CALL � THE HEALTH CARE FRAUD HOTLINE

202-418-3300

OR WRITE TO:

United States Office of Personnel Management

Office of the Inspector General Fraud Hotline

1900 E Street NW Room 6400

Washington, DC20415-1100

Identification cards

We will send you an identification (ID) card when you enroll. You should carry your ID card with you at all times. You must show it whenever you receive services from a Plan provider, or fill a prescription at a participating pharmacy. Until you receive your ID card, use your copy of the Health Benefits Election Form, SF-2809, your health benefits enrollment confirmation (for annuitants), or your Employee Express confirmation letter.

If you do not receive your ID card within 30 days after the effective date of your enrollment, or if you need replacement cards, call us at 800-235-8631 or write to us at Blue Cross of California, P.O. Box 60007, Los Angeles, CA. 90060-0007. You may also request replacement cards through our Website at www.bluecrossca.com.

Where you get covered care

You get care from "Plan providers" and "Plan facilities." You will only pay copayments and/or coinsurance, and you will not have to file claims. For treatment of a mental health or substance abuse condition you may request an authorized referral to a non-Plan provider. See Mental Health and Substance Abuse Benefits (Section 5e) for details.

Plan providers are physicians and other health care professionals in our service area that we contract with to provide covered services to our members. We credential Plan providers according to national standards.

We publish a directory of Planproviders. You can get a directory which lists all medical groups, IPAs, and the primary care physicians and hospitals that are affiliated with each medical group or IPA. You may call our Customer Service number or you may write to us and ask us to send you a directory. You may also search for a Plan provider using the "Provider Finder" function on our Website at www.bluecrossca.com.

Plan facilities are hospitals and other facilities in our service area that we contract with to provide covered services to our members. We list these in the provider directory, which we update periodically. The list is also on our Website.

What you must do to get covered care

It depends on the type of care you need. First, you and each family member must choose a primary care physician. Your primary care physician will be the first doctor you see for all your health care needs. If you need special kinds of care, this doctor will refer you to other kinds of health care providers. This decision is important since your primary care physician provides or arranges for most of your health care. Your primary care physician will be part of a Blue Cross HMO contracting medical group. There are two types of Blue Cross HMO medical groups:

Your primary care physician can be a general or family practitioner, internist or pediatrician. Certain specialists we may approve may also be designated primary care physician. Your primary care physician will provide most of your health care, or give you a referral to see a specialist.

If you want to change primary care physicians or if your primary care physician leaves the Plan, call us. We will help you select a new one.

Your doctor may refer you to another physician if you need special care.Your primarycare physician must approve all the care you get except when you have an emergency or need urgent care.

Your doctor's medical group has to agree that the service or care you will be getting from the other health care provider is medically necessary. Otherwise it won't be covered.

• You will need to make the appointment at the other doctor's office.

• Your primary care physician will give you a referral form to take with you to your appointment. This form gives you the approval to get this care. If you don't get this form, ask for it or talk to your Blue Cross HMO coordinator.

• You may have to pay a copayment. You shouldn't get a bill, unless it is for a copayment, for this service. If you do, send it to your Blue Cross HMO coordinator at your primary medical group right away. The medical group will see that the bill is paid. If you need additional help you can call our customer service department.

  Standing Referrals. If you have a condition or disease that:

• Requires continuing care from a specialist; or is

• Life-threatening;

• Degenerative; or

• Disabling;

  your primary care physician may give you a standing referral to a specialist or specialty care center. The referral will be made if your primary care physician, in consultation with you, and a specialist or specialty care center, if any, determine that continuing specialized care is medically necessary for your condition or disease.

  If it is determined that you need a standing referral for your condition or disease, a treatment plan will be set up for you. The treatment plan:

• Will describe the specialized care you will receive;

• May limit the number of visits to the specialist; or

• May limit the period of time that visits may be made to the specialist.

  If a standing referral is authorized, your primary care physician will determine which specialist or specialty care center to send you to in the following order:

• First, a Blue Cross HMO contracting specialist or specialty care center which is associated with your medical group;

• Second, any Blue Cross HMO contracting specialist or specialty care center; and

• Last, any specialist or specialty care center;

  that has the expertise to provide the care you need for your condition or disease.

  After the referral is made, the specialist or specialty care center will be authorized to provide you health care services that are within the specialist's area of expertise and training in the same manner as your primary care physician, subject to the terms of the treatment plan.

  Remember: We only pay for the number of visits and the type of special care that your primary care physician approves. Call your physician if you need more care. If your care isn't approved ahead of time, you will have to pay for it (except for emergencies or urgent care.)

  Ready Access. There are two ways you may get special care without getting an approval from your medical group. These two ways are the "Direct Access" and "Speedy Referral" programs. Not all medical groups take part in the Ready Access program. See your Blue Cross HMO Directory for those that do.

