February 24, 2022

H.R.3076 – Postal Service Reform Act of 2022

NOTEWORTHY

Background: H.R.3076, Postal Service Reform Act of 2022, was introduced in the House on May 11, 2021. The House Committee on Oversight and Reform and the House Rules Committee advanced the bill on February 7 by voice vote. The bill passed the House on February 8 by a vote of 342-92.

Floor Situation: The Senate could consider H.R.3076 as early as the week of February 14.

Executive Summary: H.R.3076 makes reforms intended to increase the financial stability and reliability of the U.S. Postal Service. The bill requires the Office of Personnel Management to create the Postal Service Health Benefits Program for postal employees and retirees, and it repeals the requirement that USPS prefund future retiree health benefits. USPS would be required to deliver mail six days a week and to create an online dashboard with service performance data at the national and local levels. The bill would allow USPS to form strategic partnerships with state, local, and tribal governments to provide nonpostal, noncommercial services. 

OVERVIEW OF THE ISSUE

In 2021, the U.S. Postal Service had its 15th consecutive annual net revenue loss but saw growth in package shipping. There is bipartisan concern over the long-term financial stability of the USPS and the need for reforms to its operations and health benefit funding requirements. The financial condition of the USPS has raised questions about its ability to ensure postal employees get their retiree health benefits as scheduled. 

CONSIDERATIONS

Americans, particularly those in rural communities, rely on the postal service for consistent, efficient delivery of essential goods and mail, and there is bipartisan consensus that reforms are needed to help the USPS adapt to 21st century commerce.  

The 2006 statutory requirement that the USPS prefund future retiree health benefits has caused severe financial strain for the service. Unlike in the private sector, postal service retirees are not required to enroll in Medicare for primary coverage. Eliminating the prefunding requirement and integrating postal retirees’ health care with Medicare could yield cost savings to USPS.  

NOTABLE BILL PROVISIONS

Title I – Postal Service Financial Reforms

Section 101 – Postal Service Health Benefits Program

Requires the Office of Personnel Management to create the Postal Service Health Benefits Program within the Federal Employees Health Benefits Program for postal service employees, beneficiaries, and other eligible family members. Insurance carriers will contract with OPM to offer health plans to participants. Carriers will be required to offer plans in the first year that are equal to benefits currently offered to postal service employees through the FEHB. Requires Medicare-eligible employees and retirees to enroll in Medicare. The plans must provide prescription drug benefits through an employee group waiver plan under Medicare Part D.

Requires postal employees and beneficiaries who enroll in employee health insurance to enroll in a Postal Service Health Benefits plan.

Requires USPS to create a health benefits education program to assist employees and beneficiaries with the enrollment process. OPM will automatically enroll people who do not choose a plan into a PSHB plan equivalent to their current FEHB plan.

Creates a six-month Medicare Part B special enrollment period, starting in April 2024, for current Medicare-eligible retirees and family members who wish to enroll in Medicare before the initial contract year. Requires the postal service to pay the late enrollment penalty for current Medicare-eligible beneficiaries or family members enrolling during the special enrollment period.

Provides funding for the Centers for Medicare and Medicaid Services, Social Security Administration, and OPM to implement the new program. In fiscal year 2022, appropriates $7.5 million to CMS, $16 million to SSA, and $70.5 million to OPM. 

Section 102 – USPS Fairness Act

Eliminates the retiree health prefunding requirement for the postal service. The requirement is replaced with a new requirement that the postal service pay into the Retiree Health Fund for current retiree health care costs equal to premiums minus the cost of annual claims paid.

Section 103 – Nonpostal Services

Allows agreements between the USPS and state, local, and tribal governments to offer nonpostal services and property to the public on behalf of these governments for noncommercial purposes. Requires that the agreements be approved by the USPS board of governors.

Requires the USPS to submit a report that analyzes costs, rates, revenues and quality of service for each agreement.

Title II – Postal Service Operational Reforms

Section 201 – Performance Targets and Transparency

Requires the USPS to establish and provide reasonable service performance targets for “market dominant products” – generally letter mail, magazines, and catalogs – annually. It must make weekly service performance data public and develop and maintain a website that provides the public with this information. 

Section 202 – Integrated Delivery Network

Requires that the USPS maintain an integrated network of delivery of market dominant products and “competitive products” – generally parcels – six days a week. 

Section 203 – Review of Postal Service Cost Attribution Guidelines

Requires the Postal Regulatory Commission to assess whether regulatory revisions are needed to ensure all direct and indirect costs attributable to mail and package delivery are properly attributed to these products.

Section 204 – Rural Newspaper Sustainability

Increases from 10% to 50% the portion of “within-county” newspaper publications that can be mailed to nonsubscribers at the same rate as for subscribers.

Section 205 – Funding of Postal Regulatory Commission

Removes the Postal Regulatory Commission’s budget from the appropriations process and makes it subject to review by the governors of the postal service. The governors in office can adjust the amount requested by unanimous written decision.

Section 206 – Flats Operation Study and Reform 

Requires the PRC, in cooperation with the USPS inspector general, to submit a report to Congress and the postmaster general identifying the causes of inefficiencies in handling flats mail – such as magazines and catalogs – and quantifying the effects of volume trends, investment decisions, excess capacity, and operational inefficiencies on flats costs.

Requires USPS to develop and implement a plan to solve identified inefficiencies within six months and consider the report’s findings when implementing adjustments to rates of their current products.

Section 207 – Reporting Requirements

Requires the postmaster general to submit a report to the PRC, House Oversight and Reform Committee, and Senate Homeland Security and Governmental Affairs Committee on the financial and operational conditions of the USPS within 240 days of enactment and every six months thereafter.

Section 208 – Postal Service Transportation Selection Policy Revisions

Amends requirements for postal service selection of modes of transportation.

Section 209 – USPS Inspector General Oversight of Postal Regulatory Commission

Gives the USPS inspector general oversight authority over the PRC.

ADMINISTRATION POSITION 

The administration released a statement of administration policy in support of H.R.3076.

COST

The Congressional Budget Office estimates the bill would decrease on-budget direct spending by $73 million over the 10-year budget window. Off-budget USPS direct spending would be reduced by $386 million over the same period. Generally, CBO estimates that premiums will decrease in the FEHB and the new Postal Service Health Benefits Program as a result of shifting postal retirees into Medicare. CBO estimates that net Medicare spending attributable to this bill will increase by $5.5 billion from 2025 to 2031. Since this shift does not go into effect until 2025, the full cost to the Medicare program is not displayed in the scoring window. CBO does not include statutorily required USPS health prefunding payments in its baseline, so cancelling the current obligations of $57 billion is not reflected in the formal estimate.