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

AGENCY:

Office of Personnel Management.

ACTION:

Final rule.

SUMMARY:

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

DATES:

Effective December 30, 2004.

FOR FURTHER INFORMATION CONTACT:

Karen Leibach, (202) 606-0004.

SUPPLEMENTARY INFORMATION:

On June 7, 2004, OPM published an interim rule in the Federal Register (69 FR 31721) modifying the 2-option limitation on health plans to allow FEHB plans to offer 2 options plus a high deductible plan. The regulation also modified what happens when an annuitant whose plan terminates an option doesn't make a health benefits change. Such an annuitant will only be transferred to the plan's remaining option if that option reasonably approximates the terminating option; otherwise, the annuitant will be transferred to the standard option of the Blue Cross and Blue Shield Service Benefit Plan.

We received comments from 1 employee union, 1 Federal agency, and 1 FEHB carrier.

One commenter opposed allowing high deductible plans and health savings accounts (HSAs) in the FEHB Program. This commenter believes that a high deductible/HSA plan will attract younger healthier enrollees, leaving older, less healthy people in traditional health plans, which will drive up premiums. The commenter also believes that people will move back and forth, moving into traditional plans in years when they anticipate more medical expenses and moving back into the high deductible plan after they've had their treatment, again increasing premiums in the traditional plans. We believe that offering high deductible/HSA plans is consistent with OPM's overall goal of providing FEHB enrollees with benefit options that allow greater personal decision-making and flexibility when choosing health coverage for themselves and their families. OPM's experience with consumer-driven health plans has not shown any negative impact on the FEHB premiums. We believe that people will use the coverage as intended: spending the accounts for routine health care costs, banking the difference for future needs, and relying on the insurance portion for a catastrophic event.

One commenter said agencies would have problems programming their computer systems to accept an enrollment code ending in something other than a 1, 2, 4, or 5; the commenter suggested assigning a completely new enrollment code to any high deductible/HSA plans. The commenter also suggested that to avoid confusion these plans should be treated as separate plans, rather than options of existing plans, and should have separate brochures. These are operational issues outside the scope of the regulations. We have forwarded the suggestions to the contracting offices.

One commenter expressed concern that the term “reasonably approximate” wasn't defined, in relation to determining whether an annuitant in a terminating option should be transferred into a plan's remaining option or transferred into the standard option of the Blue Cross and Blue Shield Service Benefit Plan. Whenever a plan terminates—whether it's the whole plan, an option, or a service area enrollment code—OPM notifies agencies and retirement systems of the actions they should take regarding the plan's enrollees. This regulatory change will not require retirement systems (or agencies) to make a determination on their own regarding whether a plan's remaining option reasonably approximates the terminating option. OPM will continue to provide specific instructions regarding terminations.

One commenter requested that OPM make it clear whether the regulatory change applies to all plans, including the Blue Cross and Blue Shield Service Benefit Plan. The commenter believes that the Service Benefit should be allowed to offer more than 2 options. The regulation as written could indeed apply to all plans. However, OPM disagrees with the commenter's interpretation of the FEHB statute regarding the Service Benefit Plan. Our interpretation is that the statute limits the Service Benefit Plan to no more than 2 options; the regulatory change does not negate the statutory provision. If at some point the language in the law is changed to allow the Service Benefit Plan to offer more than 2 options, there would be nothing in the regulatory language to preclude them from doing so.

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 recordkeeping requirements
• Retirement

Accordingly, under the authority of 5 U.S.C. 8913, OPM is adopting its interim regulations under 5 CFR part 890 as published on June 7, 2004 (69 FR 31721), as a final rule without change.