  Direct Access. You may be able to get some special care without an approval from your primary care physician. We have a program called "Direct Access", which lets you get special care, without an approval from your primary care physician for:

• Allergy

• Dermatology

• Ear/Nose/Throat

  Ask your Blue Cross HMO coordinator if your medical group takes part in the "Direct Access" program. If your medical group participates in the Direct Access program, you must still get your care from a physician who works with your medical group. The Blue Cross HMO coordinator will give you a list of those doctors.

  Speedy Referral. If you need special care, your primary care physician may be able to refer you for it without getting an approval from your medical group first. The types of special care you can get through Speedy Referral depend on your medical group.

  If You Are A Woman

  You can get OB-GYN services from a doctor who specializes in caring for women (OB-GYN) or family practice doctor who does OB-GYN and works with your medical group.

• You can get these services without an approval from your primary care physician.

• Ask your Blue Cross HMO coordinator for the list of OB-GYN health care providers you must choose from.

  When You Want A Second Opinion

  Your medical group is responsible for arranging second opinions and specialty care with health care providers who are part of or who are affiliated with your Blue Cross HMO medical group. Working with your medical group supports and improves the coordination and quality of your medical care.

  If your primary care physician referred you to a specialist (called a "group" specialist) and you want a second opinion, you have the right to a second opinion by an appropriately qualified health care professional who is part of the Blue Cross HMO provider network. If there is no appropriately qualified health care professional in the network, we will authorize a second opinion by another appropriately qualified health care professional, taking into account your ability to travel.

  Reasons for asking for a second opinion include, but are not limited to:

• Questions about whether recommended surgical procedures are reasonable or necessary.

• Questions about the diagnosis or plan of care for a condition that threatens loss of life, loss of limb, loss of bodily function, or substantial impairment, including but not limited to a serious chronic condition.

• The clinical indications are not clear or are complex and confusing.

• A diagnosis is in doubt because of test results that do not agree.

• The first doctor is unable to diagnose the condition.

• The treatment plan in progress is not improving your medical condition within an appropriate period of time.

• You have tried to follow the treatment plan or you have talked with the specialist about serious concerns you have about your diagnosis or plan of care.

  To ask for a second opinion about recommendations by your primary care physician, call your primary care physician or your Blue Cross HMO coordinator at your medical group.

  To ask for a second opinion from a specialist outside your medical group, please call us at 800-235-8631. The customer service representative will verify your Blue Cross HMO membership, get preliminary information, and give your request to an RN case manager.

  A decision is made within five business days from when we get the information necessary to make a decision. Decisions on urgent requests are made within a time frame appropriate to your medical condition and no later than the next business day.

  When approved, your case manager helps you with selecting a Blue Cross HMO specialist within a reasonable travel distance and makes arrangements for your appointment at a time convenient for you and appropriate to your medical condition. If your medical condition is serious, your appointment will be scheduled within no more than seventy-two (72) hours. Your case manager will work with you and your medical group to make sure the specialist has your medical records before your appointment. Except for your usual co-payment, we cover the specialist's fee.

  An approval letter is sent to you and the specialist. The letter includes the services approved and the date of your scheduled appointment. It also includes a toll free number to call your case manager if you have questions or need additional help. Approval is for the second opinion consultation only. It does not include any other services such as lab, x-ray, or treatment by the specialist. You and your primary care physician will get a copy of the specialist's report, which includes any recommended diagnostic testing or procedures. When you get the report, you and your primary care physician or group specialist should work together to determine your treatment options and develop a treatment plan. Your medical group must authorize all follow-up care.

  Only our Medical Director may decide when we will not cover the fees for a specialist you choose. This may happen when you choose a specialist who is not part of the Blue Cross HMO network and the same kind of specialist is available in the network. If your request is not approved, the letter we send you will include the names of the specialists that can be approved.

  You may appeal a disapproval decision by following our complaint process. Procedures for filing a complaint are described later in this booklet under Section 8 and in your denial letter.

  If you have questions or need more information about this program, please contact your Blue Cross HMO coordinator at your medical group or call us at 800-235-8631.

  Here are other things you should know about specialty care:

• If you are seeing a specialist when you enroll in our Plan, talk to your primary care physician. Your primary care physician will decide what treatment you need. If he or she decides to refer you to a specialist, ask if you can see your current specialist. If your current specialist does not participate with us, you must receive treatment from a specialist who does. Generally, we will not pay for you to see a specialist who does not participate with our Plan.
• If you are seeing a specialist and your specialist leaves the Plan, call your primary care physician, who will arrange for you to see another specialist. You may receive services from your current specialist until we can make arrangements for you to see someone else.

• If you have a chronic or disabling condition and lose access to your specialist because we:

  -- terminate our contract with your specialist for other than cause; or

  -- drop out of the Federal Employees Health Benefits (FEHB) Program and

  you enroll in another FEHB Plan; or

  -- reduce our service area and you enroll in another FEHB Plan, you may be able to continue seeing your specialist for up to 90 days after you receive notice of the change. Contact us or if we drop out of the Program, contact your new plan.

