OPM to share information with other agencies to 
implement the statutory requirements, including the Medicare Part B 
enrollment requirement and the Medicare Part B special enrollment 
period administered by the Social Security Administration (SSA).

B. PSHB Program Background Information

    The PSRA establishes the PSHB Program within the FEHB Program. The 
FEHB Program was established in 1960 and provides a choice of health 
plans, including fee-for-service plans and health maintenance 
organizations, to approximately 8.2 million covered individuals 
including employees of the Federal Government, Federal retirees 
(referred to as annuitants due to their eligibility for an annuity), 
members of their families, former spouses, and other groups statutorily 
eligible as enumerated in 5 U.S.C. 8901 or set forth in other 
authorizing legislation. Currently, Postal Service employees, Postal 
Service annuitants, and their family members are also eligible for FEHB 
pursuant to 39 U.S.C. 1005.
    Health benefits plans offered under the FEHB Program cover a wide 
range of health services including routine physical exams, primary and 
specialist provider visits, inpatient hospital care, outpatient care, 
surgery, laboratory and diagnostic tests, prescription drugs, and 
mental health services. Required benefits are listed in broad 
categories at

[[Page 37063]]

5 U.S.C. 8904 and include ``hospital benefits'', ``surgical benefits'', 
``medical care and treatment'', and ``obstetrical benefits'', among 
others. Eligible individuals, including Postal Service employees, 
Postal Service annuitants, and their eligible family members, can have 
additional dental and vision coverage through the Federal Employees 
Dental and Vision Insurance Program.
    OPM negotiates the benefits, coverage, and premium details of each 
plan in the FEHB Program with health benefits carriers each year. Each 
year, OPM issues guidance for health benefits carriers preparing health 
benefits plan proposals. The guidance for the 2025 plan year is 
available here: https://www.opm.gov/healthcare-insurance/carriers/fehb/2024/2024-04.pdf. This guidance references OPM's commitment to ensuring 
that the Federal Government offers competitive, comprehensive health 
insurance benefits and includes OPM's policy goals and initiatives for 
the year. The guidance outlines technical requirements for each 
proposal, including benefit package details such as actuarial value, 
benefit changes from the previous year, and the drug formulary.
    Carriers offering PSHB plans, as part of the FEHB Program, will be 
subject to the same or similar guidance as is issued to FEHB plans. The 
PSRA requires that carriers offering PSHB plans will, to the greatest 
extent practicable, offer benefits and cost-sharing (e.g., deductibles, 
copayments, and coinsurance) equivalent to the benefits and cost-
sharing for FEHB plans for that carrier in the initial contract year.
    Generally, an enrollment in a health benefits plan under the FEHB 
Program may be continued into retirement if the enrollee has been 
enrolled in a health benefits plan under the FEHB Program for five 
years before retiring or, if less than five years, for all periods in 
which they were eligible to enroll. Enrollees in an FEHB plan can also 
enroll in Medicare when they become eligible for Medicare regardless of 
whether they are retired or still actively employed. Medicare is the 
primary payer for annuitants who are enrolled in an FEHB plan and 
covered by Medicare. The rules for continuing a PSHB enrollment into 
retirement parallel those applicable for FEHB but the Medicare 
enrollment requirements differ for PSHB as discussed in the next 
section.

C. PSHB Program Eligibility

    Under the PSRA, Postal Service employees whose Government 
contribution under chapter 89 is paid by the Postal Service, Postal 
Service annuitants whose Government contribution under chapter 89 is 
required to be paid under 5 U.S.C. 8906(g)(2), and family members of 
those Postal Service employees and Postal Service annuitants are 
eligible for coverage under the PSHB Program. Starting January 2025, 
these Postal Service employees and Postal Service annuitants may not 
enroll in an FEHB plan. The major difference in eligibility between 
PSHB plans and FEHB plans is that, generally, as a condition of 
eligibility in the PSHB Program, the PSRA requires that Postal Service 
annuitants and their eligible family members who are entitled to 
Medicare Part A (also referred to as ``covered Medicare individuals''), 
must enroll in Medicare Part B, unless an exception applies. Those 
exceptions are described in the Executive Summary and at Sec.  890.1604 
and are discussed more fully in the section ``Regulatory Changes in 
This Final Rule.''
    A ``covered Medicare individual'' under section 8903c(a)(1) means 
an individual who is entitled to Medicare Part A, excluding an 
individual who is eligible to enroll under section 1818 or 1818A of the 
Social Security Act (42 U.S.C. 1395i-2, 1395i-2a). Individuals entitled 
to Medicare Part A under 1818 are individuals age 65 or older who are 
not otherwise entitled to premium-free Medicare Part A, typically due 
to not having the required work history for premium-free Part A. 
Individuals entitled to enroll under 1818A are disabled individuals who 
lose Medicare coverage solely because they have exceeded the amounts 
allowed for substantial gainful work.\3\ These individuals are exempt 
from the Medicare Part B enrollment requirement that applies to most 
other Postal Service annuitants and their family members.
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    \3\ For more information, see SSA's amounts for Substantial 
Gainful Activity at https://www.ssa.gov/oact/cola/sga.html.
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    For purposes of the FEHB Program, 5 U.S.C. 8901(5) defines a 
``member of family'' of employees and annuitants to include spouses and 
children under 22 years of age, subject to exception, including natural 
children, adopted children, stepchildren, and foster children. The 
enactment of the Affordable Care Act in 2010 required health insurers 
to cover dependents until age 26. At that time, OPM issued updates to 
its regulations codified at 5 CFR 890.302(b) and (c) to reflect that 
change, which defines FEHB covered family members to include such 
children until they reach the age of 26, subject to exception. The PSHB 
Program will align with 5 CFR part 890 regarding the definition of 
family members for all purposes, including the Medicare SEP 
opportunity.
    The PSRA adds new definitions to chapter 89. Section 8903c(a)(9) 
defines a Postal Service employee as ``an employee of the Postal 
Service enrolled in a health benefits plan under this chapter whose 
Government contribution is paid by the Postal Service.'' Under section 
8903c(a)(8), a Postal Service annuitant ``means an annuitant enrolled 
in a health benefits plan under this chapter whose Government 
contribution is required to be paid under section 8906(g)(2).'' 
Therefore, individuals not meeting the statutory definition of a Postal 
Service annuitant or Postal Service employee are not eligible to enroll 
in a PSHB plan. If such individuals are eligible for enrollment in an 
FEHB plan, they may enroll or continue enrollment in such plan.
    The PSRA does not establish a distinct category for Postal Service 
compensationers, those employees who sustain workplace-related illness 
or injury, receive workers' compensation payments through the 
Department of Labor's Office of Workers' Compensation Programs (OWCP) 
because of that illness or injury, and who are determined by the 
Secretary of Labor to be unable to return to duty. Section 8901 of 
title 5, U.S.C. includes ``an employee who receives monthly 
compensation under subchapter I of chapter 81 of this title and who is 
determined by the Secretary of Labor to be unable to return to duty'' 
in the definition of annuitant.\4\ However, the PSRA definition of 
Postal Service annuitant is limited to those who are enrolled in a 
health benefits plan under 5 U.S.C. chapter 89, whose Government 
contribution is required to be paid under section 8906(g)(2).
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    \4\ 5 U.S.C. 8901(3)(C).
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    Section 8906(g)(2) authorizes Government contributions for health 
benefits for individuals who become Postal Service annuitants ``by 
reason of retirement'' and their survivors. These contributions are 
paid first by the Postal Service Retiree Health Benefits Fund with any 
remaining amount paid by the Postal Service. The description in 
8906(g)(2) does not include Postal Service compensationers, as they 
have not become annuitants by reason of retirement. Postal Service 
compensationers are more closely aligned with the 8903c(a) definition 
of Postal Service employee, whose Government contribution is paid by 
the Postal Service.
    The definition of Postal Service employee, rather than Postal 
Service

[[Page 37064]]

annuitant, will include Postal Service compensationers. Postal Service 
compensationers will not be subject to the Medicare Part B enrollment 
requirement, regardless of Medicare Part A entitlement.

D. Centralized Enrollment

    The FEHB Program's enrollment functions are decentralized processes 
that utilize independent systems at different Federal agencies. For 
purposes of the PSHB Program, OPM will shift certain responsibilities 
from the employing office to a centralized enrollment system which will 
be administered by OPM. The centralized enrollment system will be an 
electronic enrollment solution for all PSHB stakeholder groups 
including enrollees, the Postal Service and other employing offices, 
and PSHB Carriers. The centralized enrollment system will include an 
online portal to enter and process enrollment transactions (e.g., 
uploading verification of eligibility), robust decision support tools, 
and a customer support center to assist enrollees via phone, email, or 
online chat. Persons who are unable to access the online portal will be 
able to enroll through other means such as phone, fax, or mail. The 
interim final rule included regulatory provisions in Sec. Sec.  
890.1605, 890.1606, 890.1608, and 890.1614 specifying that OPM will 
assume responsibility for the following health benefits actions for the 
PSHB Program: enrollment, changes of enrollment, correction of errors, 
election not to enroll, and disenrollment of enrollees and removal of 
family members.

Comments Received on the Interim Final Rule and OPM's Responses

    OPM received a total of 71 comments on the interim final rule. Most 
of these were from individual Postal Service employees, Postal Service 
annuitants, and their family members. There were also several detailed 
comment letters from stakeholders including health insurers and 
employee organizations. In addition to comments supporting the policies 
in the interim final rule, OPM received comments raising questions or 
expressing concerns with aspects of the interim final rule, mostly from 
individual Postal Service employees, Postal Service annuitants, and 
their family members.
    Many public comments expressed support for the alignment between 
the FEHB and PSHB Programs. Commenters expressed support for issues in 
the rule including the January 1--December 31 plan year for PSHB plans, 
OPM's approach to automatic enrollment of Postal Service employees and 
Postal Service annuitants who do not elect a PSHB plan during the 
transitional Open Season, OPM's integration of Medicare Part D 
prescription drug benefits for Medicare enrollees, OPM's member-centric 
approach allowing for an additional enrollment opportunity for Postal 
Service annuitants or family members who are inadvertently not enrolled 
in Medicare Part B, despite the requirement as a condition to maintain 
PSHB enrollment, and OPM's establishment of centralized enrollment 
through a new electronic enrollment system for PSHB.
    In reviewing comments received in response to the interim final 
rule and feedback received, OPM determined a need to provide additional 
specification on several topics that were beyond the scope of the 
interim final rule. Accordingly, OPM will soon issue a proposed rule 
that further explains and expands on the implementation of the PSHB 
Program to provide clarity for PSHB Carriers, other agencies, and 
Postal Service employees, annuitants, and their family members before 
the Program begins enrollment for 2025. Topics OPM plans to address in 
more detail in the proposed rule include: reconsideration of initial 
decisions concerning PSHB eligibility; application of the Medicare Part 
B requirement and associated exceptions in specific scenarios; 
allocation of Reserves credits; calendar year alignment of government 
contribution requirements; financial reporting and actuarial 
calculations; premium payment prioritization from the Postal Service 
Retiree Health Benefits Fund; and Medicare Part D integration. A 
summary of the comments received during the 60-day comment period and 
OPM's responses follows; however, OPM notes that additional details on 
the topics listed above will be provided through the new rulemaking.

A. Transition From FEHB Plans to PSHB Plans

    The interim final rule detailed the process by which Postal Service 
employees, Postal Service annuitants, and their family members will 
transition from FEHB plan coverage to PSHB plan coverage for plan year 
2025. Medicare covered Postal Service annuitants who retire after 
January 1, 2025, and the Medicare covered members of family are 
required to enroll in Medicare Part B to remain enrolled in a PSHB 
plan, with limited exceptions.
    Comments: OPM received several comments with concerns about the 
effect of the new program on Postal Service annuitants and their family 
members. Specifically, the commenters are concerned about two new 
requirements: the requirement to transition from an FEHB plan to a PSHB 
plan and the requirement for most Postal Service annuitants and their 
Medicare-covered family members to enroll in Medicare Part B to 
maintain enrollment in the PSHB Program. A theme of the concerns is 
that many Postal annuitants plan their retirement based on the benefits 
packages available at the time of their employment and the PSHB Program 
changes those plans involuntarily.
    Response: Pursuant to 5 U.S.C. chapter 89, the PSHB Program must 
include Postal Service employees, Postal Service annuitants, and their 
eligible family members. The law also requires that Medicare covered 
Postal Service annuitants, with limited exceptions as described in the 
Executive Summary, enroll in Medicare Part B to maintain enrollment in 
the PSHB. OPM is required to implement these statutory provisions and 
is not able to modify these mandates by regulation. As such, OPM will 
not make a regulatory change in response to these comments.
    Comment: A commenter asked that OPM consider creating a hardship 
exception allowing individuals to continue in their chosen FEHB plan 
after the PSHB Program begins, should that plan not be offered in PSHB. 
The commenter stated that some small regional plans may not be 
available, creating a potential loss of access to coverage under those 
plans due to the creation of PSHB.
    Response: OPM does not have the statutory authority to allow a 
hardship exception as requested by the commenter. Where a small 
regional plan is no longer available in the PSHB Program, coverage will 
nonetheless always be available under one of the nationwide PSHB plans.
    Comments: Several commenters requested that Postal annuitants who 
retired under the Civil Service Retirement System, rather than the 
Federal Employees Retirement System, be allowed to maintain coverage 
under an FEHB plan.
    Response: OPM does not have the statutory authority to allow an 
exception based on a Postal Service annuitant's retirement system.
    Comments: Several commenters asked why employees of the United 
States Postal Inspection Service would be required to transition to 
PSHB.
    Response: The United States Postal Inspection Service is part of 
the United States Postal Service as defined by statute. While certain 
individuals may receive other Federal benefits, those benefits are not 
relevant to the

