Latest postal reform bill includes USPS-only health plan

Wednesday - 1/29/2014, 10:48am EST

(This story was updated Wednesday at 5:15 p.m. with more information about the hearing).

The Senate Homeland Security and Governmental Affairs Committee debated an updated version of postal reform legislation Wednesday that would allow the cash-strapped U.S. Postal Service to restructure its health benefits program.

Included in the revised postal reform bill from Sens. Tom Carper (D-Del.) and Tom Coburn (R-Okla.) is a proposal that would create a new postal-only health plan within the broader Federal Employees Health Benefits Program (FEHBP).

"If the Postal Service is going to be a viable, self-sustaining entity and not continue to be a drag on the Treasury, we need to work things out on the retiree health care side," Carper said in his opening statement ahead of the bill markup. "And wonder of wonders, I think we've done that."

The postal-only health plan is just one piece of a major effort to set the troubled agency on firmer financial ground. The committee recessed Wednesday afternoon without a vote and after debating and approving only 11 of about 30 proposed amendments to the underlying Carper-Coburn bill.

A second hearing to finish marking up the bill has not yet been scheduled.

Postal-only plan solution to health funding riddle?

U.S. Postmaster General Pat Donahoe has been pushing over the past few years for the agency to carve out its own health plan, saying it would ease the burden of prefunding future retirees' health care costs. Currently, the agency is required to make fixed, massive payments to prefund health costs — payments which USPS has repeatedly defaulted on over the past two years.

The program, as envisioned in the bill, would cover all postal employees and retirees and would require Medicare-eligible postal retirees to also enroll in Medicare parts A, B, and D which cover hospital stays, doctor's visits and prescription drug coverage, respectively.

FEHB insurers with more than 5,000 postal enrollees — that currently covers more than 90 percent of postal employees and retirees — would be required to participate in the new postal-specific plan and provide plans that are "actuarially equivalent in value to those policies that they offer for other federal employees who receive FEHBP coverage," according to a Senate summary of the bill.

Employees currently in plans that won't be offered in the new program will be allowed to opt out of the new postal-only plan but only until they reach retirement age, at which point they will be required to shift to the new postal- only plan and enroll in Medicare.

Current retirees who are enrolled in plans that won't be offered in the new program will be allowed to opt out entirely.

Bill includes new prefunding requirement

The revised legislation aims to solve the longstanding problem of prefunding — the requirement that the agency set aside billions of dollars each year for the payment of future retirees' health benefits. The 2006 Postal Accountability and Enhancement Act first mandated prefunding, which Carper said Wednesday had been a "huge drag on the Postal Service" and has contributed significantly to the increasing red ink on the agency's balance sheet.

The revised bill significantly modifies the prefunding requirement for future retiree health care costs, eliminating the current onerous payment schedule and setting in place a new schedule to be amortized over 40 years with a reduced pre- funding goal of 80 percent of projected obligations.

But the updated bill creates a new prefunding requirement to shore up unfunded liabilities in the workers' compensation trust fund, which USPS recently estimated exceeds $17 billion. That prefunding requirement would only kick in when the Postal Service's net income exceeds $1 billion in order "to make sure that this new process does not create new financial difficulties for the Postal Service," according to the bill summary.

But, in a letter to the committee sent earlier this week, the four major postal-employee unions called the new prefunding requirements "totally unfair and unnecessary."

The unions said the revised bill included some of the recommendations the unions made after Carper and Coburn first introduced their bill last August. But the updated legislation "retains the misguided service cuts and unfair employee hits contained in the original bill," according to their letter.

Bill delays five-day delivery

Senators on the committee defeated an amendment to the bill that would have allowed the Postal Service to move immediately, upon the bill's passage, to end Saturday first-class mail delivery.

As it stands in the revised Carper-Coburn bill, USPS would able to shift to five- day delivery only after mail volume drops below 140 billion pieces of mail annually.