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What Would Happen if the Postal Service and FEHBP Part Ways?

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The U.S. Postal Service wants to be left alone.

It wants to be administered by its own board of governors,  make its own decisions on how many days a week to deliver mail and set its own product prices.

It also wants to run its own health care plan.

Currently, the approximately 1 million postal employees and retirees collect their health care with all other feds; that is, through the Federal Employees Health Benefits Program. Removing these enrollees -- as well as their dependents -- from the FEHBP would amount to losing about one quarter of the current pool, according to the Office of Personnel Management, which administers the benefits.

The Postal Service has touted the switch as economically responsible, alleging it would save the agency $8 billion annually -- most of which would come from ending the requirement to prefund retirees health care, but $2 billion of which would come from reduced health care costs. In total, retires and employees would save nearly $700 million annually in premiums, according to Postmaster General Patrick Donahoe.

“When we do this, we will be able to provide our employees and retirees with the same or better health care coverage,” Donahoe said during a recent speech. “We would be able to invest in much more effective health and wellness programs. Financially, it’s a smart move. It’s also the responsible thing to do for our employees and retirees.”

Unintended Consequences

Because such a large portion of the FEHBP pool would be leaving under the Postal Service’s plan, many of the remaining 6 million or so enrollees would likely feel the ripple effects.

Jonathan Foley, OPM’s planning and policy analysis director, told a House committee last month that 23 plans that are a part of the federal program have at least 50 percent postal workers or retirees.

“In the aggregate, as a whole, it doesn’t amount to a very significant price impact as far as disrupting the market,” Foley said. “However, on and individual plan basis it has a very significant impact.”

Non-postal federal employees would see varying impacts depending on their plan, he said.  Some plans, he told the panel, “would not stay in business,” while others would “experience increases” in premium costs.

The Postal Service’s proposal “does have unintended consequences,” he said.

Rep. Gerry Connolly, D-Va., who represents many federal employees, expressed concern about the potential fallout if the Postal Service left FEHBP.

“We have to [determine] without emotion, without bias, what are the consequences both for the postal employees who are being pulled out and for the remaining FEHB programs,” Connolly said. “I want to know could this have the unintended consequence of killing some options for all employees, maybe with the best of intentions.”

Walton Francis, an independent consultant and author of Consumers' Checkbook Guide to Health Plans for Federal Employees, has criticized the plan, telling Congress in 2012 the move would destroy FEHBP.

"The USPS proposals would massively disrupt or destroy the FEHBP, the single most successful health insurance program ever operated by the United States government,” Francis said. “In destroying the FEHBP, the USPS would disrupt the health insurance of 8 million Americans, and breach statutory entitlement promises made to millions of federal retirees."

U.S. Comptroller General Gene Dodaro told a Senate committee in February the Government Accountability Office would issue a report on the effects of USPS withdrawing from FEHBP -- both on postal workers and the rest of enrollees -- in July.

More Pay for Overtime

While the Postal Service considers how to reduce its health care costs, the Labor Department has told the agency to increase its overtime expenditures.

Labor found that USPS violated the Fair Labor Standards Act by using the wrong formula for calculating how much overtime to pay to its employees. The adjustment will go into effect June 15 and result in postal workers earning an additional 86 cents per overtime hour, according to the American Postal Workers Union. 

Eric Katz joined Government Executive in the summer of 2012 after graduating from The George Washington University, where he studied journalism and political science. He has written for his college newspaper and an online political news website and worked in a public affairs office for the Navy’s Military Sealift Command. Most recently, he worked for Financial Times, where he reported on national politics.

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