Expert's View

One of the hottest topics in the federal health benefits arena is the Postal Service’s proposal to leave the Federal Employees Health Benefits program and set up a system of its own. Since the Postal Service is losing money hand over fist, it’s not surprising that there is a good deal of skepticism about its motives. Is it just to save money or are they on the right track?

Unfortunately, the Postal Service hasn’t shown all its cards, so it’s difficult to determine whether this would be a good move for enrollees or only for the Postal Service. Let’s take a look at the bare bones they have outlined.

First, they want to modify the way they account for health care costs to match a private sector model. This appears to mean that they don’t want to fund future retiree benefits, which is now required by law.

Next, they want to require Medicare-eligible retirees and survivors who aren’t currently enrolled in Medicare Part A and B to be enrolled, with no late-enrollment penalty. While Part A would be free to qualified retirees (no change there), they would have to enroll in Part B and pay the premiums (a change because Part B is optional, and many who are enrolled in the FEHB program have found that Part B isn’t needed).

Then they want to coordinate prescription drug benefits with Medicare Part D. While this might be a plus for retirees and survivors over age 65 with extraordinarily high prescription drug bills, the main purpose seems to be to reduce the employer share of their costs. To date few eligible federal retirees have signed up for Medicare Part D, because it largely duplicates, at an additional cost to the enrollee, coverage they already have in the FEHB.

Postal officials also want to move from the two-tier health care structure in the FEHB – self only and self and family – to a four-tier one: employee only, employee and spouse, employee and children, and employee and family. It remains to be seen which tier would pay more and which would pay less. As a rule, fragmenting the risk pool isn’t a good idea.

In addition to implementing improved private sector-style health purchasing arrangements – whatever that means – the original Postal Service plan would have changed the order of responsibility for the payment of health care costs so that they would be paid in the following order: employee, Medicare, private insurance, employer. Not surprisingly, the Postal Service later eliminated this self-serving feature.

Finally, they originally proposed to freeze the subsidy they provide for retiree health care premiums at 2013 dollar levels for employees retiring after January 1, 2014. Subsequently, the premiums that enrollees pay would increase. Once again, it’s no surprise to learn that the Postal Service has dropped this proposal.

So there you have it. The Postal Service is in dire straits financially and is hoping to reduce its burden through a variety of cost-cutting strategies. While there may be merit in some of its proposals to leave the Federal Employees Health Benefits program, the fact that two key elements have been dropped in the face of strong opposition suggests that the Postal Service will neither be able to reach its cost-cutting goal nor provide a viable alternative to the FEHB.