PNHP

Is the federal employees health program anti-competitive?

OPM seeks more competition for employee health plans

By Joe Davidson
The Washington Post, August 6, 2012

The Obama administration is considering fundamental changes to the Federal Employees Health Benefits program (FEHB), which is generally regarded as something Uncle Sam does right.

Yet, the Office of Personnel Management (OPM) thinks the good thing could be even better by giving workers more choice in health insurance companies. The OPM wants to do that by reviving legislation proposed during the George W. Bush administration.

“While the FEHB model has withstood the test of time and influenced the direction of health reform, the competitive environment is not as robust as it could be,” says an unsigned OPM briefing paper obtained by The Washington Post. “The health insurance market has changed dramatically over the last 50 years, but . . . the FEHB program lacks the flexibility to adjust in response to the changing market.”

Specifically, the OPM paper, which has circulated recently among congressional and industry officials, expresses concern about the growing dominance and market concentration of Blue Cross Blue Shield and the departure or diminished role of other health plans.

Two Blue Cross Blue Shield plans, standard and basic, together serve about 62 percent of the federal employee market. The next five largest plans cover 22 percent.

In a June article about health exchanges under the Affordable Care Act, Health Affairs says that although insurance plans are widely available in FEHB, “enrollment was concentrated in plans owned by just a few organizations, typically Blue Cross/Blue Shield plans.” Health insurance premiums, the article continued, were lower “where competition was extremely high” and higher “where competition was extremely low.”

FEHB “continues to be the gold standard for health insurance, offering far more choices and competition than other large employers,” said Alissa Fox, a senior vice president of the Blue Cross and Blue Shield Association.

She goes on to offer an argument that runs counter to the basic notion of capitalism. Increased competition, in this case, will result in increased prices, according to Fox. The regional plans could “cherry pick” low-cost regions, argues a Blue Cross Blue Shield paper, resulting in national plans being forced to charge higher premiums to cover higher-cost regions.

“Within a few years, the nationwide plans will become non-competitive and stop offering nationwide coverage all together,” the Blue Cross Blue Shield paper says. “This may leave certain areas of the country underserved.”

More competition might be better in theory, but that theory falls short with FEHB, says Jacqueline Simon, public policy director for the American Federation of Government Employees. Arguments on both sides of this debate are invalid, she said, “unless and until there is one standard benefits package that all plans must provide, plans will not be competing on price and/or quality, and those are the only things that matter.”

http://www.washingtonpost.com/politics/opm-seeks-more-competition-for-employee-health-plans/2012/08/06/ea6c242e-dffc-11e1-a421-8bf0f0e5aa11_story.html

OPM paper:
http://www.washingtonpost.com/r/2010-2019/WashingtonPost/2012/08/06/National-Politics/Graphics/FEHBOPMcompplan.pdf

BlueCross BlueShield Association perspective:
http://www.washingtonpost.com/r/2010-2019/WashingtonPost/2012/08/06/National-Politics/Graphics/FEHBBlueppo.pdf

Comment:

By Don McCanne, MD

Many in the policy community have claimed for decades that employer-sponsored plans offer the best benefits and the greatest value in health care coverage, and that the largest of all programs – the Federal Employees Health Benefits Program (FEHBP) – is the very best, with the greatest competition and the greatest value.

The position papers from the Office of Personnel Management (OPM) and from the BlueCross BlueShield Association (BC/BS) cast serious doubt on whether private plan competition is providing us with the best value. OPM claims that the dominance of BC/BS is anti-competitive and results in higher than necessary insurance premiums. BC/BS claims that introducing more competition on a regional level will result in adverse selection, forcing national plans (i.e., BC/BS) to charge higher premiums to cover higher-cost regions.

The point is obvious. The very best that we have in competition of private health plans – FEHBP – doesn’t work well since it still is anti-competitive and exhibits adverse selection.

If the very best can’t do it right, why do our policy makers insist on sticking with this flawed model? One model that worked very well and avoided these unsound policies was the traditional Medicare program, that is until private Medicare Advantage plans were introduced into the mix. We now see anti-competitive plan concentration (United Health) and well-documented adverse selection favoring the private plans while sticking taxpayers with a larger Medicare bill.

