Health Insurance Choices, Part One

By Tammy Flanagan

September 29, 2006

That exciting time of year is upon us. Not the beautiful fall colors, not the crisp cool air, not the festive holidays. No, I'm talking about open season for the Federal Employees Health Benefits Program. Open season doesn't officially begin until Nov. 13, but it's not too early to start thinking about it.

Last week, Government Executive's Pay and Benefits Watch columnist, Karen Rutzick, noted that there will be 284 plans to choose from -- the most ever -- when open season begins. Luckily, no one person actually has to choose from that many plans. Many are regional and not available outside of a limited service area.

For an individual, it helps to simplify the health insurance decision by breaking it down to three basic choices:

Once you choose one of these three basic styles, you'll have fewer than 10 available plans to pick from. (And some FEHBP participants will only have two basic choices, because the HMO option isn't available everywhere.)

In preparation for open season, I'm kicking off a three-part series on the choices available to federal employees and retirees. This week will be dedicated to a general explanation of the options and a look at the oldest type of insurance available: traditional fee-for-service coverage. Next week, we'll delve into the new high-deductible health plans with health savings accounts or health reimbursement arrangements. The last installment in the series will focus on HMOs.

Common Characteristics

There are several things that all FEHBP plans have in common:

Fee-For Service Plans

Traditional fee-for-service plans are the mainstay of FEHBP. Here are some reasons why such plans might be attractive.

There are also some disadvantages to these kinds of plans: Some FEHBP fee-for-service plans, such as the Mail Handlers high option, have much higher premiums than other plans in the category. A plan that has a higher proportion of retirees than current employees may incur higher expenses, due to a greater incidence of enrollees needing hospitalization or requiring prescriptions. The National Active and Retired Federal Employees Association reported in November that OPM data showed that 59 percent of the enrollees in the Mail Handlers plan are retirees, with employees making up 41 percent. Blue Cross Blue Shield, on the other hand includes 47 percent annuitants and 53 percent employees. For 2007, the Mail Handlers high option fee-for-service plan will cost $172.06 biweekly for self-only coverage and $340.36 for family coverage. Blue Cross Blue Shield's equivalent standard option will have premiums of $57.30 for self-only coverage and $134.30 for family coverage.

How to Choose

If you decide that fee-for-service coverage is for you, then choosing a plan involves selecting between high and low option coverage and picking a plan within one of those categories that makes the most sense.

If you are likely to need hospital care, ongoing physical therapy, drug treatment or other kinds of chronic care, you most likely will want to look at the high-option health plans, which provide fuller coverage with higher premiums. If you need high option coverage, compare the plan brochures for coverage on the type of care that you normally use. For example, if you use a lot of prescriptions, check out the plan's mail order drug program to learn about the deductibles and coverage for name brand and generic drugs. Look at the formulary for the type of drugs that you are using to make sure they are covered.

Then look at the premiums. Sometimes the least expensive plan offers all the coverage you are looking for. If you are in good health and do not have many recurring medical expenses, your best choice may be the standard or basic option. (Be careful, though. In some cases -- as in the Blue Cross Blue Shield example above -- "standard" is the name for the high-coverage option.) If you have Medicare or other health insurance, look at the plan brochure for coordinating this coverage. Sometimes even those with chronic health problems may choose the low option, if Medicare or other health insurance is the primary payer.

Most FEHBP fee-for-service plans offer Preferred Provider Organization arrangements. Your health plan will have a list of PPO doctors and facilities available on their Web sites or you may request a catalog of members by contacting your health plan. Two advantages of using a PPO are that it reduces your out-of-pocket expenses, and providers will generally file your claims for you. Read your plan's FEHBP brochure carefully to find out about other benefits. Resources

Tammy Flanagan is the senior benefits director for the National Institute of Transition Planning Inc., which conducts federal retirement planning workshops and seminars. She has spent 25 years helping federal employees take charge of their retirement by understanding their benefits.

By Tammy Flanagan

September 29, 2006