  If you are in the second or third trimester of pregnancy and you lose access to your specialist based on the above circumstances, you can continue to see your specialist until the end of your postpartum care, even if it is beyond the 90 days.

There may be a time when your primary care physician says you need to go to the hospital. If it is not an emergency, the medical group will look into whether or not it is medically necessary. If the medical group approves your hospital stay, you will need to go to a hospital that works with your medical group. The same is true for admissions to a skilled nursing or other type of facility.

If you are in the hospital when your enrollment in our Plan begins, call our customer service department immediately at 800-235-8631. If you are new to the FEHB Program, we will arrange for you to receive care.

If you changed from another FEHB plan to us, your former plan will pay for the hospital stay until:

• You are discharged, not merely moved to an alternative care center; or

• The day your benefits from your former plan run out; or

• The 92^nd day after you become a member of this Plan, whichever happens first.

These provisions apply only to the benefits of the hospitalized person.If your plan terminates participation in the FEHB Program in whole or in part, or if OPM orders an enrollment change, this continuation of coverage provision does not apply. In such case, the hospitalized family member's benefits under the new plan begin on the effective date of enrollment.

Circumstances beyond our control

Copayments

A copayment is a fixed amount of money you pay to the provider, facility, pharmacy, etc., when you receive services.

Example: When you see your primary care physician you pay a copayment of $10 per office visit.

Deductible

This Plan does not have a deductible.

Coinsurance

Coinsurance is the percentage of our allowance that you must pay for your care.

Example: In our Plan, you pay 50% of our allowance for infertility services.

Your catastrophic protection out-of-pocket maximum

After your copayments total $1,000 for one family member or $3,000 for three or more family members in any calendar year, you do not have to pay any more for covered services. However, copayments or coinsurance for the following services do not count toward your catastrophic protection out-of-pocket maximum, and you must continue to pay copayments or coinsurance for these services:

How to claim benefits

You normally won't have to submit claims to us unless you receive emergency or urgent care services from a provider who doesn't contract with us. If you file a claim, please send us all of the documents for your claim as soon as possible. Send claims to Blue Cross of California, P.O. Box 60007 Los Angeles, CA. 90060-0007. To obtain claim forms or other claims filing advice or answers about our benefits, contact us at 800-235-8631, or at our Website at www.bluecrossca.com.

Prescription drugs

You normally won't have to submit claims to us unless you receive prescriptions from a non-participating pharmacy. You need to take a claim form with you to the non-participating pharmacy. If you need a claim form or if you have questions, call 1-800-700-2541. Have the pharmacist fill out the form and sign it. Then send the claim form (within 90 days) to Prescription Drug Program P.O. Box 4165 Woodland Hills, CA 91365-4165.

Deadline for filing your claim

Most claims will be submitted for you. However, there is a deadline for filing claims yourself. You must submit claims by December 31 of the year after the year you received the service. OPM can extend this deadline if you show that circumstances beyond your control prevented you from filing on time.

When we need more information

Please reply promptly when we ask for additional information. We may delay processing or deny your claims if you do not respond.

Step

Description

1

Ask us in writing to reconsider our initial decision. You must:

a) Write to us within 6 months from the date of our decision; and

b) Send your request to us at: Blue Cross of California, P.O. Box 4310, Woodland Hills, CA. 91367; and

c) Include a statement about why you believe our initial decision was wrong, based on specific benefit provisions in this brochure; and

d) Include copies of documents that support your claim, such as physicians' letters, operative reports, bills, medical records, and explanation of benefits (EOB) forms.

For additional review information regarding Review of Denials of Experimental or Investigative Treatment - go to page 49. Blue Cross will only initiate this additional review if you have not proceeded to step 4 below.

2

We have 30 days from the date we receive your request to:

a) Pay the claim (or, if applicable, arrange for the health care provider to give you the care); or

b) Write to you and maintain our denial - go to step 4; or

c) Ask you or your provider for more information. If we ask your provider, we will send you a copy of our request�go to step 3.

3

You or your provider must send the information so that we receive it within 60 days of our request. We will then decide within 30 more days.

If we do not receive the information within 60 days, we will decide within 30 days of the date the information was due. We will base our decision on the information we already have.

We will write to you with our decision.

4

If you do not agree with our decision, you may ask OPM to review it.

You must write to OPM within:

Write to OPM at: United States Office of Personnel Management, Insurance Services Programs, Health Insurance Group II, 1900 E Street, NW, Washington, DC 20415-3620.

The disputed claims process (continued)

Send OPM the following information:

Note: You are the only person who has a right to file a disputed claim with OPM. Parties acting as your representative, such as medical providers, must include a copy of your specific written consent with the review request.

Note: The above deadlines may be extended if you show that you were unable to meet the deadline because of reasons beyond your control.

5

OPM will review your disputed claim request and will use the information it collects from you and us to decide whether our decision is correct. OPM will send you a final decision within 60 days. There are no other administrative appeals.

