Health insurance premiums to rise again next year

Federal employees' health insurance costs will most likely continue to spiral upward next year, the Office of Personnel Management told lawmakers at a hearing Thursday.

In response to questions from the House Government Reform Subcommittee on the Civil Service, OPM said it expects an increase in premiums for the Federal Employees Health Benefits Program (FEHBP) in 2000.

"While we expect an increase in premiums for the coming year, we will not know what it is until negotiations have concluded at summer's end," OPM said in a written statement to the civil service panel. "However, as in past years, we expect that our premiums will remain highly competitive and ... will track or remain below industry averages."

President Clinton's proposed fiscal 2000 budget estimated a total increase of 14 percent in health insurance contributions from employees and retirees. The estimate includes an assumption that there will be more retirees paying insurance premiums next year, so the increase does not suggest that premiums will rise 14 percent, OPM said.

In 1999, FEHBP premiums rose an average of 10.2 percent, following an average increase of 8.5 percent in 1998. More than 250 private health insurance companies offer federal employees coverage under FEHBP. The companies set their own rates after negotiations with OPM, so premium increases vary from plan to plan each year. In 1998, for example, some employees saw their premiums hiked as much as 75 percent, while others saw much smaller increases.

Civil service panel chairman Joe Scarborough, R-Fla., held the hearing to discuss potential premium increases and raise concerns about the increasing number of mandated benefits that FEHBP carriers must provide.

"The key to the program's success has been its market orientation," Scarborough said. "Experts have warned this subcommittee that mandates and overregulation of the FEHB market add costs to the program and reduce consumer choice."

William E. Flynn III, OPM's associate director for retirement and insurance, said mandated improvements in benefits have cost less than $10 per year for each FEHBP policy holder during the past decade.

OPM has urged health insurance carriers to begin offering employees dental and vision coverage as supplemental insurance options next year. OPM is also asking carriers to cover "transitional" care, which provides health insurance coverage for up to 90 days to people with chronic or disabling conditions who are dropped by their insurance company. OPM also wants insurance companies to give patients access to their medical records and the right to have a doctor fix any mistakes in those records.

The Blue Cross and Blue Shield Association, which covers 3.8 million of the nine million people covered by FEHBP, testified that providing transitional care coverage and giving patients access to medical records would be too difficult and costly.

Meanwhile, Bobby Harnage, president of the American Federation of Government Employees, said the union wants to be involved in negotiations with FEHBP insurance companies to stop the rising premiums for federal employees.

Last year, "federal employees were simply advised to respond to the higher premiums by switching to lower-cost and lower-benefit plans," Harnage said. "The fact that workers are forced to switch into less expensive and less comprehensive plans in response to these sharp premium increases should not be used to obfuscate the facts regarding FEHBP's uncontrolled price inflation."