Healthy ideas

The Federal Employees Health Benefits Program open season begins Monday, Nov. 12. Through Dec. 10, you'll be able to change your health insurance carrier or your type of coverage. With health premiums for federal employees and retirees rising an average of 13.3 percent, many people may want to shop around. One Pay and Benefits Watch reader from Oregon, for example, reports that her biweekly premium is going up from $40.13 to $69.05, a 72 percent increase. (Her health plan is PacifiCare Health Plans.) "As far as I'm concerned that is robbery!!!" the reader wrote. While they're shopping around for health insurance, the woman from Oregon and many other federal workers are grumbling about the hikes in premiums that are hitting them wear it hurts-in their wallets. Premiums have risen nearly 50 percent over the past four years, reflecting the rising costs of prescription drugs, medical technology, increased use of health services and the aging of the federal workforce. Two weeks ago, Pay and Benefits Watch reviewed some experts' suggestions for controlling federal employees' health insurance costs ("Reining in the FEHBP"). The column also asked for ideas from readers. Here are some of your suggestions.

• Offer more premium levels. By far the most popular suggestion was adding more premium levels, depending on how many people there are in one's family. Currently, FEHBP plans offer self-coverage or self-plus-family coverage. In the future, married couples with no children in the house would like to see a third option: self-plus-spouse. "Why do husband and spouse pay the same as a family of three, four or five?" one reader asked. Some readers suggested a differential payment based on how many children are in the family. Under one variant of that idea, the program could offer self- coverage, self-plus-spouse coverage and then a $10-a-week add-on fee for each child.
• Eliminate the five-year rule. Currently, if you want to have FEHBP coverage in retirement, you have to be continuously enrolled in an FEHBP plan for the five years before you retire. That rule forces many people to enroll in the FEHBP even though they don't need the coverage, a few readers said. The government pays about 72 percent of FEHBP premiums-money that the government wouldn't have to spend if the five-year rule went away. "I am covered by my husband's very generous nonfederal insurance policy. For $220 a month, we have far superior medical, dental, pharmaceutical, and vision care policy," one reader wrote. "I do not need FEHBP, have not needed it since 1976, and only retain it in order to preserve my option to carry it into retirement (disability, regular, early out, etc.) … Think of the money that could be saved by both the employee and the government if the five-year requirement were replaced with a requirement that the employee must have been covered by any health insurance plan continuously for the past five years."
• Award one contract. Some readers think the government could better harness its purchasing power if it didn't negotiate with hundreds of health insurance plans. (There will be 180 health plans in the program in 2002.) Here's a reader's suggestion, in e-mail-ese: "Government pays 100 percent for employees and retirees. Build one plan to fit all. Put on the street for bid. One company takes all. Build in inflation factor and issue the contract for 10 years. This will provide stability for the insurer. The size of the program should result in a good price to the government for the benefits provided." Other readers like the idea of reducing the number of health insurers in the program, but they still want to have a choice of providers. Keeping several insurers in the program would ensure some competition, they said, but not so much that purchasing power is diluted.
• Get more plans, health care providers in the program. Federal workers in some parts of the country pointed out that they have very few options under the FEHBP. They would like to see OPM get more insurers, particularly HMOs, into the program. Workers in remote areas said they want their health insurance companies to include more doctors in their plans. "The list of preferred providers is mostly nonexistent and we have to go to a nonprovider or drive over 100 miles to see a doctor," an FEHBP enrollee in upstate New York said.
• Stand up to the health insurance companies. In presenting various ideas, many readers said they think the Office of Personnel Management could be tougher in negotiating with health insurers. The reader from Oregon, for example, can't figure out why her carrier was allowed to raise its premiums 72 percent. Said another reader, "OPM is just too complacent and we need someone in OPM that can stand up to the health providers." (William Flynn, OPM's associate director for retirement and insurance, said last month that that under carriers' initial proposals, premiums next year would have increased 15.9 percent on average, instead of 13.3 percent. OPM negotiations brought the premiums down, he said. "There is no basis to say OPM is not tough enough," Flynn said.)
• Create medical savings accounts or cafeteria-style plans. Readers had mixed feelings about medical savings accounts, or MSA, but many said MSAs are a good way to give people more control over their health care. Readers said they like the idea of being able to spend their health care money on any type of health care they want. One reader who uses alternative medicine says an MSA would be better than traditional health insurance because she doesn't need most of the benefits offered in the FEHBP. Other readers said they would prefer cafeteria-style plans under the FEHBP, so that people could pick and choose the coverage they want-contraceptive coverage, substance abuse treatment, naturopathic medicines, etc.-and not have to pay for the benefits they don't need.
• Pay a greater share of the premiums. The current FEHBP premium formula requires the government to pick up about 72 percent of premiums, while employees pick up the remaining 28 percent. Several readers said they support a shift to an 80/20 formula, as proposed by Rep. Steny Hoyer, D-Md.
• Deal with it. In one reader's words: "Congress and interested parties will 'slice and dice' this program all they want and hopefully tune-up the process. But, we all need to be realistic in our expectations. The underlying cost escalators will not change. The baby boomers' need for health care will continue to rise over the next 20 years. And, technological advances will march forward offering physicians new and expensive courses of treatment. Bottom Line: "We get what we pay for."

TSP: Shares or Units? The Oct. 11 Pay and Benefits Watch (Beating the TSP Blues), included this information: "…TSP investors who stick out market drops wind up with more shares or units…" The phrase shares or units unleashed an avalanche of e-mails from people who challenged the notion that TSP accounts have shares the way direct stockholders or private sector 401(k) accounts have shares. The e-mails pointed out that TSP account statements show dollar amounts, not shares. Here's how the TSP board's "Guide to TSP Investments" explains it: "Although TSP participants' accounts are not stated or held in shares but in dollar balances, consistent contributions have the same 'averaging' effect as if shares were being acquired." The averaging effect that the TSP guide refers to is called "dollar cost averaging," an investment strategy that allows the TSP to buy more shares when market prices are low. For an explanation of dollar cost averaging, download the guide and refer to the section on "dollar cost averaging" on pages 14 and 15. The guide is in PDF format at www.tsp.gov/forms/tspbk03.pdf.