OPM's Proposal to Expand FEHB: Is Agency Ignoring Existing Law to Avoid Healthcare Act Penalties?

By on August 29, 2014 in Current Events with 9 Comments

As we noted in an earlier article, the Office of Personnel Management (OPM) issued for comment a proposal to expand coverage under the Federal Employees Health Benefits (FEHB) Program.  Comments were due by August 28. The proposal defines working full-time as working 130 hours per month. The change is based on Internal Revenue Service and Treasury Department regulations implementing the Affordable Care Act but the proposal does not explain how the agency is able to ignore existing law defining affected employees. (See Expanding FEHB Coverage: What Will it Cost Agencies and Is it Legal? for a greater explanation of the proposal to expand the FEHB.)

As noted in the FedSmith article:

The new OPM regulation is changing the definition of a full-time employee to 130 hours per month. It would also change the amount of the FEHB premiums based on this new definition, based on regulations issued by the IRS and Treasury. In other words, according to its proposal, OPM is using the authority of regulations issued by other agencies to override the current federal law which is still in effect.

“The Federal Register notice does not address the current federal law or why OPM believes it has the authority to issue a regulation to override Title 5 without additional Congressional action. Perhaps OPM is just assuming that there will not be any challenges to the proposal, despite the conflict with current law, as unions are not likely to object nor will employees who obtain the new coverage are not likely to object either.”

Senator Coburn (R-OK)  sent a letter to the director of OPM this week voicing his concerns about the legality of the OPM proposal to expand FEHB coverage.

“This rule would allow certain types of temporary, seasonal, and intermittent federal employees to qualify for health coverage under the Federal Employees Health Benefits Program (FEHBP). Eligible workers would also receive a full government contribution towards their premiums. Avoidance of the penalty under the employer mandate of the Patient Protection and Affordable Care Act appears to be a key reason the Office of Personnel Management (OPM) is moving forward with the proposal. The proposed rule discusses at length how the federal government will be subject to the mandate’s penalty if any full-time worker receives a subsidy for health insurance through an exchange.

I am concerned the proposed rule may be inconsistent with current federal law, which appears to prohibit eligibility of temporary employees for both the FEHBP and full government contribution under the conditions you established.”

According to the Senator’s letter, the OPM proposal contradicts a view held by the agency for at least twenty years. As noted in the letter to OPM: “Your department has previously acknowledged legal limitations of extending coverage under the FEHBP. Before a congressional hearing in 2010, Angela Bailey (now OPM’s Chief Operating Officer) said, “[OPM] took a very good, close look at both our regulations and the law. And the way the law is currently written, it is written in such a way that it excludes temporary employees from receiving health benefits…After 1 year, even temporary employees are eligible to apply for health benefits as long as they pay the 100 percent contribution of that” (emphasis added). From my understanding, OPM has held this view for decades.” (footnotes eliminated)

The senator suspects that OPM was proposing its new regulation to ensure the government is not penalized under the Affordable Care Act (AKA Obamacare).  Under the employer mandate, an employer with 50 or more full-time employees,  or an equivalent of part-time workers, must provide adequate health coverage or pay a penalty.

While it is not clear how an OPM regulation can override the conflicting requirements of a 1978 law (Public Law 95-437, also known as the Federal Employees Part-time Career Employment Act of 1978), the OPM proposal pointedly ignored the existing legal requirements which legislate the issue of government payment of health insurance benefits for part-time employees. According to the Washington Times, an OPM representative indicated that the agency is “currently reviewing his [Senator Coburn’s] concerns.”

On the other side of the issue, the National Treasury Employees Union (NTEU) wrote in response to the proposal that “NTEU urges OPM to ensure that the regulations state that health insurance coverage for these employees is effective as of the first day of employment, as is currently done for other employees.” The NTEU comments did not address the legality of the OPM proposal. The NTEU response stressed that OPM should regulate that “employing agencies must provide all new hires with updated health benefit materials that include FEHBP eligibility information for temporary, seasonal, and intermittent employees. NTEU requests that OPM encourage agencies to begin identifying newly-eligible existing employees, so that these individuals are given the opportunity to enroll at the earliest possible time rather than at the January 2015 deadline.”

What will be the final result?  OPM’s experts in this area have testified on this topic in Congress going back for about 20 years. The underlying law has been around since 1978. OPM is an expert in this field and had to be aware of the conflict with existing law before issuing the proposed regulation but chose not to address the issue in its proposal. Rather than seek changes, the agency moved forward with the proposal and probably concluded it would deal with the conflict, should it arise, at a later date. If the proposal was thoroughly vetted, which is likely as there are a number of very capable experts in this area at the agency, OPM already has a “game plan” in place to respond to Senator Coburn’s letter. While the agency is “currently reviewing (Senator Coburn’s concerns)” and will probably respond to his letter,  it is a reasonable assumption that OPM is likely to proceed with the proposal in the near future despite the legal conflict.

© 2016 Ralph R. Smith. All rights reserved. This article may not be reproduced without express written consent from Ralph R. Smith.

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About the Author

Ralph Smith has several decades of experience working with federal human resources issues. He has written extensively on a full range of human resources topics in books and newsletters and is a co-founder of two companies and several newsletters on federal human resources.

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