If you do not agree with OPM's decision, your only recourse is to sue. If you decide to sue, you must file the suit against OPM in Federal court by December 31 of the third year after the year in which you received the disputed services, drugs, or supplies or from the year in which you were denied precertification or prior approval. This is the only deadline that may not be extended.

OPM may disclose the information it collects during the review process to support their disputed claim decision. This information will become part of the court record.

You may not sue until you have completed the disputed claims process. Further, Federal law governs your lawsuit, benefits, and payment of benefits. The Federal court will base its review on the record that was before OPM when OPM decided to uphold or overturn our decision. You may recover only the amount of benefits in dispute.

When you have other health coverage

You must tell us if you or a covered family member have coverage under another group health plan or have automobile insurance that pays health care expenses without regard to fault. This is called "double coverage".

When you have double coverage, one plan normally pays its benefits in full as the primary payer and the other plan pays a reduced benefit as the secondary payer. We, like other insurers, determine which coverage is primary according to the National Association of Insurance Commissioners' guidelines.

When we are the primary payer, we will pay the benefits described in this brochure.

When we are the secondary payer, we will determine what the reasonable charge for the benefit should be. After the first plan pays, we will pay either what is left of the reasonable charge or our regular benefit, whichever is less. We will not pay more than the reasonable charge. If we are the secondary payer, we may be entitled to receive payment from your primary plan.

We will always provide you with the benefits described in this brochure. Remember: even if you do not file a claim with your other plan, you must still tell us that you have double coverage.

What is Medicare?

Medicare is a Health Insurance Program for:

The decision to enroll in Medicare is yours. We encourage you to apply for Medicare benefits 3 months before you turn age 65. It's easy. Just call the Social Security Administration toll-free number 1-800-772-1213 to set up an appointment to apply. If you do not apply for one or both Parts of Medicare, you can still be covered under the FEHB Program.

If you can get premium-free Part A coverage, we advise you to enroll in it. Most Federal employees and annuitants are entitled to Medicare Part A at age 65 without cost. When you don't have to pay premiums for Medicare Part A, it makes good sense to obtain the coverage. It can reduce your out-of-pocket expenses as well as costs to the FEHB, which can help keep FEHB premiums down.

Everyone is charged a premium for Medicare Part B coverage. The Social Security Administration can provide you with premium and benefit information. Review the information and decide if it makes sense for you to buy the Medicare Part B coverage.

If you are eligible for Medicare, you may have choices in how you get your health care. Medicare Advantage is the term used to describe the various private health plan choices available to Medicare beneficiaries. The information in the next few pages shows how we coordinate benefits with Medicare, depending on whether you are in the Original Medicare Plan or a private Medicare Advantage plan.

The Original Medicare Plan (Original Medicare) is available everywhere in the United States. It is the way everyone used to get Medicare benefits and is the way most people get their Medicare Part A and Part B benefits now. You may go to any doctor, specialist, or hospital that accepts Medicare. The Original Medicare Plan pays its share and you pay your share. Some things are not covered under Original Medicare, such as most prescription drugs (but coverage through private prescription drug plans will be available starting in 2006).

Tell us if you or a family member is enrolled in Original Medicare. When you are enrolled in Original Medicare along with this Plan, you still need to follow the rules in this brochure for us to cover your care.

Claims process when you have the Original Medicare Plan - You probably will never have to file a claim form when you have both our Plan and the Original Medicare Plan.

Primary Payer Chart

A. When you - or your covered spouse - are age 65 or over and have Medicare and you...

The primary payer for the individual with Medicare is...

Medicare

This Plan

1) Have FEHB coverage on your own as an active employee or through your spouse who is an active employee

�

2) Have FEHB coverage on your own as an annuitant or through your spouse who is an annuitant

�

3) Are a reemployed annuitant with the Federal government and your position is excluded from the FEHB (your employing office will know if this is the case) and you are not covered under FEHB through your spouse under #1 above

�

4) Are a reemployed annuitant with the Federal government and your position is not excluded from the FEHB (your employing office will know if this is the case) and ...

You have FEHB coverage on your own or through your spouse who is also an active employee

�

You have FEHB coverage through your spouse who is an annuitant

�

5) Are a Federal judge who retired under title 28, U.S.C., or a Tax Court judge who retired under Section 7447 of title 26, U.S.C. (or if your covered spouse is this type of judge) and you are not covered under FEHB through your spouse under #1 above

�

6) Are enrolled in Part B only, regardless of your employment status

�for Part B services

� for other services

7) Are a former Federal employee receiving Workers' Compensation and the Office of Workers' Compensation Programs has determined that you are unable to return to duty

�*

B. When you or a covered family member...

1) Have Medicare solely based on end stage renal disease (ESRD) and...

�

�

2) Become eligible for Medicare due to ESRD while already a Medicare beneficiary and...

