FEHBP introduces "health-spending accounts"
The Washington Post
September 17, 2002
Federal Employees' Health Premiums to Increase
By Stephen Barr
Health insurance premiums for federal employees and retirees will rise an
average of 11.1 percent next year, the Bush administration said this
afternoon. The increase marks the third consecutive year that premiums have
jumped by more than 10 percent.
The officials said OPM held down the average increase through negotiations
with insurance companies and by allowing health maintenance organizations to
raise the co-payments or add co-payments for their enrollees.
The federal program also will see the introduction of a new
"consumer-directed option" sponsored by the American Postal Workers Union,
the officials said.
In the APWU plan, enrollees will receive a health-spending account worth
$1,000 for individuals and $2,000 for families. Employees will be able to
draw from the account to pay for doctor visits, lab tests and prescription
drugs. They may also use the account to pay for dental and eye care.
Unspent account dollars are rolled over to the next year. If an employee
spends all of the money, they must cover all their medical expenses out of
their pockets, ranging up to $600 for individuals and $1,200 for families,
before traditional health plan coverage kicks in.
The National Association of Retired Federal Employees said it would oppose
the new APWU option and called on OPM to withdraw the plan before the start
of the year.
NARFE president Frank G. Atwater said his group feared the new plan would
divide healthy and sick persons into different coverage options and drive up
premiums in FEHBP's more comprehensive plans.
http://www.washingtonpost.com/wp-dyn/articles/A29075-2002Sep17.html
And from a press release from the Office of Personnel Management:
Kay Coles James, Director of the OPM:
"Because our program is designed to let employees and retirees compare
benefits, costs and other features important to them in a health plan, they
can select one plan from among many and get the most bang for their
health-care dollars. At the same time, having a choice of plans promotes
healthy competition among carriers for subscribers and helps contain costs."
"I met with the FEHB plans and asked for their best ideas to help hold down
premiums and promote quality. And I encouraged them to explore all
reasonable options to constrain premium increases, while maintaining a
benefits program that is highly valued by our employees and retirees, as
well as attractive to prospective federal employees. One result is an
innovative consumer-driven option under the APWU health plan."
http://www.opm.gov/pressrel/2002/MO-FEHB.asp
Comment: The FEHBP is the largest employer-sponsored health insurance
program in the nation. Changes in the FEHBP will reflect changes in our
entire system of funding health care. We need to be concerned about premium
increases and about the new consumer-directed accounts.
The OPM takes pride in that fact that by offering a choice of competing
health plans, the market is controlling health care costs. Three years of
double digit premium increases hardly represents success in cost
containment! And that doesn't even factor in the increases in co-payments
inflicted on the beneficiaries. Since this is the very best the market has
to offer it is clear that costs will never be controlled until they can be
contained within a single global budget.
And now the OPM has opened the FEHBP to an initial, modest version of the
"consumer-driven option" of "health-spending accounts." These individually
delegated accounts, designed along the medical savings account model, appeal
to healthy individuals who anticipate that they will not spend down their
accounts and never have to face the large deductibles of the "catastrophic"
backup managed care plan. It is anticipated that these plans will be popular
for the majority who are healthy because they really are a good deal for
those that will never face major medical expenses.
But what happens to the traditional insurance programs? Those who do have
chronic medical conditions or who are aging and recognize their
vulnerability will remain in the traditional programs. Because this is a
much more expensive population, costs per individual for this sector will
skyrocket, resulting in the so-called "death spiral" of ever higher
premiums, causing these plans to shut down because they are no longer
affordable. All that will be left for this sector will be plans that are
stripped of benefits and that have unaffordable cost-sharing arrangements,
further impairing access.
Market competition of health plans and the newer consumer-driven trends are
making health care unaffordable for the average resident of the United
States. Yet we have the resources to provide comprehensive care for
everyone. What we lack is an effective method controlling the allocation of
health care funds. A fragmented system of multiple health plans and shifting
of risk to those with medical needs will continue to impair access.
Switching to a single, publicly-administered risk pool with a generous
global budget would assure access to affordable care for everyone. Why do we
keep avoiding the inevitable moral imperative when so many are suffering
because of our inaction?