How Medicare Part D will work in the upcoming USPS insurance program

With a few weeks to go Open season begins, the Office of Personnel Management is finalizing how it plans to implement the Postal Service Health Benefits (PSHB) program for the USPS.

OPM’s final regulations for the PSHB program, which published last weekdescribes many technical factors for running the program. The PSHB will support nearly 2 million USPS employees, retirees and their family members beginning in 2025.

Part of the final regulations, which attracted the attention of many stakeholders, clarifies how Medicare Part D and prescription drug coverage will function for Medicare-eligible USPS annuitants and family members. According to OPMPSHB plans are required to integrate Medicare Part D and provide prescription drug coverage to eligible postal workers through what the program calls an “Employer Group Waiver Plan” (EGWP).

All during the open season Medicare eligible Postal retirees are automatically enrolled in an EGWP through the PSHB program. The EGWP includes prescription drug coverage through Medicare Part D. Individuals who are not eligible for Medicare, such as those living abroad, receive prescription drug benefits through their PSHB plan.

Notably, under the final rule, Medicare-eligible USPS enrollees who opt out of Part D coverage will lose access to any underlying drug coverage through PSHB. Despite to assure created in response to the proposed rulemaking, OPM maintained the same plans it initially proposed to opt out of Part D.

“OPM appreciates these comments and the thoughtful concerns they raised,” OPM wrote in the final line. “OPM believes that the proposed approach – namely, that Part D eligible Postal Service members and their eligible family members who opt out of the Medicare Part D plan offered by their PSHB plan will lose prescription drug benefits under their PSHB plan – is most consistent with the (Postal Service Reform Act) and its policy objectives.”

There will also be “seamless coordination” between PSHB and Medicare, OPM said, and Part D costs will be included in the PSHB premium. In other words, Medicare-eligible USPS retirees who opt out of Part D coverage would pay the same premium rate but lose the benefits of their prescription drugs.

For that reason, OPM said it expects “very few” USPS annuitants and their family members to opt out of Medicare Part D.

“The vast majority of Part D eligible individuals will be better off maintaining their PSHB drug coverage,” OPM wrote.

Concerns about “removal of choice” for USPS retirees

After reviewing OPM’s final rule, the National Active and Retired Federal Employees Association (NARFE) questioned what the organization said was a “removal of choice” for prescription drug coverage for Medicare-eligible retirees.

In a letter dated October 28 to OPMNARFE National President William Shackelford said there may be circumstances in which individuals find a PSHB plan a better alternative to a Medicare Advantage plan. For example, some enrollees may consider opting out of Part D to avoid Income Related Monthly Adjustment Amounts (IRMAA) fees or to take advantage of prescription drug discount coupons.

“If the cost-reducing benefits of Medicare PDP coverage for the individual are offset by income-based Medicare premium surcharges or the inability to combine drug company rebates with insurance coverage, some Postal Service retirees would be better off keeping their PSHB . plan drug coverage,” Shakelford wrote. “Yet OPM’s final rule forces these Postal Service retirees to accept the more expensive option or lose prescription drug coverage through PSHB altogether.”

However, some federal benefits experts have said that even when IRMAA costs and drug coupons are taken into account, the cost savings are unlikely to outweigh the benefits of staying in Medicare. From a cost perspective, some experts say postal retirees usually are it is better to keep Medicare Part D.

Some flexibilities have been added to help resolve “errors”.

Generally, Postal registrants can only make changes to their registration during Open Season or if they experience a qualifying life event, such as a marriage or the birth of a child. Outside of these occasions, PSHB enrollees will retain their selected enrollments for the entire 2025 plan year.

But several commenters on OPM’s proposed PSHB regulations raised concerns about the possibility that some annuitants could opt out of Medicare Part D without realizing the full consequences – that they would lose prescription drug coverage while paying the same premium rate.

In the PSHB final rule, OPM has made one adjustment to try to combat what the agency says is a “high risk of confusion” among USPS annuitants about the rules surrounding Medicare Part D. The new flexibility included in the final rule is intended to highlight “potential consequences” that Medicare-eligible annuitants may face based on their decisions during the Open Season.

OPM said annuitants who opt out of Part D “due to an error” may have some flexibility to change their enrollments outside of the Open Season. If a registration error is determined, the participant will be given 90 days, or longer in some cases, to make another selection.

OPM did not specifically define what would constitute an “error,” but said it will use PSHB enrollment flexibility “broadly” for the initial plan year for the PSHB program. However, the flexibility is only limited to new enrollments in a Part D EGWP, OPM said.

“OPM seeks to ensure that anyone who opts out does so based on an informed understanding of the consequences and that anyone who improperly opts out can have their Part D EGWP enrollment corrected,” OPM wrote.

During Open Season, which this year runs from November 11 to December 9, postal workers and annuitants will have time to review their enrollments and, if they wish, make changes to their health insurance options. Participants in the Federal Employees Health Benefits (FEHB) program can also take a look and make changes to their enrollments during Open Season.

Mail participants who do not make a selection during the Open Season will automatically be enrolled in the same plan they had through FEHB, as long as the same carrier is part of the new PSHB program. If no equivalent subscription option exists, Postal participants will automatically be enrolled in the cheapest option for which they qualify.