�for 30-month coordination period

�

C. When either you or a covered family member are eligible for Medicare solely due to disability and you...

1) Have FEHB coverage on your own as an active employee or through a family member who is an active employee

�

2) Have FEHB coverage on your own as an annuitant or through a family member who is an annuitant

�

D. When you are covered under the FEHB Spouse Equity provision as a former spouse

�

If you are eligible for Medicare, you may choose to enroll in and get your Medicare benefits from a Medicare Advantage plan. These are private health care choices (like HMOs) in some areas of the country. In most Medicare Advantage plans, you can only go to doctors, specialists, or hospitals that are part of the plan. Medicare Advantage plans provide all the benefits that Original Medicare covers. Some cover extras, like prescription drugs. To learn more about enrolling in a Medicare Advantage plan, contact Medicare at 1-800-MEDICARE (1-800-633-4227) or at www.medicare.gov.

If you enroll in a Medicare Advantage plan, the following options are available to you:

This Plan and our Medicare Advantage plan: You may enroll in our Medicare Advantage plan and also remain enrolled in our FEHB plan. In this case, we do not waive any of our copayments or coinsurance for your FEHB coverage.

This Plan and another plan's Medicare Advantage plan: You may enroll in another plan's Medicare Advantage plan and also remain enrolled in our FEHB plan. We will still provide benefits when your Medicare Advantage plan is primary, even out of the Medicare Advantage plan's network and/or service area (if you use our Plan providers), but we will not waive any of our copayments or coinsurance. If you enroll in a Medicare Advantage plan, tell us. We will need to know whether you are in the Original Medicare Plan or in a Medicare Advantage plan so we can correctly coordinate benefits with Medicare.

Suspended FEHB coverage to enroll in a Medicare Advantage plan: If you are an annuitant or former spouse, you can suspend your FEHB coverage to enroll in a Medicare Advantage plan, eliminating your FEHB premium. (OPM does not contribute to your Medicare Advantage plan premium). For information on suspending your FEHB enrollment, contact your retirement office. If you later want to re-enroll in the FEHB Program, generally you may do so only at the next Open Season unless you involuntarily lose coverage or move out of the Medicare Advantageplan service area.

Private contracts

A physician may ask you to sign a private contract agreeing that you can be billed directly for service ordinarily covered by Original Medicare. Should you sign an agreement, Medicare will not pay any portion of the charges, and we will not increase our payment. We will still limit our payment to the amount we would have paid after Original Medicare's payment.

TRICARE and CHAMPVA

TRICARE is the health care program for eligible dependents of military persons, and retirees of the military. TRICARE includes the CHAMPUS program. CHAMPVA provides health coverage to disabled Veterans and their eligible dependents. IF TRICARE or CHAMPVA and this Plan cover you, we pay first. See your TRICARE or CHAMPVA Health Benefits Advisor if you have questions about these programs.

Suspended FEHB coverage to enroll in TRICARE or CHAMPVA: If you are an annuitant or former spouse, you can suspend your FEHB coverage to enroll in one of these programs, eliminating your FEHB premium. (OPM does not contribute to any applicable plan premiums.) For information on suspending your FEHB enrollment, contact your retirement office. If you later want to re-enroll in the FEHB Program, generally you may do so only at the next Open Season unless you involuntarily lose coverage under the program.

Workers' Compensation

We do not cover services that:

Medicaid

When you have this Plan and Medicaid, we pay first.

Suspended FEHB coverage to enroll in Medicaid or a similar State-sponsored program of medical assistance: If you are an annuitant or former spouse, you can suspend your FEHB coverage to enroll in one of these State programs, eliminating your FEHB premium. For information on suspending your FEHB enrollment, contact your retirement office. If you later want to re-enroll in the FEHB Program, generally you may do so only at the next Open Season unless you involuntarily lose coverage under the State program.

When other Government agencies are responsible for your care

We do not cover services and supplies when a local, State, or Federal Government agency directly or indirectly pays for them.

When others are responsible for injuries

When you receive money to compensate you for medical or hospital care for injuries or illness caused by another person, you must reimburse us for any expenses we paid. However, we will cover the cost of treatment that exceeds the amount you received in the settlement.

If you do not seek damages you must agree to let us try. This is called subrogation. If you need more information, contact us for our subrogation procedures.

Blue Cross HMO Coordinator

Blue Cross HMO coordinator is the person at your medical group who can help you with understanding your benefits and getting the care you need.

Calendar year

January 1 through December 31 of the same year. For new enrollees, the calendar year begins on the effective date of their enrollment and ends on December 31 of the same year.

Coinsurance

Coinsurance is the percentage of our allowance that you must pay for your care. You may also be responsible for additional amounts. See Section 4 page 14.

Copayment

A copayment is a fixed amount of money you pay when you receive covered services. See Section 4 page 14.

Covered services

Care we provide benefits for, as described in this brochure.

Custodial care

Custodial care is care for your personal needs. This includes help in walking, bathing or dressing. It also includes preparing food or special diets, feeding, giving medicine which you usually do yourself or any other care for which the services of a professional health care provider are not needed.