Let’s get rid of the private plans, including the private Medicare Advantage plans, and then, under our own improved Medicare for all program, we would no longer have to deal with market concentration and adverse selection.

Is the federal employees health program anti-competitive?

OPM seeks more competition for employee health plans

By Joe Davidson
The Washington Post, August 6, 2012
The Obama administration is considering fundamental changes to the Federal Employees Health Benefits program (FEHB), which is generally regarded as something Uncle Sam does right.
Yet, the Office of Personnel Management (OPM) thinks the good thing could be even better by giving workers more choice in health insurance companies. The OPM wants to do that by reviving legislation proposed during the George W. Bush administration.
“While the FEHB model has withstood the test of time and influenced the direction of health reform, the competitive environment is not as robust as it could be,” says an unsigned OPM briefing paper obtained by The Washington Post. “The health insurance market has changed dramatically over the last 50 years, but . . . the FEHB program lacks the flexibility to adjust in response to the changing market.”
Specifically, the OPM paper, which has circulated recently among congressional and industry officials, expresses concern about the growing dominance and market concentration of Blue Cross Blue Shield and the departure or diminished role of other health plans.
Two Blue Cross Blue Shield plans, standard and basic, together serve about 62 percent of the federal employee market. The next five largest plans cover 22 percent.
In a June article about health exchanges under the Affordable Care Act, Health Affairs says that although insurance plans are widely available in FEHB, “enrollment was concentrated in plans owned by just a few organizations, typically Blue Cross/Blue Shield plans.” Health insurance premiums, the article continued, were lower “where competition was extremely high” and higher “where competition was extremely low.”
FEHB “continues to be the gold standard for health insurance, offering far more choices and competition than other large employers,” said Alissa Fox, a senior vice president of the Blue Cross and Blue Shield Association.
She goes on to offer an argument that runs counter to the basic notion of capitalism. Increased competition, in this case, will result in increased prices, according to Fox. The regional plans could “cherry pick” low-cost regions, argues a Blue Cross Blue Shield paper, resulting in national plans being forced to charge higher premiums to cover higher-cost regions.
“Within a few years, the nationwide plans will become non-competitive and stop offering nationwide coverage all together,” the Blue Cross Blue Shield paper says. “This may leave certain areas of the country underserved.”
More competition might be better in theory, but that theory falls short with FEHB, says Jacqueline Simon, public policy director for the American Federation of Government Employees. Arguments on both sides of this debate are invalid, she said, “unless and until there is one standard benefits package that all plans must provide, plans will not be competing on price and/or quality, and those are the only things that matter.”
http://www.washingtonpost.com/politics/opm-seeks-more-competition-for-em…
OPM paper:
http://www.washingtonpost.com/r/2010-2019/WashingtonPost/2012/08/06/National-Politics/Graphics/FEHBOPMcompplan.pdf
BlueCross BlueShield Association perspective:
http://www.washingtonpost.com/r/2010-2019/WashingtonPost/2012/08/06/National-Politics/Graphics/FEHBBlueppo.pdf

Many in the policy community have claimed for decades that employer-sponsored plans offer the best benefits and the greatest value in health care coverage, and that the largest of all programs – the Federal Employees Health Benefits Program (FEHBP) – is the very best, with the greatest competition and the greatest value.
The position papers from the Office of Personnel Management (OPM) and from the BlueCross BlueShield Association (BC/BS) cast serious doubt on whether private plan competition is providing us with the best value. OPM claims that the dominance of BC/BS is anti-competitive and results in higher than necessary insurance premiums. BC/BS claims that introducing more competition on a regional level will result in adverse selection, forcing national plans (i.e., BC/BS) to charge higher premiums to cover higher-cost regions.
The point is obvious. The very best that we have in competition of private health plans – FEHBP – doesn’t work well since it still is anti-competitive and exhibits adverse selection.
If the very best can’t do it right, why do our policy makers insist on sticking with this flawed model? One model that worked very well and avoided these unsound policies was the traditional Medicare program, that is until private Medicare Advantage plans were introduced into the mix. We now see anti-competitive plan concentration (United Health) and well-documented adverse selection favoring the private plans while sticking taxpayers with a larger Medicare bill.
Let’s get rid of the private plans, including the private Medicare Advantage plans, and then, under our own improved Medicare for all program, we would no longer have to deal with market concentration and adverse selection.