Postmaster General advocates for an Improved Health Plan to Save Money

During his testimony before the Congressional Committee on Homeland Security and Governmental Affairs, Postmaster General Patrick R. Donahoe advocated for a new proposal to help the Postal Service reduce its health care costs. By allowing the Postal Service to establish its own health care plan, Donahoe predicted they could leverage better prices from insurance companies and focus on issues such as “improved prescription coverage, integrated care and disease management, wellness incentives” to help reduce costs. 

Below is the relevant excerpt from his testimony:

An astonishing 20 cents of every revenue dollar the Postal Service takes in must go toward health care costs. The cost of this large component of our total operating costs, second only to wages, is largely outside of our control.

There is a substantial opportunity for savings – up to $7 billion each year through 2016 – by moving to a more modern, responsive and customer-focused system. This would involve having the Postal Service sponsor its own healthcare plan.  By moving away from the federal system, nearly all of our employees and retirees would reap the benefits of getting equivalent or better healthcare coverage and paying less for it.

A Postal Service sponsored health care plan is critical, because it resolves the root cause of soaring healthcare costs – the issue of liability. Without addressing the liability issue in a responsible way, the Postal Service will be unable to sustain the current approach to providing health benefits to retirees.  In its proposal, the Postal Service would sponsor its own health care plan independent of the Federal Employee Health Benefits (FEHB) program. This would include employees, as well as current and future retirees. Congressional action to allow this fundamental change would dramatically reduce health care spending, helping the Postal Service take a significant step toward financial stability. It would also provide savings for employees and retirees.  Our health care plan proposal provides savings and benefits in a variety of ways:

• Helps return the Postal Service to financial stability. Preliminary estimates indicate savings would exceed $1 billion in reduced premiums for the Postal Service in the first year, and $600 million in reduced premiums for employees.
• Eliminates the need for future scheduled RHB prepayments (ranging from $5.6 billion to $5.8 billion annually) under the PAEA by reducing the unfunded liability to a manageable level.
• Leverages the tremendous buying power of more than one million employees and retirees to obtain better pricing.
• Achieves significant savings for the Postal Service, employees and retirees.
• Maintains the Postal Service’s commitment to provide quality health care coverage to our dedicated workforce and retirees, as the cost of FEHB plans is unstainable.
• Implements best practices such as improved prescription coverage, integrated care and disease management, wellness incentives, and integrated Medicare and Employer Group Waiver Plans (EGWP) for retiree health benefits.
• Enables better choices with simple, more understandable options.

The CWA Health Care Blog has highlighted studies that have shown the potential for savings to employers that focus on disease management and wellness here and here.

For more information, Donahue’s entire testimony can be found here.