[[Page 37065]]

definition of Postal Service employee under 5 U.S.C. 8903c(a)(9).
    Comments: Several commenters asked if PSHB Program enrollment will 
count towards the five-year FEHB Program enrollment requirement to 
retire with FEHB coverage from another agency.
    Response: Yes, the five-year requirement under the FEHB Program 
will continue to be in effect for the PSHB Program. An individual is 
eligible to continue enrollment in a PSHB plan into retirement if they 
meet the five-year requirement and were enrolled in a PSHB plan 
immediately before retirement. The five-year requirement does not 
change and is not changed by the Medicare Part B enrollment requirement 
for certain Postal Service annuitants enrolled in PSHB.
    A Postal Service annuitant, whose Government contribution is 
required to be paid under 5 U.S.C. 8906(g)(2), is not eligible to 
continue enrollment in an FEHB plan. See section 8903c(d). As stated in 
the preamble of the interim final rule, in order to continue coverage 
into retirement, enrollees in the PSHB Program will be subject to the 
FEHB Program requirement of being covered by a plan for the 5 years of 
service immediately before retirement, or if less than 5 years, for all 
service since their first opportunity to enroll. See Sec.  890.306.
    A Postal Service annuitant who (at the time the individual becomes 
an annuitant) was enrolled in a health benefits plan under chapter 89, 
including under section 8903c, can meet that 5-year requirement if they 
were so enrolled as a Postal Service employee, as an employee defined 
at 5 U.S.C. 8901(1), or a mix of both in order to maintain health 
benefits after retirement. Similarly, an annuitant who is not a Postal 
Service annuitant, whose Government contribution is not required to be 
paid under 8906(g)(2), may meet the 5-year requirements for continuing 
FEHB coverage into retirement, if they were enrolled in a plan under 
chapter 89 as both an employee defined at 5 U.S.C. 8901(1) and as a 
Postal Service employee.
    Comment: One commenter asked if a Postal Service annuitant is 
eligible to enroll under their spouse's FEHB eligibility rather than 
moving to the PSHB.
    Response: Yes, the PSHB Program does not affect the eligibility of 
any Postal Service employee or Postal Service annuitant to be covered 
as a family member under an FEHB plan. In this circumstance, the spouse 
of the Postal Service annuitant would need to cover the Postal Service 
annuitant under their FEHB plan during Open Season 2024. The Postal 
Service annuitant would also need to elect not to enroll in a PSHB plan 
during the transitional Open Season to avoid automatic enrollment in a 
PSHB plan.

B. Medicare Part B Enrollment Requirement for Postal Service Annuitants

    Many commenters asked about the details of the Medicare Part B 
enrollment requirement for Postal Service annuitants enrolled in a PSHB 
plan. OPM is taking the opportunity to clarify in this preamble and 
regulatory text some details about how the Medicare Part B requirement 
will be enforced after the launch of the PSHB Program.
    The PSRA authorized a Medicare Part B Special Enrollment Period 
(SEP) for certain Postal Service annuitants and their family members. 
Codified at section 1837(o) of the Social Security Act (42 U.S.C. 
1395p), the six-month special enrollment period will run from April 1 
through September 30, 2024. Postal Service annuitants and their family 
members who are entitled to Medicare Part A but not enrolled in 
Medicare Part B as of January 1, 2024 are eligible to enroll in 
Medicare Part B during the SEP. The PSRA allows the Postal Service to 
pay any applicable Medicare Part B late enrollment penalties for 
individuals who enroll during this SEP.
    As explained below in the section of the preamble discussing the 
changes included in this final rule, OPM is amending Sec.  890.1604 to 
clarify the timing aspects of several exceptions that are statutorily 
required to apply ``as of January 1, 2025''.
    Comment: A commenter said that many Postal Service annuitants may 
be unaware of the requirement to enroll in Medicare Part B to maintain 
PSHB coverage. The commenter requested that such annuitants be 
automatically enrolled in Medicare Part B.
    Response: OPM and the Postal Service are working together on 
educational materials to explain the transition to PSHB and the 
Medicare Part B enrollment requirements. They include plain language 
written materials such as fact sheets and tri-fold mailers, multi-media 
activities such as a five-part video series available at https://www.keepingposted.org/postal-service-health-benefits.htm, and regular 
``lunch and learn'' virtual seminars. The Postal Service and OPM have 
been engaged in ongoing communication with Postal Service employees, 
annuitants, and their family members since late 2022 when OPM published 
FAQs on its website at https://www.opm.gov/healthcare-insurance/pshb/.
    OPM does not have the authority to enroll Postal Service annuitants 
in Medicare Part B automatically and will not make a regulatory change 
in response to this comment. Postal Service annuitants or their family 
members who enroll in Medicare Part B during the Special Enrollment 
Period may be subject to a Medicare Part B late enrollment penalty.\5\ 
The PSRA allows the Postal Service to pay such late enrollment penalty 
on behalf of the annuitant or family member.
---------------------------------------------------------------------------

    \5\ Explanation of Medicare late enrollment penalties available 
here: https://www.medicare.gov/basics/costs/medicare-costs/avoid-penalties.
---------------------------------------------------------------------------

    Comment: Some commenters asked when family members of disabled 
Postal Service annuitants are required to enroll in Medicare Part B.
    Response: A family member of a disabled Postal Service annuitant is 
required to enroll in Medicare Part B if the family member themselves 
are a Medicare covered individual. As described in the interim final 
rule, the Medicare Part B enrollment requirement applies regardless of 
how the Postal Service annuitant becomes entitled to Medicare Part A, 
such as age, end stage renal disease or receiving Social Security 
disability payments for 24 months. A family member of a PSHB enrollee 
who is a disabled Postal Service annuitant is required to enroll in 
Medicare Part B if both the Postal Service annuitants and the family 
member are Medicare covered individuals (meaning that both are entitled 
to Medicare Part A), unless the family member qualifies for an 
individual exception as listed in the Executive Summary and at Sec.  
890.1604 and discussed more fully in the section ``Regulatory Changes 
in This Final Rule.''
    Comment: A commenter asked whether a family member must maintain 
Part B coverage if the family member is enrolled in Medicare Part B 
prior to January 1, 2025, but the Postal Service annuitant, under whose 
PSHB enrollment the family member is covered, is not required to enroll 
in Part B.
    Response: No, a Medicare covered family member is required to be 
enrolled in Medicare Part B only if the Postal Service annuitant under 
whose PSHB enrollment the family member is covered, is required to be 
enrolled in Medicare Part B. OPM is amending Sec.  890.1604 to clarify 
the requirements and exceptions for enrolling in Medicare Part B, as 
described in the Executive Summary and in the section

[[Page 37066]]

``Regulatory Changes in this Final Rule.''

C. Exceptions to the Medicare Part B Enrollment Requirement

    OPM received several comments regarding the details of the 
requirement for Postal Service annuitants to enroll in Medicare Part B. 
The interim final rule addressed the requirement in Sec.  890.1604, 
including several statutory exceptions to that requirement described in 
the Executive Summary and in the section ``Regulatory Changes in This 
Final Rule.''
    Comment: A commenter expressed support for OPM's rule to allow 
self-attestations as proof of eligibility for health services from the 
Indian Health Service (IHS). The same commenter asked OPM to confirm 
that PSHB Carriers will not be responsible for determining whether PSHB 
enrollees qualify for the exception based on eligibility for IHS health 
services.
    Response: OPM is not authorizing PSHB Carriers to determine whether 
an individual is excepted from the Medicare Part B enrollment 
requirement under the IHS exception or any other exceptions under Sec.  
890.1604. Under part 890, a carrier may only verify an individual's 
relationship to the enrollee to confirm whether they are an eligible 
family member.
    Comment: Several commenters requested clarification regarding how 
the PSHB Program will affect enrollees residing outside the United 
States especially as it relates to Medicare coverage.
    Response: The interim final rule included a list of exceptions to 
the Medicare Part B enrollment requirement at 5 CFR 890.1604(c). These 
exceptions included an exception for Medicare covered Postal Service 
annuitants and Medicare covered members of family residing outside the 
United States. The PSRA and this final rule requires that individuals 
residing outside the United States will demonstrate such residency. OPM 
and the Postal Service are working together to operationalize the 
details of how individuals will demonstrate residency outside the 
United States. OPM is amending Sec.  890.1604 to clarify the 
requirements and exceptions for enrolling in Medicare Part B.

D. Changes To Coverage and Premium Costs Due to the Medicare Part B 
Enrollment Requirement

    Comment: OPM received several comments from Postal Service 
employees and Postal Service annuitants currently enrolled in FEHB 
plans seeking more information about anticipated changes to their 
medical, physician, and pharmaceutical coverage and health insurance 
premiums when they are required to enroll in Medicare Part B to 
maintain coverage under the PSHB Program.
    Response: OPM negotiates health benefits and premiums each year 
with carriers. As delineated in the interim final rule, a carrier's 
PSHB plan must provide equivalent benefits and cost-sharing to the 
carrier's FEHB plan in the 2025 contract year. Approved PSHB Carriers 
will submit benefit and rate proposals for PSHB plans by the end of May 
2024. OPM expects that full benefits and premium information for 2025 
PSHB plans will be available in September 2024.
    OPM is asking carriers to focus on Medicare coordination in both 
FEHB plans and PSHB plans for 2025. The call letter for the 2025 FEHB 
and PSHB plan year \6\ states ``All Carriers must implement a multi-
pronged educational outreach effort to eligible enrollees focused on 
Medicare coordination. . . . FEHB and PSHB Program members for whom 
Medicare is primary must receive medical and drug coverage equal to or 
greater than the medical and drug coverage they would have received 
without Medicare Advantage Prescription Drug Plan (MA-PD) EGWP or 
Prescription Drug Plan (PDP) EGWP.''
---------------------------------------------------------------------------

    \6\ https://www.opm.gov/healthcare-insurance/carriers/fehb/2024/2024-04.pdf.
---------------------------------------------------------------------------

    The call letter further ensures robust coordinated coverage by 
directing carriers that ``The PSRA requires PSHB Carriers, in the 
initial contract year, to provide benefits and cost-sharing that are 
equivalent to the benefits and cost-sharing of that Carrier's 2025 FEHB 
plan option, except to the extent needed to integrate Medicare Part D 
prescription drug benefits. PDP EGWP formularies must, at a minimum, 
include the same covered drugs under the plan's formulary. Furthermore, 
every drug covered under a plan option's formulary must be covered at 
the same or lower cost-share by the plan's PDP EGWP formulary. In 
circumstances where equivalent drug benefits and cost-sharing (not 
actuarial equivalence) cannot be met due to limitations in integrating 
Medicare Part D prescription drug benefits, PSHB Carriers must provide 
justification explaining why they cannot meet this standard.''

E. Continuity of Costs and Coverage Between FEHB Plans and PSHB Plans

    Comment: OPM received many comments regarding changes in premium 
costs and benefits between FEHB plans and PSHB plans. There were 
questions about specific covered services and requesting information 
about whether such services will be covered in a similar way after the 
launch of the PSHB Program. Several commenters raised concerns about 
possible cost increases after the launch of the new program.
    Response: The PSRA requires that, in the initial contract year, a 
carrier offering PSHB plans must offer coverage with equivalent 
benefits and cost-sharing to FEHB plans offered by that carrier, except 
to the extent needed to integrate Medicare Part D prescription drug 
benefits. This requirement was codified in the interim final rule at 
Sec.  890.1610 ``Minimum standards for PSHB Program plans and 
Carriers.''
    OPM is approving carriers for participation in the PSHB Program. 
Approved carriers will submit plan benefit and rate proposals by the 
end of May 2024, the plan premiums will be made public in September 
2024, and more detailed plan brochures will be available prior to Open 
Season 2024 at https://www.opm.gov/healthcare-insurance/open-season.
    In order to ensure that the drug coverage under a PSHB plan's 
Medicare Part D EGWP is equal to the drug coverage under the PSHB plan, 
OPM has required that PSHB plans' ``PDP EGWP formularies must, at a 
minimum, include the same covered drugs under the plan's formulary. 
Furthermore, every drug covered under a plan option's formulary must be 
covered at the same or lower cost-share by the plan's PDP EGWP 
formulary.'' See supra note 6.

F. Information Sharing

    The interim final rule outlined a process for agencies to share 
relevant information for OPM's administration of the PSHB Program. This 
included implementing a statutory requirement for OPM and the SSA to 
share information necessary to identify individuals who may be eligible 
to enroll in Medicare Part B during the 6-month Medicare special 
enrollment period (SEP) from April 1, 2024, to September 30, 2024.
    Comment: A commenter suggested that coordination of benefits with 
Medicare at 5 U.S.C. 8910(d) requires OPM to expand PSHB information 
sharing regulations at 5 CFR 890.1612 to the entire FEHB Program and 
allow carriers to access that information for coordination and 
reporting purposes.
    Response: OPM agrees that information sharing between agencies is 
critical to administer the PSHB Program effectively. OPM is not 
expanding our information sharing effort to the entire FEHB Program 
since the PSRA's

[[Page 37067]]

information sharing provisions are intended to implement the PSHB 
Program and its Medicare enrollment requirement for certain Postal 
Service annuitants and their family members. Similarly, OPM does not 
intend to provide the information that is the subject of interagency 
information sharing agreements to carriers, except in limited 
circumstances required to operate the PSHB Program as permitted under 
the Privacy Act.

