[Federal Register Volume 89, Number 102 (Friday, May 24, 2024)]
[Proposed Rules]
[Pages 45782-45800]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-11127]


 ========================================================================
 Proposed Rules
                                                 Federal Register
 ________________________________________________________________________
 
 This section of the FEDERAL REGISTER contains notices to the public of 
 the proposed issuance of rules and regulations. The purpose of these 
 notices is to give interested persons an opportunity to participate in 
 the rule making prior to the adoption of the final rules.
 
 ========================================================================
 

  Federal Register / Vol. 89, No. 102 / Friday, May 24, 2024 / Proposed 
Rules  

[[Page 45782]]



OFFICE OF PERSONNEL MANAGEMENT

5 CFR Part 890

[Docket ID: OPM-2024-0002]
RIN 3206-AO59


Postal Service Health Benefits Program: Additional Requirements 
and Clarifications

AGENCY: Office of Personnel Management.

ACTION: Notice of proposed rulemaking.

-----------------------------------------------------------------------

SUMMARY: The Office of Personnel Management (OPM) is issuing a notice 
of proposed rulemaking to clarify and establish additional requirements 
regarding the Postal Service Health Benefits (PSHB) Program, which was 
established pursuant to the Postal Service Reform Act of 2022. This 
proposed rule expands on previous regulations concerning the PSHB 
Program and is intended to provide greater detail and clarity necessary 
to properly implement PSHB in 2025 and beyond. In particular, this 
proposed rule includes details on: reconsideration of PSHB eligibility 
decisions, various applications of the Medicare Part B enrollment 
requirement, allocation of reserve 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.

DATES: Comments must be received on or before June 24, 2024.

ADDRESSES: You may submit comments, identified by docket number or 
Regulation Identifier Number (RIN) and title, by the following method:
    [ssquf] Federal eRulemaking Portal: https://www.regulations.gov.
    Follow the instructions for submitting comments. All comments 
received must include the agency name and docket number or RIN for this 
document. The general policy for comments from members of the public is 
to make them available for public viewing at https://www.regulations.gov without change, including any personal identifiers 
or contact information. However, OPM retains discretion to redact 
personal or sensitive information from comments before they are posted.

FOR FURTHER INFORMATION CONTACT: Cameron Stokes, Senior Policy Analyst, 
at (202) 936-2847 or [email protected].

SUPPLEMENTARY INFORMATION:

Background

    Section 101 of the Postal Service Reform Act of 2022 (PSRA), Public 
Law 117-108, added new section 8903c to 5 U.S.C. chapter 89 and directs 
OPM to establish the PSHB Program within the Federal Employees Health 
Benefits (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 
any amendments resulting from this rulemaking. Under 5 U.S.C. 
8903c(c)(3), except as otherwise set forth in 5 U.S.C. 8903c, the 
provisions of chapter 89 ``applicable to health benefits plans offered 
by carriers under section 8903 or 8903a shall apply to plans offered 
under'' the PSHB Program.
    On April 6, 2023, OPM issued an interim final rule (88 FR 20383) to 
establish the PSHB Program. The interim final rule became effective on 
June 5, 2023. On May 6, 2024, OPM published a final rule (89 FR 37061) 
that made minor changes to the regulations in response to public 
comments. (This notice of proposed rulemaking refers to the interim 
final rule and the final rule collectively as the ``initial 
rulemaking.'') However, as program development and interagency 
coordination continued after publication of the interim final rule, OPM 
determined a need to provide additional specification on several topics 
that were beyond the scope of that initial rulemaking. While that 
initial rulemaking established the Program, this proposed rule further 
explains and expands on the implementation of the PSHB Program to 
provide clarity for PSHB Carriers, other agencies, and Postal Service 
employees and Postal Service annuitants before the program begins 
enrollment for 2025. In particular, OPM is proposing to provide 
implementation details on several additional topics: reconsideration of 
initial decisions concerning PSHB eligibility; application of the 
Medicare Part B enrollment requirement and associated exceptions in 
specific scenarios; allocation of reserve 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.

Discussion of the Proposed Changes

Initial Decision and Reconsideration of PSHB Program Eligibility and 
Enrollment

    The interim final rule at 5 CFR 890.1606(d) provided that standards 
for requesting reconsideration of an initial decision affecting 
enrollment in the PSHB Program will be the same as current FEHB 
standards at 5 CFR 890.104. However, on page 20401 of the preamble to 
that rule at 88 FR 20383 (April 6, 2023) noted that OPM was considering 
establishing PSHB-specific processes. With the establishment of a new 
enrollment system for the PSHB Program, OPM had to reevaluate how to 
process, address, and even adjudicate reconsideration requests, 
particularly how to distinguish between reconsideration requests 
concerning enrollment decisions versus eligibility decisions. 
Therefore, OPM is proposing a series of changes to incorporate existing 
FEHB reconsiderations standards and processes into the PSHB Program 
while also taking into account aspects of the PSHB Program that are 
unique from FEHB. These aspects include OPM's responsibility to 
administer the enrollment system and receive information from source 
agencies regarding Medicare Part B exceptions.
    OPM proposes to amend Sec.  890.1602(c) by adding a definition of 
``Reconsideration'' that parallels the definition at Sec.  890.101 with 
respect to PSHB reconsiderations. The definition notes that 
reconsideration means the final level of administrative review of an 
initial decision by an employing office or OPM. Under existing 
regulations at Sec.  890.1602, for purposes of this part, the United 
States Postal Service is the employing office for Postal Service 
employees, and the Retirement Services

[[Page 45783]]

office within OPM is the employing office for Postal Service 
annuitants. These changes reflect that OPM will retain authority under 
this Part to reconsider certain initial decisions and issue final 
agency decisions regarding enrollments and coverage of family members 
with respect to Postal Service employees and Postal Service annuitants 
in the PSHB Program. In making a final agency decision in response to a 
reconsideration request, OPM will consider facts submitted by an 
individual, including proof of family member eligibility, facts from a 
source agency pursuant to a data exchange and the opportunity for an 
individual to contest the data, and certain Medicare Part B exceptions, 
as discussed below.
    OPM also proposes to define ``source agency.'' The definition notes 
that source agency means an agency that routinely provides information 
or data to OPM pursuant to an agreement under 5 CFR 890.1612 (regarding 
information sharing for Medicare Part B enrollment requirements and 
exceptions) or 5 U.S.C. 8903c(e)(3)(C) (regarding identification of 
individuals who reside abroad). As indicated in proposed Sec.  
890.1612(c), a source agency may also refer to other agencies routinely 
providing information as required by OPM.
    OPM proposes to amend Sec.  890.1606(d) to reflect that initial 
decisions and reconsiderations of PSHB eligibility or enrollment, as 
applicable, will be made pursuant to proposed Sec.  890.1607, as 
discussed below in the preamble. Currently, there is a cross-reference 
to Sec.  890.104, which will no longer be applicable to PSHB.
    OPM proposes to add new Sec.  890.1607 governing initial decisions 
and reconsiderations of PSHB eligibility or enrollment, as applicable. 
Proposed Sec.  890.1607 would replace Sec.  890.104 with respect to the 
PSHB Program. These changes reflect that in the PSHB Program, OPM may 
issue an initial decision regarding an individual's eligibility for 
PSHB where that eligibility is conditioned on a source agency's data or 
information that it sends to OPM pursuant to a data exchange, under 
Sec.  890.1612, discussed below in this section of the preamble. Before 
OPM will issue such an initial decision under Sec.  890.1607, OPM will 
provide notice, as described under Sec.  890.1612(f), that information 
or data OPM has received from a source agency may render the individual 
ineligible for PSHB enrollment or coverage and will provide 
instructions on how the individual may contest that information or data 
with the source agency before OPM issues a decision. Under proposed 
Sec.  890.1612(f), OPM would notify an individual that they may be 
ineligible for PSHB enrollment or coverage based on information 
provided to OPM by a source agency. In that notice, OPM would provide 
the individual with the source agency's contact information on how the 
individual may contest the accuracy of the information used to 
determine PSHB eligibility. Paragraph (f) would also provide an 
explanation of the associated processes and timeframes to contest the 
provided evidence and to demonstrate that the individual is so engaged 
in such a contest with the source agency. Proposed Sec.  890.1612(g) 
provides an individual who would be disenrolled or removed from the 
PSHB Program based on information from a source agency with information 
on their reconsideration rights. Section 890.1607 cross references 
Sec.  890.1612, which accounts for provision of such notice and 
establishes a process under which an individual may dispute data OPM 
relies on from a source agency, over which OPM does not maintain 
authority and cannot independently verify.
    Proposed Sec.  890.1607 would include standards and processes for 
reconsideration requests concerning PSHB eligibility. First, in 
paragraph (a), OPM proposes that reconsiderations will be the 
responsibility of the employing agency (the Postal Service or 
retirement system) or OPM whereas only the employing agency or 
retirement system are responsible for reconsiderations in Sec.  
890.104(a). Second, in paragraph (b), OPM proposes to delineate which 
initial decisions are made by employing offices (see paragraph (b)(1)) 
rather than by OPM as the administrator of the PSHB Program (see 
paragraph (b)(2)), and that OPM will make an initial decision when it 
is based on information that OPM receives from a source agency only 
after the notice process is complete, as described in Sec.  890.1612 
and discussed below (see paragraph (b)(3)). OPM invites comment on the 
delineation of responsibilities for initial decisions.
    Third, paragraph (c) gives an individual a right to 
reconsideration.
    Fourth, paragraph (d) explains the time limits for requesting 
reconsideration, and the circumstances under which the time limit may 
be extended, similar to Sec.  890.104(d).
    Fifth, in paragraph (e), OPM proposes that after reconsideration, 
the employing agency (the Postal Service or retirement system) or OPM 
will issue a final decision.
    OPM proposes to amend Sec.  890.1608 regarding PSHB disenrollment 
and removal from coverage by adding new paragraphs (b)(5)(iii) and 
(b)(6) through (b)(9), which would allow for reconsideration after 
OPM's disenrollment of a Postal Service Medicare covered annuitant or 
removal of a Medicare covered family member from the PSHB, as 
applicable. Reconsideration in such circumstances is modeled after 
Sec.  890.308(f)(4)-(6). OPM invites comment on this proposed approach.
    OPM proposes to amend the information sharing provisions at Sec.  
890.1612 by adding paragraphs (f) and (g). Proposed paragraph (f) 
details the information that OPM would provide in a written notice 
before issuing an initial decision on eligibility for PSHB enrollment 
or coverage when OPM receives data from a source agency through an 
information sharing agreement which establishes a basis that the 
individual may be ineligible for PSHB enrollment or coverage. The 
notice would include the specific data impacting the individual's PSHB 
enrollment or coverage, PSHB enrollment requirements, the source 
agency's contact information to dispute the data, and the process and 
timeframe for providing OPM with evidence that the individual is 
engaged in a dispute with the source agency. The notice would also 
provide that the individual will remain enrolled while engaging in the 
dispute, but that OPM may issue an initial decision to disenroll or 
remove the individual from PSHB within 60 days if the individual does 
not provide OPM with sufficient evidence of engagement in the dispute 
with the source agency, or if the source agency's data does not 
establish a basis for the individual's PSHB eligibility, 
notwithstanding evidence of a dispute with the source agency. OPM 
invites comments on the approach set forth in proposed paragraph (f), 
which details the notice process that OPM will follow prior to issuing 
an initial decision on eligibility for PSHB enrollment or coverage 
based on data received from a source agency which establishes a basis 
that the individual may be ineligible for PSHB enrollment or coverage.
    Proposed paragraph (g) of Sec.  890.1612 would provide that if OPM 
issues an initial decision to remove or disenroll the individual based 
on the information or data from the source agency, the individual will 
have reconsideration rights pursuant to Sec.  890.1607 and that such 
reconsideration is limited to the source agency's data that was before 
OPM at the time it made the initial decision.

Correction of Errors

    OPM proposes to amend Sec.  890.1614(a) about correction of errors. 
These

[[Page 45784]]

changes are proposed to reflect OPM's central role in administering the 
PSHB enrollment process. Currently, Sec.  890.1614(a) cross-references 
Sec.  890.103. Corrections will be made pursuant to Sec.  890.1614, and 
not according to Sec.  890.103. Proposed Sec.  890.1614(a) would expand 
the role of OPM in making correction of errors. Specifically, proposed 
Sec.  890.1614(a)(1) would clarify that OPM may also make prospective 
or retroactive corrections of administrative errors at any time, 
whereas Sec.  890.103(a) only allows employing offices to make such 
corrections. Similarly, proposed Sec.  890.1614(a)(2) would allow OPM 
to make, in addition to ordering an employing office to make, a 
correction of an administrative error for purposes of equity and good 
conscience as is the case under Sec.  890.103(b). Proposed Sec.  
890.1614(a)(3) would allow OPM to make retroactive corrections of 
enrollee enrollment code errors instead of the employing office. 
Proposed Sec.  890.1614(a)(4) would adopt the same standards in Sec.  
890.103(d) and add a reference to PSHB. Proposed Sec.  890.1614(a)(5) 
would note that retroactive corrections are subject to withholdings and 
contributions under the provisions of both Sec. Sec.  890.502 and 
890.1613, whereas Sec.  890.103(c) cross-references only Sec.  890.502. 
OPM invites comments on the proposed changes to Sec.  890.1614(a), 
which states that a correction of error under the PSHB will be made 
pursuant to 890.1614 and not 890.103, expands OPM's role in the 
correction of errors, and would clarify that OPM may also make 
prospective or retroactive corrections of administrative errors at any 
time and allow OPM to make a correction of an administrative error for 
purposes of equity and good conscience.

Court Review

    OPM proposes to add a new paragraph (f) to Sec.  890.107. Proposed 
paragraph (f) would establish that PSHB enrollment-related lawsuits 
concerning Postal Service annuitants and their family members, where 
OPM's decision was based on data it received under agreements with 
source agencies, but with respect to which OPM lacks authority or means 
to attain independent verification, may not be brought later than 
December 31 of the 3rd year after the year in which the enrollment 
action was effectuated. For example, if the enrollment action at issue 
is effectuated for the 2025 plan year, a lawsuit may not be brought 
after December 31, 2028. This timeline is consistent with existing 
Sec.  890.107(d) and (e), which state that an action to recover on a 
claim for health benefits and suits seeking equitable relief, 
respectively, may not be brought later than December 31 of the 3rd year 
after the year in which the care or service was provided.
    This paragraph would also limit the review of OPM's final decision, 
based on data obtained by OPM under such agreements, to the 
administrative record before OPM when OPM effectuated the enrollment 
action. Limiting review to this record is consistent with current Sec.  
890.107(d)(3) regarding actions to recover on a claim for health 
benefits under Sec.  890.107(c). OPM invites comments on this approach, 
including the time limit that is modeled after Sec.  890.107(d) and 
(e).

