In his latest “State of the Business” video to employees, PMG Pat Donahoe says the proposal to move away from the current Federal Employee Health Benefits Plan (FEHBP) to a USPS-sponsored benefit is a vital element of a more sustainable business model.
“This all ties into the larger picture of what we’ve been talking about over the last several months regarding legislative change,” said Donahoe. “The whole idea and aim is to secure a strong financial future for the organization, the industry and for you as an employee.”
Donahoe acknowledged that employees are used to the FEHBP and feel comfortable in knowing they’re part of a large plan. “But that doesn’t mean it’s the best plan or the plan that offers the best flexibility for you or the Postal Service as a business,” said Donahoe. “By pulling this piece of our costs away from FEHBP, we’d be able to save about $500-700 million a year.”
The PMG said this proposal is the same business model followed by other large companies with extensive employee bases such as General Electric and IBM. “These companies leverage their size to get the lowest cost and best value for their employees,” he said. “This is the model USPS wants to follow.”
“While all of us have been taking great steps to reduce our costs, the health care cost is one we’re unable to address in its current model,” said Donahoe. “We need to change this. We need the support to own this program to maximize the benefit to you as an employee and to the Postal Service.”
The Postal Service’s proposal will require congressional approval. It will allow USPS to establish its own health benefits program.
source: USPS News LinkIn a 2002 letter to then Postmaster General John Potter and prior to passage of the Postal Accountability and Enhancement Act (PAEA) GAO wrote:
We also believe that our previous analysis of multiemployer characteristics did not give adequate attention to at least two additional significant areas where USPS’s plan is different from a typical multiemployer plan. First, an attempt by the USPS to terminate its participation in the Federal Employees Health Benefits Plan (FEHBP) would be subject to statutory constraints. Unlike private sector employers, USPS is statutorily prohibited from making a variation, addition, or substitution with respect to fringe benefits if it would result in a program of fringe benefits that on the whole is less favorable to its officers and employees than fringe benefits in effect on July 1, 1971. Further, as to unionized officers and employees, no changes can be made except by collective bargaining agreement. This statutory provision may not technically require USPS to provide its officers and employees with a substitute defined benefit health “plan” comparable to FEHBP. However, because of the significance of health insurance coverage to any “program of fringe benefits” and the dominance of unionized employees within USPS with whom USPS would have to obtain concurrence, it seems highly unlikely that USPS would be able to terminate participation in FEHBP without providing a comparable defined benefit health plan. Multiemployer plans are not typically subject to comparable statutory constraints. In any event, if termination were to occur, USPS would be required to continue to make contributions to OPM towards the health costs of its current retirees.
Second, like most multiple employer (single-employer) plans, USPS is required by law to make contributions towards the health costs of only its own retirees and employees and no others. In a typical multiemployer plan, an employer may have to make additional contributions in the event that other employers that participate in the plan are unable to make their required contributions.