Open Season: Premium cost should not be a main consideration in choosing an FEHB Plan: Part II

This second of two Federal Soup Open Season columns explaining medical, dental and vision insurance choices for employees examines point-of-service (POS) plans, consumer driven health plans (CDHP) and high deductible health plans (HDHP). This two-week discussion of the different types of  Federal Employee Health Benefits (FEHB) program plans will hopefully make it easier for employees to decide which FEHB plan best addresses  their medical needs and those of eligible family members.

As noted last week, from Nov. 10 through Dec. 8 federal employees who participate in the FEHB program must decide which health insurance plan they and eligible family members want to be covered by during 2015. Employees who wish to keep their current plan in 2015 need not take any action. But if they want to enroll in a different plan for 2015, they must do so during the annual benefits open season with the new FEHB plan taking effect in January 2015.

This column also discusses dental and vision insurance choices for employees. Both the dental and vision insurance is offered through the Federal Employees Dental and Vision Insurance Program (FEDVIP). During the benefits open season, employees must decide if they want to enroll in a different dental and/or vision insurance plan or if they want to drop their current dental and /or vision plan coverage for 2015.

Point of Service (POS) Health Plans

A POS health insurance plan is structured in many ways to combine the advantages of both a Health Maintenance Organization (HMO) and a Preferred Provider Organization (PPO) health insurance plan. In particular, a POS plan is not as restrictive as a traditional HMO in that a POS enrollee is not limited to seeing HMO doctors. Additionally, overall out-of-pocket expenses associated with most POS plans are less when compared to the out-of-pocket expenses associated with a PPO plan, including coinsurance, copayments and deductibles.

Similar to an HMO, an enrollee in a POS health care plan will be asked to select a primary health care provider from a list of preferred providers within the POS network. The enrollee will then receive all medical care from the selected doctor or medical specialist. Referrals to other specialty doctors and hospitals that are also part of the POS plan will originate and be directed by the primary health care provider. Although many POS enrolllees get slightly anxious or concerned when choosing from a list of doctors provided to them (especially if they have a hometown favorite doctor that they are more comfortable receiving medical assistance from) the lower overall costs usually with a POS plan ease those anxieties. For instance, the deductible is usually small and there is a minimal charge in the form of a co-payment for doctor visits and medical prescriptions. Perhaps one drawback associated with a POS plan with respect to prescription drugs is that a majority of the time an enrollee is required to use generic brands of any prescriptions or else pay more out-of-pocket.

Aside from having a primary health care provider referring an enrollee to specialists within the plan, the
enrollee also has the option of using a specialist or doctor outside of the POS health care plan network; however; keep in mind this will warrant additional costs which will need to be paid out of the enrollee’s pocket. The one exception would be if an enrollee were in an emergency medical situation that required immediate medical assistance. If someone is truly looking for a health care plan that allows one to see one's own doctor or health care provider, then a fee-for-service plan is more appropriate than a POS plan.

Many individuals like the flexibility that a POS health care plan offers. An employee’s decision to enroll in a POS should be based on whether the POS best serves the employee’s current medical needs. If this plan isn't right for their health care needs, then their other choices include fee-for-service (FFS), health maintenance organizations (HMO), consumer driven health plans (CDHP) and high deductible health plans (HDHP). FFS and HMO plans were discussed in the Nov. 5 column. CDHP and HDHP plans are discussed below.

Consumer Driven Health Plans

The term "consumer driven health plan," or CDHP, is used to describe a variety of mechanisms for providing health insurance or funding healthcare costs, all of which encourage individuals to become actively involved in making their own healthcare decisions (for example, designing their health insurance coverage, choosing their service providers, selecting healthcare services, and managing their own fitness and wellness).