Disenrollment and Removal Due to Non-Enrollment in Medicare Part B 
After Notice of Mandatory Enrollment

    OPM proposes to amend Sec.  890.1608(b) by adding language to 
reflect that where a Postal Service Medicare covered annuitant or 
Medicare covered family member is enrolled or covered in a PSHB plan 
but is not enrolled in Medicare Part B and does not qualify for an 
exception to the Part B enrollment requirement, that individual will be 
permitted to stay enrolled in or covered by PSHB if they enroll in 
Medicare Part B within a limited period.
    In the proposed regulatory text, OPM has proposed specifying that 
the period would end at the end of the individual's next Medicare 
enrollment period, which may be the next Medicare General Enrollment 
Period. (See 42 CFR part 407.) Under this approach, OPM would require 
an individual to enroll at their earliest opportunity, including any 
Special Enrollment Periods for which they are eligible. OPM could 
require an individual to attest to their earliest enrollment 
opportunity. OPM would also consider, in a final rule, adopting another 
method of establishing this limited period. For example, OPM could 
establish a fixed deadline such as March 31, which is the end of the 
Medicare General Enrollment Period. One potential challenge of this 
approach would be determining the deadline when an individual is 
eligible for two different enrollment periods at the same time. For 
example, a person's Initial Enrollment Period could run concurrently 
with and extend beyond Medicare's General Enrollment Period. Another 
option would be to establish the deadline as 30 days after the end of 
an applicable enrollment period for coverage to become effective. OPM 
is interested in providing some flexibility to allow individuals to 
transition to Medicare Part B, given that it is a new requirement, but 
also recognizes that individuals who are eligible for Medicare Part B 
must be enrolled in Part B to remain eligible for coverage under PSHB. 
Furthermore, the PSHB program will realize cost savings with prompt 
enrollment in Medicare Part B. Conversely, OPM recognizes that 
disenrollment from retirement health benefits under the PSHB program is 
a permanent loss of eligibility. OPM solicits comments on how these 
proposals, or other suggested options, would impact the program, 
enrollees, and carriers. (See also the discussion in ``Medicare Part B 
Exception for Postal Service Annuitants, their Family Members, and 
Survivor Annuitants Who Reside Outside the United States'' regarding 
the time period for enrollment for individuals returning to the U.S. 
from living abroad.)
    The proposed rule clarifies that this opportunity to remain in a 
PSHB plan by enrolling in Medicare Part B at the next enrollment 
opportunity is a one-time privilege. OPM also proposes to amend Sec.  
890.1608(b) to provide that if the Postal Service Medicare covered 
annuitant or eligible Medicare covered family member does not enroll in 
Medicare Part B during the next enrollment period, they will be 
disenrolled or removed from their PSHB plan and, in the case of a 
Postal Service annuitant, will have no further opportunity to re-enroll 
in a PSHB plan. Disenrollment of a Postal Service annuitant will also 
result in the removal of covered family members from PSHB coverage. OPM 
proposes to move the concept of allowing an individual to enroll in 
Medicare Part B at the next opportunity in order to retain PSHB 
coverage from Sec.  890.1608(b)(2) with respect to Postal Service 
annuitants into Sec.  890.1608(b) in order to give this one-time 
opportunity to any individual who may not be enrolled in, or who 
disenrolls from, Medicare Part B, but is required to be so enrolled in 
order to maintain PSHB enrollment or coverage. Individuals who 
successfully enroll in Medicare Part B during their next Medicare 
enrollment opportunity to maintain their PSHB coverage will be 
responsible for any Medicare Part B late enrollment penalty, if 
applicable.
    OPM proposes in Sec.  890.1608(b)(5) that in any case where a 
Postal Service Medicare covered annuitant is disenrolled from a PSHB 
plan for non-enrollment in Medicare Part B, except in the case of fraud 
or intentional misrepresentation of material fact, OPM will treat this 
removal as a termination. A termination, in contrast with a 
cancellation, is prospective and confers rights to a 31-day temporary 
extension

[[Page 45785]]

of coverage and rights to conversion for the enrollee and covered 
family members. In a case of fraud or intentional misrepresentation of 
material fact, the individual's coverage will be terminated 
retroactively, as applicable, and rights associated with termination 
will not be available.
    In Sec.  890.1608(b)(6), OPM proposes that a disenrollment or 
removal from coverage under PSHB is effective as of the date that OPM 
becomes aware of the Medicare Part B non-enrollment, subject to a 31-
day temporary extension of coverage.
    OPM proposes in Sec.  890.1608(b)(8) that a family member may be 
reinstated after removal from PSHB enrollment after failing to enroll 
or non-enrollment in Medicare Part B, so long as the Postal Service 
annuitant's enrollment under which they are covered is still effective, 
and proof of the family member's Medicare Part B enrollment is provided 
to OPM. In Sec.  890.1608(b)(9), OPM proposes the timeframes for 
reinstatement when a family member gains coverage under Medicare Part 
B, which aligns with OPM's qualifying life event rules (see paragraph 
(b)(9)(i)). Proposed Sec.  890.1608(b)(9) would specify that the 
reinstatement may be prospective or, if the family member can show 
uninterrupted enrollment in Medicare Part B from the time of their 
removal from PSHB enrollment, retroactive, at the option of the Postal 
Service annuitant who may cover the family member, when the 
requirements under the paragraph are met. OPM invites comment on the 
proposed changes to Sec.  890.1608(b), which clarifies the 
opportunities to remain in a PSHB by enrolling in Medicare Part B at 
their next enrollment opportunity, provides that disenrollment from 
PSHB with be treated as a termination in certain circumstances, and 
provides reinstatement opportunities for family members.

Survivor Annuitants and the Requirement To Enroll in Medicare Part B

    Under Sec. Sec.  890.1603 and 890.1604, the eligibility of survivor 
annuitants for enrollment or continued enrollment in the PSHB Program 
will generally follow the current eligibility requirements for 
enrollment or continued enrollment in the FEHB Program but will 
include, as applicable, the requirement to enroll in Medicare Part B. 
Under certain circumstances, however, requiring a survivor annuitant to 
enroll in Medicare Part B in order to enroll or continue enrollment in 
the PSHB Program would be inequitable if the survivor annuitant had 
relied upon the Part B enrollment exception of the Postal Service 
annuitant while they were a covered family member to establish their 
own exception to Part B enrollment while the Postal Service annuitant 
was alive. Inequities may be presented upon the Postal Service 
annuitant's death, unless the survivor annuitant could establish their 
own exception to the Part B enrollment requirement (such as enrollment 
in Veterans Affairs (VA) health care benefits). The covered Medicare 
individual survivor annuitant could be required to enroll in Part B, 
perhaps years after their initial enrollment opportunity and may be 
required to pay a Part B late enrollment penalty reflecting years of 
non-enrollment in Part B.
    OPM proposes to amend Sec.  890.1604 to provide that a survivor 
annuitant under 5 U.S.C. 8901(3)(B) of a Postal Service annuitant may 
continue enrollment in a PSHB plan without enrolling in Part B if, at 
the time of the Postal Service annuitant's death, the Postal Service 
annuitant had not been required to enroll in Part B because of an 
exception under Sec.  890.1604.
    Individuals who may continue enrollment as survivor annuitants may 
also have their own exception to the Part B enrollment requirement if 
they qualify for one (reside outside the United States, are enrolled in 
VA health care benefits, or are eligible for health services provided 
by the Indian Health Service) under Sec.  890.1604(c).
    The following examples are provided to illustrate when the amended 
provision may apply to a survivor annuitant:
    Example 1. A spouse is married to a Postal Service annuitant who is 
not required to enroll in Part B as a condition of eligibility to 
enroll in a PSHB plan under Sec.  890.1604(c)(1)(i) (as of January 1, 
2025, the Postal Service annuitant was not both entitled to Part A \1\ 
and enrolled in Part B). The spouse, who is eligible for Medicare, is 
also not required to enroll in Part B as their Postal Service annuitant 
spouse has an exception to Part B enrollment. If the Postal Service 
annuitant dies and the surviving spouse becomes a survivor annuitant, 
the surviving spouse will not be required to enroll in Part B to 
continue enrollment in a PSHB plan.
---------------------------------------------------------------------------

    \1\ Under 5 U.S.C. 8903c(a)(1), as adopted by reference in 5 CFR 
890.1602(b), the definition of a Medicare covered individual 
excludes those eligible to enroll pursuant to sections 1818 and 
1818A of the Social Security Act. All references to Medicare Part A 
should be read to exclude those enrolled under these sections.
---------------------------------------------------------------------------

    Example 2. A spouse is married to a Postal Service annuitant who is 
not required to enroll in Part B as a condition of eligibility to 
enroll in a PSHB plan under Sec.  890.1604(c)(1)(iv) (enrolled in VA 
health care benefits). The spouse is not eligible for Medicare because 
they are not yet 65. If the Postal Service annuitant dies before the 
surviving spouse becomes eligible for Medicare and the surviving spouse 
becomes a survivor annuitant, the surviving spouse will not be required 
to enroll in Part B to continue enrollment in a PSHB plan when becoming 
eligible for Medicare.

Medicare Part B Exception for Postal Service Annuitants, Their Family 
Members, and Survivor Annuitants Who Reside Outside the United States

    For Postal Service Medicare covered annuitants, Medicare covered 
family members, and survivor annuitants who demonstrate residency 
outside of the United States, the Medicare Part B exception under Sec.  
890.1604 applies with respect to the PSHB plan year, prospectively, 
commencing the first day of the month coinciding with or following the 
month in which they reside outside the United States. As a result, an 
individual who demonstrates residency outside the United States any 
time during the period January 1 through December 31 is not required to 
be enrolled in Medicare Part B for the remainder of that PSHB plan year 
(through December 31 of that year). If an individual who resides 
outside of the United States subsequently resides in the United States 
at any time before the following PSHB plan year and continues to reside 
in the United States in that following year, they must be enrolled in 
Medicare Part B by the end of the General Enrollment Period of that 
following year.
    For example, an individual who is covered under PSHB, entitled to 
Medicare Part A and eligible for Medicare Part B but not enrolled in 
Part B, and resides outside of the United States on February 1, 2025 
through September 30, 2025, is not required to be enrolled in Part B 
starting on February 1, 2025 (which coincides with commencement of 
residing outside the United States) in order to continue their PSHB 
coverage for the remainder of the 2025 PSHB plan year. If the 
individual subsequently resides in the United States on October 1, 
2025, through December 31, 2025, and still resides in the United States 
on January 1, 2026, they are excepted from the Part B enrollment 
requirement for the remainder of the 2025 PSHB plan year. In order to 
remain covered for the 2026 PSHB plan year, however, they must enroll 
in Part B by the end of their next enrollment opportunity which may be

[[Page 45786]]

the 2026 Medicare General Enrollment Period, from January 1 through 
March 31, 2026. Failure to enroll in Part B may result in termination 
of PSHB coverage as described in Sec.  890.1608. Because 5 U.S.C. 
8903c(e)(3)(iii) provides that the exception from Medicare Part B for 
individuals residing abroad remains valid for the remainder of the PSHB 
contract year, OPM is proposing that individuals moving back to the 
U.S. must enroll in Medicare Part B not later than the end of the 
Medicare General Enrollment Period beginning January 1 of the following 
calendar year. (Compare with discussion in Disenrollment and Removal 
Due to Non-enrollment in Medicare Part B After Notice of Mandatory 
Enrollment.)

