GovernmentExecutive.com

President Bush's 2007 budget proposes saving $3.4 billion on federal employee health care over 10 years by offering more consumer-directed health plans, administration officials said.

The request would allow Blue Cross Blue Shield of America's Federal Employee Program to offer a consumer-directed plan and provide incentives for prudent health care decisions. The insurer is presently limited by law to offering a maximum of two health plans.

Consumer-directed plans, which already are offered to federal employees by a number of other smaller providers, include health savings accounts that participants can use to cover medical costs, or spend on personal needs. They have high deductibles, further encouraging conservative health care spending, and lower annual premiums.

Blue Cross Blue Shield's federal program has 4.5 million enrollees. Offering a consumer-directed option to that many participants could significantly expand the use of such plans. The Government Accountability Office reported that by March 2005, only 7,500 individuals were covered by consumer-directed plans.

Employee groups have balked at the new plans, arguing that younger, healthier employees will migrate to them and drive up costs for the rest of employees.

"It is no accident that health care policy experts believe the competition and choice available in the FEHBP makes it the best employer-sponsored health insurance system in the nation," said Charles Fallis, president of the National Active and Retired Federal Employees Association. "It would be a shame if the current market forces in the program were undermined by stacking the deck in favor of one particular type of plan."

Indeed, GAO issued a report in January that found that enrollees in consumer-directed plans "were generally younger, earned higher federal salaries and were more likely to select individual rather than family plans."

The Office of Personnel Management, which administers the FEHB program, said this change would increase choice, which is good for employees.

"People's right to select any plan they want is not changed," said Nancy Kichak, OPM's associate director for strategic human resources policy. "We feel that this is a good selection; it's not reducing people's options."

What's more, Kichak said, GAO's report was based on findings that were too preliminary. The first consumer-directed plans were offered in January 2005.

"Every time we offer new options in the program . . . it is a fact that the people who tend to move are your younger, healthier people," Kichak said. "So it's not high-deductible plans that are causing this, it's the new product and the people who like new products."

The $3.4 billion in savings would be realized only if employees chose to sign up for the new plan, and if Blue Cross Blue Shield offered the option starting in 2007.

A spokeswoman said the health insurer has not yet decided what it will do if this proposal goes into effect. She said Blue Cross Blue Shield is taking a "wait-and-see approach" and watching other insurers.

COMMENTS

• Stephanie Smith has hit the nail on the head. However, most of the government administration and the Congress have little idea of how insurance works. Look at the Bush proposals for "saving" social security by allowing people to make their own decisions as to how to invest their contributions. When they all end up with a loss, they still come back to the government swill for their handout. Social security is an insurance plan -- that is why it is called social security insurance. Likewise, Medicare and Medicaid are insurance programs that should balance benefits with premiums and stop Congress from expanding benefits beyond premiums simply to buy votes and maintain their jobs. Finally, Bush has destroyed the government health insurance program except for himself and Congress by allowing the young and healthy to opt out of insurance coverage and thus increase premiums for the older and less healthy employees. I only can hope that Congress will increase the government’s share of the health insurance premiums paid by those of us that remain in the old program as he drives up our costs. See, I can go to the government swill just as everyone else! Taxpayer Posted February 15, 2006 7:04 AM
• I'm not sure I follow the President's math. How can the government expect to save money just by offering another high-deductible plan? Once the young, healthy people leave the general plan, the premiums will go up for those who remain. The cost savings realized by the lower premiums for the high deductible plans will be negated by the higher premiums for the standard plans (because insurance companies will make sure that they maintain their profits). It seems to me that it simply redistributes the cost to those who use their insurance more. This plan could only work if the type of federal employee shifted from one with more health care needs (i.e., those with families and the elderly) to one with less health care needs (i.e., the young and/or single). Since the general plan already has a FSA, which works like the HSA but without the accumulative rollover, I don't foresee a mass migration to the new high deductible plan. I would love to see how the president's advisor came up with the proposed $3.4 billion in savings! Otherwise, I agree that BCBS should be allowed to offer more than its two programs -- it's only fair in a capital market ;) Stephanie Smith Posted February 9, 2006 1:59 PM
• "those Health Savings plans, why do we get a penalty for good health practices? Why not roll over the savings from one year to another, instead of taking them for some fat cat's pocket??" What are you talking about? HSA's do roll over from on year to another -- the only person who gets the money is the employee.. GovExec.com reader Posted February 9, 2006 8:25 PM