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Health premiums increase 3.4 percent, smallest hike in 5 years

Sep. 23, 2012 - 02:43PM   |  
By STEPHEN LOSEY   |   Comments
Federal Employees Health Benefits Program premiums will rise 3.4 percent overall in 2013, the Office of Personnel Management said last week.
Federal Employees Health Benefits Program premiums will rise 3.4 percent overall in 2013, the Office of Personnel Management said last week. (File photo / Getty Images)

Federal Employees Health Benefits Program premiums will rise 3.4 percent overall in 2013, the Office of Personnel Management said last week.

While that’s the smallest increase since 2008, when premiums went up 2.1 percent, federal unions said it stings after two years of frozen pay scales, and with the freeze almost certain to be extended at least through next March.

“Any increase is hard for federal employees given the freeze on federal pay,” said Colleen Kelley, president of the National Treasury Employees Union.

J. David Cox, national president of the American Federation of Government Employees, said the increase amounts to a cut in take-home pay and that OPM should have frozen all health insurance premiums.

“Congress and the administration have decided to turn the federal workforce into a ‘fixed income’ population that simply cannot afford another cent toward already-inflated FEHBP premiums,” Cox said. “How can they be expected to afford another increase in FEHBP rates while their salaries don’t increase?”

But Walt Francis, who writes the annual Checkbook health care guide for federal employees, said the relatively low increases are a sign that OPM’s efforts to hold down costs are succeeding.

“It’s been clear that OPM’s leadership over the last three or four years has been pretty aggressive about trying to improve disease management and drug management,” Francis said. “Finding ways to keep you out of the hospital by taking your medicine is a winner for everybody” by lowering the use of health care services and, as a result, costs.

Francis said OPM’s successful efforts to encourage enrollees to use generic prescription drugs, when available, also have contributed to holding down premium increases.

Jonathan Foley, OPM’s director of planning and policy analysis, said 13 of the top 19 plans in FEHBP now meet OPM’s goal of issuing 75 percent of its drugs in generic form. OPM said 67 percent of drugs issued in 2011 were generic, although OPM could not say how many plans that year met the 75 percent goal.

Pharmaceutical costs make up about 30 percent of FEHBP spending, said John O’Brien, OPM’s health care and insurance director.

Francis also said the nationwide growth in health insurance costs has slowed in recent years, partly because of the lingering effects of the recession.

And the sheer size of FEHBP — with 8.2 million federal employees, retirees and family members enrolled, it is the largest private health plan in the nation — helps it hold costs down, O’Brien said.

O’Brien said FEHBP’s increases are lower than other health care increases nationwide. The Henry J. Kaiser Family Foundation’s latest survey, issued Sept. 11, found health care costs increased 4 percent this year, for example. And PricewaterhouseCoopers in May estimated that premiums nationwide will likely increase 5.5 percent in 2013.

FEHBP enrollees will see a slightly larger increase in their share of premiums — 3.7 percent — than the government, which will pay about 3.3 percent more on average, OPM said.

But enrollees in FEHBP’s most popular plan — the Blue Cross Blue Shield standard option — will see minuscule increases next year.

Enrollees with self-only coverage in Blue Cross standard will pay just 33 cents more per pay period next year, or a 0.4 percent increase, O’Brien said. And the Blue Cross standard family option premiums will go up $1.66 per pay period, or 0.8 percent. About 43 percent of FEHBP enrollees — or about 3.5 million — are on the Blue Cross standard plan.

“That’s basically flat,” Francis said.

The average dental coverage premium will go up less than 1 percent next year. Vision premiums will decline slightly on average, O’Brien said. The Federal Employees Dental and Vision Insurance Program allows enrollees to choose from seven dental plans and three vision plans.

O’Brien said there will be no significant benefit changes next year. Francis said enrollees should double-check their current plans during the open season to make sure their benefits haven’t been scaled back.

But beginning next year, health care flexible spending accounts will be capped at $2,500, instead of $5,000. That reduction was mandated as part of the Affordable Care Act health care reform bill. Dependent care flexible spending accounts will remain capped at $5,000, O’Brien said. He said 331,000 federal employees participate in FSAs.

Foley said that roughly 288,000 young adult children of federal employees have been added to FEHBP since the health care reform law required health plans to cover children until they turn 26. Federal employees’ children used to lose their FEHBP coverage when they turned 22.

OPM is encouraging health insurers to find ways to take better care of their enrollees. OPM wants insurers to reduce hospital readmissions by 20 percent and cut preventable “hospital-acquired conditions,” such as falls, by 40 percent. Foley said those are significant factors driving up the cost of medical care.

OPM also wants insurers to improve maternity and neonatal care and to eliminate early elective delivery of babies before 39 weeks.

The open season to sign up for health, dental and vision benefits and flexible spending accounts will go from Nov. 12 to Dec. 10. FEHBP will offer 230 health plans, up from 206 plan choices available in 2012. OPM said 13 of those plans will be open to all eligible employees and retirees. OPM added five new health maintenance organization plans this year.

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