Methodology for Crediting PSHB Program Plan Reserves

    OPM administers the contingency reserve as described in Sec.  
890.503. The contingency reserve will be administered the same under 
the PSHB Program. OPM is proposing to add Sec.  890.1615, titled 
``Crediting separate reserves for PSHB,'' to establish a formula for 
the one-time allocation of reserves from 2024 FEHB plans with Postal 
Service employee and Postal Service annuitant enrollees (collectively 
Postal Service enrollees) to 2025 PSHB plans.
    In the interim final rule, OPM implemented the statutory 
requirement at 5 U.S.C. 8903c(j)(1)(A) that OPM maintain separate 
reserves, including a separate contingency reserve, for each PSHB Plan. 
OPM codified this requirement at Sec.  890.1610(a)(4).
    The law further requires at 5 U.S.C. 8903c(j)(1)(D) that each PSHB 
plan ``shall be credited with a proportionate amount of the funds in 
the reserves for health benefits plans offered by the carrier.'' As 
soon as practicable on or after January 1, 2025, OPM proposes to credit 
each PSHB reserve with the proportionate Reserve Credit. The 
methodology that OPM proposes to use to credit reserves from FEHB plans 
to PSHB plans will be based on the 2024 premium income attributable to 
the Postal Service enrollee population as a percentage of the 2024 FEHB 
premium income. In general, the requirement to credit reserves will 
apply to all 2024 FEHB carriers.
    Because FEHB enrollees pay premiums based on the plan option of the 
health benefits plan in which they are enrolled, OPM proposes to apply 
its Reserve Credit methodology on an Option level. First, OPM would 
determine a Postal Service Percentage, which refers to the 2024 premium 
attributable to Postal Service enrollees divided by the 2024 premium 
attributable to both Postal Service and non-Postal Service enrollees, 
for each 2024 FEHB Option. OPM would apply that percentage to the 
amounts available in the 2024 FEHB Option's reserves (generally, 
amounts not needed for payment of Runout claims and expenses incurred 
but not paid, described below) for each 2024 FEHB Option as of December 
31, 2024. OPM would credit the resulting reserve amount to the PSHB 
plans for 2025.
    OPM proposes to define the term Corresponding PSHB Option as the 
PSHB Option into which Reserve Credits will flow from a 2024 FEHB 
Option that had Postal Service enrollees. Corresponding PSHB Option 
means a 2025 PSHB Option that is in the same geographic area and has 
equivalent benefits and cost-sharing as a 2025 FEHB Option, and that 
2025 FEHB Option was also offered in 2024.
    Under OPM's proposal, the amount of the Reserve Credits to be 
allocated to PSHB options is not based on an enrollee's enrollment 
action, or any automatic enrollments that may occur during the 
transitional open season under Sec.  890.1605(b). OPM proposes to 
allocate 2025 PSHB Option Reserve Credits into the PSHB Contingency 
Reserve and PSHB Letter of Credit Account, as applicable to experience-
rated and community-rated PSHB Options, as follows:
    i. If a Carrier offers an FEHB Plan with one, two, or three Options 
in 2024 and offers the same number of Corresponding PSHB Options in 
2025, the Reserve Credits for those Options will be allocated to the 
Corresponding PSHB Options' reserves.
    ii. If a Carrier offers an FEHB Plan with two or three Options in 
2024 and offers only one Corresponding PSHB Option in 2025, the Reserve 
Credits attributable to all the 2024 FEHB Plan's Options will be 
allocated to that Corresponding PSHB Option's reserve.
    iii. If a Carrier offers an FEHB Plan with three Options in 2024 
and offers only two Corresponding PSHB Options in 2025, the Reserve 
Credits attributable to the two FEHB Options that have Corresponding 
PSHB Options will be allocated to those two Corresponding PSHB Options' 
reserves. The Reserve Credit from the third FEHB Option (that does not 
have a Corresponding PSHB Option) will be allocated to one of the two 
Corresponding PSHB Plan Options that has the lowest self only premium 
and is not a High Deductible Health Plan (HDHP).
    iv. If a Carrier offers an FEHB Plan in 2024 and offers no FEHB 
Plan in 2025, but offers at least one 2025 PSHB Option with similar 
benefits and cost sharing and in the same geographic area as the 
Carrier's 2024 FEHB plan, as determined by OPM, the Reserve Credit(s) 
attributable to that FEHB Plan will be credited to the reserves of the 
Carrier's 2025 PSHB Options as described in (i) through (iii) as if the 
2025 PSHB Option(s) were a Corresponding PSHB Option.
    v. If a Carrier offers an FEHB Plan in 2024, and offers that FEHB 
Plan in 2025, but offers no Corresponding PSHB Options for that 2025 
FEHB Plan, the Reserve Credit(s) attributable to that FEHB Plan will be 
credited to the reserves of the PSHB Options offered in 2025, 
proportionately, consistent with 5 U.S.C. 8903c(j)(2) where the 
subscription charges paid are the 2024 Postal Service Premium.
    vi. If a Carrier offers a 2025 PSHB Option for which no 2024 Postal 
Service Premium is attributable, then that 2025 PSHB Option will 
receive no Reserve Credit.
    OPM seeks comment on this proposed Methodology for Crediting PSHB 
Program Plan Reserves, and also seeks comment on any situation that 
would not be covered under scenarios i. through vi.
    Under 5 U.S.C. 8903c(c)(2), a carrier's 2025 PSHB plan must have 
equivalent benefits and cost sharing to the carrier's 2025 FEHB plan; 
however, the law does not require a 2025 FEHB plan to have equivalent 
benefits and cost sharing to the 2024 FEHB plans, so OPM proposes to 
credit the Reserve Credit(s) attributable to that FEHB Plan to the 
reserves of the carrier's 2025 PSHB Options as if the 2025 PSHB 
Option(s) were a Corresponding PSHB Option. Therefore, generally, where 
a carrier offers a 2024 FEHB plan and offers that plan in FEHB in 2025 
along with an equivalent 2025 PSHB plan, the Reserve Credits will be 
allocated to the 2025 PSHB plan options in accordance with Sec.  
890.1615(c)(5)(i) through (iii).
    The ``Coverage with Equivalent Benefits and Cost-Sharing'' 
requirement in 5 U.S.C. 8903c(c)(2) does not apply where a carrier 
offers a 2024 FEHB plan and offers a 2025 PSHB plan but does not offer 
a 2025 FEHB plan. OPM proposes to ensure that a carrier's 2025 PSHB 
plan receives an equitable proportion of reserves attributable to that 
carrier's 2024 FEHB plan, and that the expectation of the carriers and 
enrollees that a PSHB plan reserves will be funded, and to closely 
follow Congress' intent under the PSRA. OPM further intends for the 
PSHB Program to have continuity within the FEHB Program. Therefore, OPM 
has determined that the reserves from a

[[Page 45787]]

2024 FEHB plan where the carrier does not offer a 2025 FEHB plan will 
be allocated to the carrier's 2025 PSHB plan where OPM has determined, 
in its discretion, that the benefits and cost sharing are similar 
between the 2025 PSHB plan and that carrier's 2024 FEHB plan. Under 
this rulemaking, generally, for 2024 FEHB plans covering mostly Postal 
Service enrollees where the carrier chooses to not offer a 2025 FEHB 
plan, and offers only a PSHB plan in 2025, then Sec.  
890.1615(c)(5)(iv) will apply.
    For 2024 FEHB Carriers that do not offer a PSHB plan in 2025, any 
Reserve Credits attributable to the carrier's 2024 Postal Service 
premium will be distributed proportionately into the Contingency 
Reserves for each PSHB Option offered in 2025, consistent with 5 U.S.C. 
8903c(j)(2). Distributing FEHB Reserve Credits to the PSHB Program in 
this way is consistent with OPM's distribution of the reserves of an 
FEHB plan that is discontinuing as described under 5 U.S.C. 8909(e), as 
described in Sec.  890.1615(c)(5)(v).
    Where a carrier offers a 2025 PSHB plan that has no 2025 FEHB plan 
with equivalent benefits and cost sharing, and there is no 2024 FEHB 
plan with similar benefits and cost sharing, as determined by OPM, no 
reserves will be allocated to the carrier's 2025 PSHB plan as described 
in Sec.  890.1615(c)(5)(vi).
    Runout refers to the estimated amount, as of December 31, 2024, 
needed to pay claims and expenses incurred but not paid for periods on 
or before December 31, 2024, for an FEHB experience-rated Option, 
considering any income attributable to periods on or before, but not 
yet received by, December 31, 2024. OPM will estimate the Runout 
amount.
    Each experience-rated 2024 FEHB Option will have a separate Runout 
account. This Runout account will be credited with the Runout amount, 
will be available to pay Postal Service and non-Postal Service claims 
and expenses incurred but not paid prior to January 1, 2025, and will 
receive any income attributable to periods on or before, but not yet 
received by, December 31, 2024.
    Any remaining funds in an FEHB Option's Runout account after all 
pre-2025 claims and expenses are paid will be allocated to the FEHB 
Option and PSHB Options' reserves by applying the Reserve Credit 
methodology described in this rulemaking. If an FEHB Option's Runout 
account becomes depleted before all pre-2025 claims and expenses are 
paid, a reallocation of funds from the applicable FEHB and PSHB 
reserves to the Runout account will be necessary. In such circumstance, 
OPM will estimate the amount of additional funding needed in the Runout 
account to pay all remaining pre-2025 claims and expenses. OPM will 
determine the estimated amount of additional funding to be credited to 
the Runout account by applying the Reserve Credit methodology set forth 
in this rule to determine the proportion of additional funds that come 
from the applicable FEHB and PSHB options.
    Each experience-rated FEHB Option will continue to maintain its 
separate FEHB Letter of Credit Account to pay non-Postal Service claims 
and expenses incurred on or after January 1, 2025 and to receive any 
income attributable to periods on or after January 1, 2025. Each 
experience-rated PSHB Option will have a separate PSHB Letter of Credit 
Account to pay Postal Service claims and expenses incurred on or after 
January 1, 2025 and to receive any income attributable to periods on or 
after January 1, 2025.
    Any funds OPM receives under 5 U.S.C. 8909(b) for premiums 
attributable to periods on or before, but not yet received by, December 
31, 2024, will be credited to PSHB Options' and FEHB Options' 
Contingency Reserves using the Reserve Credit methodology set forth in 
this rulemaking. OPM annually distributes end-of-year Contingency 
Reserve adjustments, including earned interest and distribution of FEHB 
discontinued Plan funds, to Contingency Reserves in the Spring of the 
following year. For the initial PSHB contract year, these end-of-year 
2024 adjustments will be allocated between FEHB Options and PSHB 
Options using the Reserve Credit methodology set forth in this rule.

Clarification of One-Year Application of Automatic Enrollment

    OPM is proposing to amend Sec.  890.1605 ``Enrollment in the 
initial contract year'' to clearly delineate the process in which 
individuals will be automatically enrolled into a PSHB plan if they do 
not select a plan during the transitional Open Season. OPM is 
clarifying that the standards and processes are specific to the 
transition into PSHB plans in 2025, from FEHB plans in 2024. These 
proposed amendments identify the FEHB plan on December 31, 2024 as the 
plan from which individuals will be automatically enrolled into a PSHB 
plan. The PSHB plan and option into which individuals will be 
automatically enrolled will generally be offered by the same carrier 
and have equivalent benefits and cost sharing, however there are 
exceptions, and the proposed regulatory text addresses the potential 
scenarios. OPM invites comment on this process. OPM also invites 
comment on whether the proposed regulatory text clearly specifies the 
PSHB plan and option into which an individual will be automatically 
enrolled.

Aligning the Government Contribution Requirements With the January 1-
December 31 Plan Year

    Under Sec.  890.1610(a)(5), PSHB Carriers are required to begin 
coverage on January 1 of each year. The PSHB plan year is from January 
1 through December 31 each year starting in 2025. Section 890.1606(e) 
provides that PSHB enrollments, changes of enrollment, or reenrollments 
made during Open Season take effect on January 1 of the next year. A 
PSHB plan year is different from a FEHB plan year in that under an 
enrollment in an FEHB plan, coverage under a plan elected during Open 
Season begins on the first day of the first pay period that starts on 
or after January 1.
    For PSHB plans, however, coverage begins on January 1st of each 
year regardless of whether the individual continues enrollment or 
coverage in that PSHB plan or whether the PSHB plan was selected during 
Open Season, including when the individual is automatically enrolled in 
the PSHB plan during the transitional Open Season.
    For most years, January 1st is not the first day of the first pay 
period of the year, which means that in the PSHB Program the new 
premium for the new plan year will become effective during a pay period 
that overlaps calendar years. Under 5 U.S.C. 8906(b)(1), for an 
employee, the Government contribution for the new plan year's premiums 
begins on the first day of the employee's first pay period of each 
year. If section 8906(b)(1) applied to Postal Service employees 
enrolled in the PSHB Program, the employee would be responsible for the 
difference between the total premium for the new plan year less the 
Government share of premium for the prior plan year for the period of 
time between January 1st and the beginning of the first full pay period 
in the new plan year. In other words, by being responsible for that 
difference, Postal Service employees would end up paying a higher 
portion of premium in the overlapping pay period than would be paid 
pursuant to the statutory formula for all other pay periods in the plan 
year.
    Therefore, for Postal Service employees, as defined in 5 U.S.C. 
8903c(a)(9), OPM is proposing in Sec.  890.1606(e) that the Government 
contribution for Postal Service employees starts on January 1st of each

[[Page 45788]]

year. This ensures that the Government contribution is calculated in a 
manner that is consistent with the intent of the statute, accounting 
for the premiums for the employee's plan and plan type that is 
effective for the entire plan year, here under PSHB, from January 1st 
through December 31st of each year. As a result, when January 1 is not 
the first day of the first pay period of the year, employee premiums 
and the Government's share of premiums for that pay period will be 
calculated to account for the number of days in the pay period that 
occur in the prior plan year, and the number of days in the pay period 
that occur in the new plan year in which the change is effective, to 
account for the different premiums respectively.
    To ensure that Government contributions for PSHB plan premiums are 
adjusted and applied starting on January 1 of each year, OPM is 
proposing to amend Sec.  890.1613(a) to clarify how 5 U.S.C. 
8906(b)(1), which governs the Government contribution adjustment, 
applies to Postal Service employees under the PSHB Program.

Financial Reporting and Actuarial Calculations

    Section 102 of the PSRA (``The USPS Fairness Act''), makes changes 
to how OPM will calculate payments to the Postal Service Retiree Health 
Benefits Fund (PSRHBF) trust fund, as well as changes to how OPM will 
perform calculations for purposes of financial reporting. OPM is 
proposing to amend Sec.  890.1613 ``Contributions and Withholdings'' to 
clarify the elements of the statutory financial reporting calculations 
that OPM is required to complete yearly under the PSRA.
    Under 39 U.S.C. 3654(b), the Postal Service is required to file a 
report with the Postal Regulatory Commission, indicating the funded 
status of the Postal Service's pension obligations under the Civil 
Service Retirement System (CSRS) and Federal Employees Retirement 
System (FERS) and its post-retirement health obligations under the FEHB 
Program. OPM is responsible for computing the amounts. The pension 
obligations of the Postal Service are governed by 5 U.S.C. chapters 83 
and 84, while its post-retirement health obligations are governed by 5 
U.S.C. 8909a. Section 102 of the PSRA adds section 8909a(e), which 
provides that these figures must be based on economic and actuarial 
methods and assumptions consistent with the methods and assumptions 
associated with determining the Postal Service surplus and supplemental 
liability.
    Section 8909a(e) states that ``any computation'' required under 39 
U.S.C. 3654(b) is to be based on ``the net present value of the future 
net claims costs'' of current Postal Service annuitants and active 
Postal Service employees who would be eligible to retire under 5 U.S.C. 
8901(3)(A)(i) or (ii). In accordance with OPM's actuarial funding 
methods applied under 5 U.S.C. 8348(h), that population includes 
current and future Postal Service annuitants as of the end of the 
fiscal year ending on September 30 of the relevant reporting year. In 
this proposed amendment, OPM further clarifies the population on which 
the calculations under 39 U.S.C. 3654(b) are based. OPM is also 
proposing to remove the word ``future'' from before ``net claim costs'' 
in Sec.  890.1613(e)(1) to clarify the equivalence in terms is between 
``net claims costs'' and ``estimated net claims costs.''

Prioritizing Premium Payments From the Postal Service Retiree Health 
Benefits Fund

    The interim final rule explained that the Postal Service will pay 
any applicable Medicare Part B late enrollment penalty for Postal 
Service Medicare covered annuitants and their Medicare covered family 
members who enroll during the 6-month Special Enrollment Period in 2024 
established by section 1837(o) of the Social Security Act (42 U.S.C. 
1395p). The Postal Service may direct OPM to pay these late enrollment 
penalties out of the PSRHBF established under 5 U.S.C. 8909a until 
those funds are depleted. If at any time the PSRHBF is depleted, 5 
U.S.C. 8903c(i)(4) states that USPS shall pay late enrollment penalties 
out of its funds established under 39 U.S.C. 2003. OPM proposes, under 
its administrative responsibilities granted in 5 U.S.C. 8909a(a), to 
prioritize the payment of health benefit premiums for individuals 
described in 5 U.S.C. 8906(g)(2)(A) from the PSRHBF, over payment of 
the late enrollment penalties as proposed in Sec.  890.1613(c). The 
prioritization of premium payments from the PSRHBF will not impact the 
Postal Service's ability to pay late enrollment penalties for those 
that enroll during the SEP.

