... if this is not an actually an outcome of the efficiency (no pun intended) of the USPS? I.e. processing first class flat mail is almost totally automated so they do not want to introduce inefficiencies in that process by allowing exceptions.
Indiana could have used Priority Mail and achieve what they wanted for no extra charge. I doubt that by the time you add the cost of the blocks, time to stuff the envelope and the price of the confirmation service, they were even near the Priority Mail rate.
(Might this even be a case of Indiana law stating the Election Division "shall use First Class mail"?)