Health premiums to rise more than 10 percent

September 14, 1998

DAILY BRIEFING

Health premiums to rise more than 10 percent

The Office of Personnel Management has announced that premiums under the Federal Employees Health Benefits Program will rise an average of 10.2 percent next year, the largest increase in nearly a decade.

Employees' costs will rise 7.4 percent in 1999, OPM said. Employees' agencies will cover the rest of the premium increases. The government covers 72 percent of the weighted average cost of health plans, under a new formula Congress approved last year for splitting insurance costs between employees and the government.

The average employee will pay $3.39 more every two weeks, while the government will pay $12.07 more.

OPM announced the increases late Friday after briefing key members of Congress, the Washington Post reported. Rep. Elijah Cummings, D-Md., called for congressional hearings on the issue.

OPM officials said three factors contributed to the premium increase:

• 17 percent annual increases in the cost of prescription drugs in recent years.
• Reductions in the financial reserves in the FEHBP trust fund. Excess reserves were used to hold down premiums in the early 1990s.
• Increases in the average age of federal workers and retirees covered by FEHBP.

Employees will have an opportunity to try to hold their costs down by switching health plans during the next FEHBP open season, which runs from Nov. 9 to Dec. 14. Some employees will have to switch; 65 health plans are dropping out of the FEHBP in 1999. That will leave 285 plans for federal employees to choose from, down from 350 this year. Consolidations contributed to the decline, OPM said. Less than two percent of enrollees are covered by plans leaving the program.