Medicare Part D Enrollment for Postal Service Annuitants and Family 
Members Who Are Eligible for Part D

    Section 8903c(h) of 5 U.S.C. mandates that OPM require PSHB plans 
to provide Medicare Part D prescription drug benefits to Postal Service 
annuitants and family members who are eligible to enroll in Part D, as 
defined in section 1860D-1(a)(3)(A) of the Act, and receive coverage 
offered under for Medicare Part D through employment-based retiree 
health coverage through a prescription drug plan as defined in section 
1860D-41(a)(14) of [the] Act) or ``contracts between such a [PSHB] plan 
and PDP sponsor, as defined in section 1860D-41(a)(13) of [the] Act, of 
such a prescription drug plan.'' Individuals who are not eligible to 
enroll in Part D, will receive prescription drug benefits through their 
PSHB plan coverage.
    Under chapter 89, carriers are required to offer plan options with 
uniform benefits and premium rates. See 5 U.S.C. 8902 and 8903; 5 CFR 
890.201 (a)(6). This means that two individuals enrolled in a 
particular plan option and enrollment type (self only, self plus one, 
or self and family) will receive the same benefit package at the same 
premium rate. Under the PSHB Program within chapter 89, an individual 
who is eligible to receive benefits under a Medicare Part D plan will 
receive the same benefits under a Part D plan option as an individual 
who is not eligible to enroll in a Part D plan who is enrolled in the 
same option and enrollment type. As such, OPM is proposing at Sec.  
890.1616 that a PSHB Carrier must, to the extent necessary to integrate 
the Medicare Part D prescription drug benefits coverage required under 
5 U.S.C. 8903c, ensure that the prescription drug benefit offered under 
its Medicare Part D EGWP is equal to or better than the PSHB plan's 
prescription drug benefit. OPM will retain the authority to determine 
what is necessary for the carrier to effectuate Medicare Part D 
integration.
    OPM's proposals in this rulemaking regarding Medicare Part D EGWPs 
provided under the PSHB Program should not be construed to affect an 
individual's ability to enroll in a Medicare Part D plan outside of 
health benefits plans offered under chapter 89. This means an 
individual may purchase a Medicare Part D plan, at their own expense, 
outside of their PSHB plan. An individually purchased Medicare Part D 
plan will not provide EGWP benefits.
    OPM invites comment on these proposals concerning integration of 
Medicare Part D prescription drug benefits into the PSHB Program.

Group Enrollment of Eligible Individuals Into Part D EGWPs

    An employer has the option to enroll individuals who are covered 
under the employer's group health plan, as described in section 1860D-
22(c)(3)(A) of the Social Security Act, and who are eligible to receive 
benefits under Medicare Part D, into a Part D EGWP. This process is 
called ``group enrollment.'' Group enrollment avoids requiring each 
individual to submit

[[Page 45789]]

enrollment forms in order to enroll in the Part D EGWP offered by their 
employer-based plan. Recognizing that prescription drug benefits are a 
fundamental component of an employment-based retiree group health plan, 
and that most individuals enrolled in such a plan want to receive 
prescription drug benefits through that plan, group enrollment provides 
administrative simplicity and ensures that all retirees have access to 
prescription drug benefits that meet their needs.
    OPM, as the administrator of the PSHB Program, can require PSHB 
Carriers to automatically group enroll individuals eligible to enroll 
in Part D, and OPM is planning to operationalize Part D enrollment 
through group enrollment to support a seamless Part D EGWP enrollment 
process for eligible Postal Service annuitants and family members. 
Group enrollment provides a simplified process for enrollment into 
Medicare Part D and limits the potential for error on the part of an 
individual who might otherwise fail to enroll in Medicare Part D. It is 
also consistent with the experience of individuals who were previously 
covered by an FEHB plan where a single enrollment afforded both medical 
and prescription drug coverage.
    An individual cannot enroll in more than one Medicare Part D plan 
at a time. As a result, the group enrollment process, which enrolls all 
individuals regardless of whether or not they have obtained or are 
seeking coverage elsewhere, may create an additional burden for some 
individuals. For example, an individual may prefer to maintain or 
receive Part D coverage under a Part D plan outside of the PSHB plan, 
through a standalone Part D plan, or as a covered family member 
receiving prescription drug coverage under the employment-based retiree 
group health plan of a spouse. If that retiree does not want 
prescription drug benefits under their own employer-based plan's Part D 
EGWP, they may ``opt out'' of group enrollment. For this reason, this 
rule proposes in Sec.  890.1616(d) to require PSHB Carriers to group 
enroll eligible individuals into the Medicare Part D EGWP provided by 
their PSHB plan carrier by default but allow them to opt out of group 
enrollment if they choose.
    OPM proposes in Sec.  890.1616(e) that an individual who opts out 
of group enrollment into their PSHB plan's EGWP or declines the Part D 
EGWP coverage under the PSHB plan, will no longer be group enrolled 
into the Part D EGWP for each next consecutive plan year under that 
PSHB plan but may request enrollment into a PSHB plan's Part D EGWP at 
the individual's next enrollment opportunity described under Sec.  
890.1606. While remaining in an opt-out status, the individual will not 
be automatically group enrolled into a PSHB plan's Part D EGWP so long 
as they remain in the PSHB plan. Should they choose a different plan 
during a later enrollment opportunity, they will be group enrolled into 
that plan's Part D EGWP unless they request to opt out. In this way, 
the decision to opt out of the Part D EGWP does not follow the 
individual when they change plans, and they must elect to opt out anew.

Individual Impact of Non-Enrollment in Part D EGWP

    Section 8903c(h) of title 5 U.S.C. requires that PSHB Carriers 
provide Medicare Part D coverage to Part D eligible individuals within 
the PSHB program. Under this proposed rule, Medicare Part D eligible 
individuals are not required to be enrolled in Medicare Part D as a 
condition of enrollment in a PSHB plan. Instead, this rule would allow 
Postal Service annuitants and their family members to decline Medicare 
Part D coverage provided under their PSHB plan, by either opting out of 
group enrollment into the Part D plan under the PSHB plan or 
disenrolling from Part D under the PSHB plan. Declining to enroll in a 
PDP EGWP or MAPD EGWP offered through the PSHB plan would eliminate 
coverage of prescription drug benefits for the individual under the 
PSHB plan but would not result in a reduction of premium. The 
individual would continue to pay the same premium for the PSHB plan 
charged to all similarly situated enrollees in that option and 
enrollment tier. Postal Service annuitants and their family members 
would retain all of the other benefits under their PSHB plan. Should 
the individual wish to reenroll in the Part D EGWP at a later date, 
they may be subject to a Medicare Part D late enrollment penalty.
    OPM is proposing this approach because it views it as most 
consistent with the PSRA statutory language. The PSRA did not establish 
an express requirement for Postal Service annuitants and their family 
members to enroll in Medicare Part D. This proposal provides Postal 
Service annuitants and their family members with flexibility for 
enrollment in Medicare Part D while creating incentives to be enrolled 
in the Medicare Part D EGWP offered by their carrier, which is expected 
to lead to cost savings for the PSHB program. This proposal is also 
consistent with the voluntary nature of the Medicare Part D program.
    This approach would permit Postal Service annuitants and their 
family members with a higher income who are subject to an Income 
Related Monthly Adjustment Amount (IRMAA) (which would require these 
individuals to pay an extra amount for Medicare Part D) to decline Part 
D and forgo prescription drug coverage under the PSHB plan. Permitting 
individuals to decline Part D may present a risk that individuals may 
fail to enroll in, or inadvertently disenroll from the Part D EGWP 
(which includes either a PDP EGWP or MAPD EGWP, if offered), which 
would result in loss of access to prescription drug benefits under the 
PSHB plan while paying the full premium. This approach, however, would 
not prevent an individual from enrolling in a stand-alone Medicare Part 
D plan outside the PSHB Program, at the individual's own expense. This 
approach also does not prevent an individual from suspending PSHB 
coverage while enrolled in a Medicare Advantage plan. Affirmatively 
declining enrollment in the Medicare Part D EGWP provided by the PSHB 
plan would result in an individual's loss of prescription drug benefits 
under a PSHB plan until the next PSHB enrollment opportunity, as 
described in Sec.  890.1606, which could be the next open season. We 
seek comment on how best to mitigate the risk of inadvertent 
disenrollment and educate Part D-eligible individuals about the PSHB 
Program requirements.
    OPM recognizes that the mandatory integration of Medicare Part D 
benefits into PSHB plans under the PSRA is a significant shift from 
requirements for FEHB carriers, which offer plans with prescription 
drug benefits and are not required to provide Medicare Part D EGWPs. 
Annuitants who are not Postal Service annuitants and who are enrolled 
in FEHB plans receive comprehensive, creditable drug coverage if they 
elect an FEHB plan that does not offer Medicare Part D benefits. It is 
possible for a Postal Service annuitant or the Postal Service 
annuitant's family member to fail to recognize that declining to enroll 
in or disenrolling from the Part D prescription drug benefits under 
their PSHB plan will result in the loss of prescription drug benefits 
under the PSHB plan. Moreover, it is possible individuals may not 
understand that declining Part D coverage will not result in a lower 
PSHB premium, as their PSHB premiums include the cost to the plan of 
prescription drugs covered under the Part D EGWP and that portion of 
the premium is not severable.
    Carriers must ensure a seamless, customer-friendly approach for 
affected enrollees and their family members to

[[Page 45790]]

opt out of group enrollment into the Medicare Part D EGWP portion of 
the PSHB plan. Carriers may not complicate the opt-out process by 
requiring enrollees or their family members to take actions such as 
including a wet signature or sending a physical copy of opt-out 
documents through the mail. Carriers must comply with all requirements 
for group enrollment contained within Centers for Medicare & Medicaid 
Services (CMS) guidance including the Medicare Prescription Drug 
Benefit Manual and the PDP Enrollment and Disenrollment Guidance. OPM 
is also clarifying that a carrier must follow all CMS requirements with 
regard to individuals who disenroll from an MAPD EGWP under its PSHB 
plan.
    OPM expects very few PSHB enrollees and family members to opt out 
of or decline coverage from their PSHB plan's Part D EGWP, as (1) the 
vast majority of individuals eligible for Part D will be better off 
retaining their PSHB drug coverage, (2) there will be seamless 
coordination between the PSHB plan and Medicare, and (3) the cost of 
the Part D EGWP will be included in their PSHB premium either way. 
Those who choose to opt out of group enrollment into the PSHB plan's 
EGWP or decline enrollment once effectuated will be doing so after 
receiving notice regarding the loss of prescription drug coverage under 
the PSHB plan.
    A retiree's enrollment in an employment-based retiree health plan 
that includes a Medicare Part D EGWP ensures that the prescription drug 
benefits will be coordinated by the plan. When a Part D eligible 
individual covered under a PSHB plan elects to opt out of group 
enrollment in the PSHB plan's Part D EGWP, or if the individual 
disenrolls at any time from the EGWP, the individual loses all 
prescription drug benefits under the PSHB plan, which includes 
coordination of care that would have been afforded between the 
prescription drug benefits of the Part D EGWP and the PSHB plan.

Expected Impact of Proposed Changes

Statement of Need

    This proposed rulemaking follows an initial rulemaking implementing 
sections 101 and 102 of the PSRA, which directed OPM to establish the 
PSHB Program for Postal Service employees, Postal Service annuitants, 
and their eligible family members. The PSHB Program is contained within 
5 U.S.C. chapter 89, which governs the FEHB Program generally.
    While developing and implementing the regulatory provisions found 
in the initial rulemaking, OPM determined that a number of topics 
associated with the PSHB Program needed further refinement, 
development, or clarification. For example, in the initial rulemaking, 
OPM enacted procedures for handling requests for reconsideration of 
initial decisions affecting enrollment in the PSHB Program. After 
further consideration, OPM determined that specific changes were needed 
to distinguish the different relationship between employing offices and 
OPM as it relates to the PSHB Program versus the FEHB Program. 
Similarly, several regulatory changes to the PSHB Medicare Part B 
requirement are necessary to make the transition from FEHB, where there 
is no Medicare Part B requirement, to PSHB as consumer friendly as 
possible and to provide policies for certain scenarios that were not 
contemplated when the interim final rule was initially developed. As an 
example, public comments received on the interim final rule concerning 
survivor annuitants as it relates to the Medicare Part B requirement 
indicated a need to provide clear regulation of the treatment of this 
group and informed the proposal in this rulemaking.
    In addition, some issues required more development time and were 
not able to be included in the initial rulemaking. Those issues include 
reconsiderations of PSHB eligibility decisions, various applications of 
the Medicare Part B enrollment requirement, 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.
    Because the PSRA included a statutory deadline for OPM to publish 
regulations for the program, OPM reserved for this rulemaking those 
more complex issues that required more time than the interim final rule 
timeframe allowed. For example, determining a methodology for 
allocation of reserve credits required more development time. This 
rulemaking provides an additional vehicle for a more comprehensive 
regulatory scheme before the PSHB Program begins operation in 2025.
    OPM's proposals regarding reconsideration in this rulemaking would 
ensure that policies and procedures related to eligibility decisions in 
the PSHB Program properly account for aspects that are unique to the 
PSHB Program. Without these clarifications, there would be confusion 
among agencies as to their responsibilities when faced with a PSHB 
reconsideration request. These PSHB-specific reconsiderations 
regulations also account for the use of a centralized enrollment 
system, which is not used for enrollment in FEHB plans.
    OPM is further clarifying Medicare Part B requirements and 
exceptions in this rulemaking. The Medicare Part B exceptions included 
in this rulemaking are specific scenarios that OPM either received 
questions about during the development of the PSHB Program or were 
raised internally during the that process. While the most common Part B 
exception scenarios are provided in the PSRA and largely clarified in 
detail through OPM's initial rulemaking, the scenarios addressed in 
this proposed rulemaking were beyond the scope of the initial 
rulemaking. Confusion or inequitable treatment among current or future 
Postal Service annuitants and their family members could result if OPM 
does not address these scenarios before PSHB enrollment begins.
    Several of the proposals found in this rulemaking are necessary to 
properly operationalize financial aspects of the PSHB Program before it 
begins in 2025. The inclusion of the methodology for the allocation of 
reserve credits from 2024 FEHB plans, with Postal Service employee and 
Postal Service annuitant enrollees, to 2025 PSHB plans is necessary to 
implement the calculations of this one-time allocation that is required 
in order create the reserves for PSHB plans. Implementing requirements 
that align the government contribution adjustment for Postal Service 
employees with the calendar year is necessary to ensure the adjustment 
aligns with the PSHB plan year, which is also on a calendar-year basis. 
Regulations regarding financial reporting and actuarial calculations 
are necessary to align PSRA financial requirements of both OPM and USPS 
with current actuarial methods. Finally, the proposed rules regarding 
payment prioritizing premium payments from the Postal Service Retiree 
Health Benefit Fund and thereafter Medicare Part B late enrollment 
penalty payments establishes an order of priority for funds. Without 
this section, it would be unclear how OPM prioritizes payments 
statutorily allowed from the PSRHBF at times when the fund may be 
depleted.
    Finally, the integration of Medicare Part D benefits into the PSHB 
Program, which is a significant aspect of the PSRA, requires further 
regulation, particularly as it relates to group enrollment into the 
Part D EGWP as well as how an individual may decline

[[Page 45791]]

Part D coverage and the consequences of doing so. This clarification is 
necessary to fully implement the Part D integration sections of the 
PSRA in compliance with Medicare regulations and requirements. In the 
absence of this rulemaking, carriers' plans are required to provide 
prescription drug benefits to any Postal Service annuitant and member 
of family of such annuitant who is a part D eligible individual (as 
defined in section 1860D-1(a)(3)(A) of the Social Security Act) through 
employment-based retiree health coverage (as defined in section 1860D-
22(c)(1) of such Act) through (A) a prescription drug plan (as defined 
in section 1860D-41(a)(14) of such Act); or (B) contracts between such 
a Program plan and PDP sponsor, as defined in section 1860D-41(a)(13) 
of such Act, of such a prescription drug plan. Alternatively, in the 
absence of this rulemaking, OPM could provide unenforceable guidance 
interpreting this provision. OPM agrees that the default for this issue 
is unclear based on the initial rulemaking, which is why this 
rulemaking is vital.

