Coming Changes in USPS Health Benefits

Currently Postal Service employees are offered the same benefits that all other federal employees receive. While the employee’s share of premiums may differ, Postal employees, just like Federal employees, each year chose from a wide range of health benefit options, including plans offered by all four postal unions. This will soon change.

For at least five months, Postmaster General Pat Donahoe has promoted moving the Postal Service out of the federal health benefit system. More recently, National Association of Letter Carrier President Frederic Rolando has stated that the NALC and the Postal Service are negotiating a new approach to health benefits. The approach has three components:

  1. adoption of best practices on disease management and wellness care,
  2. improved purchasing power for drugs and other medical services and
  3. integration of postal employee health insurance plans with Medicare benefits.

These negotiations are extremely important as they would likely provide a model for negotiations underway with the Mailhanders and an arbitration decision with rural carriers. Non-bargaining unit postal employees could also see their benefits follow this model shortly after it is announced. (I would not be surprised if the Postal Service is not already discussing such changes with both Postmaster associations and Postal Supervisors.) Finally, the APWU may be asked to open up its contract, in order to integrate changes that the other Postal Service Unions have agreed to.

In his op-ed in Politico, President Rolando states that modifying the Postal Service’s approach to health care could save $20 billion in costs. What President Rolando does not say is that the changes that are proposed could reduce pressure to raise the employee’s share of the total health premium if the changes result in total premium decreases equal to or larger than the savings that are expected.

What is unclear at this point is how much comes from each of these three changes. As the integration of postal employee health insurance plans with Medicare benefits have an impact on the federal budget, savings from that portion of the plan would require legislative approval. It is clear from the CBO report on the House bill that it is possible to allow the integration to happen as part of a postal reform bill without affecting the Federal budget.

So how will these changes affect Postal Service employees?

Adoption of Best Practices on Disease Management and Wellness Care

The goal here is to provide strong incentives for Postal Service employees to:

  • improve the chance that they will not need expense medical treatments through a combination of health improvement programs (i.e. weight loss, smoking cessation, and exercise programs) and early diagnosis programs for cancer and other diseases when they are easier and less expensive to treat;
  • manage their chronic medical conditions (i.e. diabetes, high blood pressure, heart disease, and asthma), that they precisely follow behaviors and treatment protocol that minimizes their need for hospitalizations; and
  • if they have a serious medical condition, that they get the follow-up care that both improves outcomes and minimizes the chance of re-occurrences.

Meeting these goals requires that the employee’s insurer adopt a disease and health risk management program.  Disease and health risk management programs are population-based, evidence-based systematic approaches to improving care of individuals with relevant diagnoses. These individuals are identified through algorithms based on medical and/or pharmacy claims, and laboratory results, as well as health risk appraisal results, referrals by providers and self-referral.

It is also possible that a third party independent of the insurer will conduct the analysis. Often these third parties integrate web-, mobile- and mail-based programs to reinforce a treatment program. For example, these programs use mobile technology to both remind diabetics to check their insulin levels, as well as send the results to their doctors so that he/she can be notified when a patient is either not complying with proper monitoring or if readings raise concerns.

Improved Purchasing Power for Drugs and Other Medical Services

The improved purchasing power will come primarily from shifting the choice of the pharmacy benefit manager from the individual health plans to the Postal Service.   With this shift all health plans offered by the Postal Service to its employees will use the same pharmacy management program.

The impact on employees depends on how the pharmacy manager controls costs.   Pharmacy managers use a formulary to identify drugs that must be purchased as a generic, brand name drugs that are approved for use when multiple similar brand-name drugs are available; and the cost to the insured of using brand name instead of generic drugs as well as a non-preferred brand-name drug over a preferred brand-name drug.   Pharmacy managers may also get into issues of the off-label use of drugs, as well as a means to control costs.

The shift to a single pharmacy manager may cause some limited inconvenience during a transition period if an insured Postal Service employee has to shift their prescriptions to a preferred mail-order or retail pharmacy.  The biggest impact may be for individuals that are currently using mail-order pharmacies, as each pharmacy manager usually has a preferred supplier.   The impact on the use of retail pharmacies should be limited as nearly all retail pharmacies accept payment schedules from all pharmacy managers.   However, to get the biggest savings, the Postal Service’s new health plan may encourage using the mail-order pharmacy or a particular pharmacy chain.

The Postal Service may make some changes in how the insurers that it uses pay doctors, hospitals and other medical professionals.   This may result in different levels of payment to medical practices and hospitals based on how they treat patients.  It could also result that Postal Employees who work in cities with multiple hospitals will find that choosing a physician that practices at one hospital could be more expensive than choosing a physician who practices at a preferred hospital.

Integration of Postal Employee Health Insurance Plans With Medicare Benefits

This change would more than likely generate a significant share of the savings projected by the NALC.   It requires legislative change, so its inclusion is uncertain.

For older Postal Service employees and retirees, coordination with Medicare benefits will require a little more time when filling in paperwork when visiting a doctor for the first time or entering a hospital. The individual would have to include both Medicare and the Postal Service’s plan as insurers with Medicare being primary.  Paying bills may be a bit more complicated, as well as payments could come from two insurers instead of one making figuring out how much is owed after insurance benefits are paid would be a bit more difficult to compute.

As far as getting medical care, coordination of insurance benefits with Medicare should not affect the patient’s ability to get care.  To the extent that Medicare payment schedules are lower than the Postal Service’s insurance plan, then the doctor would receive the amount that is in the Postal Service’s plan with a portion of that amount paid by Medicare.  The same would be true for hospitals and other medical services.

Long-term Impact of Change

This introduction of a Postal Service health benefit plan is an important first step in developing a new business model.   The NALC should be commended for promoting this change and other postal unions and management associations should join them in this effort.

With the exception of the change involving Medicare, the proposed changes here reflect the current trend in thinking about how to both improve medical care and control costs.    Two good examples are Harvard Pilgrim and QuadMed.  Harvard Pilgrim, one of the largest insurers in New England, is a leader among insurers in implementing a wellness and disease management approach to medical care.   QuadMed, provides medical services and health management services for Quad Graphics and other companies in Wisconsin.  In the next few days this post will post more on what these entities are doing as they provide the best information as to how the NALC program will save the Postal Service money and improve the health of Postal Service employees.

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