A CDHP is a broad definition incorporating several emerging healthcare strategies that heighten consumer awareness of the cost and utilization of healthcare services through plan design incentives. In practice, a CDHP could encompass any of the following strategies:

• Modifications to traditional HMO, PPO, and POS benefit plans using plan design elements such as high-deductible, co-insurance, co-payments to provide incentives to plan participants to take a more vested interest in the cost and frequency of services used.

• Tiered networks within an HMO, PPO, or POS network where participants pay higher co-payments or co-insurance when using higher-cost providers.

• Personal health savings accounts in plans where an account, either a Health Savings Account (HSA), Health

Reimbursement Arrangement (HRA), or a Health Care Flexible Spending Account (HCFSA), is combined with high-deductible PPO plan to empower the plan participant with greater flexibility, and Financial Savings Accounts or Health Reimbursement Arrangements that may be rolled over into subsequent plan years.

• Information systems (Web and voice) that enable consumers' greater price transparency in purchasing care along with tools to make prudent decisions about accessing healthcare services.

CDHP plans offer:

• Greater choice. Members seem to be moving away from managed care restrictions as HMO enrollment continues to decline while enrollment in PPO plans is increasing.

• Incentives for employees to become more involved in making economic decisions about the utilization of healthcare, resulting in more educated purchasers demanding lower cost and higher quality service from their providers.

• Options to address cost and access problems within the current healthcare system.

High Deductible Health Plans

A High Deductible Health Plan (HDHP) is a health insurance plan in which during 2015 the enrollee has a minimum deductible of $1,300 (self only coverage) and $2,600 (self and family coverage). The enrollee’s annual out-of-pocket expenses during 2015 (including deductibles and copayments) cannot exceed $6,450 (self only coverage) or $12,900 (self and family coverage). Under the Affordable Care Act of 2010 (ACA) HDHPs have “first dollar” coverage (no deductible) for preventive care. HDHPs have higher out-of-pocket copayments and coinsurance for services received from non-network providers. HDHPs offered in the FEHB program establish and partially fund HSAs for all eligible enrollees and provide a comparable HRA for enrollees who are ineligible for an HSA. The HSA premium funding or HRA credit amounts vary by FEHB plan. HSAs and HRAs will be discussed in the Nov. 19 Federal Soup Open Season newsletter.

A listing of the Fee-For-Service (discussed last week) FEHB program plans for 2015 including those offering CDHP and HDHP options may be viewed at www.opm.gov/healthcare-insurance/healthcare/plan-information/premiums/2015/nonpostal-ffs.pdf.

The following is a summary comparing the different types of FEHB program plans:

Comparing the Types of FEHB Program Plans

You are enrolled in a FFS plan and do not use the PPO (or one is not available):

• You will generally pay more when you get care
• Fewer preventive health care services may be covered
• You will have to file claims for services yourself

You are enrolled in a FFS plan and use the PPO:

• You will generally pay less when you get care
• More preventive health care services may be covered
• You may have less paperwork

You are enrolled in a FFS plan's "PPO-only" option:

• You must use network providers to get benefits
• You will generally pay copayments and have no deductibles
• You will have little, if any, paperwork

You are enrolled in a HMO:

• You will have limitations on the doctors and other providers you can use
• You will usually pay less when you get care
• You will have little, if any, paperwork
• More preventive health care services may be covered

You are enrolled in a POS plan and use only the providers in that network:

• You will pay less when you get care
• You will get full network benefits and coverage
• You will have very little paperwork

You are enrolled in a POS and do not use network providers or referral procedures:

• You will pay more when you get care
• Some services may not be covered out of network at all
• You generally have to file claims for services yourself

Be sure to look at the primary care physicians, specialists, and hospitals with whom your health plan contracts (the provider network). Does it promote prevention and early detection and intervention? Does it have the specialists to treat your chronic condition? Does it contract with a hospital close to your home?

You are enrolled in a HDHP and use only the providers in that network:

• You will usually pay less when you get care
• Preventive care is often covered in full, usually with no or only a small deductible or copayment

Dental and Vision Insurance

The Federal Employee Dental and Vision Benefits Enhancement Act of 2004 provided OPM the opportunity to establish arrangements under which supplemental dental and vision benefits are made available to federal employees, retirees, and their dependents.

