FEHBP premium increases indicate that we have not controlled health care costs

Federal health-care plan costs to rise by most in five years

By Eric Yoder
The Washington Post, September 29, 2015

The enrollee share of premiums in the health insurance program for federal employees and retirees will rise by 7.4 percent on average in 2016, the largest increase since 2011, the government announced Tuesday.

Overall premium increases in the Federal Employees Health Benefits Program will average 6.4 percent, but because of the way the formula works for setting the employer and enrollee shares, the enrollee share on average is increasing by more.

The increases in enrollee premiums break down to an average of 6.5 percent for self-only coverage and 10.7 percent for self and family coverage. Current family plan enrollees who switch to self plus one will see their premiums rise by 4.9 percent on average, rather than the 10.7 percent increase for sticking with family coverage.

Within the averages, there is much variation among plans, with some even reducing their premiums while others are increasing them by well more than the average. There are about 250 participating plans, the large majority available only regionally. In the Washington, D.C., metropolitan area, there will be 33 choices.

Office of Personnel Management officials said the increases are in line with estimates of upcoming hikes in private-sector employer-sponsored health plans, which are in the 4 to 6 percent range. Increases in another large governmental plan to which the FEHBP is often compared, the one covering California state employees, will range from 7 to 11 percent depending on the coverage chosen.

Organizations representing federal employees and retirees decried the increases, pointing out that federal employees are in line for only a 1.3 percent raise in January on average, and that retirees likely will receive no cost of living adjustment, or only a minimal one, due to the overall low rate of inflation.

Rising health-care costs “could even mean reduced take-home pay for some federal employees,” while retirees “are facing an even worse situation,” National Active and Retired Federal Employees Association President Richard G. Thissen said in a statement.



By Don McCanne, MD

The Federal Employees Health Benefits Program (FEHBP) is the epitome of the golden standard of employer-sponsored health insurance - the type of coverage that the Affordable Care Act was designed to protect. The claim that we have controlled health care costs is belied by the fact that FEHBP premiums are increasing by an average of 6.5 percent for individual coverage and 10.7 percent for families, when wage increases are relatively flat - only a 1.3 percent increase for next year.

Premium increases in CalPERS - a similar program for California state employees - will range from 7 to 11 percent, a large increase considering that a return to a robust economy does not seem imminent.

This is the best we have, and it is not working well enough. A major factor is that FEHBP and CalPERS use competing private insurers. We have more than ample evidence to show that, not only have the private insurers been ineffective in slowing cost increases to sustainable levels, they have also perpetuated and expanded the profound administrative waste characterizing our system, both through their own administrative excesses and through the tremendous administrative burden they place on the health care delivery system.

Yesterday’s message was on a new OECD report on fiscal sustainability of health systems of economically-developed nations. What these nations have in common that is working for them is a collaboration between government health and budget officials. The most effective models for the United States would be either a single payer national health insurance program or a government-owned and operated national health service.

Since most Americans are comfortable with and supportive of Medicare, the more pragmatic and politically feasible approach would be to enact the single payer model of an improved Medicare for all. Of course, we could certainly enact a national health service if people were to become well informed on the models and decided that’s what they wanted instead.