FEHBP As a Model of Health

Of the Republican proposals to eliminate, modify and otherwise undermine the health care reform law known as Obamacare, two would affect federal employees. Rep. Dave Camp, R-Mich., wants to move government workers out of the Federal Employees Health Benefits Program and into the insurance exchanges created by the 2010 Affordable Care Act. Conversely, Rep. Darrell Issa, R-Calif., thinks FEHBP is so good that all Americans should be allowed in the program.

“The American people should have as easy a consumer experience as federal employees do,” Issa said when he introduced legislation -- the Equal Healthcare Access Act -- in October to open FEHBP to everyone.

Neither proposal has a snowball’s chance in hell of becoming reality for many reasons, including politics and the difficulties inherent in implementing change on such a massive scale. But the two ideas beg an important question: Are such proposals really necessary? The irony of the debate over Obamacare is that its structure already closely resembles FEHBP, which is one of the most successful health care plans in the country.

FEHBP served as an important model for the Affordable Care Act. Some of the central and most consumer-driven components of Obamacare, such as making sure insurance companies do not deny health care coverage because of pre-existing conditions, are hallmarks of the 53-year-old federal program. Obamacare is in its infancy, and if it remains the law of the land it will no doubt need tweaks and other, more significant improvements along the way. But it has good genes, observers say: Medicare Advantage and Medicare’s Part D prescription drug coverage were created in the FEHBP mold, and “both are working very, very well,” says Walton Francis, author of Consumers’ Checkbook Guide to Health Plans for Federal Employees.

But FEHBP isn’t immune to change or criticism. Some government workers have complained that increases in their premiums, co-payments and prescription drug expenses during the past few years are much more than the average and add insult to injury on top of the three-year pay freeze and furloughs. Feds will pay 4.4 percent more toward their health insurance premiums in 2014; total premiums, which include both the employee and government portion, will increase by 3.7 percent for non-postal enrollees.

Still, the Office of Personnel Management -- which runs FEHBP and, separately, the multiple state health plans in the Affordable Care Act’s insurance exchange network -- says it has worked hard to keep overall premiums down. Health premiums in FEHBP shot up by more than 7 percent each year between 2009 and 2011 because of benefit changes and rising health care costs. The 2010 health care reform law led OPM to require more preventive treatments in each FEHBP plan. Such measures include screening and counseling for alcohol abuse, tobacco use intervention for children and adolescents, and hepatitis C screening. Even so, adding preventative measures required by Obamacare was not a big change for FEHBP, Francis says. “OPM had been improving plans for years, so they had gotten pretty good,” he says. “FEHBP was a leader in this area, so there was not much to improve.”

The fact that the average overall premium increases have been less than 4 percent since 2012 is a testament to the “good cooperation” between OPM and insurance carriers, says David Ermer, a managing partner at Washington-based Ermer Law Group who represents the Association of Federal Health Organizations, a trade association of FEHBP plans.

Obamacare did introduce two significant changes to FEHBP: extending coverage for children of enrollees up to age 26, which began in 2011, and coverage for employees of Indian tribes and organizations. OPM opened enrollment for tribal employees on May 1, 2012, adding more than 20,000 people to the FEHBP rolls.

OPM has taken pains to reassure FEHBP participants that they can retain their health insurance and that the Affordable Care Act’s insurance marketplace will not affect FEHBP. The two health insurance programs, despite their similarities, are completely separate. Federal employees who have opted out of coverage because it’s too expensive will have to choose between enrolling in the exchange network or FEHBP. Francis and Ermer say FEHBP offers better bang for the buck. The program, which will have 256 health plans in 2014, could add more participants to its beneficiary pool because of Obamacare.

But opening up FEHBP to everyone would be problematic, according Ermer, Francis and others who are familiar with the program. One challenge would be figuring out what portion of premiums enrollees would pay if FEHBP covers the general population. Right now, the government pays up to 75 percent of premiums. “It’s an employer-sponsored plan, it’s not a program like Medicare or Medicaid,” Ermer says. “That’s one of the reasons why Congress created the multistate plan [in the Affordable Care Act].”

A 2009 Urban Institute report on FEHBP captures the program’s popularity as a health insurance model, but also the limitations. “Conservatives like the program’s reliance on private health plans and market competition,” the analysis stated. “Liberals like the prospect of expanding to everyone the FEHBP’s large-employer-style benefits, community rating, and close oversight of insurer pricing. However, it does not seem to be wise simply to open the existing FEHBP to nonfederal enrollment nor feasible to precisely replicate the FEHBP and its national approach outside the context of federal employment.”