Impact

    This rulemaking proposes additional requirements and clarifications 
for the operations and management of the PSHB Program. Based on OPM's 
estimates, OPM does not believe that this proposed regulation will have 
a large impact on the broader health insurance market. In 2022, Postal 
premiums accounted for about 22% of the total FEHB premiums, meaning 
that Postal Service employees, Postal Service annuitants, and their 
family members make up about one fifth of health insurance carriers' 
overall FEHB books of business. OPM seeks general comments on the 
impact of this proposed rule.
    As with the interim final rule, this proposed rule is intended to 
help promote the financial stability and long-term viability of the 
Postal Service by implementing the PSHB Program as effectively as 
possible. The largest potential impact from this rule is found in the 
regulatory proposals addressing reserves. OPM estimates that $4.7 
billion of the estimated $22 billion in total FEHB reserves is 
attributable to the Postal population. In addition, OPM estimates that 
the vast majority of PSHB enrollees will remain with the same carrier 
during the move from FEHB to PSHB. In this scenario, the move of funds 
from FEHB to PSHB reserves will have no economic impact--the money will 
remain with the same carrier, still overseen by OPM. Based on 2023 
enrollment and expected carrier participation in the PSHB, OPM 
estimates that the total reserves that will be transferred between 
carriers will not exceed $100 million.
    The other changes in the proposed rule are not expected to be 
economically significant. The reconsideration process largely mirrors 
that in the FEHB Program, except to the extent the PSHB Program 
requires incorporation of verification of the requirement to enroll in 
Medicare Part B. Discussions of the application of various Part B 
exceptions are clarifications rather than deviations from the status 
quo. To the extent there are impacts from the various proposals, they 
are discussed below.
A. Impacts on PSHB Carriers
    The reserves policies addressed in this proposed rule will result 
in a shift of funds from FEHB plan reserves to PSHB plan reserves based 
on the proportion of enrollment attributable to PSHB between 2024 and 
2025. However, in large part we expect these funds to shift between 
plans within the same carrier, as we expect many PSHB enrollees to 
remain with their current FEHB carrier to the extent possible.
B. Impacts on PSHB Enrollees
    The proposed rule provides clarification on several situations 
concerning Medicare Part B enrollment requirements and exceptions under 
the PSHB Program. Because each enrollee's circumstances are unique, it 
is not possible to expressly regulate every scenario that could arise 
under the program. However, the rule does clarify treatment of survivor 
annuitants and Postal Service annuitants and family members returning 
to the U.S. after living abroad and qualifying for that PSHB Program 
exception regarding Medicare Part B enrollment. These clarifications 
benefit affected enrollees and family members by providing greater 
certainty relating to an affected individual's rights or 
responsibilities concerning Part B enrollment as they remain enrolled 
in the PSHB Program. They also allow affected enrollees and family 
members to plan ahead when making Medicare enrollment decisions upon 
reaching Medicare eligibility.
    This proposed rule also reiterates the policy first included in the 
interim final rule at 88 FR 20387 and codified at 5 CFR 890.1608(b)(2) 
that individuals who are required under the PSRA to enroll in Medicare 
Part B in order to enroll in the PSHB program will be given the 
opportunity to correct a non-enrollment in Part B if OPM discovers the 
discrepancy after the individual is enrolled in the PSHB program. This 
policy is intended only to allow for good-faith corrections of 
mistakenly missing Part B coverage and should apply to a very small 
number of individuals. This proposed rule clarifies that this 
opportunity is a one-time benefit, and any subsequent instances where 
the individual lacks required Medicare Part B enrollment will result in 
PSHB termination. OPM expects the number of individuals who face two 
good-faith instances of missing Medicare Part B enrollment to be 
negligible, so the impact will be very small.
    The right to request reconsideration of PSHB Program eligibility 
and enrollment decisions is important to enrollees and family members. 
The FEHB Program has a robust reconsideration process, and the PSHB 
Program incorporates FEHB Program rights and processes where 
appropriate. However, this rulemaking is necessary to clarify 
differences due to several unique aspects of the PSHB Program. Without 
these clarifying regulations, enrollees could face confusion over which 
agency should receive their reconsideration request and how they may 
challenge an adverse PSHB determination that is not covered by the 
reconsideration process related to FEHB plan eligibility and 
enrollment. Most notably, the PSHB Program contains a Medicare Part B 
enrollment requirement for many Postal Service annuitants, which does 
not exist for annuitants eligible for enrollment in FEHB plans. OPM 
will receive information from various source agencies that have the 
ability to verify certain information about an individual upon which 
OPM can determine PSHB eligibility and compliance with Medicare Part B 
requirements.
C. Impacts on Employing Agencies
    Under this proposed rule, employing agencies (USPS for Postal 
Service employees or OPM, as the agency with the authority to approve 
payment of annuity, etc., for Postal Service annuitants) will have 
similar responsibilities when addressing reconsideration requests for 
the PSHB Program as they do for the FEHB Program. With the Medicare 
Part B requirement for most Postal Service annuitants and eligible 
family members in order to be covered under the PSHB Program, there 
will be additional verification for affected Postal Service annuitants 
and family members. In addition to performing verification checks where 
appropriate, an adverse outcome for enrollees may increase the number 
of eligibility reconsideration requests made by individuals seeking 
coverage.

[[Page 45792]]

    This proposed rule would also ensure that the government 
contribution adjustment for PSHB premiums aligns with the January 1 to 
December 31 PSHB plan year already set out in the initial rulemaking. 
Changing the effective date for the government contribution adjustment 
to align with the PSHB plan year will have a slight impact on employing 
agencies, that are responsible for ensuring that funds are correct, and 
that may need to adapt procedures for timing the adjustment. Because 
the changes to the plan year and government contribution adjustment 
date only apply to the PSHB Program, the overall impact is limited to 
USPS and OPM.
    OPM's proposed policy of prioritizing PSHB premium payments over 
Medicare Part B late enrollment penalties payments from the PSRHBF will 
not result in increased costs for USPS, regardless of the extent to 
which Postal Service annuitants take advantage of the PSRA Medicare 
Part B Special Enrollment Period. Should the PSRHBF be depleted at any 
time and OPM is unable to pay Part B late enrollment penalties out of 
the fund, the Part B late enrollment penalties will be paid directly by 
USPS' general operating fund, as described in the PSRA. The status of 
the PSRHBF will not jeopardize USPS' ability to pay these penalties on 
behalf of their Postal Service annuitants.
    Finally, the proposed policy relating to Medicare Part D benefit 
integration, which allows Part D eligible individuals to opt out of a 
PSHB Part D EGWP, will likely have little impact on the program 
overall. Very few individuals are expected to opt out given that they 
will lose PSHB prescription drug coverage and will see no reduction in 
monthly premiums. Carriers will account for the small number of 
expected opt-outs in calculating overall premiums, although the effect 
of opt-outs on premiums is expected to be insignificant. The impact for 
enrollees who retain their Part D coverage through the PSHB plan will 
likewise be negligible. However, the impact for any Part D eligible 
individual who opts out will be large. They will pay an identical 
premium but receive no prescription drug benefit through PSHB. In the 
event that they opt out erroneously or due to not understanding the 
negative implications of doing so, the financial penalty could be 
severe. Out-of-pocket drug costs can be very high, particularly for 
name brand drugs, and should an individual later choose to opt back 
into the Part D EGWP, they may be faced with a Part D late enrollment 
penalty from Medicare. In an effort to ensure that all PSHB enrollees 
understand the consequences of opting out of Medicare Part D under the 
PSHB plan, OPM and USPS will provide education regarding the 
consequences of opting out of Part D benefits and what effect that will 
have on their prescription drug benefits. This education will be 
provided in addition to a detailed notice that all PSHB enrollees will 
receive, as required by CMS regulations. OPM is seeking to ensure 
education about Part D and that the implications of opting out are as 
clear as possible and is looking to ensure that any individual who opts 
out is doing so under full information. OPM invites comment on ways to 
most effectively mitigate these concerns.

Costs

    OPM does not anticipate that this regulatory action will result in 
any significant or quantifiable economic costs. The proposals related 
to reserves are strictly distributional and are not expected to result 
in any costs. Discussions of the application of the various PSHB 
program Medicare Part B exceptions are clarifications of the 
requirements established in the interim final rule. Thus, while costs 
may be incurred as a result of specific, individual scenarios, these 
costs were addressed in the interim final rule and will not be 
significantly impacted by the clarifications provided by this proposed 
rule.
    In particular, this proposed rule would clarify the interim final 
rule provision related to PSHB enrollees who are belatedly discovered 
to be ineligible based on their non-enrollment in Part B by limiting 
the exception to a one-time privilege, thus minimizing the potential 
costs to agencies. To the extent that these scenarios result in 
additional costs, OPM anticipates that these would be negligible, given 
the number of eligibility checks, and would be impossible to quantify. 
Because enrollees who use this one-time privilege may be responsible 
for a Part B late enrollment penalty, there remains a financial 
incentive to enroll in Part B when first eligible. Because this 
privilege is only available once, the number of enrollees who utilize 
the exception will likely be limited.

Benefits

    OPM does not expect this proposed rule to result in any significant 
economic benefits. As with the interim final rule, this proposed rule 
is intended to promote the financial stability and long-term viability 
of the Postal Service by implementing the PSHB Program as effectively 
as possible. The resulting societal benefits associated with these 
outcomes were appropriately discussed in the interim final rule and are 
not expected to be significantly impacted by the clarifications 
proposed.

Distributional Effects

    OPM estimates that $4.7 billion of the projected $22 billion in 
2024 FEHB reserves will be attributable to PSHB enrollees, based on 
2023 enrollment, and will therefore be reallocated to PSHB plans in 
2025. Despite the size of funds being reallocated, OPM does not expect 
these transactions to result in an economically significant transfer, 
as defined in OMB Circular A-4, for several reasons.
    First, although allocated to individual plans, unobligated reserves 
ultimately belong to the FEHB and PSHB programs upon the carrier's 
exit. Payments or transfers from the contingency reserves are 
regulated, as outlined in 5 CFR 890.503 and in 48 CFR chapter 16, the 
Federal Employees Health Benefits Program Acquisition Regulation 
(FEHBAR) at 48 CFR 1632.770, and balances are closely monitored by OPM 
to ensure compliance with minimum balance standards. Further, if an 
existing plan is discontinued or elects not to participate in the FEHB 
program, the reserve balances credited to that plan are redistributed 
to the remaining plans and carriers.
    Second, OPM estimates that more than 97% of the fund transfers will 
be attributed to FEHB carriers that plan to offer PSHB plans. In these 
cases, reserve funds will remain with the carrier and will be 
reallocated from FEHB plans to the PSHB plans, as outlined in the 
proposed methodology (scenarios a-c). Thus, to the degree that reserve 
funds afford any monetary benefit, the aggregated benefit afforded to 
the carrier, across the entire portfolio of plans offered, would remain 
the same.
    Third, OPM estimates that less than 3% of the funds transferred 
will be attributed to FEHB carriers that do not plan to offer PSHB 
plans. In these cases, a portion of the reserve funds for each FEHB 
plan will be redistributed across the PSHB Options based on the 
percentage of 2024 premiums attributable to Postal enrollees, as 
described in the proposed methodology (scenario d). To the degree that 
reserve funds afford any monetary benefit, these transfers would result 
in a net change in the aggregated benefit afforded to each carrier. 
Based on 2023 enrollments and anticipated carrier participation in the 
PSHB program, OPM estimates that the total amount of these between-
carrier transfers will not exceed $100M, well below the $200M threshold 
for economic significance.

