Federal health premiums rising at same rate as private sector plans

Federal health insurance premiums are rising at roughly the same rate as those included in large insurance plans offered at companies, according to a new report from the General Accounting Office.

From 1991 to 2002, Federal Employees Health Benefits Program (FEHBP) premiums have increased an average of 6 percent a year, a rate that is in line with other large health plans, the report (GAO-03-236) said. On average, premiums for the federal health plan grew less than other large purchasers during the first half of this period, but rose in the second half.

Premiums for health plans serving companies with more than 5,000 employees rose at an average annual rate of 6.4 percent over the same period, GAO calculated, based on the results from a Kaiser Family Foundation/Health Research and Education Trust survey. California Public Employees' Retirement System (CalPERS) premiums rose by an average of 5.9 percent a year.

The Senate Committee on Governmental Affairs and Subcommittee on International Security, Proliferation and Federal Services commissioned the report, to make sure that the Office of Personnel Management, which administers the FEHBP, is doing an adequate job negotiating with FEHBP insurance providers to keep premiums in check.

Unlike many large health insurance programs in the private sector, the FEHBP, which provides coverage for about 9 million federal employees, retirees and their families, OPM contracts with all insurance plans willing to meet minimum standards, to broaden the selection of plans available. OPM relies on competition among plans within FEHBP to keep premiums under control, the report said. In addition, OPM meets annually with representatives from each plan within the federal health insurance program to negotiate premiums and suggest cost-containment strategies.

FEHBP premiums have seen double-digit growth for the past three years. Premiums rose by 13.3 percent in 2002 and by 11.1 percent in 2003. The increase was 2 percentage points lower for 2003 than 2002 because some FEHBP enrollees accepted minor benefit reductions or switched over to less expensive plans, the GAO said.

OPM has attributed the premium growth to escalating prescription drug costs, which health plans pass on to beneficiaries. In FEHBP's three largest plans, claims rose because of a combination of the higher drug costs and patients using more hospital outpatient care. These two factors accounted for about 70 percent of increased claims expenditures from 1998 to 2000, GAO said.

OPM generally agreed with the report.

Stay up-to-date with federal news alerts and analysis — Sign up for GovExec's email newsletters.
Close [ x ] More from GovExec

Thank you for subscribing to newsletters from GovExec.com.
We think these reports might interest you:

  • Sponsored by Brocade

    Best of 2016 Federal Forum eBook

    Earlier this summer, Federal and tech industry leaders convened to talk security, machine learning, network modernization, DevOps, and much more at the 2016 Federal Forum. This eBook includes a useful summary highlighting the best content shared at the 2016 Federal Forum to help agencies modernize their network infrastructure.

  • Sponsored by CDW-G

    GBC Flash Poll Series: Merger & Acquisitions

    Download this GBC Flash Poll to learn more about federal perspectives on the impact of industry consolidation.

  • Sponsored by One Identity

    One Nation Under Guard: Securing User Identities Across State and Local Government

    In 2016, the government can expect even more sophisticated threats on the horizon, making it all the more imperative that agencies enforce proper identity and access management (IAM) practices. In order to better measure the current state of IAM at the state and local level, Government Business Council (GBC) conducted an in-depth research study of state and local employees.

  • Sponsored by Aquilent

    The Next Federal Evolution of Cloud

    This GBC report explains the evolution of cloud computing in federal government, and provides an outlook for the future of the cloud in government IT.

  • Sponsored by Aquilent

    A DevOps Roadmap for the Federal Government

    This GBC Report discusses how DevOps is steadily gaining traction among some of government's leading IT developers and agencies.

  • Sponsored by LTC Partners, administrators of the Federal Long Term Care Insurance Program

    Approaching the Brink of Federal Retirement

    Approximately 10,000 baby boomers are reaching retirement age per day, and a growing number of federal employees are preparing themselves for the next chapter of their lives. Learn how to tackle the challenges that today's workforce faces in laying the groundwork for a smooth and secure retirement.

  • Sponsored by Hewlett Packard Enterprise

    Cyber Defense 101: Arming the Next Generation of Government Employees

    Read this issue brief to learn about the sector's most potent challenges in the new cyber landscape and how government organizations are building a robust, threat-aware infrastructure

  • Sponsored by Aquilent

    GBC Issue Brief: Cultivating Digital Services in the Federal Landscape

    Read this GBC issue brief to learn more about the current state of digital services in the government, and how key players are pushing enhancements towards a user-centric approach.

  • Sponsored by CDW-G

    Joint Enterprise Licensing Agreements

    Read this eBook to learn how defense agencies can achieve savings and efficiencies with an Enterprise Software Agreement.

  • Sponsored by Cloudera

    Government Forum Content Library

    Get all the essential resources needed for effective technology strategies in the federal landscape.


When you download a report, your information may be shared with the underwriters of that document.