G. Centralized Enrollment System

    The interim final rule explained that OPM will develop and 
implement a centralized enrollment system for the PSHB Program. The 
centralized enrollment system will be an electronic enrollment solution 
for PSHB enrollees, the Postal Service and other employing offices 
(including OPM's Retirement Services office for Postal Service 
annuitants), and PSHB Carriers. The centralized enrollment system will 
include an online portal to be used to process enrollment transactions 
and will include decision support tools and customer support to assist 
enrollees and their family members.
    Comment: Several commenters made specific recommendations about the 
mechanics and operations of OPM's PSHB central enrollment system. 
Commenters requested elements such as specific data fields, a total 
cost calculator, and filtering capabilities.
    Response: OPM appreciates the comments and will consider the 
recommendations in the system design. In July 2023, OPM awarded a 
contract for the development of the PSHB System. The scope of the 
project includes enrollment functions and a customer support center 
that will service PSHB employees, annuitants, and family members. The 
center will provide services such as eligibility determinations, 
enrollment support, and enrollment and premium reconciliation and a 
decision support tool.
    That request for proposal (RFP) is available at https://sam.gov/opp/94b39c9c3e504c02ae593ab3fab7a342/view.
    The RFP includes nearly 300 distinct requirements, including 
determining eligibility based on listing all necessary data fields to 
manage eligibility and enrollment, the ability for users to calculate 
total costs, and sort and filter plan information. OPM is on track with 
development of the system and is determining how and when these 
functionalities will be rolled out.\7\
---------------------------------------------------------------------------

    \7\ From the PSHB System Performance Work Statement (https://sam.gov/api/prod/opps/v3/opportunities/resources/files/81805a8de14f4084b5650da08d347e42/download?&status=archived&token=) 
``Starting in the fall of 2024, the system will process all 
enrollments and changes in enrollments for PSHB, including open 
season transactions, qualifying life events, and enrollments for 
newly eligible. The fully functional system will provide an account-
based, one-stop-shop where enrollees can: (1) compare and learn 
about PSHB plan options, including benefits, provider networks, 
formulary, cost-sharing, and total out-of-pocket expenses, (2) 
select a plan that fits the unique needs of their family, and (3) 
complete the enrollment process. The system will also serve as the 
authoritative source for PHSBP enrollment data, ensure enrollee 
eligibility by exchanging data with relevant Federal agencies, and 
provide real-time enrollment and premium transaction information to 
all employing agencies and participating PSHBP health insurance 
issuers (herein referred to as Carriers).''
---------------------------------------------------------------------------

    Comment: One commenter requested that OPM continue to provide 
periodic updates to carriers as the centralized enrollment system is 
developed, so that carriers can make appropriate adjustments to their 
systems and processes.
    Response: OPM intends to continue regular communications with 
carriers as OPM's plans for the central enrollment system development. 
Carriers may contact their OPM contract representatives with specific 
questions.

H. PSHB Contracting

    The interim final rule included several provisions related to 
contracting, including requirements for PSHB Carriers and PSHB plans.
    Comment: Several commenters had specific recommendations about 
contracts, including details about the contract effective date and 
several comments related to accounting principles.
    Response: OPM appreciates the comments and notes that PSHB 
contracting details are outside the scope of the regulation.

I. Automatic Enrollment

    The interim final rule implemented the requirement that Postal 
Service employees and Postal Service annuitants who do not make an PSHB 
plan election during the transitional Open Season in 2024 will be 
automatically enrolled in a PSHB plan with coverage effective January 
1, 2025.
    Comment: A commenter requested clarification on 5 CFR 890.1605(c), 
regarding how automatic enrollment will work for a carrier that has 
three FEHB plan options but intends to offer only two PSHB plan 
options.
    Response: In the interim final rule at Sec.  890.1605(c)(2), when a 
carrier offers more than one PSHB plan or option in 2025, the 
individual will be automatically enrolled in the PSHB plan and option 
offered by the carrier that provides equivalent benefits and cost 
sharing to the individual's 2024 FEHB plan and option, as determined by 
OPM. In a case where the carrier is not offering a PSHB plan, the 
individuals enrolled in the carrier's FEHB plan in 2024 will be 
automatically enrolled in the lowest-cost nationwide PSHB plan option 
that is not a high deductible health plan and does not charge an 
association or membership fee. See Sec.  890.1605(c)(3). OPM will apply 
the FEHB regulation at 5 CFR 890.301(n) to determine the lowest-cost 
nationwide plan. Per that regulation, OPM can designate an alternate 
plan for automatic enrollments if circumstances dictate this. All 
automatic enrollments will be into a PSHB plan of the same enrollment 
type (self only, self and family, or self plus one) as the 2024 FEHB 
plan. OPM plans to provide additional details regarding specific 
automatic enrollment circumstances in future rulemaking.
    Comment: One commenter asked for clarity regarding the definition 
of a carrier for purposes of automatic enrollment and recommended that 
OPM allow automatic enrollment into the same carrier as under FEHB, 
regardless of whether the plans available in the PSHB Program are 
offered under a different contract than the enrollee's current FEHB 
plan.
    Response: In the interim final rule, OPM defined ``PSHB Carrier'' 
at 48 CFR 1602.170-20, as follows: ``PSHB Carrier means a carrier that 
enters into a contract with OPM under 5 U.S.C. 8902 to offer a health 
benefits plan in the PSHB Program.'' The interim final rule provided 
that the enrollee is automatically enrolled into a PSHB plan offered by 
the same carrier. This is true even though the PSHB plan is under a 
different contract with OPM than the enrollee's 2024 FEHB plan. OPM 
will automatically enroll the enrollee into a PSHB plan offered by a 
different carrier (the lowest-cost nationwide PSHB plan option that is 
not a high deductible health plan and does not charge an association or 
membership fee) if the carrier of the enrollee's 2024 FEHB plan does 
not offer a PSHB plan in 2025.

J. Health Benefits Education Program

    Comment: One commenter requested that OPM provide outreach and 
education to Postal Service annuitants and their families regarding the 
changes to their coverage options under the PSHB Program.
    Response: The Postal Service is coordinating with OPM and other 
agency partners to inform Postal Service employees, Postal Service 
annuitants, and their family members about the transition to the PSHB 
Program and

[[Page 37068]]

their coverage options. This education has been ongoing since late 2022 
when OPM published FAQs on its website at https://www.opm.gov/healthcare-insurance/pshb/. Under 5 U.S.C. 8903c(l), the Postal Service 
is responsible for establishing a Health Benefits Education Program. 
The Postal Service's Health Benefits Education Program notifies 
eligible individuals about the PSHB Program, coverage options, and the 
Medicare Part B enrollment requirement.
    In October 2023, USPS published a bulletin announcing an update to 
its Employee and Labor Relations Manual (ELM) to incorporate the Health 
Benefits Education Program at https://about.usps.com/postal-bulletin/2023/pb22634/html/welcome.htm. This Program included notifications of 
PSHB options, Medicare enrollment requirements, links to submit 
inquiries from employees and annuitants, and navigator activities for 
program education. The updates included in the October 2023 Postal 
Bulletin were effective immediately and were incorporated in the ELM as 
of March 31, 2024.
    OPM and the Postal Service have been collaborating on education 
materials since 2022. Those informational materials include plain 
language written materials such as fact sheets and tri-fold mailers. 
There are also multi-media activities such as a five-part video series 
available at https://www.keepingposted.org/postal-service-health-benefits.htm and regular ``lunch and learn'' virtual seminars.
    The Postal Service's Health Benefits Education Program notifies 
eligible individuals about the PSHB Program and provides information 
about coverage options, and the Medicare Part B enrollment requirement.
    Additionally, PSHB plan premiums will be made public in September 
2024, and more detailed plan brochures will be available prior to Open 
Season 2024 at https://www.opm.gov/healthcare-insurance/open-season.

K. Prescription Drug Benefits and Integration of Medicare Part D

    As noted in the preamble to the interim final rule, PSHB plans must 
provide prescription drug benefits through Medicare Part D to Part D-
eligible Postal Service annuitants and their Part D-eligible family 
members. Under 5 U.S.C. 8903c(h), PSHB plans are required to provide 
prescription drug benefits to these individuals through ``employment-
based retiree health coverage'' either through a ``prescription drug 
plan (PDP)'' or a contract with a ``PDP sponsor'' of a prescription 
drug plan, as these terms are defined in sections 1860D-22(c)(1), 
1860D-41(a)(14), and 1860D-41(a)(13) of the Social Security Act, 
respectively. A carrier providing prescription drug benefits may, 
subject to OPM's approval, provide a Medicare Advantage plan with 
prescription drug benefits (MA-PD) so long as the carrier also provides 
a PDP.
    Comment: Several commenters asked about how the timing of Medicare 
Part D coverage will align with the January 1-December 31 plan year of 
the PSHB Program. One commenter requested that OPM review the Centers 
for Medicare & Medicaid Services (CMS) rules to determine if Medicare 
Part D coverage needs to begin on the first day of the following month 
in a PSHB retroactive enrollment to avoid violation of CMS 
requirements.
    Response: OPM appreciates the comment and is actively engaged with 
key stakeholders to ensure that enrollees and covered family members 
experience a seamless enrollment process. OPM notes that the proposed 
rule will provide more information regarding PSHB Program 
implementation of Medicare Part D coverage.
    Comment: One commenter requested that OPM address perceived 
conflicts between the Internal Revenue Service (IRS) requirements for 
high deductible health plans with health savings accounts and CMS 
guidance around Part D prescription drug plans.
    Response: OPM, through its guidance, rate and benefits 
negotiations, contract administration and negotiations process, will 
ensure that carriers' plan proposals are in compliance with all 
applicable requirements.
    Comment: One commenter raised a concern about OPM's method for 
automatically enrolling members who do not choose a PSHB plan during 
the transitional Open Season in 2024. This commenter was concerned 
about whether members may be automatically enrolled into a plan with a 
standalone PDP, and whether an MA-PD plan may be more advantageous for 
such members.
    Response: As directed by the PSRA, PSHB Carriers must integrate 
Medicare Part D into their PSHB plan design through a PDP or a contract 
with a PDP sponsor. OPM will also consider approving a carrier's MA-PD 
plan so long as the carrier provides a PDP. Whether a carrier provides 
Medicare Part D through a PDP or through a PDP and MA-PD does not 
affect automatic enrollment into a PSHB plan during the transitional 
Open Season. If an individual wants to be covered by a PDP or MA-PD, if 
available, under a PSHB plan enrollment then the enrollee may choose a 
PSHB plan with the desired prescription drug benefits during the 
transitional Open Season. OPM notes that the proposed rule will provide 
more information regarding program implementation, including group 
enrollment and Medicare Part D plans including MA-PD plans.
    Comment: One commenter asked that OPM encourage or require PSHB 
plans to offer health reimbursement arrangements (HRAs) with sufficient 
funds to offset the cost of any Medicare Part D income-related monthly 
adjusted amount (IRMAA), or alternatively, to reduce the costs of Part 
B premiums or other out-of-pocket expenses if not subject to IRMAA.
    Response: PSHB Carriers may propose to offer HDHPs with an HRA, and 
individuals may enroll in such a plan and use the HRA to help pay for 
qualified medical expenses, Medicare premiums including any applicable 
IRMAA, and other qualified medical expenses. As demonstrated in the 
Federal Employees Health Benefits and Postal Service Health Benefits 
Programs Call Letter for 2025, OPM is working with carriers to inform 
enrollees about the possible impact of the IRMAA.

L. Medicare Part B Special Enrollment Period (SEP)

    The PSRA authorized a 6-month Medicare Part B SEP that will run 
from April 1 through September 30, 2024. This SEP is codified in the 
Social Security Act and will allow enrollment in Medicare Part B for 
Postal Service annuitants who are entitled to Medicare Part A and their 
family members who are entitled to Medicare Part A and not already 
enrolled in Medicare Part B. In the interim final rule, OPM included a 
process to share information with SSA to identify individuals who may 
be eligible to enroll in Medicare Part B during the SEP.
    Medicare-eligible individuals may have several opportunities to 
sign up for Medicare. More information is available at the CMS website 
here: https://www.medicare.gov/basics/get-started-with-medicare/sign-up/when-can-i-sign-up-for-medicare. If an individual does not enroll in 
Medicare Part B at their earliest opportunity, they may be subject to a 
permanent Medicare Part B late enrollment penalty.\8\ The PSRA allows 
the Postal Service to pay any applicable Medicare Part B late 
enrollment penalty on behalf of individuals who enroll during the SEP 
in 2024. If a Medicare-eligible Postal

[[Page 37069]]

Service annuitant or covered family member not enrolled in Medicare 
Part B declines to enroll during the PSRA-authorized SEP in 2024, they 
may be subject to the Medicare late enrollment penalty if they choose 
to enroll in Medicare Part B at a later date. Such individual may also 
be eligible other SEPs due to extenuating circumstances. For example, 
Medicare Part B has an SEP for individuals impacted by an emergency or 
natural disaster.\9\
---------------------------------------------------------------------------

    \8\ https://www.medicare.gov/basics/costs/medicare-costs/avoid-penalties.
    \9\ https://www.medicare.gov/basics/get-started-with-medicare/sign-up/when-does-medicare-coverage-start#SEP.
---------------------------------------------------------------------------

