Could Postal Employees Lose Retiree Health Benefits?

The OPM-OIG Report, entitiled, "A Study of the Risks and Consequences of the USPS OIG's Proposals to Change USPS's Funding of Retiree Benefits," suggests Postal employees could lose their retiree health benefits if the Postal Service cannot make its statutorily required payments tothe Enployee Health Benefit (EHB) Fumd. They even seem to imply that current employees could lose their health benefits.

The report goes on to suggest that any shortfall by the Postal Service could raise the premiums paid by all other Federal employees. Although it is not clear if that woud depend on OPM continuing to provide benefits to postal employees and retirees.

 The following quote can be found on pages 8 and 9 of the report.
"It is unclear, however, what the effect would be upon USPS employees' or retirees' rights if the USPS ceased making its required payments into the EHB Fund because the fund does not contain sufficient reserves to "replace" the USPS's contributions.  Consequently the fund's assets would be exhausted very quickly.

In such a scenario, the insurance companies would still be legally entitled to the full amount of the premium negotiated under the contract.  The OPM would have to take some sort of an action because without the USPS's contributions, the fund simply would not have enough money to pay every FEHB participant's premium.

Absent an emergency appropriation from Congress,it is possible that the OPM would have to exercise its regulatory authority to disenroll USPS employees and retirees as a class in order to continue providing health care coverage to all other FEHB program participants.  

If the OPM did not take such drastic measures, the EHB would very quickly run out of assets and plans would stop receiving premium payments because OPM simply would not have the money to pay them.  In that scenario some insurance companies may unilaterally decide that the Government is in default of the plan and withdraw from the program.

If enough insurance companies withdrew, it would threaten the existence of the FEHB Program.  Even if some insurance companies continued to offer coverage for the remainder of the year, they may decide not to participate in the FEHB program the following year.   If they did decide to stay in the program they may be forced to increase premiums dramatically in order to make up the premium shortfall, which would affect other non-USPS participants. 

Brian Sheehan, publisher of Postalnews.com pointed out in an e-mail to me, there are no concerns about the Postal Service not covering its obligations for health benefits for current postal employees. So health benefits of current employees should be safe for the time being regardless of whether the Postal Service makes its payment to cover its statutory obligations to pay a portion of its its future retiree health benefit liability.  He indicated that the payments that the Postal Service finds difficult to make now would affect the FERHB fund in 2017.   This raises some interesting questions about what the OPM-OIG means by "disenroll."

• Would the "disenrolling" of USPS employees in retiree health benefit plans occur before or after 2017?
• If it is is after 2017, would retiree health benefits just stop in 2017 for both existing and future retirees or would retiree benefits exist for employees that retire before 2017 but not exist for employees who retire in 2018 and beyond?

Italicized text added 9:46 am on 3/1/2011