New Postal Reform Legislation Could Raise FEHB Premiums

Long sought-after legislation to reform the U.S. Postal Service (USPS) has returned to Congress, with bipartisan bills introduced in both the House and Senate meant to place USPS on better financial footing. The Postal Service Reform Act of 2021, H.R. 3076 and S. 1720, is designed to save USPS billions of dollars over the next decade, but NARFE is concerned that the legislation could inadvertently cause premiums to rise for health plans under the Federal Employees Health Benefits (FEHB) program.

The bill would end the 2006 mandate requiring the Postal Service to prefund billions of dollars of future retiree health benefits, payments that USPS has been unable to make fully. It would also engender a new Postal Service Health Benefits (PSHB) program, creating separate health plans for postal employees and retirees, parallel to current FEHB plans and required to be “actuarially equivalent.” Current postal employees would be required to enroll in a new PSHB plan and also would be required to enroll in Medicare when they turn 65.

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 the retiree cannot go back to an FEHB plan.

Of particular interest to NARFE members: Current postal retirees age 65 and older without Medicare would have a new opportunity to enroll in Medicare Part B without a late penalty, but the legislation does not require enrollment as it did in previous bills—a change NARFE has been advocating for over the years.

All postal employees and retirees would be moved to the new PSHB program, except those Medicare-eligible postal retirees who do not enroll in Medicare Part B during the special enrollment period; these retirees would stay in FEHB.

Retirees without Medicare tend to cost more to insure, as older individuals use more health care, on average, than younger ones. As such, this exception could increase the average cost of coverage for FEHB plans, which could then lead to an increase in FEHB premiums for all participants.

In a letter to the Senate Committee on Homeland Security and Governmental Affairs, NARFE urged lawmakers to amend the bill and consider feedback and analysis from the Office of Personnel Management (OPM), the agency that administers FEHB and would administer the PSHB program. Shortly thereafter, a