What You Need to Know About Your Health Insurance Choices

Monday, Nov. 13 marked the beginning of the 2017 Federal Employees Health Benefits Program open season. According to a new GAO report on FEHBP, as of 2015, 85 percent of federal workers and 90 percent of retirees were enrolled in the program. FEHBP is the largest employer-sponsored health insurance program in the country, providing coverage to about 8.2 million people in 2016.

Two-thirds of those participants were enrolled in one of the two options offered as part of the Blue Cross Blue Shield Association’s nationwide fee-for-service plan.

There are, of course, many other options available to FEHBP participants. But Office of Personnel Management data indicates that between 2005 and 2015, the annual percentage of FEHBP enrollees who changed their plan enrollment by choice—rather than because of mergers or plan terminations—ranged from 5 percent to 7 percent.

Why, with so many choices, do federal employees and retirees seldom switch health plans? Part of the reason may be a lack of understanding the differences in the many plan choices.

In 1960 there were only four plan types, and OPM placed them into two categories: fee-for-service and health maintenance organization. Since then, many options have emerged within the broad categories, with significant variation in plan designs and enrollee cost sharing. Most FFS plans have preferred provider organization arrangements, which usually have lower out-of-pocket expenses (in the form of smaller copayments and reduced or waived deductibles) when enrollees use providers within the plan’s preferred network. Many HMO plans now offer “open access,” allowing participants to use providers outside of the HMO network.

Also, FEHBP now offers consumer-driven health plan and high-deductible health plan options with the ability for participants to set up pre-tax accounts to pay for qualified medical expenses.

GAO undertook its report to assess participation in FEHBP and the potential impact of adding more plan types to the program. But are more choices really needed? How about simplifying the current choices to reflect the true cost of participation based on age, family size, health, geographic region, and importance of plan options? These include freedom to choose providers and types of services covered, such as dental and vision care.

Even under the current system, there are many moving parts that need to be considered when evaluating your health plan choices. Let’s look at some of the factors to evaluate.

Premiums: For 2018, in the 262 health plan choices available governmentwide, the biweekly premiums for a self-only plan range from a little over $40 to nearly $500. By statute, the government generally pays 72 percent of the average premium of all health benefit plans participating in FEHBP, but no more than 75 percent of any particular plan’s premium. Enrollees pay the balance.

Deductibles: This is the amount that you pay out-of-pocket before your health plan starts to pay benefits. Some plans have a deductible for some services, such as outpatient care, but not for inpatient care or prescription drugs. Some deductibles are only a few hundred dollars per year and others are several thousand dollars. Some plans don’t charge a deductible if you use providers in the plan network.

Copayments: These are out-of-pocket expenses charged as a flat fee for a particular service—for example, a $30 copayment when you visit an in-network specialist. There can be prescription copayments as well as copayments for medical care from a physician or other provider.

Coinsurance: This is another out-of-pocket cost, charged as a percentage of a service. Fees can range from 5 percent to as high as 50 or 60 percent of the charge. For most plans that charge a coinsurance fee, the percentage is significantly lower if you use a network provider.

Catastrophic Limits: This is the maximum out-of-pocket expense you will be responsible for paying. The amount will generally be higher for non-network care. Some plans only apply catastrophic protection limits to in-network care. Be aware that this cap may not apply to all of your medical expenses. For example, prescription copayments and coinsurance may not be included.

Health Fund: Sometimes referred to as a medical fund, Medicare reimbursement account (in the case of Blue Cross Blue Shield Basic), premium pass-through or premium reimbursement. These are usually part of consumer-driven health plans, which involve higher deductibles. These can be offset by money contributed to a fund you can use to offset out-of-pocket expenses. Money in the fund may or may not carry over to the next year or be portable when changing health plans.

Health Savings Accounts and Health Reimbursement Arrangements: These  are associated with high-deductible health plans. If you’re eligible for an HSA, you can contribute tax-free dollars to the account, which can only be funded while you’re covered in an HDHP plan. (But since the account is yours, you can continue to spend the money in the account even if you leave the HDHP plan.) If you’re not eligible for an HSA, then the HDHP plan will establish an HRA for you and will provide funding. But you won’t be able to contribute to the HRA and it may not carry over if you change plans.

Dental and Vision Care: Some FEHBP plans include preventative dental and vision care. Some may even cover other dental and vision expenses up to certain limits. This may help you avoid the additional expense of paying out of pocket for this care or purchasing a supplemental dental or vision plan.

Prescriptions: This can be the Achilles heel in determining which health plan is best for you. Not all plans cover all prescription drugs, and if you need a drug that’s not covered, it can cost you a lot of money. The list of drugs covered by your health plan is called a formulary. There are also differences in out-of-pocket costs depending on, for example, whether you are getting generic drugs, name-brand medications or specialty medications. These levels of prescription drug coverage are sometimes referred to as tiers. Some plans have three tiers and some have five or more.

Plan Coordination: If you have other health coverage such as TRICARE, Medicare, or another employer plan, then you will need to understand additional terminology such as primary and secondary payers and if your health plan will waive any of your out-of-pocket costs (copayments, deductibles and coinsurance) when you have dual coverage. Medicare is one of the areas where understanding coordination can be critical to choosing the best health plan. Although federal employees must pay the Medicare tax to qualify for premium-free Medicare Part A (hospital insurance) while they are employed, it is not mandatory to enroll in Medicare Part B (for medical coverage or outpatient care). Since Part B has a premium this year ranging from $134 per person per month to as much as $428, the decision of whether or not to enroll in it is one of the most difficult decisions that federal retirees face when it comes to their health insurance.

This year’s FEHBP open season will run until Dec. 11. If you start now, you’ll have plenty of time to find the most economical and comprehensive plan for your needs.

Photo: Flickr user Adrian Clark