    Comment: A commenter asked if OPM and SSA will include any 
additional criteria to determine who is eligible for the SEP.
    Response: OPM does not have the authority to establish eligibility 
criteria for the Medicare Part B SEP. Under the PSRA, the SEP is 
available to a Postal Service annuitant who is entitled to Medicare 
Part A and who is an annuitant as of January 1, 2024 and their family 
members who are entitled to Medicare Part A, excluding those eligible 
to enroll in Medicare under section 1818 or 1818A of the Social 
Security Act.
    Comment: A commenter requested further clarification regarding the 
SEP for PSHB, asking specifically if OPM intends to create an appeals 
process for those who believe that they are eligible for SEP but were 
misinformed or were never informed.
    Response: OPM is coordinating with SSA and the Postal Service to 
prepare for the 6-month Medicare Part B SEP. The PSRA requires that OPM 
establish a process to provide information to SSA about Postal Service 
annuitants and covered family members who may be eligible for Medicare 
Part B during the PSRA SEP. Any appeals related to an individual's 
eligibility to enroll in Medicare Part B would be handled by SSA 
according to that agency's procedures. OPM does not have the authority 
to enroll individuals in Medicare Part B or to handle appeals of SSA's 
enrollment decisions.
    Comment: A commenter requested clarification as to whether any PSHB 
plan information will be available at the beginning or during the SEP 
to allow individuals eligible to enroll in Medicare Part B during the 
SEP to consider the PSHB plans in deciding whether to enroll in Part B.
    Response: The PSRA authorized a 6-month Medicare Part B SEP that 
will run from April 1 through September 30, 2024. OPM expects to make 
PSHB premium rate information available in September 2024. PSHB plan 
benefit information, including detailed plan brochures, will be ready 
according to OPM's standard schedule for releasing such information 
before Open Season begins. Due to the plan application and contract 
negotiation schedule, there is no opportunity to make this information 
available sooner.
    Comment: A commenter asked if OPM would consider extending the SEP 
to ensure Medicare Part B decisions and PSHB decisions can be made at 
the same time.
    Response: The Medicare Part B SEP is established by statute under 
the PSRA and is administered by SSA. The authorizing language for the 
SEP, codified in the Social Security Act at section 1837(o)(1)(B) (42 
U.S.C 1395p(o)(1)(B)) states that eligible individuals ``may elect to 
be enrolled under this part during a special enrollment period during 
the 6-month period beginning on April 1, 2024.'' OPM does not have the 
legal authority to extend the Medicare Part B SEP.
    Comment: A commenter asked when individuals would be notified about 
SEP eligibility.
    Response: OPM is coordinating with SSA and the Postal Service to 
identify individuals who may be eligible to enroll in Medicare Part B 
during the 2024 SEP. In January 2024, the Postal Service mailed 
informational postcards that included information about the PSRA 
Medicare Part B SEP to Postal Service annuitants and family members who 
were not enrolled in Medicare Part B. The Postal Service mailed 
notifications to eligible individuals in March 2024.

M. OPM Administration of PSHB

    Comment: A commenter made a recommendation about the timing of the 
maximum Government contribution calculation and recommends that OPM 
release the maximum Government contribution earlier to create fair 
competition between all carriers.
    Response: In the interim final rule, OPM addressed the Postal 
Service contribution at Sec.  890.1613(b). OPM must determine the 
Government contribution consistent with the timing requirements at 5 
U.S.C. 8906 and 5 CFR 890.501. OPM will endeavor to release PSHB and 
FEHB rates as soon as possible, no later than September 2024, and in a 
manner that does not impede fair competition.

N. Allocation of Carrier Reserves

    Comment: One commenter recommended that OPM promote fair allocation 
of carrier reserves.
    Response: OPM issued Carrier Letter 2023-13 (CL 2023-13) in July 
2023 available at https://www.opm.gov/healthcare-insurance/carriers/fehb/2024/2024-04.pdf outlining a methodology to allocate FEHB plan 
reserves from FEHB plans to PSHB plans. In short, reserves will be 
allocated based on 2024 premium income attributable to the Postal 
Service and non-Postal Service populations for each plan option. OPM 
considered incorporating a risk component in the allocation of 
reserves; however, OPM determined the method outlined in CL 2023-13 is 
most consistent with current FEHB practice. As explained in CL 2023-13, 
OPM intends to use a similar approach for allocating medical loss ratio 
(MLR) credits between FEHB plans and PSHB plans offered by the same 
carrier.
    Comment: One commenter inquired about the effect of PSHB on Postal 
Service annuitants who are eligible to continue their health insurance 
plan and pay the employee share of premium out of pocket directly to 
the National Finance Center and not as a deduction from their annuity.
    Response: All payment options that are available for FEHB plans, 
including direct pay, will be available for enrollees in PSHB plans. 
Note that, if an annuitant pays both the employee share and the 
Government's share of premium, then the annuitant is not within the 
statutory definition of a Postal Service annuitant and is not subject 
to transition to a PSHB plan and will remain eligible for enrollment in 
an FEHB plan.

Regulatory Changes in This Final Rule

    OPM is amending Sec.  890.1604 in response to comments requesting 
clarification around the requirements for certain Postal Service 
annuitants and their family members to enroll in Medicare Part B, as 
discussed in the previous section. Specifically, OPM is clarifying how 
we are implementing the statutory language at 5 U.S.C. 8903c(e).
    OPM is making this change to provide more clarity as to the 
applicability of exceptions to the Medicare Part B enrollment 
requirement under 5 CFR 890.1604. The statutory language in 5 U.S.C. 
8903c(e), ``as of'' January 1, 2025, can be interpreted to either 
include or exclude events occurring on January 1, 2025. To avoid 
potential confusion and to ensure that Postal Service employees and 
annuitants can make informed decisions about their health coverage 
during important life events, OPM is revising the regulatory text to 
provide additional clarity on eligibility for the Medicare Part B 
exceptions.
    Therefore, OPM is clarifying timing aspects of several exceptions 
to the requirement to enroll in Medicare Part

[[Page 37070]]

B. Specifically, OPM is clarifying that the statutory exception at 5 
U.S.C. 8903c(e)(3)(A)(i), which applies to individuals ``as of'' 
January 1, 2025, includes individuals who are annuitants ``on or 
before'' January 1, 2025, and who were not both entitled to Medicare 
Part A and enrolled in Medicare Part B ``on'' January 1, 2025. OPM is 
making this change to ensure that the regulations are clear and 
specific when the exceptions are applicable so that all individuals can 
make informed decisions. For example, a Postal Service employee's last 
day of service is December 31, 2024. Because this individual will be an 
annuitant on January 1, 2025, the individual is eligible for an 
exception to the requirement to enroll in Medicare Part B under 5 CFR 
890.1604(d)(1)(i). This clarification also applies to employees age 64 
on or before January 1, 2025. For example, a Postal Service employee 
turning age 64 on January 1, 2025, is eligible for an exception to the 
Medicare Part B requirement under 5 CFR 890.1604(d)(1)(ii) because they 
will be age 64 on January 1, 2025. This clarification is included in 
Sec.  890.1604(d)(1)(i) and (ii).
    OPM is revising the regulatory text of Sec.  890.1604 related to 
demonstrating residency outside the United States to provide more 
operational flexibility to the Postal Service and OPM by removing the 
specific entity that will receive information about overseas residency. 
These changes are in Sec.  890.1604(d)(1)(iii) for annuitants and Sec.  
890.1604(d)(2)(ii) for family members.
    We are reserving Sec.  890.1604(c) in anticipation of future 
rulemaking.
    OPM is revising Sec.  890.1604(e) (now codified at Sec.  
890.1604(f) due to insertion of the new, reserved paragraph (c)) to 
clarify that a Postal Service annuitant or their family member who is 
required to be enrolled in Medicare Part B must promptly notify OPM or 
the Postal Service, in writing, if they choose not to enroll in or to 
disenroll from Medicare Part B as described in Sec.  890.1608(e). This 
implements the PSRA requirement codified at 5 U.S.C. 8903c(g)(3)(D) 
that OPM issue regulations allowing individuals to cancel coverage in 
writing to the Postal Service, while allowing flexibility for OPM to 
also take these cancellations in writing.
    Under part 890, OPM has imposed similar responsibilities on 
individuals to inform OPM of any changes that may affect their or their 
family member's eligibility or coverage, for instance, if an individual 
is covered under another insurance plan. (See 5 CFR 890.302(a)(2)(ii), 
``To ensure that no person receives benefits under more than one 
enrollment, each enrollee must promptly notify the insurance carrier as 
to which person(s) will be covered under his or her enrollment; see 
also 5 CFR 890.1605(d)(2) ``The enrollee must affirmatively notify the 
PSHB Carrier, employing office, or OPM of any changes to members of 
family;'' and Sec.  890.808(b)(4), ``The former spouse will be required 
to certify that he or she meets the requirements . . . and that he or 
she will notify the employing office within 31 days of an event that 
results in failure to meet one or more of the requirements.'').
    OPM is correcting a typo in Sec.  890.1606(e) by removing the word 
``the'' before ``January 1 of the next year.'' This correction does not 
affect the PSHB Program or policy.
    The changes outlined in this section do not affect OPM's estimation 
of the regulatory impact of the PSHB Program.

Regulatory Impact Analysis

A. Need for Regulatory Action

    This final rule follows an interim final rule implementing sections 
101 and 102 of the PSRA, which direct OPM to establish the PSHB Program 
for Postal Service employees, annuitants, and their eligible family 
members. These sections of the PSRA amend 5 U.S.C. chapter 89, which 
identifies: the individuals who, starting in January 2025, will be 
eligible to enroll in a PSHB plan and may not remain in an FEHB plan 
under their Postal Service employment or retirement; those who must 
enroll in Medicare Part B to maintain enrollment in PSHB; the health 
benefits plans that should be offered to the greatest extent 
practicable; PSHB plan requirements; the need for automatic enrollment 
in certain circumstances; contributions by the Postal Service; how 
reserves for PSHB plans are to be structured; requirements for 
information sharing; and other requirements necessary for PSHB Program 
implementation.
    The PSHB Program is contained within chapter 89, which governs the 
FEHB Program generally. The PSRA confirms that PSHB plans are subject 
to the same provisions as FEHB plans unless they are inconsistent with 
the PSRA. OPM is given the discretion to make such determinations.
    Section 101 of the PSRA, codified at 5 U.S.C. 8903c, directs OPM to 
issue regulations establishing the PSHB Program and gives OPM the 
discretion to include ``any provisions necessary to implement this 
section.'' Section 8903c(g) addresses the topics for which Congress 
specifically instructed OPM to promulgate rules, clarifies how existing 
rules for the FEHB Program will apply to the PSHB Program, and provides 
new requirements regarding eligibility and enrollment, information 
sharing with other agencies, PSHB Carrier requirements, and other rules 
that will govern the PSHB Program. This rule finalizes the provisions 
of the interim final rule and provides transparency into how OPM is 
implementing the PSRA, memorializes processes and procedures that will 
apply, and give individuals who will be impacted as much information 
about the PSHB Program as early as possible.

B. Summary of Impacts

    Overall, the PSRA and the PSHB Program, through this final rule, 
promote the financial stability and long-term viability of the Postal 
Service, which provides a crucial role for society with respect to 
communication, commerce, and political participation. The Postal 
Service was established as a basic and fundamental service for the 
public to provide prompt, reliable, and efficient nationwide postal 
services, including mail and package delivery. With the Postal 
Service's wide reach in providing essential services to nearly everyone 
in the U.S. in some form, its long-term stability is crucial. The PSRA 
helps improve the Postal Service's financial position. Ultimately, a 
financially sustainable Postal Service ensures that it can continue to 
fulfill its universal service mission and make the investments needed 
to support service excellence and network efficiency and to introduce 
enhanced products and services for its customers.
    This societal benefit will result primarily from the removal of the 
prefunding obligation related to future retiree health benefits and the 
shifting of insurance coverage costs away from the Postal Service to 
Medicare, and ultimately to taxpayers, who together with beneficiaries, 
fund Medicare. The Postal Service is generally self-funded, and the 
Postal Service, along with its employees, pay taxes to fund Medicare 
each year, but many of its employees do not enroll in Medicare after 
they retire. Therefore, unlike other employers who offer retiree health 
benefits and pay Medicare taxes, the Postal Service has not been able 
to ensure that its retiree health care program fully utilizes Medicare. 
Enabling the Postal Service to generally require its annuitants who are 
entitled to Medicare Part A to enroll in Medicare Part B when eligible 
ensures that the Postal Service can utilize Medicare in a similar 
manner as other employers, which strengthens its financial position and 
therefore its ability to continue its critical public service mission.

