OPM seeks firms to offer health savings accounts

The Office of Personnel Management announced this week that it is seeking medical insurance firms to provide health savings accounts to federal employees.

OPM and Treasury Department officials have been touting HSAs as an affordable health-care option for workers with low regular medical bills. Employers and workers could contribute pre-tax money into the accounts.

HSAs would be available to Federal Employees Health Benefits Program members who are not eligible for Medicare and who are enrolled in a high-deductible plan. Money in the accounts could be used for regular medical bills while the high-deductible plans would serve as a safety net for catastrophic injuries.

Government officials have also said that HSAs would improve the quality of service available because participants choose where to spend their money.

About 3.1 million federal employees who are covered by FEHBP would be eligible for the new accounts, providing they enroll in a high-deductible plan. Federal officials have been considering the HSAs, and this week's letter to health care providers was the de facto announcement of a decision to introduce the accounts to federal employees.

Unlike other flexible spending accounts, health savings accounts do not require participants to spend their accumulated money in a particular calendar year. The accounts are portable; if employees with HSAs change jobs, their accounts travel with them.

OPM Director Kay Coles James "made a commitment to identify ways to provide access to health savings accounts and expand the options available to federal enrollees under the FEHB Program," the letter to insurance providers said. James acknowledged that not everyone is excited about the plan. "The introduction of HSAs to the federal team has been the source of both great excitement and significant concern among both employees and stakeholders."

Some lawmakers have said that HSAs, which were created in the 2003 Medicare Modernization Act, will draw young, healthy federal employees away from the standard FEHBP offering, which could drive up the cost of insurance for those who are left behind.

Del. Eleanor Holmes Norton, D-D.C., has said that "rational" eligible federal workers will flock to a plan that benefits them financially.

"The assumption of those entering our plan, and most such plans … is that the strong and weak will both benefit. If you pull the strong out, you are undoing that," Norton told Government Executive earlier this month.

John Gage, president of the American Federation of Government Employees, called the OPM letter "the first step on a slippery slope that may undermine employer-provided comprehensive health insurance."

"OPM is going in the wrong direction with this initiative," Gage said. "Group insurance works best when the pool of participants is larger, not made smaller by inferior insurance plans."

OPM officials have said there is no historical evidence that federal workers will rush to join the new plan, even if it makes economic sense for them to do so. Last week, OPM received some high-powered backing when President Bush endorsed HSAs in a speech in Washington.

"I'm a big promoter in what's called health savings accounts and association health care plans," Bush said, "because I believe that the best way to help control health care costs in the long run is to empower consumer decision-making in the process, as opposed to federal government decision-making in the process."