National Active & Retired Federal Employees Association: New Postal Reform Bill Could Increase Health Care Costs for Feds

ALEXANDRIA, Virginia, May 19 (TNSPol) -- The National Active and Retired Federal Employees Association issued the following news:

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 [email protected]. 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.

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May 12, 2021

To: Committee on Oversight and Reform, 2157 Rayburn House Office Building, Washington, DC 20515

Dear Chairwoman Maloney, Ranking Member Comer and members of the House Committee on Oversight and Reform:

I write to share the views of the National Active and Retired Federal Employees Association (NARFE) in advance of the scheduled markup of legislation related to reform of the U.S. Postal Service.

NARFE represents the interests of both federal and postal employees and retirees. Postal retirees make up a substantial portion of NARFE's 170,000 members. As stewards of our members' health and financial well-being, our views focus the legislation's effect on the earned health benefits of the entire federal and postal community.

While this bill is styled as postal reform legislation, it implicates substantially the Federal Employees Health Benefits (FEHB) program, which serves more than 8 million federal and postal employees and retirees and their families, and Medicare. In fact, the first half of the bill focuses entirely on changes to FEHB (creating an entirely new parallel program to it) and is designed around the concept of "Medicare integration" for postal retirees.

NARFE appreciates the efforts the committee has taken to ensure choice for postal retirees regarding enrollment in Medicare Part B, a longstanding concern we have had with postal reform. The improvements included in this bill are critical to honoring commitments made to postal retirees in exchange for long careers of service.

However, we are concerned that the current structure and language of the bill could result in increased premiums for federal employees and retirees enrolled in FEHB plans. Further, we are concerned that some postal retirees will be forced to change health insurance plan carriers and risk losing access to current doctors/providers. We hope to continue to work with the committee to address these concerns prior to any further movement on this bill. If these concerns are not addressed adequately, NARFE would urge opposition to this or any bill that undermines the earned health benefits of our nation's current and former public servants.

Background on NARFE

NARFE is a nonprofit, nonpartisan membership association. Our 170,000 members live in every congressional district across the country and consist of both retired and current federal workers from all branches and levels of the federal government, including the U.S. Postal Service. Federal benefits and retirement plans are unique, complex and subject to change. NARFE provides federal workers and retirees with the clear, reliable and accessible counsel they need to make critical decisions regarding their benefits.

Since NARFE's founding in 1921, the association's mission has been to defend and advance the earned pay and benefits of America's civil servants. Federal and postal workers dedicate their careers to the betterment of our country, and in return they ask their government to hold up its end of the bargain - keeping the promises made when they were hired, including their compensation package. NARFE honors the service of federal employees by helping ensure that they have a secure future.

Federal employees, including U.S. Postal Service employees, earn pensions and retiree health insurance benefits, in addition to their pay, in exchange for years of hard work. They rightfully expect the U.S. government to live up to its end of the bargain. NARFE is here to make sure it does.

FEHB Concerns

NARFE is concerned that the current structure and language of the bill could result in increased premiums for federal employees and retirees enrolled in FEHB plans. Specifically, the bill would separate postal employees and Medicare-covered postal retirees from FEHB into a new Postal Service Health Benefits (PSHB) program, but it would leave postal retirees without Medicare in FEHB. In doing so, the bill allows for the Postal Service to cherry-pick individuals who are less costly to insure, and leaves individuals who are more costly to insure in the federal population. This could cause FEHB premiums, which are based on the cost to insure, to increase.

This concerns us on two levels. Firstly, USPS has, for years, supported Medicare integration for its retirees. But now, as the proposal moves through the legislative process, the Postal Service is seeking to avoid its full financial obligation to those retirees who choose not to enroll in Medicare. If Congress goes down the road of allowing USPS its own health insurance risk pool, the Postal Service should assume responsibility for ALL its employees and retirees. Secondly, moving forward with such cherry-picking sets a dangerous precedent as it relates to future changes to the FEHB program. As the committee with jurisdiction over not only the Postal Service but also the FEHB program, we urge caution in taking this path.

We are encouraged that the bill includes language that ostensibly addresses this issue. But we do not believe the language makes clear that FEHB plan premiums (and the government and enrollee contributions to such premiums) will be based only on the cost of insuring federal employees and retirees (and family members), and that PSHB plans will be based only on the cost of insuring postal employees and retirees (and family members), regardless of whether enrolled in the FEHB or PSHB plan coverage for each carrier. We are also skeptical that the language works with how FEHB/PSHB plan premiums are determined (based on the cost of insuring plan participants). Furthermore, the Office of Personnel Management (OPM), which administers the FEHB program and would also administer the PSHB program, has not provided any technical feedback on the language of the bill prior to markup, nor has it provided an analysis of how the bill would affect FEHB plan premiums. Both should be prerequisites to further action on this bill.

We recognize that the committee does not intend to pass a bill that would increase FEHB premiums for federal employees and retirees, and NARFE appreciates efforts by the chairwoman and her staff to address these concerns. We simply urge the chairwoman, ranking member and members of the committee to commit to amending the bill, as necessary and prior to floor consideration, to protect FEHB by preventing the PSHB from cherry-picking a lower-cost risk pool and ensuring FEHB premiums will not increase, all else equal, as a result of this bill.

