Members of Congress on Thursday questioned why average premiums for federal employees' health insurance have climbed 20 percent in two years, while an Office of Personnel Management representative said employees could reduce the effects of the increase by shifting to lower-cost plans.
Rep. John Mica, R-Fla., chairman of the House Government Reform and Oversight Subcommittee on the Civil Service, called a hearing on the premium hikes at the request of Reps. Elijah Cummings, D-Md., and Connie Morella, R-Md., whose districts include large numbers of federal employees.
"These steep increases in health care premiums confront federal workers and devastate federal retirees who will, on average see their [cost-of-living adjustments] virtually wiped out by these increases," Mica said.
Earlier this month, the Office of Personnel Management, which administers the Federal Employees Health Benefits Program (FEHBP), announced health insurance premiums will increase by an average of 10.2 percent in 1999. Employees' out-of-pocket costs are expected to increase an average of 7.4 percent, because the government will be picking up a larger share of premiums than usual next year.
Premiums in some FEHBP plans rocketed 30 percent over the last two years, although others declined. All told, the government will spend $2.2 billion more on federal employees' health insurance in 1999 over 1997, while federal employees will shoulder almost $1 billion in additional costs, Mica said.
The FEHBP cost hikes are significantly higher than increases in the private sector, Mica said. Employer-based health insurance premiums rose 3.3 percent from 1997 to 1998, health industry analysts Paul Ginsburg and Jon Gabel reported in the September/October issue of Health Affairs. By contrast, FEHBP premiums were 8.5 percent higher this year than in 1997.
William E. Flynn, OPM's associate director for retirement and insurance, cited three primary reasons for the premium hikes.
First, the cost of prescription drugs is expected to rise up to 22 percent in 1999. About 20 percent of FEHB funds are used for drugs. Second, technological advances are resulting in new, more expensive medical techniques. Third, the age of enrollees is rising; the average age of FEHB enrollees is 57. Older enrollees tend to use more health care services.
"OPM will continue to look for ways to moderate cost increases while continuing to monitor the quality of care delivered," Flynn said.
Stephen Gammarino, senior vice president for the federal employee program of the BlueCross BlueShield Association, which covers 3.7 million employees, retirees and dependents, agreed with Flynn on the reasons for the premium increases. But Gammarino also argued that OPM does not give plans enough control over what benefits they offer enrollees.
"The private sector may be more aggressive in modifying their benefits structure," Gammarino said.
Flynn suggested that employees unhappy with rate increases can switch health plans during the FEHBP open season, which will run from Nov. 9 to Dec. 14.
"OPM must keep a close eye on factors that drive up premiums," Cummings said.
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