What You Need to Know
- The Postal Accountability and Enhancement Act of 2006 required the U.S. Postal Service to pre-fund retiree health benefits.
- H.R. 3076 is set to repeal the pre-funding requirement and make Medicare the main health benefits provider for most future retirees.
- About 1.1 million Postal Service employees and retirees may need help understanding the implications.
- The bill could add pressure on Congress to restructure Medicare.
Members of the Senate voted 79-19 to pass H.R. 3076 — a bipartisan bill that is the product of a 16-year effort to revamp the U.S. Postal Service retiree health benefits financing system.
The Postal Service now provides health coverage for most of its 650,000 active employees and dependents, and many of its 500,000 retirees and survivors, through the Federal Employees Health Benefits Program.
H.R. 3076 — the Postal Service Reform Act of 2022 — calls for the Postal Service to move most of its active employees and their dependents into a new Postal Service Health Benefits Program inside the main federal employee plan. Most retirees will have to use the Medicare program as their retiree health benefits coverage provider.
The House passed the bill by a 342-92 vote Feb. 8. The administration of President Joe Biden has expressed strong support for the bill, and Biden appears to be likely to sign it soon.
The signing of the bill could have a direct effect on any health insurance or retirement planning specialists who work with middle-income and moderately affluent clients, and it could have big, indirect effects on all U.S. financial professionals and clients.
Groups with an interest in government spending transparency and efforts to hold down government spending have argued for decades that public employers have been promising to provide defined benefit pensions and generous retiree health benefits plans without understanding the full cost of those obligations.
The groups pushed to require public employers to report on any retiree health benefits promises made and to explain how they would come up with the cash to make good on the obligations.
In 2006, Congress acted on the effort to increase retiree health benefits transparency and funding discipline by passing the Postal Accountability and Enhancement Act of 2006. The act required the Postal Service to pre-fund retiree health benefits.
The Postal Service was struggling to compete with UPS, FedEx, the internet and cell phones.
The U.S. Government Accountability Office reported in 2018 that the Postal Service had not put cash in the Postal Service Retiree Health Benefits Fund since 2010. The fund held $50 billion in assets on Sept. 30, 2017, and it needed $112 billion in assets to fund all retiree health benefits liabilities, according to the GAO.
The Postal Service reported a $4.9 billion net loss in the fiscal year ending Sept. 30, 2021, on $77 billion in revenue. It said it had defaulted on $57 billion in payments to the retiree health benefits fund.
The Bill Details
About 90% of Postal Service retirees and survivors now have Medicare Part A hospitalization coverage, and about 80% of Medicare Part B outpatient and physicians services coverage, according to a National Association of Letter Carriers analysis of H.R. 3076.
If the bill takes effect as written and is implemented as written:
1. Most active Postal Service employees and their dependents will move into new plans inside the Postal Service Health Benefits Program that will be similar to the plans — provided by carriers such as Blue Cross Blue Shield and Kaiser — inside the federal employee plan.
The premiums might be somewhat higher, because postal employees tend to be somewhat older and more expensive to insure than other federal employees, according to NALC.