The new health care law will mean more coverage for federal employees' adult children, restrictions on flexible spending accounts, and a possible new excise tax for the most expensive plans.

Experts say, overall, federal employees should not fear major ramifications for their health coverage but instead should expect subtle changes over the next decade or two.

Some say premiums for large group insurance plans such as those provided by the Federal Employees Health Benefits Plan are likely to be largely unaffected. The Congressional Budget Office in November predicted such plans would see no effect on premiums or would reduce future premium increases by 3 percent by 2016.

Walt Francis, a consultant who writes the annual Checkbook health care guide for federal employees, said the law's best chance at containing premiums comes from the so-called "Cadillac plan" excise tax.

That 40 percent excise tax won't apply to most FEHBP plans at first, but since the threshold for the tax will be indexed to inflation, it is expected to gradually apply to more federal plans in the 2020s.

The desire to avoid that excise tax could encourage health insurers to become more frugal and efficient and lower costs, Francis said.

"This isn't bad news, this is good news — or at least mixed news," Francis said. "There's promise here to help federal employees both through better health care and reduced costs. You want to bend that [cost] curve because, over time, health insurance is eating up employee compensation."

There are several ways insurance plans could lower their costs to avoid the excise tax, Francis said. They could reduce benefits by increasing the deductibles, co-payments and co-insurance that enrollees pay. But cost-reduction plans don't necessarily have to hit enrollees' checkbooks, Francis said.

Insurers could reduce the use of unnecessary and expensive tests, surgeries or other procedures by requiring a patient to get a second opinion or preapproval before surgery or a second CAT scan, Francis said. A patient could be required to go to a primary care physician before seeing a specialist. Insurers could try to increase preventive care and get patients to take better care of themselves to avoid future medical problems.

Or insurers could increase their use of preferred provider networks to steer more patients to providers who successfully control their costs while providing quality health care, Francis said.

"There are better ways to control costs that are more patient-friendly" than reducing benefits, Francis said. "All the press has been treating [the excise tax] as a bad thing, and that's a very shortsighted, selfish view."

Employee organizations such as unions and the National Active and Retired Federal Employees Association opposed the excise tax and fought to exempt federal employees from it.

"FEHBP is Ford- and Chevy-level coverage," said Dan Adcock, legislative director for NARFE. "The purpose of the tax is discouraging Cadillac plans [without deductibles or co-payments]. That's not the case with FEHBP."

The law, as finally written, delays implementation of the excise tax until 2018, raises the premium thresholds for determining if a health care plan is subject to the tax, and doesn't consider dental and vision coverage when determining if a plan should be taxed.

Adcock thinks it's currently impossible to tell how the law will eventually affect premiums, deductibles and other enrollee expenses.

"That's a huge question mark," Adcock said. "No one has a good handle on what will happen."

The health care law is expected to extend health coverage to about 31 million uninsured Americans, some of whom cannot currently get coverage because of pre-existing conditions. Francis said that since FEHBP enrollees are in a separate risk pool from uninsured Americans, extending coverage will have no effect on FEHBP premiums.

Dependent coverage

The first change to federal employees' health insurance will take effect in January, when employees will be able to add dependent adult children who have not yet turned 26 to their coverage. Currently, feds' children lose their coverage when they turn 22.

This change comes as a relief to Forest Service biological scientist Rhonda Boyd.

Her daughter, Kelly, turns 22 in November, and isn't expected to graduate and begin full-time work until 2012. The limited health insurance offered by her daughter's school, the University of Wyoming, covers little more than flu shots and cold treatments, Boyd said. And the few doctors in and around Laramie don't see people without insurance, she said.

"If she needed surgery, she wouldn't have been covered," said Boyd, who works in Laramie.

Boyd hopes the two additional years of physicals and regular preventive care will keep her daughter from suffering the same diabetes and heart disease as her parents.

But even with the change, Kelly will remain uncovered for nearly two months at the end of this year.

"Hopefully, nothing happens in those two months," Boyd said. "We'll just have to schedule all her preventive care and dental stuff before" her birthday.

Francis said extending coverage to young people between the ages of 22 and 25 may increase FEHBP costs and premiums, but not by much.

"These are the ‘young immortals' [who are unlikely to require much medical care], and some of them will already have coverage elsewhere," Francis said.

Flexible spending accounts

But Boyd is worried about some of the other changes in store under the new law.

Federal employees who currently deposit the maximum $5,000 in their tax-free FSAs are likely to lose roughly $800 in taxes beginning in 2013, when the FSA cap is lowered to $2,500, Francis said.

That's going to cost Boyd several hundred dollars in taxes each year because she uses FSA dollars to pay for her and her husband's diabetes and heart disease medications. And Boyd is concerned that the excise tax could eventually result in higher costs or reduced benefits from her Blue Cross and Blue Shield standard plan.

"I'm very wary," Boyd said. "I had hoped to retire [in three years], but who knows? I may have to keep working longer" because of concerns about higher premiums and other unknown effects of the law.

Also in 2013, it will become tougher for most taxpayers to write off medical expenses as itemized deductions, Adcock said. Today, taxpayers can deduct medical expenses that are more than 7.5 percent of their adjusted gross income. But in three years, taxpayers under 65 will be able to deduct only expenses that are more than 10 percent of their adjusted gross income.

As for the unknown handful of federal employees who choose not to buy FEHBP coverage, they must do so or pay penalties. Adcock said OPM and federal agencies may need to do more to encourage new federal employees to sign up for health insurance as part of the so-called "onboarding" process.

"It will be important to make them aware that if they don't sign up for coverage, or have other coverage, that they'll have a tax liability," Adcock said.