Federal Employees Health Benefits Program: Modification of Two-Option Limitation for Health Benefits Plans and Continuation of Coverage for Annuitants Whose Plan Terminates an Option

Summary:

The Office of Personnel Management (OPM) is modifying the prohibition against Federal Employees Health Benefits (FEHB) plans offering more than 2 options, to allow FEHB plans to offer 2 options plus a high deductible plan. OPM is also modifying what happens when an annuitant's health plan terminates an option, and the annuitant doesn't make a health benefits change.

Table of Contents

Addresses:

Send written comments to Abby L. Block, Deputy Associate Director for Employee and Family Support Policy, Strategic Human Resources Policy Division, Office of Personnel Management, 1900 E Street NW., Washington, DC 20415; or deliver to OPM, Room 3425, 1900 E Street NW., Washington, DC; or FAX to (202) 606-0633.

For further information contact:

Karen Leibach, (202) 606-0004.

Supplementary information:

Pub. L. 108-173, Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (the Medicare Modernization Act, 117 Stat. 2006), enacted December 8, 2003, contains a provision (section 1201) authorizing health savings accounts (HSAs) for individuals who are not eligible for Medicare and who are in a high deductible health benefits plan. A high deductible plan, as defined in U.S. Code 223(c)(2)(A) of the title 26, is a plan with a deductible of at least $1,000 for individual coverage or $2,000 for family coverage. Some FEHB plans may be interested in offering eligible enrollees such a high deductible plan product with an HSA or a health reimbursement account (HRA) if the enrollee is not eligible for an HSA. An HRA is an employer-provided accident or health plan, which reimburses employees for certain medical care expenses incurred by the employee, the employee's spouse, and dependents. However, many plans participating in the FEHB Program already offer 2 options, and current regulations do not permit FEHB plans to offer more than 2 options. Therefore, OPM is revising its regulations to allow plans participating in the FEHB Program to offer 2 options plus a high deductible plan.

OPM is also changing slightly what happens when an annuitant's plan terminates an option, and the annuitant does not make a health benefits change. Currently, our regulations state that if a plan has 2 options, and one of the options is discontinued, an annuitant who does not change health plans is considered to be enrolled in the plan's remaining option. However, with the introduction of new products, such as consumer-driven plans and plans with high deductibles, it may not be in an annuitant's best interests to be “deemed” into a plan's remaining option. We are revising our regulation to state that an annuitant who doesn't make a health benefits change when his/her plan terminates an option will be moved into the plan's remaining option if that option reasonably approximates the terminating option. If the remaining option does not reasonably approximate the terminating option, such as the remaining option is a high deductible health plan or a consumer driven plan, and the annuitant doesn't make a health benefits change, he/she will be moved into the standard option of the Blue Cross and Blue Shield Service Benefit Plan.

Waiver of Notice of Proposed Rulemaking

In accordance with § 553(b)(3)(B) of title 5 of the U.S. Code, I find that good cause exists for waiving the general notice of proposed rulemaking and the 30-day delay in effectiveness for this rule. The HSA provision of Pub. L. 108-173 became effective January 1, 2004.

Regulatory Flexibility Act

I certify that this regulation will not have a significant economic impact on a substantial number of small entities because the regulation only affects health benefits plans and annuitants participating in the Federal Employees Health Benefits Program.

Executive Order 12866, Regulatory Review

This rule has been reviewed by the Office of Management and Budget in accordance with Executive Order 12866.

List of subjects in 5 cfr part 890

Administrative practice and procedure, Government employees, Health facilities, Health insurance, Health professionals, Hostages, Iraq, Kuwait, Lebanon, Reporting and record keeping requirements, Retirement.

U.S. Office of Personnel Management.

Kay Coles James,

Director.

Accordingly, OPM is amending 5 CFR part 890 as follows:

Part 890—federal employees health benefits program

1. The authority citation for part 890 continues to read as follows:

Authority:

5 U.S.C. 8913: § 890.803 also issued under 50 U.S.C. 403(p), 22 U.S.C. 4069c and 4069c-1; subpart L also issued under sec. 599C of Pub. L. 101-513, 104 Stat. 2064, as amended; § 890.102 also issued under sections 11202(f), 11232(e), and 11246(b) and (c) of Pub. L. 105-33, 111 Stat. 251; and section 721 of Pub. L. 105-261, 112 Stat. 2061 unless otherwise noted.

2. Revise paragraph (b)(3) of § 890.201 to read as follows: § 890.201 * * * * *

(b) * * *

(3) Have more than two options and a high deductible health plan (26 U.S.C. 223(c)(2)(A).

3. Revise paragraph (1)(4)(iii) of § 890.306 to read as follows: § 890.306 * * * * *

(1) * * *

(4) * * *

(iii) If a plan has more than one option, and one or more options of the plan is discontinued, an annuitant who does not change the enrollment is considered to be enrolled in a remaining option of the plan. However, if OPM determines that there is no remaining option that reasonably approximates the terminating option, the annuitant will be considered to be enrolled in the standard option of the Blue Cross and Blue Shield Service Benefit Plan.

* * * * *

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