2024 FEHB Program Changes

Congress last year enacted the Postal Service Reform Act of 2022, a law aimed primarily at reducing postal health insurance costs by transitioning to a system under which future postal annuitants will be required to enroll in Part B. Postal annuitants over age 65 who are not already enrolled in Part B will have a special enrollment window between April 1, 2024 and September 30, 2024 to enroll in Part B and will not be subject to any late enrollment penalty. Medicare will be the primary payer for almost all postal annuitants, with big savings to FEHB plans used by these postal annuitants since Medicare will be “primary” and pay over 80% of health care costs. A new postal-only cost pool will be created and will use these savings to reduce FEHB premium costs for all postal employees and annuitants and, of course, to the Postal Service itself since it pays 75% of most premiums. Many postal annuitants, however, may only get minor savings since they will be required to pay two premiums after reaching age 65, one to Medicare and one to FEHB (unless they drop the FEHB program), and these are unlikely to be fully offset by reduced cost-sharing for health care expenses for those enrolled in both programs. Those who switch to Medicare Advantage options will often gain significantly, however. Most FEHB plans will participate in both the postal and non-postal systems, but non-postal premiums will be calculated separately and remain largely unaffected. The changed system for postal annuitants will begin in 2024 and take full effect beginning with the 2025 open season.

A bigger and far more important change to both postal and non-postal enrollees will come from the major OPM initiative encouraging FEHB plans to adopt cost-saving coordination with Medicare that will be paid by the taxpayers who finance Medicare and thereby reduce FEHB costs. This is done by having FEHB plans establish Employer Group Waiver Plans (EGWPs, pronounced “egg-whips”) covering Medicare Parts A and B and D in what are called “Medicare Advantage” plans. Medicare Advantage is an insurance program modelled after the FEHB, and now attracts almost one-half of all Medicare enrollees. These EGWP options designed for FEHB plans offer essentially 100% coverage of hospital and medical expenses, plus 90% plus of drug expenses, and almost all of them pay most of the Part B and D premiums on behalf of annuitants. In effect, they largely eliminate the “why pay two sets of overlapping insurance premiums?” dilemma that until now faced all civilian federal annuitants. In our ratings these plans show up as saving annuitants hundreds or in some cases several thousand dollars compared to the plan offerings previously available. For 2024 there will be about half a dozen FEHB MA plans that eliminate almost all health care costs for both hospitals and physicians as well as most drug costs. All annuitants enrolled in Medicare Parts A and B will have access to these plan options.

For all 60 million Medicare enrollees, not just FEHB enrollees in particular, Congress recently enacted reforms that will in future years include a ceiling of $2,000 on annual drug costs paid by those who enroll in Part D. The reformed Part D benefit will be stronger than the current drug benefit in all FEHB plans, and since 75% of its costs are paid through Medicare, it will reduce FEHB costs for all annuitants who enroll in Part D. There is no Part D late enrollment penalty for these annuitants and OPM is encouraging annuitants to sign up for Part D. Most of these savings will accrue to those currently employed, and to their employing agencies, since all employees and annuitants are in the same cost pool, but all will realize some of the savings from new Part D enrollments in any plan. For 2024 there will be about two dozen plans with Medicare Advantage options that eliminate almost all health care costs for both hospitals and physicians and most drug costs, and another seventeen that provide only the Part D drug benefit. FEHB plans that offer a Part D plan will auto-enroll plan members that have Medicare Part A only, or Medicare Parts A & B. The exception is BCBS which will only auto-enroll members that have Parts A & B. Your plan will send you a letter informing you of auto-enrollment and you'll have 30 days to disenroll, if you wish.

How these big reforms will play out is still an open question for both postal and non-postal annuitants, but since postal annuitants will have access to the new Medicare Advantage and Part D options, their mandatory enrollment in Part B in the future may prove to be an unexpected windfall. These changes have greatly changed the calculus for the “to B or not to B” decision upon turning age 65, and now make Medicare Part B enrollment a far better buy than in years past.

There are other OPM-mandated reforms underway that apply primarily to federal employees (both postal and non-postal) rather than annuitants. Arguably the biggest of these is the addition of new fertility benefits. All plans will offer some coverage of IVF drugs and artificial insemination procedures, and about two dozen plans will cover broader IVF services and benefits. An additional half-dozen plans will offer “non-FEHB” benefits in the form of discounted rates for additional fertility procedures. Also, all carriers will also now be required to cover one or more anti-obesity medications, and to cover medically recognized gender affirming therapies.