OPM Starts the Process of Booting USPS Employees to a New Health Care Program
Health care premiums will likely go down for feds across the board as Medicare absorbs more costs, Biden administration predicts.
The Biden administration will soon begin accepting applications from health insurance companies to be a part of the new exchange exclusively for U.S. Postal Service employees and retirees, according to an interim rule published Thursday, which will cost $100 million to stand up.
The Office of Personnel Management’s rule follows a requirement in the 2022 Postal Service Reform Act that USPS workers enroll in postal-specific plans as part of a health benefit network designed specifically for the mailing agency. OPM will run the exchange as part of the larger Federal Employees Health Benefit Program, but starting in 2025 postal employees and retirees will no longer be eligible for those government-wide plans.
Non-postal federal employees will see slightly lower premiums as a result of the change, OPM predicted, as older postal employees are shifted out of the risk pool. Postal workers’ premiums will also likely tick down, as newly eligible retirees will face a requirement to make Medicare Part B their primary coverage. Plans for current employees will become younger and cheaper to cover.
Over the next 10 years, Medicare premiums are expected to absorb about $9 billion in costs as a result of more postal retirees joining the program. About 75% of current Medicare-eligible postal retirees are enrolled in it, but starting in 2025 those who newly become eligible will face a requirement to sign up. Retirees who remain enrolled in their USPS-sponsored care in addition to Medicare may see their premiums increase, OPM said, but their out-of-pocket costs will likely decrease.
OPM, the Postal Service and a select few other agencies will spend a total of $101 million to stand up the new exchange, according to the interim rule, and will incur about $51 million in costs annually going forward. OPM said it will require 153 full-time employees to run the program. As part of the reform law, Congress provided $94 million to stand up the Postal Service Health Benefits initiative.
Health insurance companies must match the benefits of the plans as they existed in FEHB “to the greatest extent practicable,” OPM said, though they must match exactly for the first year at least. The agency will attempt to keep in the new exchange any plan that offers care to at least 1,500 postal employees. Carriers will begin applying for inclusion on PSHB in the coming months and must submit their applications by August. OPM stressed that it is facing a tight timeline to meet its deadlines to ensure postal employees are knowledgeable about the upcoming changes and can make their selections in late 2024 to avoid any disruption in health care coverage.
“Given the complexities of establishing this program,” OPM said, “expeditious issuance of these rules is required because otherwise PSHB plans will not be established by January 2025, potentially resulting in the loss of health insurance coverage for millions of Postal Service employees, Postal Service annuitants, and their family members.”
Laurie Bodenheimer, OPM's associate director for healthcare and insurance, said creating a brand new health insurance system for 1.7 million individuals was "nothing to sneeze at."
"It’s fair to say that it’s a very tight timeline to implement something of this magnitude," Bodenheimer said. "There are changes. Change is always difficult." She added OPM and USPS were engaging in significant planning to "make sure this transition is as smooth as possible."
Unlike FEHB, where each individual agency is responsible for enrolling its employees, OPM will centralize and run the operations of the new postal program. OPM Director Kiran Ahuja previously told Government Executive that FEHB's structure is a "challenge" and the postal program would be a test case for better management. She suggested it would help reduce improper payments and make the benefit more customer friendly. OPM said in its new rule its centralized system would include “an online portal to enter and process enrollment transactions, robust decision support tools, and a customer support center to assist enrollees via phone, email, or online chat.” The agency will begin developing and testing the new system this year.
OPM last month released a request for proposal soliciting bids for vendors to set up the centralized system. The agency asked for a flexible and scalable product that could "potentially service an additional 6.5 million" FEHB enrollees. Bodenheimer said OPM is trying to be innovative in its approach and the need to integrate its data with the Centers for Medicare and Medicaid Services, Postal Service and other agencies required a custom-built system. The challenge also presented an opportunity, she added.
"It can be hard to do big, innovative things in a system that is that old and that decentralized," Bodenheimer said of the existing FEHB structure. "We will try to use this as an opportunity to look afresh at how we administer a health benefits program."
USPS employees who do not make a selection for a postal-specific plan in 2024 will be shifted onto the most similar plan offered by their current carrier. If their insurer does not have an offering in the new exchange, the employees will be placed on the lowest cost, non-high deductible national plan. New retirees who fail to enroll in Medicare Part B will automatically lose their PSHB coverage. Existing retirees will have a six-month period beginning in April 2024 in which they can enroll in the program without facing the normal late enrollment penalty.
Other benefit programs will continue to operate as they have even after the switchover to the postal specific health care network, including dental and vision insurance, flexible spending plans, group life insurance and long-term care insurance.
Under the law, USPS must set up an education program to help employees and retirees navigate the new system and make decisions appropriate to their health care needs. OPM said those efforts will begin in October and will raise awareness about the upcoming changes. Bodenheimer added OPM is working with the Postal Service on building the education program, calling it "very much a work in progress." She said USPS has a variety of ways to reach its workforce, such as through videos, visits to facilities, a call center for employees and working with unions.
OPM cautioned that some employees and retirees may no longer see their plans available in the new program, but predicted that overall they will have access to a larger number of offerings. The agency noted there is a lot of uncertainty with exactly how the new system will play out and there are some risks that the highest-risk retirees could remain in the pool while others opt for only Medicare coverage, which could increase costs for all participants.
Bodenheimer called the release of the interim rule a big milestone, as it allows OPM and USPS to begin having many more conversations about next steps. Carriers were anxiously awaiting information on their expectations and will now quickly put together their bids to be included. The rule will be open for a comment period for the next 60 days.
"There are lots more details to come," Bodenheimer said.
Erich Wagner contributed to this report.