Postmaster General Patrick Donahoe is fighting for the right to get U.S. Postal Service employees out of the Federal Employees Health Benefits Program (FEHBP) as critics whether the service has the expertise to build a better plan.
Donahoe talked about health benefits today during a Postal Service hearing organized by the House Oversight and Government Reform Committee’s federal workforce subcommittee.
The Postal Service now gets health coverage for active employees through the FEHBP, and a federal law requires it to pay in advance to fund future retiree health benefits. The organization is facing big, growing deficits, in part because of the effects of the retiree health benefits prefunding requirement and in part because of customers’ increasing reliance on electronic communications, Donahoe said, according to a written version of his remarks posted on the committee website.
The Postal Service is spending about $13 billion per year — 20% of its revenue — on health care, with $5.6 billion per year going toward prefunding retiree health benefits, $4.4 billion for premiums for active employees, and $3.2 billion for premiums for current retirees, Donahoe said.
Today, because of the way the FEHBP and the retiree health benefits rules work, “cost fluctuations in this large component of our total operating costs, second only to wages, are largely out of our hands,” Donahoe said.
Donahoe says letting the Postal Service set up its own health plan could help it save about $7 billion in the first year and about $22 billion by 2016.
The Postal Service would achieve those savings by offering just a few levels of coverage, rather than the long list of choices that the FEHBP offers; eliminating the retiree health benefits prefunding requirement; and adding better wellness and condition management programs, Donahoe said.
Now, for example, the Postal Service has little ability to get retirees to shift into the Medicare program rather than relying mainly on Postal Service-provided benefits, Donahoe said. He reported that getting retirees to make as much use of Medicare as possible would save about $565 million in the first year.