[[Page 37071]]

    From a societal perspective, the primary costs associated with the 
implementation of the PSHB Program will be administrative and 
operational costs necessary to initiate and maintain the program, 
including development of information technology (IT) systems, education 
and outreach, and additional administrative staffing for the design, 
maintenance, and oversight of the increased quantity of health plans. 
These costs will be largest in the initial start-up phase and will be 
borne by Federal agencies, as well as carriers offering both FEHB plans 
and PSHB plans. The PSRA appropriated $94 million in implementation 
funding for OPM and other Federal agencies for these administrative and 
operational costs. Pursuant to section 101(d)(4) of the PSRA, the 
Postal Service deposited the appropriated funds into the Treasury as a 
miscellaneous receipt from the Postal Service Fund in fiscal year 2022.
    Most of the impact from the PSRA and this regulation will occur via 
distributional effects. The principal transfer will be the shifting of 
premium costs from the Postal Service and PSHB members to Medicare as a 
result of the Medicare Part B enrollment requirements and the 
integration of Medicare Part D coverage into PSHB plans. This Part D 
integration could also result in a portion of costs being transferred 
to the pharmaceutical industry via the statutory manufacturer discounts 
provided to Part D, in conjunction with discounts negotiated with 
individual FEHB plans. Further, integrating Part D coverage into PSHB 
plans may result in a transfer of costs to carriers, particularly those 
with little Medicare experience, who may need to contract with third-
party vendors to assist with integration, increasing administrative 
costs. The segmentation of the current FEHB risk pool will result in 
premiums reflective of each separate risk pool's health care 
utilization and costs, which are estimated to be higher for Postal 
Service enrollees compared with non-postal.\10\ This may result in a 
slight reduction in FEHB premiums following implementation.
---------------------------------------------------------------------------

    \10\ H.R. 3076, Postal Service Reform Act of 2021--Cost 
Estimate, Congressional Budget Office (CBO) (2021). https://www.cbo.gov/system/files/2021-07/hr3076.pdf.
---------------------------------------------------------------------------

    Ultimately, the total costs and benefits associated with the PSRA 
and this final rule are highly uncertain because enrollee and carrier 
reactions to the effects on Medicare, the FEHB Program, and the new 
PSHB Program are unknown. In accordance with Office of Management and 
Budget (OMB) Circular A-4, the following sections outline the benefits, 
costs, and transfers associated with section 101 of the PSRA and this 
final rule in more detail. Where specific costs were quantifiable, they 
are included in table 1. As described below, the rule is expected to 
result in estimated average annualized costs of $50.6 million at a 3% 
discount rate and $50.2 million at a 7% discount rate over the eleven-
year period of 2022-2032. In addition, the rule is expected to result 
in estimated average annualized net transfers from the Postal Service 
to Medicare of $347 million at a 3% discount rate and $343.3 million at 
a 7% discount rate over the eight-year period of 2025-2032.

C. Regulatory Baseline

    The regulatory baseline for the final rule is the FEHB Program as 
it is currently administered, as the eligible population under both 
programs will largely remain the same. Postal Service employees, Postal 
Service annuitants, and their eligible family members are currently 
eligible for FEHB coverage. This population totals approximately 
915,000 enrollees and 1.9 million total covered lives. There are nearly 
700,000 Postal Service annuitants, including about 123,000 survivor 
annuitants. Of the Postal Service annuitants, about 500,000 are 
currently enrolled in the FEHB Program. A majority of these are Self-
Only enrollments while 200,000 are Self Plus One or Self and Family 
enrollments.
    Beginning in the 2025 plan year, the PSHB Program will be the only 
health benefits program available through the Postal Service to Postal 
Service employees, Postal Service annuitants, and their eligible family 
members. Unless they meet a specified exception, as previously 
outlined, Postal Service Medicare covered annuitants and their Medicare 
covered members of family will be required to enroll in Part B or will 
risk losing their eligibility to continue enrollment in the PSHB 
Program. Once an annuitant loses eligibility for enrollment in PSHB, it 
cannot be reinstated. As with the regulatory baseline, those covered by 
a PSHB plan will also be responsible for Medicare premiums.
    Currently, Postal Service annuitants and their family members who 
are participating in FEHB are not required to enroll in Medicare Part 
B, regardless of Medicare eligibility status. Based on 2021 data, OPM 
estimates that 75% of Postal Service annuitants aged 65 and over have 
enrolled in Medicare Part B. There will be approximately 121,000 Postal 
Service annuitants and their eligible family members eligible to enroll 
in Part B during the six-month SEP beginning April 1, 2024.
    Prior to the PSRA, the Postal Service paid the Government 
contribution for all Postal Service employees and annuitants enrolled 
in FEHB. The Government contribution was paid directly by the Postal 
Service for employees and from the PSRHBF for annuitants. In addition, 
the Postal Service was required under the Postal Accountability and 
Enhancement Act of 2006 to fully prefund retiree health benefits. 
Section 102 of the PSRA (``The USPS Fairness Act'') amended 5 U.S.C. 
8909a to remove this prefunding requirement and replace it with a new 
calculation for annual payments into the PSRHBF beginning in 2026. The 
law maintains the requirement that the Postal Service continue to pay 
the Government contribution--directly for employees or through the 
PSRHBF for annuitants. The Postal Service is also required to pay the 
Medicare Part B late enrollment penalty for any Medicare covered 
annuitants and members of family who enroll in Part B during the 2024 
SEP. As with the regulatory baseline, there is no Government 
contribution towards Part B premiums.
    Carriers that participate in the PSHB Program will generally be 
subject to the same minimum requirements for plan design that exist for 
FEHB plans under the FEHB Program, but PSHB plans will be required to 
integrate Part D prescription drug benefits for Postal Service Medicare 
covered annuitants and Medicare covered members of family. In addition, 
carriers that are offering both PSHB plans and FEHB plans will need to 
offer equivalent benefits and cost sharing in the initial year, other 
than as needed to integrate Part D coverage.

D. Benefits of Regulatory Action and Implementation

    The interim final rule implemented the requirements of the PSRA. 
That rule built on the statute by offering clarity and efficient 
implementation. The timely promulgation of the interim final rule 
allowed other Federal agencies, PSHB Carriers, and enrollees to begin 
necessary education and deliberation. This final rule corrects a 
typographic error in the interim final rule and clarifies some 
exceptions to the Medicare Part B enrollment requirement.
    The Postal Service will benefit from fewer costs because of the 
removal of the past-due pre-funding payments and future pre-funding 
obligations related to the retiree health benefits costs and from 
having a retiree health benefits program in which more annuitants are

[[Page 37072]]

enrolled in Medicare. With fewer costs for retiree health benefits, the 
Postal Service will be better positioned to improve its financial 
stability. A more financially stable Postal Service would benefit the 
country overall. The Postal Service plays a critical role in the 
nation's communications, commerce, and voting infrastructure. In rural 
and remote communities especially, many of which lack adequate 
broadband access and rely heavily on mail service, the Postal Service's 
universal service mandate ensures crucial access to essentials 
including medicine and food.\11\
---------------------------------------------------------------------------

    \11\ The USPS and Rural America, Institute for Policy Studies 
(2020), https://inequality.org/wp-content/uploads/2020/04/IPS-policy-brief-USPS-Rural-America2.pdf.
---------------------------------------------------------------------------

    Within these communities, the Postal Service is often the only 
delivery service carrier with a door-to-door network and is heavily 
relied on by other delivery service carriers to provide ``last mile'' 
deliveries. According to the Postal Service Office of Inspector 
General, the Postal Service provided vital services during the COVID-19 
pandemic, including the delivery of critical items such as medications, 
stimulus payments, election ballots, and record levels of home package 
deliveries.\12\ A Government Accountability Office Report found that 
the Postal Service experienced a 9 percent decline in total mail volume 
in 2020 when compared to 2019, but package volume rose by 32 percent 
over the same period.\13\ This underscores the importance of a stable 
Postal Service to the Nation.
---------------------------------------------------------------------------

    \12\ Audit Report Mail Service During the Early Stages of the 
COVID-19 Pandemic, USPS Office of Inspector General (Jan. 2021), 
https://www.uspsoig.gov/document/mail-service-during-early-stages-covid-19-pandemic.
    \13\ U.S. Postal Service: Volume, Performance, and Financial 
Changes since the Onset of the COVID-19 Pandemic, Government 
Accountability Office Publication 21-261 (2021), https://www.gao.gov/products/gao-21-261.
---------------------------------------------------------------------------

    With greater financial stability for the Postal Service, current 
Postal Service employees, Postal Service annuitants, and their family 
members will also see greater stability in their future health 
insurance coverage and other benefits.
    Medicare covered annuitants may be eligible, depending on whether 
they meet statutory income and resource thresholds, for the low-income 
cost-sharing subsidies and premium subsidies that are part of the 
Medicare part D program, under section 1860D-14 of the Social Security 
Act.

E. Costs of Regulatory Action and Implementation

    Implementation of the PSRA and this final rule necessitates the 
administration and oversight of new health benefits plans, including 
substantial member education and outreach efforts, additional 
interagency coordination and the creation of new IT processes to 
satisfy new statutory eligibility and enrollment requirements, creating 
startup and ongoing costs to agencies, enrollees, and carriers. Table 1 
summarizes the assessment of the administrative costs associated with 
this regulatory action.
    This table illustrates OPM's best estimate of costs, including 
startup and ongoing maintenance costs given the information available 
from OPM and other agencies at this time. The costs are still subject 
to modification as the program implementation continues. For the 
purposes of this regulatory impact assessment (RIA), Startup Costs were 
defined as upfront, non-recurring costs associated with the PSRA 
implementation, including regulatory review costs, and are represented 
as aggregate total expenditures for the years leading up to and 
immediately following the PSHB implementation. Ongoing Costs were 
defined as recurring costs (e.g., salary costs) beginning in the years 
preceding or immediately following the PSRA implementation and expected 
to persist through at least FY2032. All ongoing costs are presented as 
fully loaded, annual totals. Given that onboarding and development will 
occur during the run-up period, ongoing costs are expected to gradually 
ramp up between FY2022-FY2025 and become fully loaded by the beginning 
of FY2026. These estimates for ongoing costs are preliminary, and 
funding for ongoing costs would be subject to the annual budget 
process.

           Table 1--Estimated Administrative and Implementation Costs Associated With This Final Rule
----------------------------------------------------------------------------------------------------------------
                                                                                                  Ongoing costs
                               Agency/category                                  Startup costs          \1\
----------------------------------------------------------------------------------------------------------------
OPM \2\......................................................................      $81,680,944       $49,315,703
    Personnel................................................................  ...............        24,434,476
    IT and IT Contracts......................................................       68,307,195        20,961,759
    Non-IT Contracts.........................................................        3,600,000         1,735,695
    General (Supplies, Equipment, Communications, Training)..................        9,773,749         2,183,773
Postal Service...............................................................       11,500,000         1,425,000
    Implementation costs (updating systems, developing training materials,          11,500,000  ................
     etc.)...................................................................
    Personnel (4 Program and 2 IT full-time employees (FTEs))................  ...............          $925,000
    Communications...........................................................  ...............           500,000
Department of Labor..........................................................           72,500             2,000
    Training and Communication...............................................           72,500  ................
    Additional support and communication for separate Open Season............  ...............             2,000
Department of Veterans Affairs...............................................          395,000  ................
    IT Contracts.............................................................          395,000  ................
Social Security Administration...............................................        7,327,764           407,881
    Staffing and Overhead....................................................        5,161,138           407,881
    System Updates...........................................................        2,166,626  ................
    Ongoing Data Exchange....................................................  ...............               TBD
Indian Health Service........................................................  ...............  ................
Carriers.....................................................................          Unknown           Unknown
                                                                              ----------------------------------
        Total Known Administrative and Implementation Costs..................      100,976,208        51,150,584
----------------------------------------------------------------------------------------------------------------
\1\ Ongoing costs represented as fully loaded annual costs beginning in FY2026 and remaining consistent through
  at least FY2032. Given that development and onboarding will occur during run-up period to PSHB implementation,
  ongoing costs will likely cross multiple fiscal periods and gradually ramp up between FY2022 and FY2025,
  although all costs are expected to become fully realized beginning in FY2026. All costs are represented based
  on 2022 dollars and pay scales and are subject to change based on PSHB enrollment and carrier participation
  following implementation.

[[Page 37073]]

 
\2\ Table 1 does not utilize estimates from OPM's FY 2025 Congressional Budget Justification (CBJ). The FY 2025
  CBJ estimates would reflect $80.1 million startup and $51.7 million ongoing costs.

    Table 2 depicts the projected allocation of total startup and 
ongoing costs by year for fiscal years (FY) 2022 through 2032. Given 
that operations and maintenance activities are occurring in the run-up 
period, albeit at a different intensity, and a portion of start-up 
costs were allocated for go-live and post go-live support (e.g., call 
centers), the expected costs for FY2022-FY2025 are composed of both 
startup and ongoing costs. Beginning in FY2026, expected costs are all 
attributable to recurring operational and maintenance activities.

                           Table 2--Projected Total Administrative and Implementation Costs by Year--All Agencies, FY2022-2032
                                                                      [$ Millions]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                   Type of Cost \1\                     FY2022   FY2023   FY2024   FY2025   FY2026   FY2027   FY2028   FY2029   FY2030   FY2031   FY2032
--------------------------------------------------------------------------------------------------------------------------------------------------------
Startup Costs........................................    $3.68   $48.49   $46.74    $2.06  .......  .......  .......  .......  .......  .......  .......
Recurring Costs......................................     3.69    17.98    28.39    50.47    51.15    51.15    51.15    51.15    51.15    51.15    51.15
                                                      --------------------------------------------------------------------------------------------------
    Total Costs......................................     7.38    66.47    75.14    52.53    51.15    51.15    51.15    51.15    51.15    51.15    51.15
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Annual cost projections are in terms of 2022 dollars and pay scales and do not reflect any adjustments for inflation, discounting, staffing
  promotions, etc. This table is intended only to summarize the expected timing of the costs outlined in table 1 and is not meant to reflect budgetary
  expectations.

