Categorized | Economy

Postal Workers Might Pay for Own Salvation

Pulling the U.S. Postal Service (USPS) out of the Federal Employees Health Benefits Program (FEHBP) might prevent financial Armageddon, but that salvation could come at a high price to postal workers, according to the Government Accountability Office (GAO).

Calling the move a key to regaining solvency and financial stability, the Postal Service has proposed withdrawing from FEHBP and running its own USPS health insurance program instead. The change would require the approval of Congress and elements of the plan are included in both the House version and Senate version of current postal reform legislation.

Also See: GAO Says USPS Should Prepay its Retiree Fund

While agreeing that the USPS “would likely realize large financial gains … primarily by increasing retirees’ use of Medicare,” the GAO reported that many current postal employees would see the cost of their health coverage increase under a USPS-administered health insurance program.

“[S]ome elements of USPS’s proposal would add uncertainties that could reduce funds available for its employees’ and retirees’ future health care,” said the GAO in its report.

In its report, the GAO listed three reasons why the Postal Service’s proposal could reduce money available for its employees’ and retirees’ future health care.

  • USPS’ plan to invest funds from its own health plan in stocks, commodities, and foreign currency, rather than U.S. Treasury securities significantly increases risk. Postal Service investments, noted the GAO, “may experience losses in a market downturn and would thus have reduced assets available for health care.”
  • Savings from the health plan switch could result in surpluses, which the USPS proposes to use to help shore up its shaky financial status, rather than plowing the money back into its health plan. However, this idea “is not fiscally prudent” according to the GAO. “If USPS were to consistently exercise this option to help maintain its financial solvency, it could result in an unfunded liability for retiree health benefits.”
  • Finally, the GAO found the Postal Services’ estimates of the financial risks it would face by operating its own health insurance plan were “Overly optimistic” and “could lead to inadequate funding for the health plan over time.”

The GAO estimated that at least 63% of postal workers and retirees now enrolled in an FEHBP insurance plan would pay similar or lower premiums under a USPS plan, but some employees and retirees “could have higher total costs — premiums and out-of-pocket costs for the use of care.” In addition, GAO noted that while employees and retirees would get coverage similar to that provided by their FEHBP plan, some might be required to change doctors.

In addition, the GAO noted that postal retirees would lose the assurance that the Postal Service’s contribution to their health benefits – and thus the amount they pay – would remain fixed by law as it is now.

What about postal employees themselves? They “vehemently” oppose the plan. In a press release, the Postal Service’s largest labor union, the American Postal Workers Union APWU), said it considers the plan “a brazen attempt to shift costs to postal employees and Medicare.”

“The FEHBP is the most successful health insurance program ever run by the federal government. Removing postal employees would jeopardize the FEHBP, and would result in less coverage and higher healthcare costs for postal workers,” claimed the APWU.

While postal employees currently make up about 25% of the total enrollment in FEHB plans, GAO found that “most non-postal (FEHB) enrollees would likely not be affected by a USPS withdrawal.”

Also See: Why Postal Unions Oppose Postal Reform Bill

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