Federal Register, Volume 89 Issue 88 (Monday, May 6, 2024)

[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
________________________________________________________________________

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.

The Code of Federal Regulations is sold by the Superintendent of Documents.

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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).

0
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