OPM Announces 2001 FEHB Program Rates

Costs projected to rise an average of 10.5 percent

On September 15, the U.S. Office of Personnel Management (OPM) announced 2001 premiums for the Federal Employees Health Benefits Program (FEHBP), which covers approximately nine million employees, retirees and their families. Nationwide, premiums for health insurance have been rising for several years and have outpaced inflation. Reflecting these trends, premiums for FEHBP Health Maintenance Organizations will increase an average 8.5 percent, while the more traditional Fee-for-Service plans will see an average increase of 10.9 percent. Weighted by population, the overall average increase will be 10.5 percent.

"Premiums are rising at unacceptable rates," said OPM Director Janice R. Lachance. "For 2001, we chose to raise premiums across the entire Program, rather than reduce benefits or take more money out of the pockets of those most in need of care. Keeping healthcare affordable, while maintaining a comprehensive benefits package, is a delicate balancing act."

Executive Branch employees will save money through pre-tax payments
On a positive note, starting next month, healthcare will be more affordable for Executive Branch employees because of premium conversion. OPM has taken a major step by adopting this plan, which lets employees pay their health insurance premiums with pre-tax dollars. In effect, premium conversion puts money in employees' pockets -- on average about $434 per year.

Another significant improvement is Mental Health and Substance Abuse Parity. Beginning in January, nine million Americans covered by the FEHBP will have health insurance that provides the same co-payments for mental health conditions as for any other health condition, the same access to specialists, the same coverage for medication and the same coverage for out-patient care. This important new coverage will cost single enrollees less than $0.50 biweekly; enrollees with family coverage will pay about $1.00 biweekly.

The largest contributor to the FEHBP premium increase is the rising cost of prescription drugs, which accounts for about 40 percent of the total rise. Other contributors include greater use of medical services, the expanded use of effective, but more expensive, medical technology, and an older population.

The new premiums go into effect in January 2001. FEHBP enrollees who have self-only coverage will pay about $3.50 more biweekly, while those with family coverage will pay $9.00 more biweekly. In 2001, the average biweekly premium for self-only coverage will be $36.52 for the enrollee and $83.74 for the agency. For family coverage, the average premium for the enrollee and agency will be $80.16 and $191.09, respectively. By comparison, the 2000 biweekly rate for self-only coverage is $33.00 for the enrollee and $76.34 for the agency. For family coverage, the rate is $71.22 for the enrollee and $172.26 for the agency.

Survey shows no slowdown in rising health care costs
In a recently released Washington Business Group on Health/Watson Wyatt Worldwide Survey, 61 large employers representing almost two million employees predict that medical costs in 2001 will increase by an average 12.2 percent for active employees and 13.3 percent for Medicare retirees. The survey findings confirm that "healthcare costs are accelerating for the fourth year in a row with no slowdown in sight." Hewitt Associates, a leading benefit and management-consulting firm, said its clients anticipate premium increases averaging 14 percent nationally.

Active and retired participants in the California Public Employees Retirement System (CALPERS) Health Plan are facing an average increase of 12.9 percent. Last spring, CALPERS announced a 9.2 percent increase for its health maintenance plans and a 20 percent rise for those in the less-restrictive Preferred Provider Organization (PPO) plan. CALPERS covers over one million employees, retirees and family members.

Similarly, John Colmers, executive director for the Maryland Health Care Commission, which oversees the benefits packages that insurers offer to small employers, said that the state actuaries expect increases of 9.6 percent for HMO premiums and 12 percent for PPOs. The State of Wisconsin just announced increases of up to 17.5 percent. Minnesota had a 19 percent increase and North Dakota a 24 percent jump.

OPM reflects national trends
While OPM's health care increases are lower than those experienced by some large entities, they reflect nationwide trends. The Federal Employees Health Benefits Program provides important features -- employees and retirees have the same benefits, the same choice of plans, and pay the same premiums. As the employer, the government pays a significant part of those premiums. All health plans are subject to rigorous audits by the OPM Inspector General, and any recoveries from audits are used to keep premiums lower.

Regarding initiatives to hold down premiums, the Director reported that, "OPM has consulted extensively with a broad range of stakeholders, including employee and retiree organizations. We have worked toward consensus on a package that will achieve two important goals. First, we want high-quality, cost-effective healthcare for our participants by raising the standards for health plans to participate in the Program. Then, we should have the flexibility to enhance benefits through direct contracting for selected benefits. These discussions have been open, useful and candid. We will continue to work with our stakeholders to reach consensus."

During the FEHBP open season, which runs from November 13 to December 11, eligible federal employees and retirees can stay with their current health plan or select a new one. Lachance encourages everyone to do his or her homework.

For Open Season information, visit the FEHBP web page at http://www.opm.gov/insure. The site includes PlanSmartChoice, an interactive tool to help select the health plan that best meets an individual's needs. Lachance advises everyone to review the open season guide, visit the web site, and carefully read the health plan brochures. "Getting the quality healthcare you and your family deserve is about more than the premium you pay. Be sure the plan you choose suits your needs," she said.

Comparing brochures will be easier this year. OPM and health plan representatives collaborated to re-format and re-write benefit descriptions. Every brochure, whether from an HMO or a Fee-for-Service plan, will be in the same format and describe benefits in plain language.

About 245 plans participate in the Program. There are seven fee-for-service plans that are open to any enrollee, worldwide. Most enrollees also can select from HMOs and point of service plans available locally. In the Washington, DC area, there are 13 plans from which to choose.

Thirty-five Health Maintenance Organizations have notified OPM that they will leave the Program in 2001. Approximately 54,000 individuals (about 1 percent of enrollees) must select a new health plan because of this. Plans that leave the program must tell each of their members that need to select a new plan during Open Season.

Edited by Bob Arguero, Managing Editor, GovCon