Hidden cost hikes aren’t new to federal benefits programs

The Office of Personnel Management is reviewing the Federal Long-Term Care Insurance Program after some enrollees learned they would be hit with unexpected rate hikes, and some lawmakers are calling for additional hearings to learn why those increases were necessary. While the size of the premium increases, which stretch as high as 25 percent in some cases, has prompted outrage and an extension of open season for program participants, this is not the first time OPM has discovered hidden costs to employees in a federal benefits program.

In 2008, the Blue Cross Blue Shield Standard Option, the Federal Employees Health Benefits Program plan of choice for 4 million government employees and their families, announced participants would be subject to much higher fees if they had surgical procedures performed by physicians outside the Blue Cross network. Previously, their payments were determined by a formula that required them to shoulder 25 percent of the cost allocated by the insurer for a given procedure -- $1,000 for a medical procedure deemed to cost $4,000 -- plus any amount over that designated cost. The new formula required plan participants to pay up to $7,500 per procedure performed by a nonparticipating physician before Blue Cross would make a contribution.

That change prompted an outcry by federal employees and lawmakers. Ultimately, Blue Cross backed down from the $7,500 deductible, and instead required participants to pay 30 percent of the pre-determined cost for out-of-network procedures in addition to an amount over that designated cost. And OPM extended open season by more than seven weeks to give federal employees time to consider the changes to their benefits and to decide whether they wanted to switch to another insurer.

Earlier in 2008, a Government Executive investigation revealed that 87,000 federal employees were enrolled in health insurance plans that would require them to pay high prices for specialty drugs used to treat conditions including anemia, hepatitis C, multiple sclerosis, rheumatoid arthritis and certain kinds of cancers. After OPM received complaints from some participants enrolled in a Kaiser plan with that drug pricing structure, the company suspended the program.

The dispute over the Long-Term Care Insurance Program is heightened because participants in line for premium hikes in 2010 believe they were misled. They say information distributed along with a plan that promised steady 5 percent growth in benefits annually and no increase in premiums in exchange for a higher payment upfront, made them think they had locked-in rates. But 144,000 of the 225,000 enrollees in that plan learned in May that their premiums were set to rise between 5 percent and 25 percent in 2010, depending on age and length of participation. As many as 133,000 participants could be hit with the highest increase.

OPM officials maintained they had a right to raise premiums for employees whose rates are "determined to be inadequate," but pledged to review the program following an Oct. 14 joint hearing of the Senate Special Committee on Aging and a Senate Homeland Security and Governmental Affairs subcommittee, during which lawmakers blasted OPM for allowing the surprise increases.

"We understand and share your concerns and would not have agreed to an increase unless we believed it was a necessary step for the stability of the program," OPM Director John Berry wrote in an Oct. 21 letter to Sen. Herb Kohl, D-Wis., chairman of the aging committee. "We intend to conduct an overall evaluation of this program to determine if there are ways in which it can be more effectively and efficiently administered in the future."

Berry also announced a number of changes to open season designed to protect Long-Term Care Insurance participants who now must reevaluate their coverage given the rate hikes. Those enrollees will get two extra months, until Feb. 15, 2010, to decide whether to keep their coverage, switch to another plan or withdraw from the program altogether. During that time, OPM will undertake an intensive campaign to educate federal employees about their benefits. And the higher premiums will not come due until March 1, 2010, giving employees moving to higher rates a two-month reprieve from the increases.

Still, some lawmakers want to be sure such surprises don't continue.

In an Oct. 27 letter, Rep. Gerry Connolly, D-Va., asked Rep. Stephen Lynch, D-Mass., chairman of the House Oversight and Government Reform Federal Workforce Subcommittee, "to investigate what if any steps are being taken to better protect the interests of federal employees so that they cannot be so grossly misled, either by OPM, or a private insurer, in the future."