Experimental or investigational services

Experimental procedures are those that are mainly limited to laboratory and/or animal research. Investigative procedures or medications are those that have progressed to limited use on humans, but which are not generally accepted as proven and effective within the organized medical community. Any experimental or investigative procedures or medications are not covered under this Plan. Your medical group or we will determine whether a service is considered experimental or investigative. Please see page 49 for more information.

Medical necessity

Medically necessary procedures, services, supplies or equipment are those that Blue Cross decides are:

Plan allowance

Our Plan allowance is the amount we use to determine our payment and your coinsurance for covered services. In most cases, our Plan allowance is equal to a rate we negotiate with providers. This rate is normally lower than what they usually charge and any savings are passed on to you.

Us/We

Us and We refer to Blue Cross of California.

You

You refers to the enrollee and each covered family member.

We will not refuse to cover the treatment of a condition you had before you enrolled in this Plan solely because you had the condition before you enrolled.

See www.opm.gov/insure. Also, your employing or retirement office can answer your questions, and give you a Guide to Federal Employees Health Benefits Plans, brochures for other plans, and other materials you need to make an informed decision about your FEHB coverage. These materials tell you:

Self Only coverage is for you alone. Self and Family coverage is for you, your spouse, and your unmarried dependent children under age 22, including any foster children or stepchildren your employing or retirement office authorizes coverage for. Under certain circumstances, you may also continue coverage for a disabled child 22 years of age or older who is incapable of self-support.

If you have a Self Only enrollment, you may change to a Self and Family enrollment if you marry, give birth, or add a child to your family. You may change your enrollment 31 days before to 60 days after that event. The Self and Family enrollment begins on the first day of the pay period in which the child is born or becomes an eligible family member. When you change to Self and Family because you marry, the change is effective on the first day of the pay period that begins after your employing office receives your enrollment form; benefits will not be available to your spouse until you marry.

Your employing or retirement office will not notify you when a family member is no longer eligible to receive benefits, nor will we. Please tell us immediately when you add or remove family members from your coverage for any reason, including divorce, or when your child under age 22 marries or turns 22.

If you or one of your family members is enrolled in one FEHB plan, that person may not be enrolled in or covered as a family member by another FEHB plan.

OPM has implemented the Federal Employees Health Benefits Children's Equity Act of 2000. This law mandates that you be enrolled for Self and Family coverage in the FEHB Program, if you are an employee subject to a court or administrative order requiring you to provide health benefits for your child(ren).

If this law applies to you, you must enroll for Self and Family coverage in a health plan that provides full benefits in the area where your children live or provide documentation to your employing office that you have obtained other health benefits coverage for your children. If you do not do so, your employing office will enroll you involuntarily as follows:

The benefits in this brochure are effective January 1. If you joined this Plan during Open Season, your coverage begins on the first day of your first pay period that starts on or after January 1. If you changed plans or plan options during Open Season and you receive care between January 1 and the effective date of coverage under your new plan or option, your claims will be paid according to the 2005 benefits of your old plan or option. However, if your old plan left the FEHB Program at the end of the year, you are covered under that plan's 2004 benefits until the effective date of your coverage with your new plan. Annuitants' coverage and premiums begin on January 1. If you joined at any other time during the year, your employing office will tell you the effective date of coverage.

When you retire, you can usually stay in the FEHB Program. Generally, you must have been enrolled in the FEHB Program for the last five years of your Federal service. If you do not meet this requirement, you may be eligible for other forms of coverage, such as Temporary Continuation of Coverage (TCC).

You will receive an additional 31 days of coverage, for no additional premium, when:

If you are divorced from a Federal employee or annuitant, you may not continue to get benefits under your former spouse's enrollment. This is the case even when the court has ordered your former spouse to provide health coverage to you. But, you may be eligible for your own FEHB coverage under the spouse equity law or Temporary Continuation of Coverage (TCC). If you are recently divorced or are anticipating a divorce, contact your ex-spouse's employing or retirement office to get RI 70-5, the Guide To Federal Employees Health Benefits Plans for Temporary Continuation of Coverage and Former Spouse Enrollees, or other information about your coverage choices. You can also download the guide from OPM's Web site, www.opm.gov/insure.

If you leave Federal service, or if you lose coverage because you no longer qualify as a family member, you may be eligible for Temporary Continuation of Coverage (TCC). For example, you can receive TCC if you are not able to continue your FEHB enrollment after you retire, if you lose your Federal job, if you are a covered dependent child and you turn 22 or marry, etc.

You may not elect TCC if you are fired from your Federal job due to gross misconduct.

Enrolling in TCC. Get the RI 79-27, which describes TCC, and the RI 70-5, the Guide to Federal Employees Health Benefits Plans for Temporary Continuation of Coverage and Former Spouse Enrollees, from your employing or retirement office or from www.opm.gov/insure. It explains what you have to do to enroll.