Detailed Startup and Ongoing Cost Related to the PSRA

    The following sections contain underlying details for the cost 
estimates presented in table 1, including, where appropriate, the 
assumptions and methodology used by individual agencies in preparing 
them. For the purposes of this regulatory impact assessment (RIA), 
Startup Costs were defined as upfront, non-recurring costs associated 
with the PSRA implementation, including regulatory review costs, and 
are represented as aggregate total expenditures for the years leading 
up to and immediately following the PSHB implementation. Ongoing Costs 
were defined as recurring costs (e.g., salary costs) beginning in the 
years preceding or immediately following the PSRA implementation and 
expected to persist through at least FY2032. All ongoing costs are 
presented as fully loaded, annual totals. These estimates for ongoing 
costs are preliminary, and funding for ongoing costs would be subject 
to the annual budget process.
OPM
    Startup Costs: OPM estimates a total of $81.6 million in start-up 
costs for the development and administration of the PSHB Program. This 
estimate includes $68.3 million of IT and IT contract costs for system 
development and updates, including the creation of the centralized 
enrollment system. The centralized enrollment system will consolidate 
data from multiple agencies, including the Postal Service, SSA, CMS, 
IHS, and VA, to create a centralized platform for verifying eligibility 
and processing enrollments. While a centralized enrollment system was 
not mandated by the PSRA, it will create efficiencies through the 
elimination of decentralized duplicative and manual processes and 
improve interagency communication. It is expected to yield long term 
cost-savings that will help offset significant upfront costs of 
development. Additional IT and IT contract costs are anticipated for 
updating existing systems, including Benefits Plus and the audit 
resolution tracking system, and developing new resources to improve 
customer experience, including the creation of an enrollment Decision 
Support Tool.
    The remaining $13.4 million in estimated startup costs include $3.6 
million for non-IT contractor support and regulatory review throughout 
implementation and $9.8 million for additional supplies, equipment, 
training, and communication related to the PSRA. All costs were 
estimated based on 2022 dollars and contract rates.
    Ongoing Costs: As this is a new program, additional staffing and 
resources will be essential to establish and administer the PSHB. OPM 
estimates a total of $49.3 million in annual, ongoing costs related to 
the PSRA. This estimate consists of $24.4 million in annual salary 
costs for additional full-time employees (FTEs) necessary for contract 
oversight, program operations, systems maintenance, customer service, 
policy support, and general support. Additionally, OPM anticipates $21 
million in annual IT and IT contract costs for ongoing system 
development and maintenance support, and an additional $1.7 million in 
annual, non-IT contract costs related to oversight and management of 
the increased number of health benefits plans within the PSHB and FEHB 
populations. Finally, OPM estimates an additional $2.2 million in 
annual costs for training, communications and overhead related to the 
PSHB program and the annual Open Season period.
    The above costs are represented as fully loaded annual projections 
based on 2022 dollars. Salaries and overhead (benefits, equipment, 
etc.) were based on 2022 pay tables and Washington, DC metro area 
locality adjustment, an overhead percentage of 34%, and award and 
transit subsidies. This adjustment factor was used in lieu of a 
standard wage rate to more accurately reflect the historical trends in 
benefit costs for OPM employees, based on the anticipated locations and 
experience-levels of the aforementioned positions. Additionally, the 
wage rate is meant to capture overhead costs which were already 
represented in separate categories. All recurring costs are projected 
to be fully loaded beginning in FY2025 and to persist through at least 
FY2032. Given that development and onboarding will occur in the run-up 
to the PSHB implementation, OPM anticipates that annual costs related 
to the PSRA will increase steadily between FY2022 and FY2024.
Postal Service
    Startup Costs: The Postal Service estimates $11.5 million in start-
up costs for updating systems, development of training materials, and 
the development and maintenance of the Health Benefits Education 
Program. These estimates were calculated based on anticipated system 
configuration and assumed effort level and are subject to change based 
on additional requirements that may be required of the Postal Service.
    Ongoing Costs: In preparation for and following implementation of 
the PSHB, the Postal Service estimates an additional $1.4 million in 
annual costs for increased staffing and communication needs. 
Specifically, the Postal Service estimates $0.9 million in

[[Page 37074]]

salary costs for 6 additional FTEs, including 4 Program and 2 IT FTEs, 
and an additional $0.5 million towards increased outreach, education, 
and communication. Given the general retirement eligibility ages in 
comparison to the Medicare eligibility age, there will be a 3- to-5-
year gap between the time of retirement until Medicare enrollment. It 
will be critical during the initial implementation of the Program and 
for the subsequent 5-10 years to send constant communications regarding 
plan options and healthcare costs, along with information about 
Medicare Part B eligibility periods and how and when to enroll. 
Additional resources will also be needed to monitor enrollee compliance 
for the Medicare Part B enrollment exceptions requirements on an 
ongoing basis. Although recruitment, onboarding, and development costs 
will gradually ramp up preceding implementation, the ongoing costs are 
expected to become fully realized beginning in FY25 and will likely 
persist for a period of 5-10 years following implementation, at which 
point the Postal Service will reevaluate resourcing needs. All costs 
were estimated in terms of 2022 dollars and pay scales.
Department of Labor--Office of Workers' Compensation Programs (OWCP)
    Startup Costs: OWCP estimates a total of $72,500 in startup costs 
related to the PSRA. These include an estimated $50,000 in staff time 
for training on the PSRA changes and implementation, and $22,500 for 
pre- and post-implementation mailings to approximately 12,500 claimants 
and beneficiaries regarding changes to health benefit coverage. All 
costs were estimated based on 2022 dollars and pay scales.
    Ongoing Costs: Beginning in 2025, OWCP estimates an additional 
$2,000 of annual, recurring costs for the creation and distribution of 
mailing announcements and customer service response letters related to 
the PSHB Open Season.
Department of Veterans Affairs (VA)
    Startup Costs: The VA anticipates startup costs for system updates 
and development to meet the information sharing requirements outlined 
in Sec.  890.1612 of the regulation. In total, the VA estimates 
$395,000 worth of IT contractor development work will be needed to 
integrate the existing Veteran Verification process with the 
centralized Enrollment and Eligibility System. The estimated costs are 
based on the anticipated number of scrum teams and sprints required to 
build this functionality and the projected firm-fixed-price contract 
rates. All costs were estimated in 2022 dollars.
Social Security Administration (SSA)
    Startup Costs: SSA estimates $7.3 million in startup costs for 
staffing support and system updates related to the PSHB implementation. 
These include an estimated $5.16 million in staffing costs for project 
management, policy and business process development, and additional 
technician support for the initial SEP. Additionally, SSA anticipates 
$2.17 million in up-front costs for system enhancements that will be 
necessary to support data exchanges and the initial SEP.
    Ongoing Costs: SSA anticipates approximately 3 FTEs will be needed 
to support the PSHB following implementation, with estimated salary and 
overhead costs totaling $408,000 annually. These costs are based on the 
anticipated workload for processing annual enrollments and exceptions 
related to the Medicare coverage requirements for postal annuitants and 
family members. Additionally, SSA anticipates a small cost for the 
ongoing data exchange with OPM, although this cost cannot be determined 
until the data exchange is completed and will ultimately be reimbursed 
by OPM.
Indian Health Service
    Indian Health Service (IHS) estimates de minimis costs for PSHB 
implementation. This is based upon the assumption that self-attestation 
will be utilized for Postal Service annuitants and family members to 
provide proof of eligibility for IHS health services for purposes of an 
exception to the Medicare Part B requirement.
Carriers (Not Quantified)
    Carriers will also have startup costs to participate in the PSHB 
Program, although the magnitude of these costs is unknown and will 
likely vary by carrier. Based on the 2021 FEHB headcount, OPM estimates 
that 41 FEHB Carriers provide coverage to Postal Service enrollees, and 
they will therefore be impacted by implementation of the PSHB Program. 
OPM has received applications for participation in the PSHB Program 
from 36 carriers, all of which currently participate in the FEHB 
Program. These carriers are expected to incur additional costs 
associated with the creation and administration of separate PSHB plans. 
These costs will likely be incurred for internal training, updating 
enrollment processes and information systems, updating financial 
systems, and development of proposals specific to the PSHB Program.
    In developing plan options for the PSHB, carriers will not simply 
be able to duplicate FEHB plan designs as the requirement to integrate 
Part D coverage is substantively different. While large carriers may be 
able to leverage existing experience integrating Medicare Part D 
coverage in their other books of business, the need to apply and submit 
a different PSHB proposal will be a cost to carriers. PSHB Carriers 
will continue to incur annual costs to offer plans as there will need 
to be two sets of proposals, contract negotiations, and enrollment 
processing for carriers offering both PSHB and FEHB plans. This will 
likely create additional staffing costs on an ongoing basis.
Postal Service Annuitants (Not Quantified)
    Existing and future Postal Service annuitants may incur additional 
costs in navigating both Medicare and PSHB enrollment decisions, 
particularly in the initial years following implementation. Prior to 
the PSHB Program Open Season, a six-month SEP will be offered to 
provide Postal Service annuitants and their family members who are 
entitled to Medicare Part A with the opportunity to enroll in Medicare 
Part B. This enrollment window will take place before PSHB benefits and 
premiums are set, meaning participants will not know the details of the 
PSHB premiums when making their Medicare election during the SEP. This 
could create additional burden and confusion for participants and may 
result in suboptimal enrollment decisions.
    As with the training and communications costs for the first year, 
Postal Service employees may continue to need training as they approach 
retirement. They may generally experience new costs associated with 
interacting with a new set of options, especially if they have already 
planned to take certain actions upon retirement which are now 
infeasible under the PSRA. Additionally, as is true currently under 
FEHB, retirement will not be a PSHB qualifying life event. Postal 
Service annuitants will need to understand how their PSHB plan election 
will work with the Part B requirement upon retirement or wait for Open 
Season alignment in both Medicare and the PSHB to make a suitable 
choice for their health care insurance needs.

Transfers

    The main impact of section 101 of the PSRA and these rules will be 
a transfer of costs from the Postal Service to

[[Page 37075]]

Medicare, which is funded by taxpayers, including the Postal Service 
and its beneficiaries. Additionally, a portion of prescription drug 
costs will likely be transferred to pharmaceutical manufacturers due to 
applicable point-of-sale discounts received by Medicare Part D 
enrollees. Table 3 summarizes the projected changes in annual premium 
expenditures for each of the primary stakeholders. These projections 
were obtained from separate, independent analyses performed by CMS, the 
Postal Service, and OPM, which were produced at different points in 
time and with different underlying methods and assumptions and are 
therefore intended to summarize the directional transfer of costs among 
the different stakeholders, not the overall budgetary impacts of the 
PSRA. Additionally, all estimates were based on FEHB and Medicare 
coverage as of 2023, and do not incorporate any changes expected from 
the Inflation Reduction Act or Carrier Letter 2023-02.\14\ Details on 
the methods and assumptions utilized by each agency are provided in the 
table 3 footnotes.
---------------------------------------------------------------------------

    \14\ FEHB Program Carrier Letter Number 2023-02, FEHB and 
Medicare Part D Prescription Drug Coordination (published January 
25, 2023), available at https://www.opm.gov/healthcare-insurance/carriers/fehb/2023/2023-02.pdf.

