New Postal Reform Bill Could Increase Health Care Costs for Feds

Postal reform legislation recently introduced in the House of Representatives has the potential to increase health care premiums for federal employees and retirees enrolled in Federal Employees Health Benefits (FEHB) plans. The new bill, titled the Postal Service Reform Act of 2021 (H.R. 3076), was introduced May 11 by House Committee on Oversight and Reform Chairwoman Carolyn Maloney, D-NY. In advance of a committee hearing marking up the proposal, NARFE National President Ken Thomas sent a letter outlining the association’s views on the bill.

The bill would create a new Postal Service Health Benefits (PSHB) program, starting in January 2023, that would provide separate health plans for postal employees and retirees, parallel to current FEHB plans. For example, there would be a Blue Cross Blue Shield Standard plan for Feds and a separate one for postal employees and retirees. The bill requires coverage in each to be “actuarially equivalent,” so that each plan covers a similar amount of expected costs.

NARFE has had long-standing concerns that previous postal bills would force current postal retirees into Medicare as a condition of keeping FEHB plans in retirement. The good news is that this bill would preserve choice for postal retirees regarding Medicare Part B enrollment. However, choosing not to enroll in Medicare would require current postal retirees to remain in the FEHB program. If a postal retiree enrolls in the PSHB program, that retiree must enroll in Medicare Part B. For those age 65 and older without Medicare, the bill also provides a new opportunity to enroll in Medicare Part B without a late penalty. Postal retirees younger than 65 would have the option to enroll in either an FEHB or PSHB plan. But once a retiree is eligible for Medicare (age 65), enrollment in Medicare would be required upon enrollment in a PSHB plan, and that retiree cannot go back to an FEHB plan. Current employees would be required to enroll in Medicare once they turn age 65 and are retired.

As any Medicare-eligible postal retirees not enrolled in Medicare Parts A and B would remain in FEHB, the entire FEHB program would be affected. Retirees without Medicare tend to cost more to insure, as older individuals use more health care, on average. If this group remains in FEHB, but the rest of the postal employee and retiree population enters the new PSHB, the average cost of coverage for FEHB plans could increase, which could then cause an increase in FEHB premiums.

However, there are other factors affecting the cost of coverage for each group. Whether the split would increase premiums, and to what extent, is still unclear. As such, NARFE has urged the committee to obtain analysis from the Office of Personnel Management (OPM) regarding the bill’s likely effect on FEHB plan premiums. Unfortunately, the committee did not receive any such analysis prior to approving the bill.

NARFE suggests that if Congress permits the creation of a new PSHB program, the program should retain all postal employees and retirees, rather than single out and exclude retirees without Medicare. This would prevent the type of cherry-picking the FEHB program has long opposed, a move that could set a dangerous precedent for the future of the FEHB program.

While the House committee has expressed an intent to protect FEHB plans, if NARFE’s concerns are not addressed, NARFE will oppose this or any bill that undermines the earned health benefits of the federal community at large.

If you’re a postal retiree scratching your head at what a new PSHB program means for you, we’re happy to answer any questions you may have. Just write to advocacy@narfe.org. If this bill passes into law, the NARFE Federal Benefits Institute will be ready to provide you with the information needed to make the best decisions for you and your family.

In addition to the possible creation of a PSHB program, the bill would end the requirement that USPS fully prefund the future health insurance benefits of its retirees. No other agency or private-sector company operates under such a mandate, which has cost the agency tens of billions of dollars and is the driving force behind the Postal Service’s financial losses throughout the last decade. Finally, the bill would maintain USPS service standards, protecting six-day delivery and requiring the agency to meet annual performance targets and consult the Postal Regulatory Commission before slowing mail delivery. NARFE has long advocated for repeal of the prefunding mandate and supports these critical provisions to preserve this universal service upon which Americans rely.