OPM Asks FEHBP Health Plans for Cost-Containment Ideas in Annual Letter

In its annual "call letter," the Office of Personnel Management has asked insurers that provide health coverage for federal employees and retirees to come up with "new ideas for containing costs" while "maintaining the quality of services," the Washington Post's Stephen Barr reports in his "Federal Diary" column. The letter, signed by OPM Assistant Director of Insurance Programs Abby Block, stated, "We would like you to explore all reasonable options to constrain premium increases while maintaining a benefits program that is highly valued by our current employees and retirees, as well as attractive to prospective federal employees." The Federal Employees Health Benefits Program -- run by OPM -- saw premiums increase by an average of 13.3% this year for its nearly nine million members. In the letter, OPM officials suggested that insurers "may want to consider reasonable proposals to introduce or increase out-of-pocket costs for some services or adjust deductibles or copay waivers, as well as reasonable proposals for new lower-cost options." In addition, the letter "welcomed" new proposals that would "encourage members to use generic drugs through higher copays or coinsurance differentials for brand drugs." OPM officials sent the letter last week, just as the California Employees' Retirement System, the nation's second largest health plan behind FEHBP, announced that its 2003 premiums would rise an average of 25%. CalPERS' announcement "sent an ominous signal to the Bush administration about rising medical costs," the Post reports. The letter is another sign that OPM this year could face "contentious negotiations" with health plans over premium rates, according to the Post. Last month, OPM Director Kay James told providers at an FEHBP conference that they will see "very, very tough negotiations from OPM this year." James added, "Given the importance that health care benefits play in the federal government's ability to recruit and retain the workforce, we need to deliver results for the American people. ... We need the best and the brightest, and that means we need the best, most attractive health benefits package." The OPM letter instructs FEHBP insurers to submit their proposals by May 31, and Block has set a deadline of Aug. 16 to complete negotiations on rates and benefits (Barr, Washington Post, 4/22).