US Postal Service Wants Out Of Government-Provided Health Insurance

By Patrick Burke - March 30, 2012

The United States Postal Service (USPS) is currently working towards delivering a private health insurance plan to its employees and wants to opt out of the Federal Employee Health Benefits Plan (FEHBP.)

“If provided the authority to do so, we believe that we can provide our employees and retirees with the same or better health coverage for significantly less cost, ” said Postmaster General and CEO Patrick Donahoe during his testimony to the House Oversight Committee.

The financially strapped USPS recently released a plan to cut costs by 2016 to adapt to a marketplace in which there is less demand for hand delivered mail.

“While I commend Mr. Donahoe for his commitment to implement cost cutting measures, the financial status of the postal service remains untenable,” said Oversight Committee Chairman Dennis Ross (R-Fla.)

“In response to this fiscal crisis, the US Postal Service recently presented its five year business plan to profitability…the centerpiece of this plan involves shifting USPS employees and their retirees from the Federal Employee Health Benefits Plan (FEHBP) to a new USPS run health plan.”

Donahoe claimed a private health plan for the USPS will result in annual savings of approximately $7 billion and will function like any other health insurance plan in the private sector.

Rep. John Lynch (D-Mass.) raised a potential concern of a lack of choice for postal employees in selecting a health insurance plan that is best for them. Donahoe assured there would be tiers of value and quality from which employees can choose, as well as options for employees who have spouses and families.

Moreover, those within the postal service who are eligible for Medicare could enter into the USPS plan as a way for them to cut costs.

“We’d like to have a plan for the current employees and then a wrap-around plan for the Medicare eligible employees that gives them excellent value at a low cost,” said Donahoe.

“So they’d used the Medicare as their primary provider and have this back-up plan from a wrap-around. That saves a lot of money.”

By Donahoe’s estimates, the USPS could implement a fully functional health insurance plan by 2014.

To demonstrate the USPS ability to provide a private health insurance plan and its commitment to saving money, Donahoe identified ways to save the post office money—namely by consolidating office locations and matching the costs of maintaining office facilities with the amount of revenue brought in by the post office each year.

However, health care expert Walton Francis testified to the Oversight Committee following Donahoe and advised against a USPS private health insurance plan.

Francis said the withdrawal of postal workers from the FEHP program would have a detrimental effect on the other federal workers who depend on FEHP for their health insurance.

“The proposal before you is essentially a proposal to dismantle the federal employees’ health benefits program. That program covers eight million people—probably half the plans in that program will be forced out effectively. All people in all those plans will be forced to move to new plans,” said Francis.

“A lot of those people are elderly—don’t want any change. They’re going to be faced with massive change,” he added.

According to Francis, a primary flaw with privately insuring the postal service is the potential cost a “postal service widow” who does not receive Medicare benefits would incur as a result of the change in coverage.

“There are tens of thousands of 80-year-old widows, postal service widows … The premium cost for one of those widows to join [Medicare] parts A and B right now under current law in the Social Security Act is over $8,000 a year – that’s what it would cost to mandate that that widow leave the postal plan she’s now in and sign up for [Medicare] A and B,” said Francis.

Although Francis adamantly disagreed with the proposal to move the USPS to a private health insurer, he did agree with most other aspects of Donahoe’s five-year plan to profitability and urged Congress to facilitate the postal service’s ability to get its fiscal house in order.

The United States Postal Service has not recorded a profit since FY 2006 and will officially be in a “cash crisis” by October of 2013 without congressional action, according to Donahoe’s own testimony.