Legislation aimed at improving the finances of the struggling U.S. Postal Service would force its retirees to use Medicare as their primary insurer.
The USPS currently pays for retiree healthcare through the Federal Employees Health Benefits Program (FEHBP). The Postal Accountability and Enhancement Act of 2006 requires it to fund all future obligations to the program in advance.
The USPS has paid close to $50 billion toward that obligation, but still owes another $50 billion. The agency says it could reduce that liability by up to $32 billion by requiring all its retirees enroll in Medicare Part A, B and D plans as their primary insurer.
Many private companies require full participation in Medicare for retirees. But the USPS, even though it no longer receives direct taxpayer support, cannot independently make that decision since it remains a government entity and is still subject to congressional mandates.
FEHB is more expensive than Medicare and most of its beneficiaries consider it a superior option to Medicare.
USPS is the largest single payer into Medicare, but second to the federal government if you're looking at largest overall payer, said the office of Sen. Tom Carper (D-Del.), a sponsor of the bipartisan bill. Toni DeLancey, a USPS spokeswoman, says the agency has pumped $29 billion into the federal healthcare for the elderly since 1983.
The bill would require the postal service to create separately rated plans within FEHBP, beginning with 2017 contract year, DeLancey said. Those plans would be fully integrated with Medicare and would be offered by any existing FEHBP carrier that currently covers at least 1,500 postal employees and retirees.
While Carper's bill hasn't been scored yet by the Congressional Budget Office, that agency earlier estimated that identical provisions included in a postal reform bill (PDF) considered by the previous Congress would increase Medicare costs by $13.2 billion over ten years, said John Hatton, deputy legislative director at National Active and Retired Federal Employees Association (NARFE).
Implementing the proposal will be a challenge, opponents said. Retirees and their dependents would have to sign up for Medicare to keep health insurance coverage after retirement, said Jessica Klement, legislative director at NARFE.
Retirees may not be aware of the new requirement and might fail to sign up, Klement said. Outreach and education would be needed to prevent retirees from losing health insurance coverage or having a gap.
The cash-strapped USPS defaulted on a $5.7 billion healthcare payment last year, Carper said in a statement. It was the fourth straight year USPS was unable to fulfill that obligation. “Our economy still depends on a healthy and robust Postal Service. It's our duty in Congress to pave a fiscally sustainable path that will enable this American institution to thrive in the digital age,” the Delaware senator said.