You may convert to a non-FEHB individual policy if:

The Health Insurance Portability and Accountability Act of 1996 (HIPAA) is a Federal law that offers limited Federal protections for health coverage availability and continuity to people who lose employer group coverage. If you leave the FEHB Program, we will give you a Certificate of Group Health Plan Coverage that indicates how long you have been enrolled with us. You can use this certificate when getting health insurance or other health care coverage. Your new plan must reduce or eliminate waiting periods, limitations, or exclusions for health related conditions based on the information in the certificate, as long as you enroll within 63 days of losing coverage under this Plan. If you have been enrolled with us for less than 12 months, but were previously enrolled in other FEHB plans, you may also request a certificate from those plans.

For more information, get OPM pamphlet RI 79-27, Temporary Continuation of Coverage (TCC) under the FEHB Program. See also the FEHB Web site at www.opm.gov/insure/archive/health; refer to the "TCC and HIPAA" frequently asked questions. These highlight HIPAA rules, such as the requirement that Federal employees must exhaust any TCC eligibility as one condition for guaranteed access to individual health coverage under HIPAA, and information about Federal and State agencies you can contact for more information.

Important information

OPM wants to make sure you are aware of two Federal programs that complement the FEHB Program. First, the Federal Flexible Spending Account (FSA) Program, also known as FSAFEDS, lets you set aside pre-tax money to pay for health and dependent care expenses. The result can be a discount of 20% to more than 40% on services you routinely pay for out-of-pocket. Second, the Federal Long Term Care Insurance Program (FLTCIP) helps cover long term care costs, which are not covered under the FEHB.

It is a tax-favored benefit that allows you to set aside pre-tax money from your paychecks to pay for a variety of eligible expenses. By using an FSA, you can reduce your taxes while paying for services you would have to pay for anyway, producing a discount that can be over 40%.

There are two types of FSAs offered by FSAFEDS:

Health Care Flexible Spending Account (HCFSA)

Dependent Care Flexible Spending Account (DCFSA)

You must make an election to enroll in an FSA during the 2005 FEHB Open Season. Even if you enrolled during 2004, you must make a new election to continue participating in 2005. Enrollment is easy!

What is SHPS?

SHPS is a third-party administrator hired by OPM to manage the FSAFEDS Program. SHPS is the largest FSA administrator in the nation and is responsible for enrollment, claims processing, customer service, and day-to-day operations of FSAFEDS.

Who is eligible to enroll?

If you are a Federal employee eligible for FEHB - even if you're not enrolled in FEHB - you can choose to participate in either, or both, of the FSAs. However, if you enroll in a High Deductible Health Plan (HDHP) with a Health Savings Account (HSA), you are not eligible to participate in an HCFSA.

Almost all Federal employees are eligible to enroll for a DCFSA. The only exception is intermittent (also called "when actually employed" [WAE]) employees expected to work fewer than 180 days during the year.

Note: FSAFEDS is the FSA Program established for all Executive Branch employees and Legislative Branch employees whose employers have signed on to participate. Under IRS law, FSAs are not available to annuitants. Also, the U.S. Postal Service and the Judicial Branch, among others, have their own plans with slightly different rules. However, the advantages of having an FSA are the same regardless of the agency for which you work.

Plan carefully when deciding how much to contribute to an FSA. Because of the tax benefits an FSA provides, the IRS places strict guidelines on how the money can be used. Under current IRS tax rules, you are required to forfeit any money for which you did not incur an eligible expense under your FSA account(s) during the Plan Year. This is known as the "use-it-or-lose-it" rule. You will have until April 30, following the end of the Plan Year to submit claims for your eligible expenses incurred from January 1 through December 31. For example if you enroll in FSAFEDS for the 2005 Plan Year, you will have until April 30, 2006 to submit claims for eligible expenses.

The FSAFEDS Calculator at www.FSAFEDS.com will help you plan your FSA allocations and provide an estimate of your tax savings based on your individual situation.

Every FEHB plan includes cost sharing features, such as deductibles you must meet before the Plan provides benefits, coinsurance or copayments that you pay when you and the Plan share costs, and medical services and supplies that are not covered by the Plan and for which you must pay. Typical out-of-pocket expenses include office visit copayments, emergency room copayments and prescription drug copayments. These out-of-pocket costs are summarized on page 65 and detailed throughout this brochure. Your HCFSA will reimburse you when those costs are for qualified medical care that you, your spouse and/or your dependents receive that is NOT covered or reimbursed by this FEHB Plan or any other coverage that you have.

The IRS governs expenses reimbursable by a HCFSA. See Publication 502 for a comprehensive list of tax-deductible medical expenses. Note: While you will see insurance premiums listed in Publication 502, they are NOT a reimbursable expense for FSA purposes. Publication 502 can be found on the IRS Web site at http://www.irs.gov/pub/irs-pdf/p502.pdf. The FSAFEDS Web site also has a comprehensive list of eligible expenses at www.FSAFEDS.com/fsafeds/eligibleexpenses.asp. If you do not see your service or expense listed please call an FSAFEDS Benefits Counselor at 1-877-FSAFEDS (372-3337), who will be able to answer your specific questions.

