Health insurance choices can ease the pain of the pay freeze

Federal employees worried about how next year's pay freeze will affect their finances should stay focused on ways to save money on health insurance during this year's open season, according to one adviser.

President Obama on Nov. 29 proposed a pay freeze for 2011 and 2012 that would apply to all civilian workers, including Defense Department employees, but not to military personnel. Workers still would be eligible for step increases and promotions, officials said. In addition to a freeze on base pay, civilian government workers would see no locality increases in 2011.

The proposal comes soon after federal employees received news of an increase in health care costs. The Office of Personnel Management in October announced that the average amount Federal Employees Health Benefits Program participants pay for their health insurance plans will rise 7.2 percent in 2011.

Walton Francis, author of the Consumers' Checkbook 2011 Guide to Health Plans for Federal Employees, said government workers should concentrate on making the best choices they can with rates and plan information already available to them.

"Don't get into some sort of paralysis worrying about these future events," he said. "Your immediate choice is what you're going to do this year."

A potential pay freeze doesn't change the options available, but it does make frugal decisions more important, Francis said.

"Families have approximately $2,000 in savings or more [annually] for making a better-buy plan choice including the obvious change from Blue Cross Standard to Blue Cross Basic -- probably as much as most people would have gotten in a pay raise," he said.

FEHBP participants could save money using flexible spending accounts or consumer-driven and high-deductible plans, Francis said. For example, individuals who switch from Blue Cross Standard to GEHA's high-deductible health plan could save $1,200 for the year.

FSAs allow participants in any FEHBP plan to make pretax contributions to a savings account to pay for medical and dependent care. Contributions do not roll over at the end of the year, so participants must spend the entire account balance, or lose it. The program does, however, have a two and a half month grace period for employees to spend leftover money.

Consumer-driven and high-deductible plans require users to carefully consider the type and cost of services they receive, according to Francis. These options have preferred providers, allow participants to seek out-of-network care and offer some type of savings account option for health care expenses. Enrollees pay several thousand dollars toward a deductible before coverage kicks in, he said.

"People who aren't making a conscious decision to stay in a higher-cost plan are throwing away money," Francis said. "It's time for homework, to look at plan brochures, think about your plan situation, and think about the other options you aren't in."