Change is Coming to Health Plans

News about changes to retirement and insurance benefits always gets the attention of employees who are planning to retire as well as those who already have. Sometimes the news is good, sometimes not.

There’s already news about the 2018 insurance open season that is causing some buzz, even though open season doesn’t start until Nov. 12 (and ends on Dec. 10).

Let’s look at some of the changes on the horizon.

Supplemental Dental Insurance

This change will be of particular interest to military retirees and family members. Delta Dental is no longer going to be available for military retirees under the TRICARE Retiree Dental Program after Dec. 31, 2018. That’s the bad news, but the good news is that retired service members and their families will be eligible to participate in the Federal Employees Dental and Vision Insurance Program. Many military retirees already have the option to participate in FEDVIP due to civilian employment, but there are those who have stayed with the TRDP even though they’ve had access to FEDVIP.

Delta Dental has been the TRDP dental insurance provider and is also available under FEDVIP in a high and standard option. But even though the benefit goes by the same name, the coverage is different. I compared the cost and benefits of Delta Dental under the TRDP program to the Delta Dental plan offered under FEDVIP. Here are some of the things I found:

• The monthly premium for TRDP is priced regionally, like FEDVIP. For example, the TRDP 2018 premium along the Gulf Coast of Florida is $32.25 for self only, while in the Washington, D.C. metro area the cost is $40.60.
• The monthly premium range for the FEDVIP Delta Dental standard option PPO is $18.81-$26.59 (self only), $37.59-$53.17 (self plus one), or $56.40-$79.76 (self and family), depending on where you live.
• The monthly premium range for the FEDVIP Delta Dental High Option PPO is $36.27-$53.95 (self only), $72.54-$107.92 (self plus one), or $108.81-$161.87 (self and family), depending on the region.
• Both the TRDP and FEDVIP plans provide 100 percent in-network coverage for preventative and diagnostic dental exams and x-rays. They both provide less generous coverage when using out-of-network providers.
• The FEDVIP high option plan has a $30,000 maximum (no deductible in-network) in-network allowance, while the standard option only allows $1,500 per person (no deductible in-network) and the TRDP has a maximum allowance of $1,300 per person (with a $50 deductible).
• The TRDP plan covers 80 percent of basic restorative services (such as fillings and periodontal maintenance) while FEDVIP standard covers 55 percent and the high option covers 70 percent
• Major dental expenses such as crowns, bridges and implants are covered at 50 percent in-network for TRDP and FEDVIP high option, while standard option FEDVIP covers 35 percent of major expenses.
• TRDP provides only $1,750 lifetime orthodontic maximum while FEDVIP standard allows $2,000 and high option has a $3,500 allowance.

By the way, there are nine other FEDVIP plans to choose from, and some have a standard as well as high option. There are plan comparison tools available at Benefeds.com. The new premiums for 2019 won’t be announced until October and the coverage will be effective on Jan. 1, 2019 for military and civilian retirees and on Jan. 6, 2019 for most civilian federal employees.

Health Plan Options

Another change brewing for the upcoming open season is being touted by the Office of Personnel Management as adding further flexibility to the Federal Employees Health Benefits Program. It allows all FEHBP plans to offer three plan options (such as high, standard and value) or two plan options and a high deductible option.

In the April 27 Federal Register, OPM notes that FEHBP currently contracts with 83 health plan carriers that offer a total of 262 health plan options. Historically, about 18,000 FEHB participants switch health care plans in any given year.

To understand the impact of the change outlined in the Federal Register, it is important to note that there are four types of FEHBP plans: service benefit, indemnity benefit, employee organization and comprehensive medical.

Here’s how these four types of plans are defined in Section 8903 of the U.S. Code (I’ve simplified this as much as I could, but bear with me, there is a reason you need to know this):

Service Benefit Plan: “One government-wide plan, which may be underwritten by participating affiliates licensed in any number of states, offering two levels of benefits, under which payment is made by a carrier under contracts with physicians, hospitals, or other providers of health services.” Blue Cross Blue Shield is the one service benefit plan under FEHBP. Blue Cross offers a standard option and a basic option. Its market share across the United States increased between 2000 and 2008, the period immediately following the introduction of the basic option—a shift away from the original high and standard options.

Indemnity Benefit Plan: “One government-wide plan, offering two levels of benefits, under which a carrier agrees to pay certain sums of money, not in excess of the actual expenses incurred, for benefits.” In a 2008 FEHBP letter to carriers, OPM noted that Aetna had served as the carrier for the governmentwide indemnity benefit plan from the establishment of FEHBP in 1960 until the end of 1989. Since 1990, there has been no carrier for the indemnity benefit plan.

Employee Organization Plans: “Employee organization plans which offer benefits...which are sponsored or underwritten, and are administered, in whole or substantial part, by employee organizations...which are available only to individuals, and members of their families, who at the time of enrollment are members of the organization.” There are currently eight employee organization plans in FEHBP: GEHA, AFSPA Foreign Service Benefit Plan, APWU, Compass Rose, SAMBA, NALC, Mail Handlers Benefit Plan and Rural Letter Carriers Benefit Plan. Aetna also operates three employee organization plans as well. Under the statute, these plans have not been restricted to only two levels of benefits.

Comprehensive Medical Plans: These plans, which are also not restricted to only two levels of benefits, are broken down as follows:

• “Group-practice prepayment plans offer health benefits of the types in whole or in substantial part on a prepaid basis, with professional services provided by physicians practicing as a group in a common center or centers.”
• “Individual-practice prepayment plans offer health services in whole or substantial part on a prepaid basis, with professional services provided by individual physicians who agree to accept the payments provided by the plans as full payment for covered services given by them.”
• “Mixed model prepayment plans which are a combination of the type of plans described [above].”

United Healthcare and Kaiser Permanente are examples of comprehensive medical plans. Aetna operates three employee organization plans and seven comprehensive plans, providing coverage to 585,000 federal employees, annuitants and their eligible dependents—more than 7 percent of the entire FEHBP population. In 2004, Blue Cross standard option had 1.99 million enrollees, and its basic option had 180,000 enrollees. In 2017, the Blue Cross standard option had 1.57 million enrollees, and its basic option had 1.03 million enrollees, representing a 20 percent enrollment gain.

By contrast, the HMOs participating in FEHBP had a combined enrollment of 1.024 million enrollees in 2004, and 655,000 in 2017, representing a 36 percent enrollment loss. Blue Cross stands to benefit from the rule change, because it is the only plan restricted to two plan options under the federal statute.

Why does this matter? Currently GEHA standard option holds the position of being the default FEHBP plan option. This means that if an FEHBP participant loses coverage under their current plan and doesn’t select a new plan, they will be placed by default into GEHA standard option. According to comments on the rule offered by GEHA, by allowing Blue Cross the opportunity to create a third service benefit plan option—with a probable goal of capturing default carrier status—Blue Cross could get even greater market share and economy of scale. That could drive some carriers out of FEHBP and create barriers to entry to others.

Blue Cross, in its comments, said the company backs “regulatory actions such as the proposed rule...which promote competition while maintaining a level playing field.”

OPM, in a response to all the comments on the rule, said, “All carriers have the ability to adjust their premiums, focus on quality, recruit providers and promote their brand to compete with the largest insurer in the FEHB Program. That some carriers attract more enrollment than others is not evidence of an anti-competitive environment.”

What do you think?

Photo: Flickr user Adrian Clark