[[Page 45793]]

Alternatives

    This proposed rule provides that individuals eligible for Medicare 
Part D may opt out of group enrollment or disenroll from the Part D 
EGWP associated with their PSHB plan. As a result of opting out or 
disenrolling from their PSHB plan's Part D EGWP, the individual will 
not receive prescription drug benefits under the Part D EGWP or under 
the PSHB plan. OPM considered this policy and several alternatives 
extensively and ultimately decided on the policy as written considering 
enrollee and family member interests, cost saving intent of the PSRA 
and OPM's obligations under Medicare regulations, and the text of the 
PSRA itself.
    One alternative approach would have been to prohibit Part D 
eligible individuals from opting out of the Part D EGWP associated with 
their PHSB plan. Construing Medicare Part D as an eligibility 
requirement would promote the goals of the PSRA by promoting enrollment 
in Part D which OPM views Congress intended to promote access to high 
quality drug coverage and result in savings to the PSHB Program. 
Enrollment in Part D as an eligibility requirement for PSHB would 
result in maximum enrollment of Part D eligible individuals ensuring 
maximum access to prescription drug coverage and result in maximum cost 
saving as intended by Congress. This approach combined with the group 
enrollment feature of Medicare EGWPs would limit inadvertent failure to 
enroll or inadvertent disenrollment from Medicare Part D and provide 
administrative simplicity for OPM and carriers. Requiring Medicare Part 
D as an eligibility requirement, however, would create a burden for 
those who may have an alternative Part D plan or for those who cannot 
access Part D benefits, such as individuals living abroad. It would 
require a host of exceptions to a Part D enrollment requirement. This 
approach would also require carriers to communicate with OPM and Postal 
Service annuitants and family members to ensure that they are aware 
that disenrolling or failing to enroll in Part D would result in loss 
of not only access to prescription drug coverage but also result in 
loss of PSHB coverage. For Postal Service annuitants, PSHB coverage in 
retirement cannot be reinstated once it is terminated. As established 
in the PSRA, the requirement to provide Medicare Part D through a PDP 
EGWP rests with the carrier. There is no equivalent requirement placed 
on a Postal Service annuitant or their family member to enroll in 
Medicare Part D, which is a voluntary program. The PSRA does not 
expressly require Postal Service annuitants to enroll in Part D. While 
OPM identified several benefits of this approach, OPM has declined to 
require enrollment in Part D as an eligibility requirement as it is not 
the most intuitive interpretation of the statute.
    Another alternative OPM considered was to allow Part D eligible 
individuals to opt out of the Part D EGWP and receive prescription drug 
benefits through their PSHB plan. This approach is consistent with the 
current requirement in the FEHB program, which does not require 
carriers to offer Medicare Part D EGWPs. Annuitants who are not Postal 
Service annuitants and who are enrolled in FEHB plans receive 
comprehensive drug coverage through their FEHB plan without a need to 
enroll in a Medicare Part D plan. However, OPM finds this approach 
inconsistent with the PSRA. Congress expressly mandated the integration 
of Medicare Part D in the PSHB Program to coordinate benefits between 
PSHB plans and Medicare Part D prescription drug coverage. Congress 
intended to achieve cost savings to USPS through this coordination, 
while providing prescription drug coverage to Postal Service annuitants 
and their family members. OPM finds that any alternative approach that 
would provide individuals with the ability to opt out of or otherwise 
decline Part D coverage under the PSHB plan and then receive PSHB 
prescription drug benefits would be counter to these cost-savings 
goals.
    As a result, OPM considers the policy included in this proposed 
rulemaking the most consistent with the PSRA statutory language and 
Congressional intent. This proposal provides Postal Service annuitants 
and their family members with flexibility for enrollment in Medicare 
Part D while creating incentives to enroll in the Medicare Part D EGWP 
offered by their carrier, which are expected to lead to cost savings 
for the program. This proposal is also consistent with the voluntary 
nature of the Medicare Part D program. OPM views this approach to be 
the most customer centric because it avoids the potential for loss of 
PSHB eligibility for failing to enroll in Medicare Part D. This 
approach strikes a balance between Congress' intent to save costs under 
the PSHB Program and the prescription drug coverage needs of Postal 
Service annuitants and their family members.
    Treatment of survivor annuitants under the Program as it relates to 
the requirement for Medicare Part B enrollment is another area where 
OPM considered alternatives approaches. OPM considered whether a 
Medicare eligible family member of a Postal Service annuitant could 
lose their exception to the Part B requirement upon the death of that 
Postal Service annuitant in a case where the family member does not 
have their own Part B exception. The rationale for this approach is 
that the family member's exception is derived from the Postal Service 
annuitant's status, and with the Postal Service annuitant no longer on 
the enrollment there is no Part B exception to apply to the family 
member. However, this alternative approach was deemed inequitable for 
the family member who relied on their Postal Service annuitant's 
exception in making decisions on their own Medicare enrollment options. 
To provide the most consumer-friendly approach, OPM decided to propose 
the policy in this rulemaking that a family member of a Postal Service 
annuitant will receive that Postal Service annuitant's Part B exception 
permanently, so that if they become a survivor annuitant who was 
entitled to a Part B exception due to the status of their former Postal 
Service annuitant, that exception remains with them going forward.

Administrative Procedure Act

    OPM is adopting a 30-day comment period to balance the need for 
public input with operational considerations for carriers and Postal 
Service employees, Postal Service annuitants, and their eligible family 
members affected by this rulemaking. OPM is already working with 
carriers on their plan benefit proposals, and individuals who will be 
enrolled in the PSHB Program as of January 1, 2025, have begun 
receiving information regarding the transition. In addition, OPM 
previously published an interim final rule that established the PSHB 
Program and a final rule that considered comments received on the 
interim final rule. This rulemaking provides further clarification on 
issues related to implementation of the Program and is based, in part, 
on issues commenters raised in the prior rulemaking. In addition, this 
rulemaking considers feedback received during the initial 
implementation and administration of the Program. Accordingly, this 
proposed rule is narrow in scope. OPM believes that a 30-day comment 
period provides sufficient time for public comments on this proposed 
rule and facilitates the issuance of a final rule before Open Season 
begins on November 11, 2024.
    These proposed provisions are also time-sensitive, as they will 
address the remaining issues needed to finalize the

[[Page 45794]]

Program. For example, with respect to the Medicare Part B enrollment 
requirement for Medicare eligible Postal Service annuitants and covered 
family members, OPM needs to provide regulatory certainty to Postal 
Service employees, Postal Service annuitants, and eligible family 
members regarding coverage before they select their health benefits 
plans in November 2024 during the transitional Open Season. Similarly, 
Postal Service employees, Postal Service annuitants, and eligible 
family members need to have complete information regarding PSHB plan 
coordination with Medicare Part D. In particular, Postal Service 
Medicare covered annuitants need information about their rights so that 
they can make informed decisions about prescription medication coverage 
during the transitional open season. For each of these issues, the 
statute and OPM's initial rulemaking provided a framework, but OPM 
needs to codify the specifics of how these provisions will impact 
individuals in different circumstances.
    As with the individuals eligible for coverage under the PSHB 
Program, carriers also need information about the interactions between 
the PSHB Program and Medicare Parts B and D. Similarly, carriers need 
final details about how insurance reserves will be allocated in the 
transition from FEHB plans to PSHB plans. OPM must transfer these funds 
as soon as practicable on or after January 1, 2025.
    Recognizing that the majority of the PSHB Program has been 
addressed through a prior rulemaking, OPM has determined that a 30-day 
comment period will provide the public with a meaningful opportunity to 
comment on the few, discrete topics presented in this proposed rule. 
OPM believes that the trade-off of a longer comment period is 
outweighed by the value to affected parties of having complete 
information to make informed decisions. OPM aims to review public 
comments on this proposed rule and make any necessary modifications 
expeditiously to provide as much advance notice to the affected parties 
as possible.
    For the forgoing reasons, OPM plans to make the final rule 
effective upon publication. See 5 U.S.C. 553(d)(3). Generally, the 
delay in the effective date of a final rule provides regulated parties 
with some time to make adjustments to come into compliance with the new 
regulation. For this rule, the requirements are all prospective in the 
sense that the PSHB Program will not be fully operational until January 
1, 2025. Nonetheless, carriers have long been developing their 
proposals and plans for coverage and will benefit from this rule being 
finalized as early as possible. Similarly, the individuals eligible for 
coverage under the PSHB Program will not need to take action in 
response to the finalization of the rule but will benefit from the rule 
becoming final as early as possible.

Severability

    OPM proposes that, if any of the provisions of this proposed rule 
as finalized is held to be invalid or unenforceable by its terms, or as 
applied to any person or circumstance, it shall be severable from the 
remaining sections and shall not affect the remainder thereof or the 
application of the provision to other persons not similarly situated or 
to other dissimilar circumstances. For example, if a court were to 
invalidate any portions of this proposed rule as finalized regarding 
non-enrollment in Medicare Part B, the other portions of the rule--
including the provisions regarding non-enrollment in Medicare Part D--
would independently remain workable and valuable. Similarly, the 
portions of this proposed rule providing procedures for challenging 
enrollment decisions can and would function independently of any of the 
other portions of this proposed rule.

Regulatory Review

    OPM has examined the impact of this rule as required by Executive 
Orders 13563, 12866, 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 (OMB) has designated this rulemaking as 
a ``significant regulatory action'' under section 3(f) of Executive 
Order 12866, as supplemented by Executive Orders 13563 and 14094.

Regulatory Flexibility Act

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

Federalism

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

Civil Justice Reform

    This rulemaking meets the applicable standard set forth in 
Executive Order 12988.

Unfunded Mandates Reform Act of 1995

    This rulemaking will not result in the expenditure by State, local, 
and Tribal governments, in the aggregate, or by the private sector, of 
$100 million or more in any year and it will not significantly or 
uniquely affect small governments. Therefore, no actions were deemed 
necessary under the provisions of the Unfunded Mandates Reform Act of 
1995.

Paperwork Reduction Act

    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.
    The information collection for form SF-2809 (OMB Control Number 
3206-0160) is currently approved with an estimated public burden of 
9,000 hours. OPM notes that there is a corresponding health benefits 
election form for retirees, OPM-2809. The information collection 
request (OMB control number 3206-0141) associated with that information 
collection 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.
    On May 6, 2024, OPM published ``Submission for Review: Revision and 
Consolidation of Two Existing Information Collections Related to Health 
Benefits Election Forms'' (89 FR 37269). This publication provides a 
60-day notice for an extension of this information collection and 
proposes categorizing the SF-2809 as a ``common form.'' OPM is 
proposing changes to the SF-2809 and the OPM-2809 for clarity, ease of 
use, and implementation of the PSHB Program. OPM has provided copies of 
the revised drafts of the SF-2809 and OPM-2809 forms for public review 
in the docket at https://www.regulations.gov/docket/OPM-2024-0011/document.While OPM is not currently proposing to consolidate the

[[Page 45795]]

SF-2809 and the OPM-2809 into a single form, we are proposing to 
combine the two information collections and manage the two forms under 
a single information collection, OMB Control No. 3206-0160, going 
forward. The comment period on this notice ends on July 5, 2024.

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.

    Accordingly, OPM proposes to amend 5 CFR part 890 as follows:

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 A--Administration and General Provisions

0
2. Amend Sec.  890.107 by adding paragraph (f) to read as follows:


Sec.  890.107  Court review.

* * * * *
    (f) A suit to compel enrollment or for equitable relief, from an 
adverse enrollment action founded on 5 U.S.C. chapter 89, that is based 
on information received by OPM pursuant to an agreement with a source 
agency as defined at Sec.  890.1602, to determine whether Postal 
Service annuitants or family members of such annuitants satisfy the 
enrollment requirements set forth in 5 U.S.C. 8903c, may not be brought 
later than December 31 of the 3rd year after the year in which the 
enrollment action was effectuated, and will be limited to the record 
that was before OPM when it effectuated the enrollment action.

Subpart P--Postal Service Health Benefits Program

0
3. Amend Sec.  890.1602 by adding in alphabetical order the definitions 
``Reconsideration'' and ``Source agency'' to paragraph (c) to read as 
follows:


Sec.  890.1602  Definitions and deemed references.

* * * * *
    (c) * * *
    Reconsideration means the final level of administrative review of 
an initial decision by an employing office or OPM, as applicable.
    Source agency means an agency that periodically provides 
information or data to OPM pursuant to an agreement under Sec.  
890.1612.
* * * * *
0
4. Amend Sec.  890.1604, as amended May 6, 2024, at 89 FR 37061, 
effective July 5, 2024, by adding paragraphs (c) and (d)(3) and 
revising (f) to read as follows:


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

* * * * *
    (c) Survivor annuitant. (1) A Postal Service annuitant's member of 
family who is an annuitant as defined in 5 U.S.C. 8901(3)(B) and who is 
entitled to Medicare Part A, must be enrolled in Medicare Part B to 
continue enrollment in a health benefits plan under this subpart, 
except as otherwise provided by paragraph (d)(3) of this section;
    (2) A Postal Service employee's member of family who is an 
annuitant as defined in 5 U.S.C. 8901(3)(B) and who is entitled to 
Medicare Part A, must be enrolled in Medicare Part B to continue 
enrollment in a health benefits plan under this subpart, except as 
provided in paragraphs (d)(3)(ii) through (iv) of this section.
* * * * *
    (d) * * *
    (3) To a survivor annuitant, as described in paragraph (c) of this 
section, who:
    (i) At the time of becoming a survivor annuitant the Postal Service 
annuitant was subject to an exception under (d)(1) 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 
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
    (iv) Is eligible for health services from the Indian Health 
Service, subject to the documentation requirements in paragraph (e)(3) 
of this section.
* * * * *
    (f) Notification of non-enrollment in Medicare Part B. A Postal 
Service Medicare covered annuitant, a Medicare covered member of 
family, or a survivor annuitant, as described in paragraph (c) of this 
section, 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).
0
5. Amend Sec.  890.1605 by revising paragraph (c) to read as follows:


Sec.  890.1605  Enrollment in the initial contract year.

* * * * *
    (c) Automatic enrollment. Each Postal Service employee or Postal 
Service annuitant who is enrolled in an FEHB plan on December 31, 2024, 
and does not make an enrollment action during the transitional open 
season under Sec.  890.1605(b), will be automatically enrolled in the 
PSHB Program as follows:
    (1) Into same plan. Individuals enrolled in a carrier's 2024 FEHB 
plan where the carrier offers the same plan in 2025 in FEHB and offers 
a 2025 PSHB plan with at least one option that has equivalent benefits 
and cost sharing and in the same geographic area as the 2025 FEHB plan, 
will be enrolled in that 2025 PSHB plan and into an option as follows:
    (i) Equivalent option. Individuals enrolled in a carrier's 2024 
FEHB option where the carrier offers that option in 2025 in FEHB and 
also offers a 2025 PSHB option with equivalent benefits and cost 
sharing as the 2025 FEHB option, as determined by OPM, will be 
automatically enrolled into that 2025 PSHB option; or
    (ii) No equivalent option. Individuals enrolled in a carrier's 2024 
FEHB option where the carrier does not offer a 2025 PSHB option that 
meets the criteria in (1)(i), will be automatically enrolled into the 
lowest-cost option of the 2025 PSHB plan, that is not a High Deductible 
Health Plan (HDHP) and does not charge an association or membership 
fee, except that if the only option is an HDHP, then the individual 
will be enrolled in that HDHP option.

[[Page 45796]]

    (2) Into a 2025 PSHB plan where the carrier offers no 2025 FEHB 
plan. Individuals enrolled in a carrier's 2024 FEHB plan where the 
carrier offers no 2025 FEHB plan and offers a 2025 PSHB plan with at 
least one option with similar benefits and cost sharing and in the same 
geographic area as the 2024 FEHB plan, as determined by OPM, will be 
enrolled in that 2025 PSHB plan and into an option as follows:
    (i) Similar option. Individuals enrolled in a carrier's 2024 FEHB 
option where the carrier offers a 2025 PSHB option with similar 
benefits and cost sharing as the 2024 FEHB option, as determined by 
OPM, will be automatically enrolled into that 2025 PSHB option; or
    (ii) No similar option. Individuals enrolled in a carrier's 2024 
FEHB option where the carrier does not offer a 2025 PSHB option that 
meets the criteria in paragraph (c)(2)(i) of this section, will be 
automatically enrolled into the lowest-cost option of the 2025 PSHB 
plan, or in the case where the 2025 PSHB plan has two or more options, 
into the lowest-cost option that is not a High Deductible Health Plan 
(HDHP) and does not charge an association or membership fee.
    (3) Into different plan. Individuals enrolled in a carrier's 2024 
FEHB plan where paragraphs (c)(1) and (2) of this section do not apply 
will be enrolled in the lowest-cost nationwide PSHB option, consistent 
with Sec.  890.301(n).
    (4) Same enrollment type. Individuals automatically enrolled under 
this section will be automatically enrolled into the same enrollment 
type as the individual's 2024 enrollment type.
* * * * *
0
6. Amend Sec.  890.1606 by revising paragraphs (c) and (d) to read as 
follows:


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

* * * * *
    (c) Reinstatement of enrollment in accordance with Sec.  890.305 is 
permitted in a PSHB plan.
    (d) Initial decisions and reconsiderations of PSHB eligibility or 
enrollment will be made pursuant to Sec.  890.1607.
* * * * *
0
7. Add Sec.  890.1607 to read as follows:


Sec.  890.1607  Initial decision and reconsideration.