                                                              Table 3--Net Transfer Effects
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                             Projected Change in Annual Coverage Costs Due to PSRA ($ Billions)
           Agency/Outlay           ---------------------------------------------------------------------------------------------------------------------
                                     FY22    FY23    FY24     FY25     FY26     FY27     FY28     FY29     FY30     FY31     FY32    FY23-27    FY23-32
--------------------------------------------------------------------------------------------------------------------------------------------------------
CMS \1\...........................    0.00    0.00    0.00     0.50     0.76     0.92     1.11     1.16     1.35     1.53     1.73       2.18       9.06
    Part B, net of premium \a\....    0.00    0.00    0.00     0.09     0.18     0.24     0.31     0.39     0.47     0.57     0.68       0.51       2.93
    Part D, net of premium and        0.00    0.00    0.00     0.41     0.58     0.68     0.80     0.77     0.88     0.96     1.05       1.67       6.13
     clawback \b\.................
USPS \2\..........................    0.00    0.00    0.00    -0.30    -0.30    -0.30    -0.30    -0.40    -0.40    -0.40    -0.40      -0.90      -2.80
    USPS share of employee            0.00    0.00    0.00    -0.30    -0.30    -0.30    -0.30    -0.40    -0.40    -0.40    -0.40      -0.90      -2.80
     premiums.....................
PSRHBF Annuitant Premiums \3\.....    0.00    0.00    0.00    -0.17    -0.23    -0.29    -0.36    -0.45    -0.49    -0.53    -0.58      -0.69      -3.10
    PSRHBF Share of Annuitant         0.00    0.00    0.00    -0.17    -0.23    -0.29    -0.36    -0.45    -0.49    -0.53    -0.58      -0.69      -3.10
     Premiums.....................
FEHB and Federal Share USPS           0.00    0.00    0.00    -0.09    -0.09    -0.10    -0.10    -0.10    -0.11    -0.11    -0.12      -0.28      -0.83
 Premiums \3\.....................
    Payments for NP annuitant         0.00    0.00    0.00    -0.06    -0.07    -0.07    -0.07    -0.08    -0.08    -0.09    -0.09      -0.20      -0.61
     premiums.....................
    Federal Share of USPS             0.00    0.00    0.00    -0.03    -0.03    -0.03    -0.03    -0.03    -0.03    -0.03    -0.03      -0.08      -0.21
     Annuitant Premiums...........
Employee and Annuitant Share of       0.00    0.00    0.00    -0.26    -0.26    -0.25    -0.25    -0.25    -0.25    -0.24    -0.23      -0.76      -1.98
 Premiums.........................
    Postal employee share PSHB        0.00    0.00    0.00    -0.10    -0.11    -0.12    -0.13    -0.14    -0.15    -0.16    -0.17      -0.34      -1.09
     premiums \2\.................
    Postal annuitants share PSHB      0.00    0.00    0.00    -0.11    -0.12    -0.14    -0.15    -0.16    -0.17    -0.18    -0.19      -0.37      -1.22
     premiums \2\.................
    Non-Postal employee share FEHB    0.00    0.00    0.00    -0.04    -0.04    -0.04    -0.04    -0.05    -0.05    -0.05    -0.05      -0.12      -0.36
     premiums \3\.................
    Non-Postal annuitant share        0.00    0.00    0.00    -0.03    -0.03    -0.03    -0.03    -0.04    -0.04    -0.04    -0.04      -0.09      -0.28
     FEHB premiums \3\............
    Postal annuitant premiums for     0.00    0.00    0.00     0.03     0.05     0.08     0.11     0.13     0.16     0.19     0.23       0.16       0.98
     Medicare B \1a\..............
--------------------------------------------------------------------------------------------------------------------------------------------------------
The estimated costs in this table were aggregated from multiple, independent analyses conducted by separate agencies, and are intended only to represent
  the directional flow of costs between various stakeholders. Due to the differences in assumptions and methodology employed by each agency (as detailed
  below), the cumulative impacts represented in this table do not directly align with the general expectation, as detailed in the narrative below, that
  aggregate premium payments will be lower post-PSRA due to the transfer of costs to drug manufacturers via mandatory Part D discounts. All estimates
  are based on coverage provisions as of 2023 and do not reflect expected changes to pharmaceutical coverage from the Inflation Reduction Act or Carrier
  Letter Number 2023-04, the 2023 FEHB Call Letter.
Sources and methodology:
\1\ Projected Medicare costs for additional Part B and Part D enrollment were provided by CMS.
\a\ Part B projections were based on an assumption that about 7,000 new retirees plus spouses would enroll in Part B in 2025, and growth would be
  consistent with aged enrollment. Additionally, CMS assumed that roughly 14,000 existing retirees would enroll in 2025, which would degrade over time
  due to deaths. Expected costs and premiums for additional enrollees were assumed to be consistent with current average Part B beneficiaries.
\b\ CMS estimated additional Part D costs based on projected annual headcounts of Postal Service annuitants. Annual headcounts were estimated using the
  2021 Postal Service annuitant enrollment total (approximately 515,000) and applying an annual growth rate based on the number of new postal retirees
  in 2021. Growth estimates were trended by the projected annual growth in overall Part A and/or Part B enrollment and were decremented yearly by the
  annual mortality rates from SSA for ages 70-75. Using this methodology, CMS estimated that approximately 603,000 postal retirees would join Part D in
  2025 and that this population would grow to 797,000 by 2032. To project annual Part D spending on Postal retirees, CMS assumed a 90/10 split between
  PDP-EGWP and MAPD-EGWP, and annual costs consistent with current beneficiaries in each of these enrollment categories.
\2\ Based on estimates provided by USPS actuaries and budget analysts. Projected savings on PSHB premiums are based on the expected reduction in the
  portion of retirees' medical costs that will be paid by PSHB plans, which is expected to lower overall costs in the combined pool of annuitants and
  employees and reduce premiums. USPS assumed that 30% of grandfathered annuitants would enroll in Part B during the SEP, resulting in 30,000 new
  enrollments in 2025. Annual projections for current and annuitant Postal enrollee populations were based on mortality and retirement projections for
  the postal population, which were developed by OPM.
\3\ Estimates from OPM Office of Administration (OA) Budget Summary as of January 2023. Assumed 30% of grandfathered annuitants and family members would
  join during SEP and stable population of total annuitants from 2025-2032 (annual new retirees + family members [ap] deaths in Postal annuitant
  population). Differential costs of FEHB and PSHB population was estimated using age distribution in the two populations, which skews slightly higher
  for Postal, and historical average costs by age band for the joint FEHB population. OA estimates a 5.8% reduction in average PSHB premiums beginning
  in 2025, which is attributed to the Part B and Part D requirements, and a 0.4% reduction in average FEHB premiums. Annual projections assumed a 4.8%
  medical inflation rate.

    The mandatory Medicare Part B enrollment for all future Postal 
Service Medicare covered annuitants enrolled in PSHB starting in 2025, 
as well as the optional Part B enrollment for current annuitants who 
are entitled to Part A, will shift a portion of Government share of 
premium costs for these individuals away from the Postal Service and 
will shift some of their healthcare costs to Medicare.
    Medicare Part B enrollment and the shift of healthcare costs to 
Medicare will lower the aggregate costs among the PSHB population as 
Medicare will cover a larger portion of healthcare costs for Postal 
Service annuitants and family members that would have previously been 
covered by a plan. Given that premiums are based on average per member 
costs of the combined pool of

[[Page 37076]]

annuitants and employees, this will likely result in lower premiums for 
PSHB plans compared to current FEHB premium amounts. This will reduce 
costs for the Postal Service and Postal Service employees. Currently in 
FEHB, approximately 75% of retirees from the Postal Service are 
enrolled in Medicare Part B and pay the Part B premium. Some of the 25% 
of the retirees from the Postal Service without Medicare Part B may 
decide to enroll in Part B to coordinate with their PSHB coverage that 
starts in 2025. Those individuals and their family members will incur 
an increased cost for Part B premium that they otherwise would not 
incur if the retiree chose not to enroll in Part B. Because these 
individuals will ultimately be subject to premiums for both Medicare 
and PSHB plans, on net their premiums may be higher than FEHB premiums. 
At the same time, being covered by Medicare in conjunction with a PSHB 
plan may also reduce out-of-pocket expenses (e.g., co-payments and co-
insurance) for Postal Service annuitants compared to those that would 
otherwise have been incurred. In addition, because Medicare will pay 
primary for the costs of medical coverage, for those enrolled in Part 
B, costs of coverage are expected to be lower for the PSHB Program and 
could result in lower PSHB premiums than they would have been without 
the integration of Medicare. Furthermore, we anticipate that some PSHB 
plans will reimburse all or part of Part B premiums, as is currently 
the case with some FEHB plans.
    As required in the PSRA, the Postal Service will need to pay to HHS 
the monthly late enrollment penalties for any Medicare Part B 
enrollments that occur during the 2024 SEP. These late enrollment 
penalties are assessed to enrollees as a monthly increase in Medicare 
Part B premiums. We estimate that approximately 100,000 Postal Service 
annuitant aged 65+ currently enrolled in the FEHB Program are not 
enrolled in Medicare Part B and, thus, would be eligible for the SEP. 
For these individuals, the late enrollment penalties will be paid by 
the Postal Service.

Uncertainty and Directional Effects Related to Enrollment, Utilization, 
and Carrier Participation

    The summary above is based on baseline assumptions that plan 
enrollment, carrier participation, and healthcare utilization will 
remain consistent following implementation of the PSHB Program. It is 
likely that implementation of the PSHB Program and the additional 
Medicare enrollment requirements will impact some or all of these 
baseline assumptions, which will have downstream effects for cost and 
utilization within both the PSHB and FEHB populations. The magnitude 
and directionality of these effects will depend on several factors that 
are presently uncertain.
    Individual carriers will likely weigh the costs and benefits of 
offering FEHB plans and PSHB plans. Shifting enrollment numbers and 
additional implementation costs may lead some carriers to scale back or 
discontinue offering both FEHB and PSHB plans. This would impact the 
number of available plan options for both PSHB and FEHB enrollees, as 
well as the likelihood that enrollees will be able to remain enrolled 
in a plan with the same carrier and have a consistent choice of plans 
and options from year to year. However, as noted below, it is likely 
that the PSRA will increase the total number of plans covering the 
Postal Service and non-Postal Service population notwithstanding that 
plan choices for each population may vary.
    PSHB enrollees required to enroll in Medicare Part B would be 
subject to additional premiums, which may impact the likelihood of 
their enrollment in PSHB plans. It is estimated that around 25% of 
Postal Service annuitants who are otherwise eligible for Part B are not 
currently enrolled. It is possible they declined Part B coverage 
because they were satisfied with their FEHB coverage or felt that the 
additional Medicare premium costs were too high, although it is also 
possible that they were not fully aware of the benefits of Medicare 
enrollment on their overall health care expenses over the course of 
their lifetimes. Assuming that a similar percentage of future Postal 
Service annuitants would have made a similar determination, these 
individuals may now be required to enroll as a condition of PSHB 
eligibility. This may result in some Postal Service annuitants dropping 
PSHB coverage altogether if they determine that PSHB and Part B 
coverage together is unaffordable or duplicative for their health care 
circumstances, though this number may be limited since it would require 
those annuitants to forgo PSHB coverage for the rest of their lifetimes 
unless individuals enroll in a Medicare Advantage plan. This could 
potentially result in adverse selection within the PSHB plans, 
referring to the tendency for individuals with higher health risks to 
disproportionately elect more generous coverage. Ultimately, this would 
increase the average risk and costs within the PSHB enrolled 
population, creating upward pressure on premiums. Additionally, some 
carriers may elect not to offer or discontinue PSHB plans if they 
anticipate or experience lower than expected enrollment.
    The additional Medicare Part B and Part D coverage may also induce 
a moral hazard effect due to the more robust coverage and lower cost-
sharing. Moral hazard refers to the tendency of individuals to increase 
health care utilization and spending in response to greater coverage or 
lower out-of-pocket costs. If an individual is required to enroll in 
Medicare, they may feel more compelled to utilize the benefits, 
increasing overall health care consumption. This effect could increase 
utilization of both necessary and unnecessary health services upon 
introduction of increased coverage and lower cost sharing. Increased 
utilization among these individuals would increase the overall per 
member costs within the PSHB plans which may result in higher premiums 
and potentially impact health outcomes.
    Because not all carriers will offer both FEHB plans and PSHB plans, 
the result is smaller risk pools within each plan option, which could 
lead to greater uncertainty with respect to costs. With smaller risk 
pools, each enrollee's health status has a larger impact on total 
costs. This can create greater variability in annual premiums. Smaller 
risk pools increase individual plans' exposure to high-cost outlier 
events, as there are fewer low or average-cost enrollees to offset 
these costs. Administrative costs would also be spread across smaller 
risk pools. To ensure financial solvency in such scenarios, plans may 
seek to price this additional risk exposure into premiums, resulting in 
an increase in the aggregate costs for all PSHB plan and FEHB plan 
enrollees compared to the baseline.
    At present, there remains a great deal of uncertainty with respect 
to the longer-term impacts on plan enrollment, carrier participation, 
plan design, and plan premiums. It is possible that a number of FEHB 
Carriers will elect not to participate in the PSHB Program or to drop 
their current FEHB plan offerings. Consolidation within the FEHB and 
PSHB markets would likely benefit larger carriers and may yield some 
efficiencies through greater economies of scale, although on aggregate, 
it is expected that PSHB implementation will result in a greater number 
of total plans across both the FEHB and PSHB Programs and increased 
administrative costs and premiums. Fewer options within the PSHB 
Program may also simplify plan choice for employees and

[[Page 37077]]

annuitants, saving time on plan comparisons.
    Enrollment in the PSHB Program, particularly among individuals who 
are required to enroll in Medicare Part B, is also uncertain. For 
future Postal Service annuitants, the requirement to enroll in Part B 
after retirement represents an additional cost. This will likely factor 
into individual retirement planning decisions and could potentially 
lead to employees remaining in the workforce longer to delay these 
additional costs. Likewise, lower-risk individuals may determine that 
their Medicare coverage, including Part B coverage is sufficient for 
their health care needs and opt out of PSHB enrollment. These aspects 
could impact PSHB Program risk pools and influence carriers' decisions 
on whether to continue offering plans in the PSHB Program. Each of 
these scenarios could trigger potential downstream effects on 
utilization and premiums and will be important to monitor.

F. Alternatives

    There are no feasible alternatives to the final rule as it 
implements section 8903c, as added by the PSRA, which establishes the 
PSHB Program and is mandated by the law. Therefore, OPM does not have 
the discretion to forego issuing regulations altogether. However, we 
considered alternatives to certain aspects of this regulation.

Initial Enrollment in the PSHB Program and Medicare Part B

    OPM recognizes that, for a small portion of Postal Service 
annuitants and their family members who take advantage of the Medicare 
Part B SEP from April 1 to September 30, 2024, there may be confusion 
about having two separate health plan enrollment opportunities given 
that the PSHB Program Open Season for plan year 2025 will occur from 
November 11 through December 9, 2024. As with FEHB plans, however, 
OPM's rate review process for PSHB plans will not be completed until 
September 2024, which makes simultaneous enrollment in Medicare Part B 
and PSHB plans impossible. If OPM were to open PSHB plan enrollment at 
the same time as the Medicare SEP, without completing the PSHB rate 
review process, enrollees would be selecting PSHB plans without knowing 
the monthly cost of their PSHB plan premium, which does not resolve the 
conflict.
    We explored an opportunity for Postal Service annuitants to ``pre-
enroll'' in PSHB plans prior to OPM completing its PSHB rate review 
process. Combining the opportunity to pre-enroll in a PSHB plan with 
the Medicare SEP would allow Postal Service annuitants to complete both 
actions simultaneously. Alternatively, Postal Service annuitants could 
be automatically enrolled in a PSHB plan at the same time they enroll 
in Medicare Part B. Automatic pre-enrollment in PSHB would relieve 
these Postal Service annuitants from two separate enrollment periods. 
However, we found both of these options would be undesirable for 
enrollees and their family members for several reasons.
    Allowing individuals to pre-enroll in PSHB plans during the SEP 
means they would sign up for a plan without knowing their PSHB premium 
obligation. Similarly, because OPM will not have certified the PSHB 
plans by the time the Medicare SEP occurs, there would be no way for an 
individual to know whether a given carrier will be participating in the 
PSHB Program for the next plan year, let alone what the final contract 
would look like. In general, while allowing those annuitants taking 
advantage of the Medicare SEP to simultaneously pre-enroll in a PSHB 
plan seems like it could reduce confusion and frustration from having 
two separate enrollment obligations, the timing of simultaneous PSHB 
pre-enrollment and the Medicare SEP would mean choosing a PSHB plan 
with unknown benefits and premiums and likely having to review the 
selection again during the PSHB Open Season period to ensure that the 
plan an individual pre-enrolled in actually makes sense for them once 
plan details are finalized and approved by OPM.
    Much of the rationale for considering PSHB plan pre-enrollment can 
be achieved by providing information about automatic enrollment to 
Postal Service employees, Postal Service annuitants, and their family 
members. Postal Service annuitants who wish to keep their plan or take 
as little action as possible can have their needs met as easily with 
automatic enrollment after Open Season ends instead of OPM implementing 
a new pre-enrollment or automatic pre-enrollment. In addition, under 5 
CFR 890.301(f)(2), the OPM Director has the authority to modify the 
dates for Open Season or hold additional Open Seasons. These 
authorities and flexibilities exist under current regulations and may 
be exercised without needing to make any specific provisions under this 
rulemaking.

