Compared with the experience of a single program for many decades, premiums may go up or down overall, up for some and down for others, and vice versa. Image: Jan-Willem Kunnen/Shutterstock.com
By: FEDweek StaffA “leap of faith” is defined in different ways, but most commonly it involves acting without knowing the exact consequences but having trust not based in reason, that it will come out right.
Just what you wanted to do with health insurance coverage for you and your family, right?
Because that’s what’s ahead at the start of 2025 when Postal Service employees and retirees will be split off from the Federal Employees Health Benefits program into a new Postal Service Health Benefits program.
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That change was ordered by a 2022 law, with the intent of shifting onto the Medicare system some of the financial burden on the USPS for health insurance coverage on its retirees. That is being done by requiring that anyone retiring from USPS after this year enroll in Medicare Part B (and pay its additional cost) when eligible—usually at age 65—unless they had reached age 64 by the end of this year.
In the more than two years since that law was enacted, much attention has been focused on what will happen. You may not be surprised to learn that there’s still no answer.
In the not exactly reassuring words of the Office of Personnel Management when issuing final rules standing up the new PSHB program, there is “a great deal of uncertainty with respect to the longer-term impacts on plan enrollment, carrier participation, plan design, and plan premiums” in both that program and the FEHB.
Much of that uncertainty arises from splitting off USPS employees and retirees into a separate premium pool, it said, resulting in “smaller risk pools within each plan option, which could lead to greater uncertainty with respect to costs. With smaller risk pools, each enrollee’s health status has a larger impact on total costs. This can create greater variability in annual premiums.”
“Smaller risk pools increase individual plans’ exposure to high-cost outlier events, as there are fewer low or average-cost enrollees to offset these costs. Administrative costs would also be spread across smaller risk pools. To ensure financial solvency in such scenarios, plans may seek to price this additional risk exposure into premiums, resulting in an increase in the aggregate costs for all PSHB plan and FEHB plan enrollees compared to the baseline,” it said.
Medicare Issues
Another issue, it said, is the impact of the Medicare enrollment requirement. Due to that shift, “Medicare will cover a larger portion of healthcare costs for Postal Service annuitants and family members that would have previously been covered by a plan. Given that premiums are based on average per member costs of the combined pool of annuitants and employees, this will likely result in lower premiums for PSHB plans compared to current FEHB premium amounts.”
About a quarter of postal retirees currently do not enroll in Part B, however, and the requirement to pay premiums means those who would not have enrolled in that program “will incur an increased cost for Part B premium that they otherwise would not incur if the retiree chose not to enroll in Part B.”
“At the same time, being covered by Medicare in conjunction with a PSHB plan may also reduce out-of-pocket expenses (e.g., co-payments and co-insurance) for Postal Service annuitants compared to those that would otherwise have been incurred. In addition, because Medicare will pay primary for the costs of medical coverage, for those enrolled in Part B, costs of coverage are expected to be lower for the PSHB Program and could result in lower PSHB premiums than they would have been without the integration of Medicare,” the notice said.
Some retirees may decide to drop PSHB in favor of only Medicare coverage “if they determine that PSHB and Part B coverage together is unaffordable or duplicative for their health care circumstances . . . This could potentially result in adverse selection within the PSHB plans, referring to the tendency for individuals with higher health risks to disproportionately elect more generous coverage.”
“Ultimately, this would increase the average risk and costs within the PSHB enrolled population, creating upward pressure on premiums. Additionally, some carriers may elect not to offer or discontinue PSHB plans if they anticipate or experience lower than expected enrollment,” it said.
Plan Availability
Also uncertain, it said, is whether carriers will continue in the PSHB program after the first year: “Shifting enrollment numbers and additional implementation costs may lead some carriers to scale back or discontinue offering both FEHB and PSHB plans. This would impact the number of available plan options for both PSHB and FEHB enrollees, as well as the likelihood that enrollees will be able to remain enrolled in a plan with the same carrier and have a consistent choice of plans and options from year to year.”
So, there you have it.
Compared with the experience of a single program for many decades, premiums may go up or down overall, up for some and down for others, and vice versa.
Plans may cut back their offerings or drop out altogether. Some people may decide it’s too expensive to have both Medicare and PSHB and drop the latter, since they’ll be compelled to have the former.
Just how much faith do you have that this change, without knowing the exact consequences but having trust not based in reason, will come out right?
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See also,
Legal: How to Challenge a Federal Reduction in Force (RIF) in 2025
The Best Ages for Federal Employees to Retire
Alternative Federal Retirement Options; With Chart
Primer: Early out, buyout, reduction in force (RIF)
Retention Standing, ‘Bump and Retreat’ and More: Report Outlines RIF Process