Views Related to Postal Retirees

Medicare Integration

NARFE appreciates improvements from Medicare integration provisions of previous postal reform bills that preserve choice for current postal retirees regarding whether to enroll in Medicare Part B. Previously, NARFE opposed a requirement that current postal retirees pay additional premiums for mostly duplicative health insurance coverage through Medicare - or else lose their earned retiree health benefits.

Notably, the bill allows current postal retirees who are not enrolled in Medicare to remain so. It also provides a new opportunity for those age 65 and older (as of 1/1/23) to enroll in Medicare Part B without penalty, which allows them to purchase additional (Part B) insurance should they choose to do so. Postal retirees under age 65 (as of 1/1/23) would have a choice whether to enroll in an FEHB or PSHB plan, and they would only be required to enroll in Medicare if they choose to enroll in a PSHB plan.

While these changes may appear modest, they preserve key principles regarding retiree health benefits. It preserves the choice for current postal retirees as to whether to enroll in Medicare Part B. By doing so, the improvements ensure that the bill does not add a new condition and new costs (additional Part B premiums) to the continued receipt of earned retiree health benefits. The changes also avoid a dangerous precedent for other federal employees and retirees - that the federal government could renege on promised retirement benefits after retirement.

Without the flexibility provided by the new provisions of the bill, a 90-year-old postal retiree and his or her spouse, living on a fixed income and already paying $7,301 per year for their popular Blue Cross Blue Shield standard plan, would be forced to pay another $3,564 a year in Part B premiums to keep that coverage - close to $11,000 in premiums. That is a significant expense, especially when those additional costs, previously declined, now must be absorbed while living on a fixed income.

While there are benefits to having both Part B and federal retiree health insurance - fewer out-of-pocket costs from co-pays and deductibles for most plans - it is currently the retiree's choice as to whether to accept that trade-off. Under this bill, it will remain so. We thank the committee for incorporating these improvements.

Preserving Existing Health Insurance Coverage for Postal Retirees

Under the bill, the PSHB program should include all plans with at least 1,500 postal employees and retirees. With several important exceptions, the general rule would require all postal employees and annuitants to enroll in a PSHB plan. One exception allows postal employees currently enrolled in plans not offered under the PSHB to stay in their current FEHB plan. They would only be required to enroll in a PSHB plan if they switch plans. Unfortunately, this exception does not apply to current postal retirees. NARFE urges the committee to provide the same flexibility to such postal retirees as it provides to similar postal employees. Doing so would ensure these retirees are not forced to switch to a new plan that does not cover health care by current providers/doctors.

Repeal of the Prefunding Mandate

NARFE supports the bill's repeal of the burdensome mandate to prefund future retiree health benefits. No other federal agency or private-sector company fully prefunds its retiree health benefits. Yet, the Postal Accountability and Enhancement Act (PAEA) of 2006 mandated specific, annual prefunding payments by USPS into the Retiree Health Benefits Fund (RHBF) over a 10-year period (2007-2016), followed by continued payments to fully cover the remaining liability for retiree health benefits as far as 75 years into the future.

Even though the Postal Service has not made all the required payments, the liability remains current on its balance sheet and is steering cost-cutting strategies and prohibiting investments, while simultaneously driving and limiting options for legislative reforms. The mandate has failed to serve its purpose of protecting health benefits. Rather, the requirement to prefund benefits for future retirees has threatened the benefits of current retirees via past legislative efforts to mandate Medicare Part B coverage for current postal retirees (rather than preserve choice).

It is important to note that even with the repeal of the prefunding mandate, the Postal Service would maintain its obligation to fund postal retiree health benefits. After using funds currently in the RHBF, the Postal Service would return to pay-as-you-go funding, similar to other federal agencies and businesses in the private sector. The repeal alone will not solve all of the Postal Service's financial problems, but it is an important first step. It would rescind an unnecessary and unreasonable mandate, providing breathing room for other reforms.

Conclusion

We understand the committee's desire to act quickly to put the U.S. Postal Service on the right track. NARFE's postal retiree members, most of whom had long careers working for USPS, care deeply about maintaining a strong and vibrant public postal service that meets the needs of American citizens. They believe, as does NARFE, that reliable mail delivery is an inherently governmental function. They want the U.S. Postal Service not only to survive, but to thrive, as does NARFE. As such, we support the intent to provide the financial relief the U.S. Postal Service needs to operate effectively.

But financial relief should not be provided at the expense of federal employees and retirees, or current postal retirees. We appreciate improvements made to preserve choice for current postal retirees. However, questions and concerns remain regarding the impact of this bill on the health benefits of federal employees and retirees covered by FEHB. We look forward to working with committee leadership and members on a path forward to both provide financial relief to the U.S. Postal Service and protect the integrity of the FEHB program, which successfully provides quality and affordable health insurance to more than 8 million Americans.

Thank you for the consideration of our views. If you have any questions or concerns, please contact NARFE Staff Vice President for Policy and Programs Jessica Klement at [email protected].

Sincerely,

Ken Thomas, National President