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Slow growth for health premiums

Sep. 29, 2013 - 06:00AM   |  
By SEAN REILLY   |   Comments

For federal workers stressed between this year’s unpaid furloughs, a long-running pay freeze and the threat of a partial government shutdown, the Office of Personnel Management offers a dash of encouraging news: The price of health insurance is rising at its lowest rate in decades.

For 2014, the total premium cost for the Federal Employees Health Benefits Program will increase 3.7 percent, OPM officials announced last week. That will mark the third straight year in which the premium inflation rate was under 4 percent — by comparison, from 2009 to 2011, the program’s pricetag was mounting by 7 percent or more annually. John O’Brien, director of healthcare and insurance at OPM, said this is the first time since at least the 1980s that the growth rate has kept below 4 percent for three years in a row.

For the average enrollee with individual coverage, next year’s increase will take another $3.28 out of their paychecks each biweekly pay period, those under a family plan will pay $7.90 more. Participants in the most popular plan — the Blue Cross and Blue Shield Standard Option — will pay another $1.91 per pay period for individual coverage and an extra $4.84 for family coverage.

OPM was focused “on keeping premium increases as low as possible and ensuring that we have good plan options available for federal employees and retirees,” Jon Foley, the agency’s director of planning and policy analysis, told reporters last week.

The federal health insurance open season runs from Nov. 11 to Dec. 9. During that period, federal employees can sign up for coverage and both active employees and retirees can also make changes in their health, vision and dental plans, as well as flexible spending accounts. The FEHBP serves 8.2 million federal workers, retirees and dependents.

For married same-sex couples, open season will mean a second chance to take advantage of newly available spousal benefits after the Supreme Court in June struck down a legal prohibition against them. Soon after that ruling, OPM extended eligibility for health insurance and other federal benefits to spouses of gay and lesbian employees and retirees in same-sex unions, but ended the sign-up period in late August.

In general, the government pays about 70 percent of the premiums for the $47 billion FEHBP, with employees footing the remainder. The employees’ share of total premiums will increase by 4.4 percent on average, while the government’s portion will grow by 3.3 percent.

For Patricia Medina, a Defense Department employee enrolled in Blue Cross’s basic plan, the rate announcement was good news.

Medina’s premium share for the plan, which has no deductibles, is going up $1.89 per pay period. While she has to use in-network doctors, “it keeps insurance affordable,” Medina said in an email. “There are more expensive insurance plans, but I don’t see the point in having one of those.”

But, she added, “it would be nice to have our cost-of-living pay raises back, as everything else is going up but our pay.”

Darren Manthei, another active federal employee who asked that his agency not be named, can relate.

“It’s a cumulative thing,” he said. While the upcoming $17 monthly increase in his Blue Cross family plan premium is modest, it goes along with “modest” hikes in the price of gas, groceries and other necessities, Manthei said. “But they all accumulate and become not-so-modest,” Manthei said.

The low overall premium increase masks sizable boosts by some individual insurers. The total biweekly premium for the Mail Handlers Benefit Plan non-postal value family plan, for example, will jump 21 percent, from about $411 to $497. The employee share will rise proportionately, from almost $103 to about $124 per pay period.

To Walt Francis, author of the annual “Checkbook’s Guide to Health Plans for Federal Employees,” the disparities are again a reminder of why federal workers should take advantage of open season to shop around for a better deal.

“I call it giving yourself a pay raise,” Francis said.

One factor in the trend toward lower premium growth, O’Brien said, is a competitive market that has brought new carriers into the FEHBP. For next year, the total number of plans will be 256, up by more than 10 percent from this year.

But OPM has also been pushing insurers to keep costs down. In a March letter seeking proposals for next year, for example, O’Brien stressed the importance of keeping a lid on pharmacy claims that make up around 30 percent of premiums. Among other steps, he said, insurers should aim for 80 percent use of cheaper generic drugs, and they should talk to enrollees and their doctors about choosing “clinically effective” medications that are lower cost and limit the use of costly specialty drugs “while remaining respectful of patient needs.”

Despite OPM’s success in restraining premium growth, the U.S. Postal Service — which accounts for roughly a quarter of enrollment in FEHBP — is anxious to leave the federal health program. The mail carrier, which is losing billions of dollars annually, wants the freedom to sponsor its own plan, either within or outside of the existing program, Postmaster General Pat Donahoe reiterated earlier this month at a Senate Homeland Security and Governmental Affairs Committee hearing.

The savings would amount to about $8 billion per year through 2016, Donahoe said. A bill introduced in August by the committee’s chairman, Tom Carper, D-Del., and its top Republican, Sen. Tom Coburn of Oklahoma, would allow the Postal Service to begin negotiating with its unions over the shape of such a plan. If no agreement were reached in two years, an arbitration panel could settle the issue, according to the bill.

Postal unions, like the American Postal Workers Union, are hotly opposed to the idea.

“What the Postal Service seeks to do is shift cost from itself to employees to retirees and to Medicare,” said union President Cliff Guffey at the hearing. “This is not acceptable.”

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