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Participants in a new type of health plan offered through the Federal Employees Health Benefits program are generally younger, healthier and better educated than enrollees in more traditional options, government auditors said in a report released Wednesday.

Advocates of the new kind of plans, known as consumer-directed health plans, say they keep health care costs down. But opponents argue that they drive up premiums for traditional plans. That is because consumer-directed plans tend to draw out younger and healthier participants who offset costs incurred by older and sick enrollees.

Consumer-directed plans are designed to provide incentives for prudent health care decisions. The plans include health savings accounts that participants can use to cover medical costs, or spend on other personal needs. They have high deductibles, further encouraging conservative health care spending.

The Government Accountability Office's report (GAO-06-143) looked at the first consumer-directed plan offered among the 279 options in the Federal Employees Health Benefits program. That plan, provided through the American Postal Workers Union, had about 9,500 enrollees in 2005.

GAO found that enrollees in the plan tended to be younger and healthier than participants in national preferred provider organization plans such as Blue Cross Blue Shield of America's Federal Employee Program.

The average age of participants in the APWU plan was 47 -- 15 years younger than the average in national plans. Excluding participants over the age of 65, 73 percent of participants reported "excellent" or "very good" health, compared to 58 percent in national plans. Forty-nine percent in the consumer-directed plan had a four-year college degree, compared to 36 percent in PPOs.

Only 11 percent of enrollees were older than 65 or retired, compared with 53 percent of national PPO enrollees. GAO pointed out, however, that all recently created FEHBP plans had much smaller numbers of these participants.

Linda Springer, director of the Office of Personnel Management, which administers the FEHB program, said in response to the GAO report that she was not concerned about any adverse effects on traditional plans. Springer noted that the three-year-old consumer-directed plan covers less than one-half of 1 percent of total FEHB enrollment.

"FEHB program enrollees have many different kinds of health plans to choose from, and we do not anticipate any enrollee harm accruing to individual enrollees as a result," Springer said. "Nonetheless, OPM will continue, as always, to monitor enrollment shift and take appropriate action to eliminate or minimize any adverse effects."

The GAO report, which was requested by Sen. Max Baucus, D-Mont., also found that enrollees in the consumer-driven plan were generally as satisfied as participants in other plans.

COMMENTS

• "Let me just say that you are so dead wrong. You have no clue what real health care costs are or can be." As a health insurance underwriter for a national health carrier for 16 years before joining the government I do know what real health care costs are and can be. I also know that if I experience a catastrophic illness/injury with single coverage in 2006 under the high deductible health plan my maximum out of pocket cost is $3,500. Someone with single coverage through basic Blue Cross experiencing the identical illness/accident has a maximum out of pocket of $5,000. If I'm healthy in 2006 I walk away with $1,500. If I'm healthy under the Blue Cross plan I walk away with nothing. GovExec.com reader Posted January 6, 2006 7:13 PM
• This is the ultimate of adverse selection and another indication of how Congress and the government do not understand insurance and the law of large numbers! The healthy leave the system and pay no premiums. The remaining have greater health care costs relative to premiums collected. Result: premiums have to increase significantly. Those of us that have been in the system for a long time and paid for the health care of the elderly when we were young have no healthy young people paying a part of the cost now. Therefore, not only did we pay for the health care of older workers in the past, we now have to pay higher costs for our own care because Congress in its inability to know how to run an insurance program has allowed those with no claims to leave the system. Great decision Congress -- you idiots are ruining our health care and will ruin social security the same way! Now I am paying for those with private pensions that have gone bad, farmers who have crop failures, rebuilding Iraq, rebuilding New Orleans, providing loans to students and small businesses that should get their own money or do without, I paid for the S&Ls that went broke because the government did not know how to supervise them or examine them, the same is true for banks and credit unions, I pay far too much for weapons of mass destruction in the USA as well as weapons systems designed to fight Word War II again when we have not won a war since WWII but continue to try and reward our military commanders as if they win, we pay to cleanup the environment that other profit making companies have polluted but do not have to bear the costs of cleanup because their stockholders would find out they made a bad investment and the SEC has never enforced its own roles for companies to disclose this information. The time has come to reduce government to essential government services, military with better control, mint and treasury, foreign policy (not the State Department as it exists today) and health and pension for elderly as a supplement not as a sole source of funds. Also, we need term limits to eliminate professional politicians! Taxpayer Posted January 6, 2006 7:04 AM
• Let me just say that you are so dead wrong. You have no clue what real health care costs are or can be. I fear that many are simply playing Russian Roulette because they are young and/or healthy. However, when a real health care crises emerges, and let's face it, sooner or later it will happen, the out of pocket payments can be devastating! For instance, what do you think you out of pocket costs would be if you were diagnosed with cancer? Or if you had a heart attack or stroke? Or any illness requiring extended care, long-term rehabilitation, etc. Please don't be swayed by OPM or an insurance company's information. Reevaluate your options. GovExec.com reader Posted January 5, 2006 11:30 PM