Dental and vision benefits are available to eligible federal and postal employees, retirees, and their eligible family members on an enrollee-pay-all basis through the Federal Employees Dental and Vision Insurance Program (FEDVIP). This program allows dental insurance and vision insurance to be purchased on a group basis, which means competitive premiums and no pre-existing condition limitations. Premiums paid by enrolled federal and postal employees in the FEDVIP are always withheld from an employee’s gross salary.

Enrollment in FEDVIP takes place during the annual federal benefits open season held each year. New and rehired employees can enroll within the 60 days after they are hired. For those employees who enroll in a dental or vision insurance plan or change their plan for 2015, coverage becomes effective Jan. 1, 2015, with insurance premiums deducted from employee paychecks starting with their first pay date in January 2015. 
Dental plan information may viewed at www.opm.gov/healthcare-insurance/insurance-overview/dental-insurance-overview.pdf. Vision plan information may be viewed at www.opm.gov/healthcare-insurance/insurance-overview/vision-insurance-overview.pdf.

Employees can enroll in a dental and/or vision plan. They may enroll as self only, self plus one eligible family member, or self and family coverage. Eligible family members include an employee’s spouse and unmarried dependent children under age 22. Dependent children include legally adopted children and recognized natural children who meet certain dependency requirements. This also includes stepchildren and foster children who live with the employee in a regular parent-child relationship. Under certain circumstances, coverage may be continued for a disabled child 22 years of age or older who is incapable of self-support.

FEDVIP and FEHB rules for family member eligibility are NOT the same. For example, changes in dependent eligibility under the Patient Protection and Affordable Care Act (PPACA) of 2010 affects eligibility for eligibility under the FEHB program but does not affect eligibility for children under FEDVIP. It should also be noted that many FEHB program plans provide some dental and vision coverage. 

Employees must be eligible to enroll in the FEHB program in order to be eligible to enroll in the Federal Employees Dental/Vision Program (FEDVIP). It does not matter if they are actually enrolled in FEHB—eligibility to enroll in the FEHB program is the key. The “last five years of employment” FEHB program participation rule for eligibility to carry FEHB coverage into retirement does not apply to the FEDVIP. Annuitants do not have to be enrolled in the FEHB program to participate in the FEDVIP.

Information, including enrollment information about the separate dental and vision plans, may be obtained by going to the website www.benefeds.com. For 2015, there are on average 10 dental plans and six vision plans available nationwide to employees. 

The question that employees have to ask: Should they enroll in a FEDVIP plan? In order to answer this question, employees have to ask themselves the following questions:

1. Do they or a member of their family expect to incur significant dental or vision expenses during 2015?

2. Assuming that the employee or a member of the employee’s family is expected to incur significant dental or vision expenses during 2015, is the employee better off “self-insuring?” That is, would the employee do better financially by setting aside money to pay the expected expenses? For example, self-insuring using a health care flexible spending account (HCFSA) or a health savings account (HSA)?

3. Since employees pay the full cost of the FEDVIP premiums with no agency contributions, does it make sense for the employee to look into purchasing an individual dental and/or vision insurance from a private insurance company and comparing the premium rates?

See more information-filled Open Season columns in Federal Soup each Wednesday in the weeks ahead from federal employee benefits expert Edward A. Zurndorfer, author of Federal Employees News Digest ’s weekly Informed Investor column.

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Edward A. Zurndorfer is a Certified Financial Planner and a Registered Health Underwriter in Silver Spring, MD.  He is also a registered representative with FSC Securities Corporation, branch address 833 Bromley St. - Suite A, Silver Spring, MD 20902 and phone number (301) 681-1652. Securities offered through FSC Securities Corporation, member FINRA/SIPC.