Budget hints at cost-cutting measures for federal health plans

The Bush administration's fiscal 2002 budget blueprint hints at changes in store for the Federal Employees Health Benefits Program (FEHBP) to reduce federal employees' health care costs and improve their quality of care. Bush's blueprint said the administration will look at "incentives to federal employees and annuitants to choose their plans wisely." FEHBP provides coverage for some 9 million federal employees, retirees and their families. Premiums rose an average of 10.5 percent in 2001, 9.3 percent in 2000, and 9.5 percent in 1999. "I would interpret this as encouraging consumers to be more responsible consumers, providing ways for them to shop wisely and consider what their needs are," a spokesman for the House Civil Service Subcommittee said. Abby Block, associate director of insurance programs at OPM, said one of the incentives the Bush administration will consider is differential premium contributions, a practice used widely in the private sector.

Under differential premium contributions, the government would contribute a different amount toward the health plan's premium based on a rating system that would rate the plan on quality and efficiency. The higher the plan is rated, the more the government will contribute to the premium. "It's something that a number of employers have been doing for some time that we don't have the statutory authority to do--it would require Congress' approval," Block said. The move to differential premiums would improve quality while controlling costs, Block said. "Our firm belief is that they're one and the same thing--high-quality plans are also cost-efficient. If there is an incentive in the government's contribution, that is presumably an incentive for plans to become more efficient." In addition to differential premiums, OPM is looking at ways to contract with higher quality health plans by judging plans on standard quality measures. "We're not talking about reducing choice or the number of plans in the program--we're talking about raising the bar and hoping all plans will try to meet that," Block said. Asking plans to obtain accreditation from an independent organization is a part of the plan. "We will strengthen that in our letter [to the insurance companies] this year in terms of being more specific about our expectations," Block said. Removing the cap on the amount of money the government will contribute to a health plan's premium, known as the contribution cap, is not being looked at, Block said. Nevertheless, "how that would work in terms of a differential premium contribution is something that would have to be considered. They tie together," she said. Currently, the government never pays more than 75 percent of a plan's premium. The government's average contribution is a little less than 72 percent. Medical savings accounts are also not being considered, Block said. The Bush administration has not yet appointed a director of OPM. Until that happens, it's too early to say what kind of legislative proposal OPM will prepare for improving FEHBP. "A lot of this will get firmed up with some time. These are ideas that are on the table that the administration has looked at. But we will wait until we have some stronger direction in terms of how we want to proceed," Block said. OPM's letters to insurance companies go out at the end of March and health care plan's proposals are due by May 31. The agency won't have an idea of how much premiums will increase in 2002 until early June.