Updated explanation of the Medicare and health care provisions of H.R. 3076/S. 1720 from the NALC

The Postal Service Reform Act of 2022 (H.R. 3076/S. 1720) would address two of NALC’s top  legislative priorities while improving the financial stability of the Postal Service:

  • It would repeal the mandate that the Postal Service pre-fund decades’ worth of retiree health benefit premiums, a mandate that applies to no other federal agency or private company.
  • It would require that the Postal Service deliver mail and packages at least six days a week.

Additionally, the legislation would reform the Federal Employees Health Benefit Program (FEHBP) to maximize its integration with Medicare for future postal annuitants, beginning on January 1, 2025. Over time, this will reduce any increases in FEHBP premiums for USPS, postal employees and future postal annuitants as health care costs rise. This updated explanation of the health care provisions of H.R. 3076 (and the identical Senate bill S. 1720) reflects modest changes made to the original bill introduced in 2021.

Health care provisions

Under the legislation, postal employees and annuitants would continue to take part in what would be a restructured FEHBP program. All the major plans now available to participants – Blue Cross Blue Shield, the NALC HBP, Kaiser, etc. – would continue to be offered to postal employees and retirees as a postal-only version of their FEHBP plans within FEHBP. While the benefits would remain the same, the premiums would be significantly reduced because postal participants would be placed in a separate risk pool with new rules related to Medicare enrollment.

The new legislation would not change a current postal annuitant’s right to decide whether they want to enroll in Medicare. Nor would this right to decide about Medicare change for any active postal employee who retires before January 1, 2025, or for any active employee at least 64 years of age as of January 1. 2025.

Active employees under the age of 64 as of January 1, 2025, would (when both retired and at least age 65) enroll in Medicare Parts A and B, absent the exceptions discussed below. Currently, around 90% of postal annuitants enroll in Medicare Part A (hospital services) and around 80% are voluntarily enrolled in Medicare Part B (medical services).

While there are no premiums for Medicare Part A, the standard monthly premium for Medicare Part B in 2022 is $170.10 per month, a figure that is set each calendar year by the federal government to cover 25% percent of the program’s cost. The reason the vast majority of Medicare eligible (age 65 and older) annuitants already choose to enroll in Medicare Parts A & B when they turn age 65 is because doing so virtually eliminates any out-of-pocket health care costs (deductibles, co-payments, etc.) under the FEHBP program, thereby reducing the uncertainty about rising health care costs as they age.

The postal-only plans in FEHBP will be regulated and run in the same way current FEHBP plans are today. There will be an annual Open Season that will allow participants to choose among a range of plans with separate rates for postal and non-postal participantsIndeed, many annuitants use the Open Season to select plans that work best with their Medicare coverage, once they obtain that coverage.

Exceptions

There are reasons why some Medicare eligible annuitants don’t wish to enroll in Medicare Part B. Some don’t need it because they have alternative coverage such as through the Veterans Administration. Others live in areas without Medicare providers. Still others, who didn’t enroll at age 65 and later wish they had as their health care costs rise, don’t do so because there is a 10% per year increase in premiums for every year enrollment is delayed after first eligibility.

NALC lobbied aggressively for the inclusion of special exceptions that are contained in the legislation. Future postal annuitants who do not need Medicare because of coverage by the Veterans Administration or by another non-FEHBP program or who cannot use Medicare because they live in a place (for example, overseas) without Medicare providers would be allowed to keep their postal FEHBP coverage without enrolling in Medicare.

We also worked to include a provision to give current annuitants who did not enroll in Medicare Part B when first eligible, but who now wish to do so, a one-time opportunity to enroll in Part B without the 10% per year late enrollment penalty that currently applies. Under the legislation, the Postal Service would pay that penalty for the annuitant (and their spouses).

Why prospective Medicare integration makes sense.

The reason it makes sense to create postal-only plans within FEHBP and to maximize Medicare participation is that it will reduce health care costs for both the Postal Service and postal participants in the federal insurance program. FEHBP premiums would be reduced for active and retired postal employees alike. Because Medicare is the first-payer insurer for its enrollees, the costs covered by postal-only FEHBP plans will be reduced, thereby reducing costs for postal employees. This would also reduce the Postal Service’s health care expenses by hundreds of millions of dollars annually and reduce its future liability for retiree health benefits by approximately $40 billion.


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