Cheaper Health Insurance Coming for Federal Employees?

Jul 7, 2017

insuranceAccording to an analysis from the Congressional Budget Office, all federal employees may see a better rate on their health insurance premiums under a bill to overhaul the U.S. Postal Service.

A major part of the 2017 Postal Service Reform Act would be the creation of a new health benefits program solely for postal employees and retirees. It would also require all eligible annuitants to enroll in Medicare as their primary health insurance provider.

Federal employees remaining in their current FEHB plans would see their costs fall because removing postal employees (who generally cost more to insure than the rest of the federal workforce) from their pools would decrease the overall expenses associated with their insurance.

CBO did predict the government’s portion of premium costs would decrease by $1.4 billion for federal retirees and $1.9 billion for current employees over 10 years. However, they didn’t estimate the savings FEHB enrollees would receive.

Analysts also predicted premiums in the new system “for postal employees and annuitants would be lower than the FRHB premiums those people would face under current law”. CBO didn’t predict, however, savings for the individual but said USPS would save $2.2 billion for current postal workers and $2.5 billion over 10 years under the postal-specific health care program.

This reform proposal, for the first time in several years of effort, has won the backing of both major political parties and nearly every stakeholder group. Although, one group remains in opposition.


The National Active and Retired Federal Employees Association has said the 76,000 postal retirees who currently use FEHB plans as their primary insurer, rather than Medicare, would face unwanted costs. By their estimation, the premium for Medicare Part B (currently $134 per month) would exceed the savings the retirees would see in their new postal-specific plan.

NARFE President Richard Thissen said, “After finishing long careers with USPS, postal retirees should not be threatened with the loss of their health insurance entirely if they do not buy additional coverage through Medicare. This not only eliminates choice about health insurance for postal retirees living on fixed incomes, but it also sets a dangerous precedent for all federal retirees.”


The American Postal Workers Union has endorsed the bill. The savings demonstrated “the positive changes that have been made in the legislation.” They noted 80 percent of its retiree members already opt into Medicare and that along with FEHB plans, provide “virtually 100 percent medical coverage with no co-pays, deductibles, co-insurance or catastrophic limits.”

To ease the transition for the remaining retirees onto Medicare, the bill will require USPS to pay 75 percent of Part B premiums in the first year, for those currently not participating, 50 percent in the second year, and 25 percent in the third year.

CBO did acknowledge some postal retirees would incur new costs but said they could be partially offset. “Some postal annuitants would be required to pay new premiums associated with mandatory Medicare enrollment and additional amounts for health care services. However, Postal Service health plans pay a share of the cost of annuitants’ health care services, and CBO estimates that the aggregate additional cost for these annuitants would be offset by those contributions,” CBO wrote.

In total, CBO estimates the bill would save $6.2 billion, which would go to USPS itself. The savings would be through a combination of health care savings, rate increases, service changes, and an accounting adjustment.

Message us & find out if you qualify today!

  • This field is for validation purposes and should be left unchanged.

Recent Articles

6 Key Reasons Why Your Disability Retirement Application Was Denied

Have you recently applied for Federal Disability Retirement, only to receive a denial? The Office of Personnel Management (OPM) is denying more initial applications than ever. However, it's important to understand that a denial does not mean the end of the road for...

Federal Employee Resources

Our ever growing library of federal employee resources give you the knowledge you need to make smart choices about your future.


Frequently Asked Questions

Get the answers you need on-demand, from a team of federal employee benefits professionals.

View FAQ

Federal Benefit Webinars

Twice per month we host webinars to help federal employees better understand their benefits and answer their questions LIVE.

See Webinar Schedule

Benefit Guides

From guides to detailed charts, these educational resources will help clarify confusing federal employee benefits topics.

See our resources