Health Premiums for Federal Employees To Rise 11.1% Next Year; Employees Will Be Allowed Flexible Spending Accounts

Federal workers and retirees who receive coverage through the Federal Employees Health Benefits Program will see health premiums increase by an average of 11% next year, the third time in as many years premiums have risen more than 10%, the Washington Post reports. The Office of Personnel Management on Sept. 17 announced premiums for fee-for-service health plans will increase 10.5% on average, and premiums for HMOs will increase 13.6%. OPM officials also announced the government will make flexible spending accounts available to executive- and legislative-branch employees. Under the plan, workers can put up to $3,000 pretax into the accounts to pay for out-of-pocket medical expenses and up to $5,000 pretax to pay for child care or elder care services. OPM Director Kay Coles James said, "Given the industry trends, our 11.1% increase is quite remarkable. Indeed, health insurance premium increases for federal employees will be among the lowest in the nation." The Post reports that FEHBP "often serves as a bellwether for premium increases in the private sector." In negotiating the new health plan rates, James said OPM encouraged HMOs to raise copayments or add copayments rather than increase premiums. Last year, premiums increased an average of 13.3%. Paul Ginsburg, president of the Center for Studying Health System Change, said, "Despite all this gloom about [health care] costs, some of the very latest numbers have suggested a simmering down of the cost trends, and these federal employee health program rates are consistent with that" (Barr, Washington Post, 9/18).

Medical Spending Accounts
In related news, the American Postal Workers Union next year plans to offer federal employees a "consumer-driven option" for health insurance through medical spending accounts, the Washington Post's Stephen Barr writes in his Federal Diary column. The new plan will be available nationwide as part of FEHBP starting Nov. 11 (Barr, Washington Post, 9/16). The plan will center around a "personal care account" that contains $1,000 for individuals and $2,000 for families to pay for doctor visits, laboratory tests and prescription drugs. Workers will be allowed to roll over a limited amount of unspent funds to the next year. Employees who exhaust their accounts must pay $600 out-of-pocket for individuals or $1,200 out-of-pocket for families before becoming eligible for traditional health insurance, which covers 80% to 90% of costs (Washington Post, 9/18). Under a catastrophic component, the plan will cover 100% of preventive care and 100% of medical expenses. AWPU has not released how much plan enrollees would pay in annual premiums. The union hopes the plan has a "competitive edge" that will attract workers who might be dissatisfied with the rising premiums of their current plans. However, Barr writes that the APWU plan could "draw the scrutiny" of the National Association of Retired Federal Employees and other groups that might oppose it on the grounds it could "siphon off" healthy federal employees from other plans and create "imbalance[d]" risk pools (Barr, Washington Post, 9/16).