Postal employees and retirees may participate in the Federal Employees’ Health Benefit Program (FEHBP), which is administered by OPM. The Postal Service accounts for current employee and retiree health benefit costs as an expense in the period the contribution is due. For retiree health benefits, multiemployer plan accounting rules are used.
The drivers of active employee health care expense are the number of employees electing coverage and the premium costs of the selected plans. On average, employees paid for 20% of the premium cost in 2010 and the Postal Service paid the remainder. The average employee contribution was 19% in 2009 and 18% in 2008. The total premium cost for each plan is determined annually by OPM. In October 2010, OPM announced average premium increases of 7.2% for calendar year 2011. Previous increases were 8.8% in January 2010, 7% in 2009, and 2% in 2008.
Despite an average increase of 8.8% in premium costs for 2010, employee migration to lower cost plans and a decline in the number of employees combined to lower total employee health benefit costs. In 2010, health benefit expenses were $5,141 million, a decrease of $153 million, or 2.9%, from 2009. The 2009 expense of $5,294 million was a decrease of $82 million, or 1.5%, from 2008 health benefits expense of $5,376 million. Employee health benefits expense was 6.8%, 7.4%, and 6.9% of total operating expenses in 2010, 2009, and 2008, respectively.
