Military pay raise takes effect

Legislation funding the Defense Department in 2012 contains a pay raise for service members and a premium hike for some enrollees in the military's health care program.

The 2012 National Defense Authorization Act, which President Obama signed into law on Dec. 31, 2011, includes a 1.6 percent pay bump for service members, effective Jan. 1. Obama recommended that figure in his fiscal 2012 budget proposal. Civilian federal employees still are subject to a two-year pay freeze that began in January 2011.

Defense Secretary Leon Panetta plans to unveil this week a strategy to downsize the Pentagon's budget over the next decade, and reductions in military salaries, retirement and health benefits could be included in the proposal. According to a report in The New York Times, Defense spends nearly one-third of its base budget on personnel costs: $107 billion for salaries and allowances, $50 billion for health care, and $24 billion in retirement benefits. The nonpartisan Congressional Budget Office estimates that the 1.6 percent pay raise will cost $1.2 billion this year.

The 2012 Defense authorization act also includes changes in TRICARE fees for some enrollees. The law raises the TRICARE Prime enrollment fees for military retirees and includes an indexed increase tied to the cost-of-living adjustment beginning in fiscal 2013. The higher fees amount to a $30 annual increase for those with individual plans (from $230 to $260) and a $60 hike (from $460 to $520) for those enrolled in family plans.

Enrollees who were in the program before Oct. 1, 2011, will begin paying the higher fees in October 2012, which is the beginning of fiscal 2013; new TRICARE Prime enrollees must pay the higher rates immediately. An earlier provision in the bill to prohibit the existing fee increases for one year was stripped from the final measure. Such provisions typically are included in the annual Defense authorization bills.

Active-duty service members, also covered under TRICARE, do not pay any out-of-pocket costs.

Defense had proposed a 13 percent increase in 2012, indexed thereafter to slightly more than 6 percent. CBO, however, estimates that over the next decade the annual indexed increase will amount to about 2 percent.

Participant fees under TRICARE were set in 1995 and until this year have remained at $460 per year for the basic family plan. The cost for comparable coverage for federal workers is between $5,000 and $6,000 annually.

The Obama administration proposed the TRICARE fee hike and in a White House statement, the president specifically mentioned those initiatives contained in the law that "control the spiraling health care costs of the Department of Defense."