Cafeteria benefit plans draw fire at hearing

A House subcommittee chairman pushed the idea of cafeteria-style benefit plans for federal employees at a hearing Tuesday, but labor leaders said the idea would simply shift costs from the government to workers.

Cafeteria benefit plans allow employees to choose from a variety of benefits and designate a set amount of money to pay for the benefits they select. Often, these plans include a flexible spending account, which allows employees to set aside pre-tax dollars to pay for medical expenses not covered by insurance plans, and a dependent care reimbursement account.

Dan Weldon, R-Fla., chairman of the House Government Reform Subcommittee on Civil Service, Census and Agency Organization, touted the approach as as a valuable recruitment and retention tool for agencies.

"We do not live in a one-size-fits-all world," Weldon said. "The federal government finds itself competing for talented workers with employers who offer cafeteria plans and other flexible programs."

But cafeteria plans would make health care unaffordable for a large number of federal employees because they "put responsibility for paying for benefits onto the employee instead of where they belong, on the employer," Derrick Thomas, national vice president of the American Federation of Government Employees' 2nd District, told the panel.

"Cafeteria plans are deceptive," Thomas said. "The plans force employees into 'either-or' decisions between benefits that should be provided universally."

Federal employees, government leaders and lawmakers have expressed concerns about the rapid rise in health care premiums under the Federal Employees Health Benefits Program. Premiums have jumped nearly 50 percent over the last four years, rising an average of 13.3 percent in 2002-the biggest increase since the 1980s. The government's current contribution to health insurance premiums is about 72 percent.

In written testimony submitted to the committee, Colleen Kelley, president of the National Treasury Employees' Union, said introducing cafeteria plans into the federal government would have "the effect of limiting employee choice by shifting health inflation costs away from the government as the employer and onto its employees."

"Cafeteria benefits…are often used by employers as a method of controlling the costs of benefits they provide to their employees," Kelley testified. "This is accomplished by limiting increases in the annual pool of money employees are given to purchase these benefits." According to Kelley, employers often use the increase in the Consumer Price Index as the benchmark for annual increases in the amount of money they give employees to buy benefits with.

"With simple inflation averaging 2 to 3 percent in recent years and annual health insurance premium increases averaging between 10 and 13 percent, it would not take long before employees would be required to forgo other benefits just to continue to maintain the health insurance coverage they choose," Kelley said.

Federal Circuit Court of Appeals Judge Dennis Jacobs testified in favor of cafeteria plans, which the court adopted in 2000.

"This successful program is a great benefit to everyone concerned regardless of their individual and specific needs," Jacobs said. "This program encourages our employees to plan for their health care needs and to be more careful consumers of health services. We have had not one complaint."