Pricey Premiums

While the Federal Employees Health Benefits Program is not in the cross hairs of the debate over health care reform, that doesn't mean those concerned with FEHBP's success aren't watching deliberations closely.

When the Office of Personnel Management announced on Tuesday that federal employees would see their FEHBP premium payments increase by an average of 8.8 percent in 2010, Nancy Kichak, the agency's associate director for strategic human resources policy, made a connection between that price hike and the state of the overall health care market.

"We think this shows that health care reform is necessary. We know that a portion of what we pay in the cost of services is the result of providers, whether they be hospitals, doctors, labs, whatever, covering the costs of the uninsured," Kichak said. "The only way to control health care costs is to get everyone covered. We have a very good program, and we know our members rely on it, but it is subject to what's going on in the health care market."

The 7.4 percent overall rise in FEHBP premium costs, which is shared between the government and its employees, is certainly bigger than any increase since 2005, when premiums jumped by the same percentage. But it's smaller than other previous premium increases, including a 12.7 percent hike in 2002. And it's only in comparison to the relatively modest increases of recent years -- 1.6 percent in 2007 and 2.1 percent in 2008 -- that the numbers in fiscal 2009 (6.5 percent) and 2010 seem out-of-whack.

And in comparison to the projected increases in health care costs at some large firms, federal employees are doing better than some of their private sector counterparts. Large manufacturers are projected to see overall health insurance costs increase 8 percent; Aon Consulting, an insurance and workforce planning consulting firm, is preparing for a 10.5 percent cost increase and consulting firm Hewitt is looking at 11.8 percent hikes.

While employee groups are unhappy with FEHBP's rising costs, particularly because they think OPM could be doing more to keep down prescription drug prices, they're also not rushing to abandon the program, recognizing that alternatives could be even more expensive.

"A 12 percent increase in [the Blue Cross Blue Shield Standard Option, the most popular FEHBP offering] is bad enough in a no-[cost-of-living increase] year for retirees and when workers are expected to receive a nominal pay increase," said National Active and Retired Federal Employees Association President Margaret Baptiste. "What's worse is that this comes at a time when some in Congress effectively want to end the FEHBP and enroll federal workers in an exchange system."

The lawmaker Baptiste was referring to is Sen. Charles Grassley, R-Iowa, who offered an unsuccessful amendment to Senate health care reform legislation that would end FEHBP. A modified version of that amendment, which was added to the bill, would give federal workers the choice of enrolling in state health care exchanges scheduled to take effect in 2013, but would leave FEHBP intact. And separately on Tuesday, the Senate Finance Committee added a Grassley-sponsored provision that would require members of Congress and their staffs to purchase health insurance through such an exchange. Those legislative branch employees currently are enrolled in FEHBP.

FEHBP's managers and participants are watching these developments closely. For the moment, it's enough to embark on a review of cost-control measures as OPM plans to and to advocate for drug-pricing reforms as federal employee groups did in a recent meeting with lawmakers.