An FSA lets you allot money for eligible expenses before your agency deducts taxes from your paycheck. This means the amount of income that your taxes are based on will be lower, so your tax liability will be less. Without an FSA, you would still pay for these expenses, but you would do so using money remaining in your paycheck after Federal (and often state and local) taxes are deducted. The following chart illustrates a typical tax savings example:

If your taxable income is:

$50,000

$50,000

And you deposit this amount into an FSA:

$2,000

-$0-

Your taxable income is now:

$48,000

$50,000

Subtract Federal & Social Security taxes:

$13,807

$14,383

If you spend after-tax dollars for expenses:

-$0-

$2,000

Your real spendable income is:

$34,193

$33,617

Your tax savings:

$576

-$0-

Note: This example is intended to demonstrate a typical tax savings based on 27% Federal and 7.65% FICA taxes. Actual savings will vary based upon the retirement system in which you are enrolled (CSRS or FERS), your state of residence, and your individual tax situation. In this example, the individual received $2,000 in services for $1,424 - a discount of almost 36%! You may also wish to consult a tax professional for more information on the tax implications of an FSA.

You cannot claim expenses on your Federal Income Tax return if you receive reimbursement for them from your HCFSA or DCFSA. Below are some guidelines that may help you decide whether to participate in FSAFEDS.

Health care expenses

The HCFSA is Federal Income Tax-free from the first dollar. In addition, you may be reimbursed from your HCFSA at any time during the year for expenses up to the annual amount you've elected to contribute.

Only health care expenses exceeding 7.5% of your adjusted gross income are eligible to be deducted on your Federal Income Tax return. Using the example shown above, only health care expenses exceeding $3,750 (7.5% of $50,000) would be eligible to be deducted on your Federal Income Tax return. In addition, money set aside through an HCFSA is also exempt from FICA taxes. This exemption is not available on your Federal Income Tax return.Paperless Reimbursement -This plan participates in the FSAFEDS paperless reimbursement program. When you enroll for your HCFSA, you will have the opportunity to enroll for paperless reimbursement. If you do, we will send FSAFEDS the information they need to reimburse you for your out-of-pocket costs so you can avoid filing paper claims.

{Note to Plan: delete this section if you do not participate in paperless reimbursement.}

Dependent care expenses

The DCFSA generally allows many families to save more than they would with the Federal tax credit for dependent care expenses. Note that you may only be reimbursed from the DCFSA up to your current account balance. If you file a claim for more than your current balance, it will be held until additional payroll allotments have been added to your account.

Visit www.FSAFEDS.com and download the Dependent Care Tax Credit Worksheet from the Forms and Literature page to help you determine what is best for your situation. You may also wish to consult a tax professional for more details.

No. Section 1127 of the National Defense Authorization Act (Public Law 108-136) requires agencies that offer FSAFEDS to employees to cover the administrative fee(s) on behalf of their employees. However, remember that participating in FSAFEDS can cost you money if you don't spend your entire account balance by the end of the Plan Year, resulting in the forfeiture of funds remaining in your account (the IRS "use-it-or-lose-it" rule).

To learn more or to enroll, please visit the FSAFEDS Web site at www.FSAFEDS.com, or contact SHPS directly via email or by phone. FSAFEDS Benefits Counselors are available Monday through Friday, from 9:00 a.m. until 9:00 p.m. Eastern Time.

Why should you consider applying for coverage under the Federal Long Term Care Insurance Program (FLTCIP)?

Call 1-800-LTC-FEDS (1-800-582-3337) (TTY 1-800-843-3557) or visit www.ltcfeds.com.

Benefits

You pay

Page

Medical services provided by physicians:

Office visit copay: $10

17

Services provided by a hospital:

Nothing

29

Nothing

30

Emergency visits to a hospital emergency room or urgent care center:

$25 per visit

33

$25 per visit

33

Mental health and substance abuse treatment............................

Regular cost sharing

34

Prescription drugs....................................................................

Network pharmacy: $5 per preferred generic;

$10 per brand name drug;

50% for non-preferred drugs.

Non-Network pharmacy: $5 plus 50% of drug limited fee per generic; $10 plus 50% of drug limited fee per brand name drug.

Mail Order Program: $5 per preferred generic;

$20 per brand name drug;

50% for non-preferred drugs.

40

Dental care..............................................................................

Restorative services for accidental injury: you pay nothing. No other dental benefits.

43

Vision care..............................................................................

Annual eye refraction; you pay nothing.

21

Special features: MedCall, a 24-hour nurse assessment service

42

Protection against catastrophic costs

(your catastrophic protection out-of-pocket maximum).............

Nothing after $1,000/Self Only or $3,000/Family enrollment per year

Some costs do not count toward this protection

14