News & information

Last month, the Postal Service Reform Act of 2021 (H.R. 3076/S. 1720) was introduced in the House of Representatives and in the Senate. NALC strongly supports these bills, the first major postal reform legislation in 15 years, because the bills address two of NALC’s top priorities:

• The repeal of the mandate that the Postal Service pre-fund decades’ worth of health benefits for its future retirees.
• A reform of the Federal Employees Health Benefit Program (FEHBP) to maximize participation in Medicare when active postal employees (as of January 1, 2023) retire and reach age 65.

Many members may have questions about the FEHBP and Medicare provisions included in these bills. Unfortunately, misinformation about them is common. Let us start with the proposed changes in FEHBP.

FEHBP reform

Under the legislation, postal employees and annuitants would participate in a restructured FEHBP program. All the major plans now available to participants – Blue Cross Blue Shield, the NALC HBP, Kaiser, etc. – would continue to be offered to postal employees and retirees as a postal-only version of their FEHBP plans. But their premiums would be significantly reduced because postal participants would be placed in a separate risk pool with new rules regarding Medicare enrollment. 

The new legislation would not change a current postal annuitant’s right to decide whether they want to enroll in Medicare. Although 90 percent of current postal annuitants are automatically enrolled in Medicare Part A (hospital services) and nearly 80 percent of them voluntarily enroll in Medicare Part B (medical services), no current annuitant would be required to enroll in either Medicare Part A or Part B. All active employees under the age of 64 (as of January 1, 2023) would be automatically placed in the postal version of the health plan they choose, and if retired upon reaching Medicare age, they would be enrolled in Medicare (absent the exceptions discussed below).

Active postal employees (as of January 1, 2023) who are 64 and older AND all current postal annuitants as of that date would be given the choice of whether to join the postal-only version of FEHBP plans (integrated with Medicare) or remain in the non-postal version of such plans, depending on whether they want to enroll in Medicare Part B, which currently carries a premium of $148.50 per month. The reason most annuitants already choose to enroll in Medicare Parts A & B when they turn 65 is because enrolling virtually eliminates any out-of-pocket costs such as deductibles and co-payments. However, under the proposed law, current annuitants (as of January 1, 2023) would decide whether to enroll. Those who do not want to enroll in Medicare would remain in the non-postal version of their FEHBP health plan – and the Postal Service would continue to pay the government’s share of their premiums.

The postal-only plans in FEHBP will be regulated and operated in the same way current FEHBP plans are regulated and operated today. There will be an annual Open Season that will allow participants to choose among a range of plans with separate rates for postal and non-postal participants.  

Special protections

NALC lobbied aggressively for the inclusion of special exceptions that are contained in the legislation. Future postal annuitants who do not need Medicare because of coverage by the Veterans Administration or by another non-FEHBP program or who cannot use Medicare because they live in a place (for example, overseas) without Medicare providers would be allowed to enroll in the non-postal version of their FEHBP plan. We also worked to include a provision to give current annuitants who did not enroll in Medicare Part B at age 65, but who now wish to do so, a one-time opportunity to enroll in Part B without the late enrollment penalty that currently applies. That penalty, which raises Part B premiums by 10% for each year after age 65 that a retiree delays enrollment, is very expensive.   

Why prospective Medicare integration makes sense.

The reason it makes sense to create postal-only plans within FEHBP and to maximize Medicare participation is that it will reduce health care costs for both the Postal Service and participants. FEHBP premiums would be reduced for active and retired postal employees alike. Because Medicare is the first-payer insurer for its enrollees, the costs covered by postal-only FEHBP plans will be reduced, thereby reducing the premiums for postal employees. This would reduce the Postal Service’s health care expenses by hundreds of millions of dollars annually and reduce its future liability for retiree health benefits by approximately $50 billion. 

Battling misinformation

Since the introduction of these bills, misinformation about the Medicare provisions included in the legislation have circulated through other outlets. Most noticeably, the National Active and Retired Federal Employees (NARFE) association has distributed inaccurate information about the bills. NARFE has falsely claimed that these bills would cause the premiums of non-postal federal employees and annuitants to increase, allow the Postal Service to “cherry-pick” individuals who are less costly to insure, and allow the Postal Service to avoid its full financial obligation to those retirees who choose not to enroll in Medicare.

None of this is true. In fact, non-postal FEHBP premiums would decline somewhat (about 1.0%) since the non-postal workforce is younger and less expensive to insure than the postal workforce. A recent professional actuarial analysis of the proposed FEHBP reforms conducted by PRM Consulting Group for the Postal Service demonstrates this clearly. That analysis mirrors the findings of the Congressional Budget Office (CBO) review of S. 1486 (the Postal Reform Act of 2014), which also included FEHBP and Medicare integration reforms. The CBO Cost Estimate for S. 1486 (July 14, 2014) states on page 14:

The effect of the legislation on federal on-budget payments for health insurance premiums in the FEHB program would partially offset the increase in Medicare spending. Premiums charged to non-postal enrollees in the FEHB program would be based on expected health costs of the employees, annuitants, and dependents remaining in the FEHB program after the health care costs of USPS workers, annuitants, and their dependents are shifted to the PSHB program. Because non-postal enrollees cost FEHB plans slightly less than postal enrollees, on average, CBO estimates that premiums in the FEHB program would be lower than under current law. Thus, the amount the federal government would contribute toward its share of annuitant premiums would be lower.

CBO estimates that federal payments for health insurance premiums for non-postal annuitants enrolled in the FEHB program would be reduced by about $1.6 billion over the 2015-2024 period.

Finally, the USPS would not be able to cherry-pick who to insure – it will pay the full cost of all postal participant premiums, whether participants are in the postal or non-postal version of their FEHBP plans.

NALC, along with other postal unions, addressed these false claims in-depth in a letter to the President of NARFE. Read the letter here.