Health premiums rise even higher than expected

Health insurance premiums under the Federal Employees Health Benefits Program will increase even higher than anticipated next year, an average of 10.5 percent, according to the Office of Personnel Management.

FEHBP provides coverage for 9 million federal employees, retirees and their families. Premiums rose an average of 9.3 percent for the year 2000. 1999 saw an increase of 9.5 percent.

In June, OPM said it expected premiums to increase an average of 8.7 percent for fiscal 2001. But Friday, the agency announced even higher figures. Premiums for Health Maintenance Organizations (HMOs) will increase an average of 8.5 percent, while fee-for-service plans will see an average increase of 10.9 percent. The overall average increase will be 10.5 percent. New premiums go into effect in January.

"Premiums are rising at unacceptable rates," said OPM Director Janice R. Lachance. Costly prescription drugs are the primary contributor to the rate hike. Escalating drug prices accounted for 40 percent of the total premium increase.

In addition, 35 HMOs will drop out of FEHBP next year, leaving about 54,000 employees to select new health plans. Drop-outs must notify their members that the need to select a new plan during FEHBP open season, which runs from Nov. 13 to Dec. 11 this year. The number of HMOs offering health insurance to federal employees and retirees declined from 476 in 1996 to 277 in 2000.

OPM was quick to point out that health care costs are rising nationwide. Various health care consultants, associations and research groups report anticipated increases next year from 12 percent to 24 percent. "OPM's increases are lower than those seen by some large organizations, but they reflect nationwide trends," said Lachance.

Earlier this week OPM called off a planned two-year pilot program with the Department of Veterans Affairs to lower prescription drug prices. Under the pilot OPM was to allow the Special Agents Mutual Benefit Association access to purchase prescription drugs off the Federal Supply Schedule at a statutory discount of 24 percent. The pharmaceutical industry's three biggest manufacturers opposed the pilot and eventually sunk the plan by refusing to fill orders.

FEHBP participants who have self-only coverage will pay about $3.50 more biweekly next year. Family coverage will cost about $9.00 more biweekly.

Average Biweekly Premiums
2001 2000
Self-only $36.52 $33.00
Family $80.16 $71.22
Source: Office of Personnel Management

2001 premium rates are available online at

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