Centralized Enrollment

    OPM is developing a centralized enrollment system simultaneously 
with the implementation of the PSHB Program. As explained above, the 
centralized enrollment system will shift certain responsibilities from 
the employing office to a new system which will function as an 
electronic enrollment solution for all PSHB stakeholder groups. 
Developing a centralized enrollment system for the PSHB Program allows 
OPM to take advantage of IT solutions and create a modern enrollment 
system for Postal Service employees, Postal Service annuitants, and 
their family members. OPM considered maintaining the existing 
enrollment processes that apply to enrollment in FEHB plans but 
ultimately determined that the establishment of the PSHB provided an 
ideal opportunity to utilize new technologies and centralization 
processes that will improve the experience of PSHB stakeholders.

PSHB Plan Coverage Effective Date

    OPM considered keeping the effective date of coverage for coverage 
under PSHB Plans as the first day of the first pay period of the 
calendar year for Postal Service employees, as it is for FEHB Plans. 
Keeping the same effective date of coverage for PSHB Plans as the 
effective date of coverage for FEHB Plans that Postal Service employees 
are familiar with would not result in implementation costs or risk 
confusing existing enrollees.
    The benefits of a January 1 effective date, however, outweigh the 
costs and risks of implementation and educating enrollees, as 
implementation costs are incurred only one time and after several years 
there will be little to no ongoing enrollee education needs. 
Conversely, the benefits of the January 1 date will remain 
indefinitely. A calendar year start date is convenient and is 
consistent with the industry standard and many similar programs, 
including health savings accounts, the Federal Employees Dental and 
Vision Insurance Program, and the cutoff date for certain exceptions to 
the Medicare Part B enrollment requirement for Postal Service Medicare 
covered annuitants and their covered members of family who qualify for 
an exception.

Regulatory Review

    OPM has examined the impact of this rule as required by Executive 
Orders 12866, 13563, and 14094, which direct agencies to assess all 
costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity). The 
Office of Management and Budget has determined that this

[[Page 37078]]

rule is a ``significant regulatory action'' under section 3(f)(1) of 
Executive Order 12866, as amended by Executive Order 14094.

Regulatory Flexibility Act

    The Director of OPM certifies this regulation will not have a 
significant economic impact on a substantial number of small entities.

Federalism

    OPM has examined this rule in accordance with Executive Order 
13132, Federalism, and has determined that this rule will not have any 
negative impact on the rights, roles and responsibilities of State, 
local, or Tribal governments.

Civil Justice Reform

    This regulation meets the applicable standard set forth in 
Executive Order 12988, Civil Justice Reform.

Unfunded Mandates Reform Act of 1995

    Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) also 
requires that agencies assess anticipated costs and benefits before 
issuing any rule whose mandates require spending by State, local, and 
Tribal governments in any 1 year of $100 million in 1995 dollars, 
updated annually for inflation. In 2023, that threshold was 
approximately $183 million. This final rule does not mandate any 
requirements for State, local, or Tribal governments, or for the 
private sector.

Congressional Review Act

    Subtitle E of the Small Business Regulatory Enforcement Fairness 
Act of 1996 (also known as the Congressional Review Act) (5 U.S.C. 801 
et seq.) requires rules (as defined in 5 U.S.C. 804) to be submitted to 
Congress before taking effect. OPM will submit to Congress and the 
Comptroller General of the United States a report regarding the 
issuance of this action before its effective date, as required by 5 
U.S.C. 801. OMB's Office of Information and Regulatory Affairs has 
determined that this rule meets the criteria in 5 U.S.C. 804(2).

Paperwork Reduction Act of 1995 (44 U.S.C. Chapter 35)

    Notwithstanding any other provision of law, no person is required 
to respond to, nor shall any person be subject to a penalty for failure 
to comply with a collection of information subject to the requirements 
of the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq.) (PRA), 
unless that collection of information displays a currently valid OMB 
Control Number.
    In the interim final rule, OPM requested comment on what, if any, 
information collection activities may be required by this rulemaking, 
including any comments on whether to create a new information 
collection or revise the information collection for SF-2809, Health 
Benefits Election Form, under OMB Control number 3206-0160. A commenter 
recommended that OPM update the existing Standard Form (SF) 2809 for 
Postal Service employees and Postal Service annuitants rather than 
developing a new form under PSHB to accommodate the needs of the PSHB 
Program. OPM agrees with this suggestion and will update the SF-2809 to 
include PSHB enrollments. OPM notes that there is a corresponding 
health benefits election form for retirees, OPM 2809 (OMB control 
number 3206-0141). OPM will also update the OPM-2809 to include PSHB 
enrollments. The revised forms would be made available prior to Open 
Season for the PSHB Program, which will begin on November 11, 2024. OPM 
is publishing a separate notice regarding modifications to these forms 
and will provide opportunities to comment as required by the PRA. An 
initial notice of proposed changes to these information collections 
with a 60-day comment period is published elsewhere in this issue of 
the Federal Register. In that notice, in addition to the changes to the 
forms, OPM proposes to combine OMB Control number 3206-0160 and OMB 
Control number 3206-0141 into a single information collection.
    The information collection for form SF-2809 (OMB Control Number 
3206-0160) is currently approved with an estimated public burden of 
9,000 hours. The information collection (OMB Control number 3206-0141) 
associated with that form is currently approved with an estimated 
public burden of 11,667 hours.
    A list of routine uses associated with these forms can be found in 
the Privacy Act System of Records Notice (SORN), OPM/CENTRAL 1 Civil 
Service Retirement and Insurance, available at https://www.opm.gov/information-management/privacy-policy/sorn/opm-sorn-central-1-civil-service-retirement-and-insurance-records.pdf.
    Participants in the 6-month Medicare Part B SEP will use form CMS 
40B, Application for Enrollment in Medicare--Part B (Medical Insurance) 
(OMB control number 0938-1230) to enroll in Medicare Part B.

List of Subjects in 5 CFR Part 890

    Administrative practice and procedure, Government employees, Health 
facilities, Health insurance, Health professions, Postal Service 
employees, Reporting and recordkeeping requirements, Retirement.

Office of Personnel Management.
Kayyonne Marston,
Federal Register Liaison.

    For reasons stated in the preamble, OPM is adopting the interim 
rule amending 5 CFR part 890 published on April 6, 2023, at 88 FR 
20383, as final with the following changes:

PART 890--FEDERAL EMPLOYEES HEALTH BENEFITS PROGRAM

0
1. The authority citation for part 890 continues to read as follows:

    Authority: 5 U.S.C. 8913; Sec. 890.102 also issued under 
sections 11202(f), 11232(e), and 11246 (b) of Pub. L. 105-33, 111 
Stat. 251; Sec. 890.111 also issued under 36 U.S.C. 5522; Sec. 
890.112 also issued under 2 U.S.C. 2051; Sec. 890.113 also issued 
under section 1110 of Pub. L. 116-92, 133 Stat. 1198 (5 U.S.C. 8702 
note); Sec. 890.301 also issued under 26 U.S.C. 9801; Sec. 
890.302(b) also issued under 42 U.S.C. 300gg-14; Sec. 890.803 also 
issued under 50 U.S.C. 3516 (formerly 50 U.S.C. 403p) and 22 U.S.C. 
4069c and 4069c-1; subpart L also issued under section 599C of Pub. 
L. 101-513, 104 Stat. 2064 (5 U.S.C. 5561 note); subpart M also 
issued under 10 U.S.C. 1108 and 25 U.S.C. 1647b; and subpart P 
issued under 5 U.S.C. 8903c.

Subpart P--Postal Service Health Benefits Program

0
2. Revise Sec.  890.1604 to read as follows:


Sec.  890.1604  Medicare enrollment requirement for certain Postal 
Service annuitants and eligible family members.

    (a) Annuitant. A Postal Service annuitant who is entitled to 
Medicare Part A must be enrolled in Medicare Part B to enroll or 
continue enrollment in a health benefits plan under this subpart, 
except as otherwise provided by paragraph (d)(1) of this section.
    (b) Member of family. A Postal Service Medicare covered annuitant's 
member of family who is entitled to Medicare Part A must be enrolled in 
Medicare Part B to be covered or continue coverage in a health benefits 
plan under this subpart, unless:
    (1) The Postal Service Medicare covered annuitant is excepted from 
the requirement to enroll in Medicare Part B as provided by paragraphs 
(d)(1)(i) through (v) of this section; or
    (2) The member of family is excepted from the requirement to enroll 
in

[[Page 37079]]

Medicare Part B as provided by paragraphs (d)(2)(i) through (iv) of 
this section.
    (c) [Reserved]
    (d) Exceptions. The Medicare Part B enrollment requirements 
provided in paragraphs (a) and (b) of this section do not apply:
    (1) To a Postal Service Medicare covered annuitant who--
    (i) Was a Postal Service annuitant on or before January 1, 2025, 
and who was not both entitled to Medicare Part A and enrolled in 
Medicare Part B on January 1, 2025;
    (ii) Was a Postal Service employee and was 64 years of age or older 
on January 1, 2025;
    (iii) Resides outside the United States (which includes the States, 
the District of Columbia, the Commonwealth of Puerto Rico, the Virgin 
Islands, Guam, American Samoa, and the Northern Mariana Islands), 
provided that the individual demonstrates such residency;
    (iv) Is enrolled in health care benefits provided by the Department 
of Veterans Affairs (VA) under 38 U.S.C. chapter 17, subchapter II, 
including individuals who are not required to enroll in the VA's system 
of patient enrollment referred to in 38 U.S.C. 1705(a), subject to the 
documentation requirements in paragraph (e)(2) of this section; or
    (v) Is eligible for health services from the Indian Health Service, 
subject to the documentation requirements in paragraph (e)(3) of this 
section.
    (2) To a Medicare covered member of family who--
    (i) Is eligible for PSHB coverage under the PSHB enrollment of a 
Postal Service Medicare covered annuitant who is not required to enroll 
in Medicare Part B, as provided in paragraphs (d)(1)(i) through (v) of 
this section;
    (ii) Resides outside the United States (which includes the States, 
the District of Columbia, the Commonwealth of Puerto Rico, the Virgin 
Islands, Guam, American Samoa, and the Northern Mariana Islands), 
provided that the individual demonstrates such residency;
    (iii) Is enrolled in health care benefits provided by the VA under 
38 U.S.C. chapter 17, subchapter II, including individuals who are not 
required to enroll in the VA's system of patient enrollment referred to 
in 38 U.S.C. 1705(a) to receive VA hospital care and medical services, 
subject to the documentation requirements in paragraph (e)(2) of this 
section; or
    (iv) Is eligible for health services from the Indian Health Service 
subject to the documentation requirements in paragraph (e)(3) of this 
section.
    (e) Documentation requirements. To qualify for an exception under 
paragraph (d) of this section, a Postal Service Medicare covered 
annuitant, or a Medicare covered member of family must meet one of the 
following documentation requirements:
    (1) Documentation or information in a form, manner, and frequency 
as prescribed by OPM demonstrating qualification, satisfactory to the 
Postal Service, for the exceptions at paragraph (d)(1)(iii) or 
(d)(2)(ii) of this section;
    (2) Documentation from the Department of Veterans Affairs in a 
form, manner, and frequency as prescribed by OPM demonstrating the 
individual meets an exception identified in paragraph (d)(1)(iv) or 
(d)(2)(iii), of this section; or
    (3) Documentation from the Indian Health Service (IHS) in a form, 
manner, and frequency as prescribed by OPM in consultation with IHS 
demonstrating the individual meets an exception identified in paragraph 
(d)(1)(v) or (d)(2)(iv) of this section.
    (f) Notification of non-enrollment in Part B. A Postal Service 
Medicare covered annuitant or a Medicare covered member of family who 
is required to be enrolled in Medicare Part B must promptly notify the 
Postal Service or OPM, in writing, if they choose not to enroll in or 
to disenroll from Medicare Part B as described in Sec.  890.1608(e).
    (g) Effect of non-enrollment in Part B. Failure to enroll or 
disenrollment from Medicare Part B will have the effect of a 
termination of PSHB coverage, as described in Sec.  890.1608(b).

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3. Amend Sec.  890.1606 by revising paragraph (e) to read as follows:


Sec.  890.1606  Opportunities to enroll, change enrollment, or 
reenroll; effective dates.

* * * * *
    (e) Under this subpart, an enrollment, change of enrollment, or 
reenrollment made during Open Season takes effect on January 1 of the 
next year.
* * * * *
[FR Doc. 2024-09565 Filed 5-3-24; 8:45 am]
BILLING CODE 6325-63-P