Lawmakers push health premium conversion benefit for retirees, military

Federal retirees and military personnel should be able to pay health care premiums using pre-tax dollars, House lawmakers said Wednesday.

"I can think of few priorities as dear as providing appropriate healthcare for our retirees and our active duty military," House Government Reform Chairman Tom Davis, R-Va., testified Tuesday during a hearing before the House Government Reform Subcommittee on Civil Service and Agency Organization.

In March, Davis introduced H.R. 1231, legislation aimed at amending the Internal Revenue Code and converting the health insurance premiums of retirees and active duty military employees to pre-tax income. The bill is similar to legislation Davis sponsored in the last two congressional sessions. Sen. John Warner, R-Va., is shepherding a companion bill through the Senate.

Federal employees have been able to use pre-tax dollars to pay for their health care premiums since October 2000, but federal retirees are unable to do so because of a glitch in the tax law. Changing the tax law and extending the benefit to federal retirees would provide some needed financial relief, testified Charles Fallis, president of the National Association of Retired Federal Employees.

"The reality is most of the average monthly cost of living adjustment of $26 in 2003 was immediately consumed by the premium increases," Fallis explained.

Federal retirees are covered under the Federal Employees Health Benefits Plan (FEHBP), which provides health care coverage for nearly 9 million federal employees, retirees and their families. FEHBP premiums have seen double-digit growth for the past three years. Premiums rose by 13.3 percent in 2002 and by 11.1 percent in 2003. According to Fallis, the cost of living adjustments that federal and military retirees received during the last six years were eroded by those double-digit increases in health insurance premiums. The tax savings gained from using pre-tax dollars would lessen some of the pain from growing health care costs, Fallis said.

"Retirees are fast becoming known as the stepchild of the federal community," Fallis said.

The subcommittee will vote on the bill next Wednesday and Rep. Jo Ann Davis, R-Va., chairwoman of the subcommittee, said she expected the bill would move quickly through the full committee.

"It will go to the House Ways and Means Committee after that and that's where we are going to have to work," Davis said, adding that the bill's 283 sponsors practically ensured a swift victory once the bill made it to the House floor. "We just have to get it out of committee." In previous congressional sessions, similar bills have died in the House Ways and Means Committee.