Brian Swerdlow: Attention US Postal Service Employees and Annuitants: Are you ready for your new health care plan rollout?

Are you a USPS employee?  Get ready for your new health insurance program.

by Brian Swerdlow

As the United States Postal Service (USPS) gears up to launch a new health insurance program, the Office of Personnel Management (OPM) is addressing a crucial issue: the potential impact on Medicare-eligible retirees who opt out of Medicare Part D. According to OPM regulations, these retirees will lose their underlying prescription drug coverage, a consequence that needs careful consideration and clear communication.

The Shift to PSHB

This fall, USPS employees, annuitants, and their families will transition from the Federal Employees Health Benefits (FEHB) program to the new Postal Service Health Benefits (PSHB) program, effective for plan year 2025. All Medicare-eligible USPS enrollees will automatically receive a prescription drug plan (PDP) under Medicare Part D through PSHB. Those not eligible for Medicare will continue to receive prescription drug benefits through their PSHB plan.

OPM’s proposed regulations include a provision allowing PSHB participants to opt out of Medicare Part D. However, opting out means losing all prescription drug benefits under the PSHB plan. This catch is significant, as retirees who opt out will retain other plan benefits but will not have any prescription drug coverage.

Potential Risks and Concerns

OPM is aware of the risk of “inadvertent disenrollment” and is seeking feedback on how to educate Part D-eligible individuals about the new PSHB program. The concern is that some retirees might opt out of Part D without fully understanding the implications, thus losing access to prescription drug benefits while still paying the entire premium.

Experts emphasize that there are relatively few situations where opting out of Part D would be beneficial. Even higher-income retirees subject to Income-Related Monthly Adjustment Amount (IRMAA) charges would not gain by opting. This is because they would still incur IRMAA costs and additional premiums if they enrolled in a commercial Part D plan. PSHB Part D plans offer flexibility and benefits beyond traditional Medicare plans, such as coverage through the Part D gap and drugs not on the Medicare formulary.

Feedback and Concerns

Some federal benefits experts are concerned that PSHB participants could opt out without realizing the long-term consequences. They note that an accessible opt-out provision makes sense for FEHB plans, where drug coverage remains. However, for PSHB enrollees, opting out would mean they have no underlying coverage.

OPM’s decision to remove underlying prescription drug coverage for those who opt out of Medicare Part D is controversial. Some say that the regulation contradicts the requirements of the 2022 Postal Service Reform Act because the potential loss of coverage acts as an enforcement mechanism not specified in the statute.

Ensuring Clear Communication

Other commenters on the proposed PSHB regulations stressed the importance of clearly explaining the consequences of opting out of Part D. Better education on this issue is necessary to avoid adverse outcomes for current and retired employees.

PSHB enrollees who choose to opt out will have the option to re-enroll in Part D at the next available opportunity, though they may face a late enrollment penalty. Health carriers have asked the Office of Personnel Management to clarify the re-enrollment process. The American Postal Workers Union (APWU) also emphasized the critical nature of maintaining equal or improved Part D coverage. The APWU has suggested creating an exception for those impacted by IRMAA.

Looking Ahead to Open Season

As Open Season approaches, from Nov. 11 to Dec. 9, USPS employees and annuitants will select from 32 different carrier options. Those who do not make a positive election will be automatically enrolled in the lowest-cost nationwide plan. The PSHB program aims to provide coverage similar to FEHB, with the first elections taking effect in January for the plan year 2025.

Hatton hopes OPM will reconsider the regulations, particularly the consequences for those who inadvertently opt-out and lose drug coverage. Ensuring retirees understand the full implications of their choices is paramount to a smooth transition to the new PSHB program.

For more information:

Current employees:

https://liteblue.usps.gov/wps/myportal/myhr

Postal annuitants:

https://www.keepingposted.org/postal-service-health-benefits.htm