Feds Are Flocking to the Same Few Health Care Plans Despite Choices

As the Office of Personnel Management worked to increase the number of health insurance plans available to federal employees over the last 15 years, workers actually flocked to the most popular carriers, analysts found.

According to a report released by the Government Accountability Office Monday, over the last decade, the number of plans available through the Federal Employees Health Benefits Program increased in the vast majority of counties. But during that same time period, nearly 90 percent of counties saw an increase in the market share held by the largest insurance carrier.

Although between 2007 and 2015, the median number of plans available in a given county increased from 19 to 24, the median share of enrollment held by the largest carrier in a county increased from 58 percent in 2000 to 72 percent in 2015. Most of that growth occurred before 2007, when the largest carrier in a county insured around 70 percent of FEHBP enrollees.

The report was commissioned by Rep. Elijah Cummings, D-Md., who asked GAO to examine federal employee and retiree participation in FEHBP, as well as the potential impact of granting the Office of Personnel Management the authority to add new plan types to the program.

GAO said since 2000, Blue Cross Blue Shield has become a behemoth in the federal employee insurance market. The company was the largest carrier in 93 percent of counties in 2000, and that proportion grew to 98 percent in 2015. Over that same time period, Blue Cross Blue Shield grew its median county market share from 58 percent to 72 percent.

Much of the company’s gains seem to be the result of its implementation in 2002 of a Basic plan, which offers lower premiums in exchange for a narrower provider network. Since its introduction, enrollments in Blue Cross Blue Shield increased by 32 percent, while enrollment in the company’s Standard plan dropped 18 percent.

GAO said it spoke to 10 stakeholders about the potential impacts of allowing OPM to authorize more HMO and regional PPOs to participate in FEHBP. Although seven of those stakeholders “generally supported” that proposal, citing improved transparency and competition, they acknowledged such a move could increase costs, particularly for Medicare-eligible enrollees.

Additionally, the agency cited outside analyses that warned that after a certain point of competition, giving consumers many choices can actually inhibit competition in the health insurance market, a phenomenon known as “choice overload.”

“A 2009 study examining the Swiss health insurance market similarly found that as the number of choices offered to individuals grows, their willingness to switch plans declines,” GAO wrote. “It concluded that having a large number of plans to choose from likely reduces the effectiveness of consumer decision making, and that simplifying health plan decision making by reducing the number of choices might result in more price competition among insurers.”

Analysts also attempted to provide estimates on how expanding OPM’s FEHBP contracting authority might impact costs to the government and enrollees, but found “three significantly differing estimates” based on a variety of different assumptions regarding premiums, administrative costs and enrollment.

GAO noted that President Trump’s fiscal 2017 budget proposal, which assumed $88 million in savings over the next decade as a result of expanding OPM’s authority to add new plan types, produced an array of cost estimates from budget experts.

“OPM officials were not able to provide us with more detailed information about how these savings were calculated,” analysts wrote. “The Congressional Budget Office, in its analysis of the budget proposal, estimated a range from $50 million in savings to $50 million in costs over the 10-year period.”

OPM did not provide comment to GAO on its conclusions.