    (a) Who may file. An individual may request the employing agency or 
OPM, as applicable, to reconsider the employing office's or OPM's 
initial decision denying eligibility for, or enrollment in, or coverage 
under, the PSHB Program. Individuals subject to Sec.  890.1112 are not 
entitled to reconsideration as used in this subpart.
    (b) Initial decision. An employing office's or OPM's initial 
decision must be in writing and state the right to an independent level 
of review (reconsideration).
    (1) Except as otherwise provided in this subpart, employing offices 
are responsible for initial decisions concerning PSHB eligibility for 
Postal Service employees or Postal Service annuitants.
    (2) OPM is responsible for initial decisions concerning:
    (i) Verification that an individual is an eligible member of family 
under Sec.  890.302;
    (ii) Postal Service annuitants or their family members who are not 
required to enroll in VA's system of patient enrollment referred to in 
38 U.S.C. 1705(a), and who must provide documentation from the VA under 
Sec.  890.1604(d)(2) indicating they satisfy the requirements for an 
exception described in Sec.  890.1604(c)(1)(iv) or (c)(2)(iii); and
    (iii) Postal Service annuitants or their family members who must 
provide documentation from the Indian Health Service under Sec.  
890.1604(d)(3) indicating they satisfy the requirements for an 
exception described in Sec.  890.1604(c)(1)(v) or (2)(iv).
    (3) OPM is responsible for initial decisions regarding enrollment 
actions made based on information received from source agencies with 
which OPM has an information sharing agreement established pursuant to 
Sec.  890.1612. An initial decision under this paragraph will be issued 
only after the notice process under Sec.  890.1612 is completed.
    (c) Reconsideration. (1) A request for reconsideration must be made 
in writing, must include the claimant's name, address, date of birth, 
Social Security number or other unique identifier, name of the carrier, 
reason(s) for the request, documentary evidence in support of the 
request, if any, and, if applicable, retirement claim number.
    (2) The reconsideration review must be an independent review 
designated at or above the level at which the initial decision was 
rendered.
    (d) Time limit. A request for reconsideration of an initial 
decision must be filed with the employing agency or OPM, as applicable, 
within 30 calendar days from the date of the written decision stating 
the right to a reconsideration. The time limit on filing may be 
extended, at the discretion of the employing office or OPM, when the 
individual shows that they were not notified of the time limit and were 
not otherwise aware of it, demonstrates a good faith effort to obtain 
the documentation as described under paragraph (b)(2)(ii) or (iii) of 
this section, or that they were prevented by circumstances beyond their 
control from making the request within the time limit. The employing 
agency's or OPM's decision in response to a request for reconsideration 
of an employing office's initial decision is a final decision as 
described in paragraph (e) of this section.
    (e) Final decision. After reconsideration, the employing agency or 
OPM, as applicable, must issue a final decision within 30 days of the 
request for reconsideration, which must be in writing and must fully 
set forth the findings and conclusions.
0
8. Amend Sec.  890.1608 by revising paragraphs (a), (b) introductory 
text, and (b)(2) and (5) and adding paragraphs (b)(6) through (9) to 
read as follows:


Sec.  890.1608  Disenrollment, removal, termination, cancellation, and 
suspension.

* * * * *
    (a) Enrollment in FEHB plan terminates prior to the initial PSHB 
contract year. For individuals who are eligible to enroll under this 
subpart pursuant to Sec.  890.1603(a), enrollment in an FEHB plan and 
coverage of the enrollee and covered family members under that FEHB 
plan will terminate at the end of the contract year preceding the 
initial contract year.
    (1) Coverage under a FEHB plan will remain available for an 
eligible family member who is or becomes covered as a member of family 
of a FEHB plan enrollee who is not eligible for a PSHB plan pursuant to 
Sec.  890.1603(a)(1) or (2).
    (2) Coverage as a family member under a FEHB plan will remain 
available for a Postal Service employee or Postal Service annuitant who 
is or becomes covered under their family member's FEHB enrollment. A 
Postal Service annuitant's or Postal Service employee's family member 
who meets the eligibility requirements for their own enrollment in an 
FEHB plan will remain eligible to enroll in an FEHB plan.
    (3) Individuals whose coverage is terminated under this paragraph 
(a) are not eligible for temporary continuation of coverage under 
subpart K of this part pursuant to Sec.  890.1103(b).
    (b) Disenrollment and removal from enrollment: Postal Service 
Medicare covered annuitants and Medicare covered members of family not 
enrolled in Medicare Part B. An individual who is required to be 
enrolled in Medicare Part B and is not enrolled in Medicare Part B will 
not be disenrolled or removed from PSHB coverage

[[Page 45797]]

immediately and will be given one opportunity to remain enrolled in or 
covered by PSHB if they enroll or re-enroll in Medicare Part B during 
their next available Medicare enrollment period, which may be the next 
Medicare General Enrollment Period, except that an individual who was 
excepted from the Medicare Part B requirement pursuant to Sec.  
890.1604(d)(1)(iii) or (d)(2)(ii) must enroll not later than the end of 
the Medicare General Enrollment Period beginning January 1 of the 
following calendar year. Failure to enroll or re-enroll in Medicare 
Part B at the next enrollment period may result in disenrollment from 
PSHB or removal from coverage under a PSHB enrollment. If disenrolled, 
a Postal Service annuitant will not be permitted to re-enroll in PSHB, 
as described in paragraph (b)(5) of this section, and a family member 
who is removed from coverage under a PSHB enrollment, may have their 
PSHB coverage reinstated only as described in paragraph (b)(9) of this 
section.
* * * * *
    (2) A Postal Service Medicare covered annuitant will not be 
disenrolled from PSHB and a Medicare covered member of family will not 
be removed from PSHB coverage in a case where that individual was not 
informed of their obligation to enroll in Medicare Part B, or it would 
be against equity and good conscience to remove the individual.
* * * * *
    (5) Disenrollment of a Postal Service Medicare covered annuitant 
from a PSHB plan under this section shall be considered a termination 
with entitlement of the enrollee and their covered family members to a 
31-day temporary extension of coverage and the right of conversion 
under Sec.  890.401, except as provided at paragraph (b)(5)(ii) of this 
section.
    (i) A Postal Service annuitant will have no further opportunity to 
re-enroll in a PSHB plan. Disenrollment of a Postal Service annuitant 
will also result in the removal of covered family members from PSHB 
coverage.
    (ii) Disenrollment or removal from coverage under an enrollment 
will be prospective in all cases except where fraud or intentional 
misrepresentation of material fact is found, in which case the 
individual's coverage will be terminated retroactively, as applicable, 
and no right to a 31-day temporary extension of coverage or to 
conversion under Sec.  890.401 will be available.
    (iii) Disenrollment or removal under this section will occur only 
after a notice process under Sec.  890.1612, if applicable, is 
completed and an initial decision to disenroll or remove, subject to 
reconsideration under Sec.  890.1607(b), is issued.
    (6) An individual who is disenrolled from Medicare Part B, where 
the individual is required to be enrolled in Medicare Part B and does 
not have an exception under this subpart, will be issued an initial 
decision disenrolling them from PSHB or removing from them coverage 
under a PSHB enrollment at the time OPM becomes aware of the Medicare 
disenrollment. Individuals disenrolled or removed from PSHB coverage 
will be entitled to a 31-day temporary extension of coverage and rights 
to conversion.
    (7) Within 60 days of OPM's initial decision, a Postal Service 
Medicare covered annuitant or Medicare covered member of family, as 
applicable, may request reconsideration of OPM's initial decision to 
disenroll or remove the individual from PSHB coverage. OPM will notify 
the carrier when a request for reconsideration of the decision to 
disenroll or remove the individual from the enrollment is made. The 
time limit for filing may be extended as noted in Sec.  890.1607.
    (8) If the Postal Service Medicare covered annuitant provides 
acceptable proof of PSHB eligibility subsequent to disenrollment which 
renders the disenrollment inappropriate, the enrollment shall be 
reinstated retroactively so that there is no gap in enrollment, as 
appropriate. A Postal Service Medicare covered annuitant's PSHB 
enrollment cannot be reinstated after disenrollment from a PSHB plan 
based on failure to enroll in, disenrolling from, or being disenrolled 
from Medicare Part B, except that a one-time opportunity as set forth 
at Sec.  890.1608(b) may be available if the Postal Service annuitants 
has not previously invoked and used it.
    (9) If the Postal Service Medicare covered member of family, who is 
required to be enrolled in Medicare Part B and is removed from a Postal 
Service Medicare covered annuitant's PSHB enrollment because the family 
member failed to enroll in, disenrolls from, or is disenrolled from 
Medicare Part B, the family member's PSHB coverage may be reinstated. 
Reinstatement of the family member's PSHB coverage will be permitted 
only if the Postal Service Medicare covered annuitant's PSHB enrollment 
continues, and only if proof of the family member's Medicare Part B 
enrollment which renders the removal inappropriate, is provided by the 
Postal Service Medicare covered annuitant or Medicare covered member of 
family, as applicable. The family member's PSHB coverage will be 
reinstated upon request by the Postal Service Medicare covered 
annuitant to reinstate the family member's PSHB coverage subsequent to 
removal, at the Postal Service Medicare covered annuitant's option, as 
follows:
    (i) Prospectively, within 60 days of the Medicare covered family 
member gaining coverage under Medicare Part B, or
    (ii) Retroactively to the date of termination of PSHB coverage, so 
that there is no gap in coverage, provided that the proof demonstrates 
the family member was continuously enrolled in Medicare Part B since 
that date and subsequent to removal, as appropriate.
* * * * *
0
9. Amend Sec.  890.1612 by adding paragraphs (f) and (g) to read as 
follows:


Sec.  890.1612  Information sharing.

* * * * *
    (f) If a source agency has provided information or data, regarding 
a Postal Service Medicare covered annuitant or Medicare covered member 
of family, which establishes a basis that the individual may be 
ineligible for PSHB enrollment or coverage, OPM will provide the 
individual with written notice that will contain at a minimum:
    (1) An explanation of the PSHB enrollment requirements and 
exceptions described in Sec.  890.1604 and the specific information or 
data provided to OPM from the source agency that was the basis for the 
notice;
    (2) The source agency's contact information where the individual 
may ask questions or contest the accuracy of the information or data on 
which OPM based the notice;
    (3) An explanation of the required process and timeframe(s) for 
providing OPM with evidence that the individual is engaged in a dispute 
with the source agency identified in the notice for the purposes of 
seeking the source agency's correction of the information or data, 
affecting the individual's PSHB eligibility, provided to OPM pursuant 
to the agreements described in this section;
    (4) That the individual will remain enrolled or covered under PSHB 
while the individual is engaged in disputing the information or data 
with the source agency, as described in paragraph (f)(2) of this 
section;
    (5) That the individual will be disenrolled or removed from PSHB, 
as described in Sec.  890.1608 and subject to reconsideration, within 
60 days of the date of the notice if the individual does not provide 
sufficient evidence, in the discretion of OPM, as described in 
paragraph (f)(3) of this section; and
    (6) That the individual will be disenrolled or removed from PSHB, 
as described in Sec.  890.1608 and subject to

[[Page 45798]]

reconsideration, within 60 days of the notice, notwithstanding evidence 
of a dispute, if the information or data OPM receives from the source 
agency continues to provide no basis for OPM to establish that the 
individual satisfies PSHB enrollment requirements.
    (g) OPM will issue an initial decision in accordance with Sec.  
890.1607(b)(3). If an individual will be disenrolled or removed from 
PSHB based on the information or data from the source agency, in 
paragraph (f) of this section, the individual will be notified in 
writing that the disenrollment or removal, as applicable, is subject to 
reconsideration pursuant to Sec.  890.1607, and that such 
reconsideration is limited to a review of the source agency's data or 
information, received pursuant to an agreement under this section or 5 
U.S.C. 8903c(e)(3)(C) that was before OPM at the time it effectuated 
the disenrollment or removal action.
0
10. Amend Sec.  890.1613 by revising the section heading and paragraphs 
(a), (c), and (e) to read as follows:


Sec.  890.1613  Postal Service contract year beginning date, Medicare 
late enrollment penalty, calculations for the Postal Service Retiree 
Health Benefits Fund, and clarification of statutory terms.

    (a) In general. The calculations for contributions and withholdings 
for coverage under this subpart will be made in the same manner as 5 
U.S.C. 8906 and subpart E of this part. For purposes of this subpart, 
the subscription charge and the Government contribution under 5 U.S.C. 
8906(b) will begin on January 1 of each year for Postal Service 
employees and Postal Service annuitants.
* * * * *
    (c) Medicare late enrollment penalty. Upon request by the Postal 
Service, and only until the Postal Service Retiree Health Benefits Fund 
established under 5 U.S.C. 8909a is depleted, OPM will pay out of such 
Fund any late enrollment penalties required under section 1839(e)(1) of 
the Social Security Act for individuals who enrolled during the special 
enrollment period established under section 1837(o) of the Social 
Security Act (42 U.S.C. 1395p). If at any time the PSRHBF is depleted, 
USPS shall pay late enrollment penalties out of its funds established 
under 39 U.S.C. 2003. In making such late enrollment penalty payments, 
OPM, as administrator of the Fund under 5 U.S.C. 8909a(a), will 
prioritize the payment of health benefit premiums for individuals 
described in 5 U.S.C. 8906(g)(2)(A), over the late enrollment 
penalties.
* * * * *
    (e) Clarification of statutory terms. (1) OPM has determined that 
``net claims costs'' in the calculation in 5 U.S.C. 8909a(e)(1) is 
equivalent to ``estimated net claims costs'' as defined in 5 U.S.C. 
8909a(g).
    (2) The computations for post-retirement health obligations 
computed under 39 U.S.C. 3654(b) shall be performed using an aggregate 
entry-age normal cost method described in 5 U.S.C. 8331(17) and in 
accordance with 8348(h).
    (3) In accordance with 5 U.S.C. 8348(h), for purposes of computing 
the amounts described in 39 U.S.C. 3654(b), this includes:
    (i) Current annuitants as described in 5 U.S.C. 8909a(e)(1)(A) 
means individuals who are Postal Service annuitants on September 30 of 
the relevant reporting year described in 5 U.S.C. 8909a(d); and
    (ii) Current employees as described in 5 U.S.C. 8909a(e)(1)(B) 
means individuals who are Postal Service employees on September 30 of 
that year.
0
11. Amend Sec.  890.1614 by revising paragraph (a) to read as follows:


Sec.  890.1614  Other administrative provisions.

