The Office of Personnel Management will be seeking applications from insurance companies in preparation of enrolling U.S. Postal Service employees in their own health program, separate from the one offered to the rest of the federal civilian workforce, according a new interim rule.

As of 2021, there were 915,000 USPS enrollees who used the Federal Employee Health Benefits plan, which covers a total of 8.2 million individuals who are federal civilian employees, retirees and family members.

The USPS is getting its own program because it will help reduce expenses for the agency, it has said. It’s one cost-saving measure of several spurred by the Postal Service Reform Act signed in 2022. The agency is trying to avoid a predicted loss of billions of dollars by 2030, and some features of the Postal Service Health Plan will allow it to integrate with Medicare and eliminate pre-funding requirements for retiree benefits that the agency says cost it 6.4 cents of every revenue dollar.

The interim rule issued by OPM this week lays out preliminary costs, deadlines and regulations for how the program will work. According to the document, startup costs are expected to be roughly $100 million. In addition to creating a USPS-only health insurance system, the project also includes a centralized enrollment system that will consolidate data from USPS, the Social Security Administration, Veterans Affairs and others to verifying eligibility and allow digital enrollment.

One of the major differences between the two systems is that future USPS retirees must also enroll in Medicare Part B, said Guy Cavallo, OPM’s CIO, at an ATARC conference on Feb. 8.

“Because it’s a smaller market segment, we expect there to smaller plans than the current 160-170 plans that are available in FEHB,” he said. Cavallo added that this project will require better IT systems, like cloud platforms, to verify enrollments, especially since the requirements will be novel to new enrollees.

Cavallo said OPM will use lessons learned from this overhaul to redo the FEHB program on a cloud-based platform.

Open season for the new program is slated for Nov. 11 to Dec. 9, 2024, with the first year of coverage to begin on Jan. 1, 2025, according to OPM.

Coverage under FEHB will end for Postal Service employees on Dec. 31, 2024. Annuitants who retire and become Medicare-eligible after that date will be required to enroll in Medicare Part B as a condition of eligibility to be in USPS’ program.

OPM said benefits offered under the USPS system should mirror as close as possible those offered by FEHB, and the rules that govern that system will also apply to USPS plan carriers.

The transition will not affect USPS workers’ ability to enroll in other benefits like the Federal Employees Dental and Vision Insurance, Federal Employees’ Group Life Insurance, Federal Employees’ Group Life Insurance and the Federal Flexible Spending Account Program.

What happens next

The Postal Service Reform Act is what directed OPM to issue regulations for carrying out the USPS health plan no later than April 6 of this year. The act also appropriated $94 million for OPM and other agencies for these and other costs.

Now, with temporary rules set out, insurance carriers wanting to contract with the USPS program must submit applications to OPM in August. Then, in the fall, OPM will review and vet these applications. In October, the Postal Service will roll out a Health Benefits Education Program to raise awareness of the new program, though information about specific rates and benefits won’t be available until 2024. OPM will also work on developing the enrollment system.

By May 31, 2024, USPS plan carriers must submit rates and benefits proposals for the 2025 plan year.

“The immediate effectiveness of this rule is necessary not only for OPM to meet the statutorily required Jan. 1, 2025 deadline for providing benefits to enrollees, but also because a failure to do so could result in a loss of healthcare coverage for Postal Service employees, annuitants, and their families,” OPM said in its notice.

Molly Weisner is a staff reporter for Federal Times where she covers labor, policy and contracting pertaining to the government workforce. She made previous stops at USA Today and McClatchy as a digital producer, and worked at The New York Times as a copy editor. Molly majored in journalism at the University of North Carolina at Chapel Hill.

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