    (a) Correction of errors. (1) Except as otherwise provided in this 
section, the employing office or OPM may make prospective or 
retroactive corrections of administrative errors at any time. 
Retroactive corrections may not apply retroactively beyond the initial 
contract year.
    (2) OPM may order or make, as applicable, a correction of an 
administrative error upon a showing satisfactory to OPM that it would 
be against equity and good conscience not to do so.
    (3) OPM may make retroactive correction of enrollee enrollment code 
errors if the enrollee reports the error by the end of the pay period 
following the one in which they received the first written 
documentation (i.e., pay statement or enrollment change confirmation) 
indicating the error.
    (4) OPM may order the termination of an enrollment in any 
comprehensive medical plan described in 5 U.S.C. 8903(4) and permit the 
individual to enroll in another PSHB plan for purposes of this subpart, 
upon a showing satisfactory to OPM that the furnishing of adequate 
medical care is jeopardized by a seriously impaired relationship 
between a patient and the comprehensive medical plan's affiliated 
health care providers.
    (5) Retroactive corrections are subject to withholdings and 
contributions under the provisions of Sec. Sec.  890.502 and 890.1613.
0
12. Add Sec. Sec.  890.1615 and 890.1616 to read as follows:


Sec.  890.1615  Crediting separate reserves for PSHB.

    (a) Definitions. For purposes of this section concerning crediting 
separate reserves from FEHB Options to PSHB Options, and for these 
purposes only, the following definitions apply:
    2024 FEHB Option premium means, for a 2024 FEHB Option, the 2024 
premium attributable to both Postal Service and non-Postal Service 
enrollees.
    2024 Postal Service premium means, for a 2024 FEHB Option, the 2024 
premium attributable to Postal Service employees and Postal Service 
annuitants as defined under 5 U.S.C. 8903c(a).
    Amounts available means:
    (1) With respect to experience-rated 2024 FEHB Options, the sum of 
the balances in the Option's Contingency Reserve Account and Letter of 
Credit Account less the Runout as of December 31, 2024; and
    (2) With respect to community-rated 2024 FEHB Options, the Option's 
Contingency Reserve Account balance as of December 31, 2024.
    Corresponding PSHB option means a 2025 PSHB Option that is in the 
same geographic area and has equivalent benefits and cost-sharing as a 
2025 FEHB Option, and that 2025 FEHB Option was also offered in 2024 by 
the same carrier.
    Option means a level of benefits offered by a carrier to self only, 
self plus one, and self and family enrollees in a specific geographic 
area, with a unique set of premiums.
    Plan means all Options offered by a carrier within a defined 
geographic area under a single contract.
    Runout means the amount estimated by OPM, as of December 31, 2024, 
needed to pay claims and expenses incurred but not paid for periods on 
or before December 31, 2024, for an experience-rated FEHB Option, 
considering any income attributable to periods on or before, but not 
yet received by, December 31, 2024.
    (b) Reserve credits. As soon as practicable on or after January 1, 
2025, OPM will credit each PSHB Option's reserves according to the 
method described in paragraph (c) of this section.
    (c) Reserve credit methodology. OPM will determine the Reserve 
credit for each 2024 FEHB Option and allocate it to the PSHB.
    (1) OPM will determine the 2024 Postal Service premium by 
multiplying

[[Page 45799]]

a 2024 FEHB Option's self only, self plus one, and self and family 2024 
premiums by the number of Postal Service enrollments of that Option in 
each enrollment type and taking the sum of these three amounts.
    (2) OPM will determine the 2024 FEHB Option premium by multiplying 
each 2024 FEHB Option's self only, self plus one, and self and family 
premiums by the number of total enrollments (inclusive of both Postal 
Service and non-Postal Service enrollments) in each enrollment type for 
that Option and taking the sum of these three amounts. OPM will use its 
March 2024 enrollment reports to determine the total enrollments.
    (3) OPM will calculate the Postal Service Percentage for each 2024 
FEHB Option by dividing the 2024 Postal Service Premium by 2024 FEHB 
Option Premium.
    (4) OPM will calculate the Reserve Credit by multiplying the Postal 
Service Percentage for each 2024 FEHB Option by the Amounts Available 
for that Option.
    (5) OPM will reallocate the Reserve Credit for each 2024 FEHB 
Option into a PSHB Contingency Reserves and Letter of Credit Account, 
as applicable, as follows:
    (i) If a carrier offers an FEHB Plan with one, two, or three 
Options in 2024 and offers the same number of Corresponding PSHB 
Options in 2025, the Reserve Credits for those Options will be 
allocated to the Corresponding PSHB Options' reserves.
    (ii) If a carrier offers an FEHB Plan with two or three Options in 
2024 and offers only one Corresponding PSHB Option in 2025, the Reserve 
Credits attributable to all the 2024 FEHB Plan's Options will be 
allocated to that Corresponding PSHB Option's reserve.
    (iii) If a carrier offers an FEHB Plan with three Options in 2024 
and offers only two Corresponding PSHB Options in 2025, the Reserve 
Credits attributable to the two FEHB Options that have Corresponding 
PSHB Options will be allocated to those two Corresponding PSHB Options' 
reserves. The Reserve Credit from the third FEHB Option (that does not 
have a Corresponding PSHB Option) will be allocated to one of the two 
Corresponding PSHB Plan Options that has the lowest self only premium 
and is not a High Deductible Health Plan (HDHP).
    (iv) If a carrier offers an FEHB Plan in 2024 and offers no FEHB 
Plan in 2025, but offers at least one 2025 PSHB Option with similar 
benefits and cost sharing and in the same geographic area as the 
carrier's 2024 FEHB Plan, as determined by OPM, the Reserve Credit(s) 
attributable to that FEHB Plan will be credited to the reserves of the 
carrier's 2025 PSHB Options as described in paragraphs (c)(5)(i) 
through (iii) of this section as if the 2025 PSHB Option(s) were a 
Corresponding PSHB Option.
    (v) If a carrier offers an FEHB Plan in 2024, and offers that FEHB 
Plan in 2025, but offers no Corresponding PSHB Options for that 2025 
FEHB Plan, the Reserve Credit(s) attributable to that FEHB Plan will be 
credited to the reserves of the PSHB Options offered in 2025, 
proportionately, consistent with 5 U.S.C. 8903c(j)(2) where the 
subscription charges paid are the 2024 Postal Service Premium.
    (vi) If a carrier offers a 2025 PSHB Option for which no 2024 
Postal Service Premium is attributable, then that 2025 PSHB Option will 
receive no Reserve Credit.


Sec.  890.1616  Medicare Part D.

    (a) Carrier requirement to offer Medicare Part D prescription drug 
benefits. (1) A carrier that offers a PSHB plan must provide 
prescription drug benefits to any Postal Service annuitant and member 
of family of such annuitant who is a Part D eligible individual (as 
defined in section 1860D-1(a)(3)(A) of the Social Security Act) through 
a Medicare Part D EGWP as described as employer-based retiree health 
coverage under 1860D-22(b), (c)(1), and (3)(A) of such Act.
    (2) A carrier must provide Medicare Part D coverage through a 
prescription drug plan (PDP), as defined in section 1860D-41(a)(14) of 
such Act, or through contracts between the PSHB plan and a PDP sponsor, 
as defined in section 1860D-41(a)(13) of such Act, of such a 
prescription drug plan.
    (3) A carrier may, in addition to offering a PDP required under 
(a)(2) and subject to OPM's approval, offer a Medicare Advantage plan 
with prescription drug coverage (MAPD), as defined in section 1860D-
1(a)(3)(C) of such Act.
    (b) Prescription drug coverage under a PSHB plan through Medicare 
Part D. A Postal Service annuitant and a member of family of such 
annuitant who is a Part D eligible individual must be enrolled in a 
PSHB plan's Part D EGWP in order to receive prescription drug coverage 
under the PSHB plan. Prescription drugs are not covered under a PSHB 
plan for a Part D eligible individual who is not enrolled in the PSHB 
plan's Part D EGWP.
    (c) PSHB plan enrollment or disenrollment and Medicare EGWPs. 
Changes to enrollment during open season under Sec.  890.301(f) or 
because of a qualifying life event as defined in part 892 of this 
chapter apply with respect to changes to PSHB plans, that include a 
Medicare Part D EGWP.
    (d) Carrier requirements for group enrollment into Medicare EGWPs. 
A carrier must comply with all applicable CMS requirements regarding 
Part D eligible individual group enrollment into Medicare EGWPs, 
including all applicable CMS notice requirements. Nothing in this 
section shall be construed as affecting an individual's ability to 
select a PSHB plan pursuant to Sec.  890.1606.
    (1) PDP EGWP. Annually at the conclusion of open season under Sec.  
890.301(f), or when an enrollee makes a change to their PSHB enrollment 
because of a qualifying life event under Sec.  892.101 of this chapter, 
a carrier must automatically group enroll a Part D eligible individual, 
who is covered by the carrier's PSHB plan, into the PSHB plan's PDP 
EGWP, unless the individual:
    (i) Elects to enroll or is enrolled in the PSHB plan's MAPD EGWP 
described in paragraph (d)(2) of this section; or
    (ii) Has previously opted out of group enrollment in the PSHB 
plan's PDP EGWP or MAPD EGWP and has not subsequently requested to be 
reenrolled.
    (2) MAPD EGWP. Annually, at the conclusion of open season under 
Sec.  890.301(f), or when an enrollee makes a change to their PSHB 
enrollment because of a qualifying life event, a carrier must 
automatically enroll a Part D eligible individual who is covered by the 
carrier's PSHB plan into the carrier's PSHB plan's MAPD EGWP if the 
individual elects to enroll in the carrier's MAPD EGWP. During the 
transitional open season, a carrier must automatically enroll a Part D 
eligible individual into the carrier's 2025 PSHB plan's MAPD EGWP if 
the individual is covered by that carrier's 2024 FEHB plan's MAPD EGWP, 
and if the individual elects the carrier's 2025 PSHB plan or is 
automatically enrolled into the carrier's 2025 PSHB plan under Sec.  
890.1605.
    (3) Notice. In addition to the CMS notice requirements, each year, 
not less than 30 calendar days prior to the start of open season under 
Sec.  890.301(f), a carrier must send written notice to Part D eligible 
individuals who are enrolled in the carrier's PSHB plan that they will 
be group enrolled into the PDP EGWP offered under the carrier's PSHB 
plan. In addition, when an enrollee makes a change because of a 
qualifying life event, a carrier must send such written notice to the 
Part D eligible individuals covered under the enrollment. The notice 
shall state:

[[Page 45800]]

    (i) The carrier intends to enroll the individual in the carrier's 
Medicare Part D PDP EGWP as described under paragraph (d)(1) of this 
section, or MAPD EGWP as described under paragraph (d)(2) of this 
section as applicable, during open season under Sec.  890.301(f), or as 
a result of a qualifying life event, as applicable;
    (ii) The individual may affirmatively opt out of group enrollment;
    (iii) Opting out of group enrollment means that the individual is 
deciding not to be enrolled in the PSHB plan's PDP EGWP, or MAPD EGWP 
if applicable;
    (iv) The date by which the individual must opt out of group 
enrollment, if the individual chooses to opt out;
    (v) The procedure for how an individual affirmatively opts out of 
group enrollment;
    (vi) The individual will not receive prescription drug coverage 
under the PSHB plan if the individual is not enrolled in the PSHB 
plan's PDP EGWP, or MAPD EGWP if applicable; and
    (vii) That no adjustment will be made to the enrollee's share of 
the PSHB plan option premium.
    (4) Additional requirements for PSHB plans providing an MAPD EGWP. 
If a PSHB plan offers an MAPD EGWP, the carrier must comply with all 
applicable Medicare requirements and the carrier must also provide the 
notices as described in (d)(3) of this section. In addition, such 
notice must state how the individual can enroll in the PSHB plan's PDP 
EGWP if the individual is opting out of group enrollment or 
disenrolling from a PSHB plan's MAPD EGWP during open season or as a 
result of a qualifying life event, the date by which the individual 
must enroll in the PDP EGWP, and must state that if the individual is 
required to be enrolled in Medicare Part B in order to maintain 
eligibility for PSHB plan coverage and does not qualify for an 
exception under Sec.  890.1604, the individual must remain enrolled in 
Part B.
    (5) Notices to be shared with OPM. A carrier must provide OPM with 
the notices under this section and the notices that CMS requires 
regarding PDP EGWP and MAPD EGWP group enrollment each year, at the 
time the carrier submits its benefit and rate proposal.
    (e) Effect of opting out of group enrollment into or disenrolling 
from a Medicare EGWP. (1) By opting out of group enrollment in a PSHB 
plan's Medicare PDP EGWP or MAPD EGWP, as applicable, the individual 
will not receive prescription drug coverage under the PSHB plan unless, 
during the open season or pursuant to the qualifying life event in 
which the individual opted out of group enrollment, the individual 
elects to enroll in a Part D EGWP under their PSHB plan.
    (2) A Part D eligible individual may enroll in a PDP EGWP or, if 
eligible, an MAPD EGWP, under a PSHB plan, under the same conditions 
that govern enrollment in a PSHB plan during open season or pursuant to 
a qualifying life event.
    (3) An individual may disenroll from their PSHB plan's Part D EGWP 
at any time during the plan year which means they will not receive 
prescription drug coverage under the PSHB plan.
    (f) EGWP prescription drug benefits. A carrier must provide the 
same prescription drug benefits to Part D eligible individuals under a 
PSHB plan's PDP EGWP, and, if applicable, the plan's MAPD EGWP, as the 
prescription drug benefits provided to individuals covered under the 
PSHB plan who are not eligible for Part D and not enrolled in the PSHB 
plan's PDP EGWP, or, if applicable, MAPD EGWP, except to the extent 
necessary, as determined by OPM, to integrate the Medicare Part D 
prescription drug benefit coverage required under 5 U.S.C. 8903c and 
this section.

[FR Doc. 2024-11127 Filed 5-23-24; 8:45 am]
BILLING CODE 6325-63-P