FEDERAL EMPLOYEES: Health Insurance Premiums Rise

      The Office of Personnel Management announced Friday that health insurance premiums for federal employees enrolled in the Federal Employees Health Benefits Program will rise an average of 10.2% next year. Although the 10.2% FEHBP increase marks the largest rise since 1989, the actual cost incurred by federal employees will rise an average of only 7.4%. A restructuring of the cost-sharing strategy will result in the government absorbing a larger part of the premium increase, with the resulting formula adding an average of $3.39 to the each employee's costs, while the government picks up an additional $12.07 per employee, the Washington Post reports. OPM Director Janice Lachance said, "I am very concerned about any kind of increase and I'm committed to promoting administration efforts to hold down costs and ensure that federal families always have quality and affordable health care." However, U.S. Rep. Elijah Cummings (D-MD) of the House civil service subcommittee expressed concern over the increased employee costs and called for a congressional hearing. "An increase in costs such as this will make it far more difficult to provide for one's family," he said.

Everyone Is Feeling The Pain
      The Post reports that federal employees are not alone in facing increased costs -- "[b]enefits specialists said rising medical costs should drive up insurance premiums substantially for workers at most large and medium-sized companies." The premium increase came as no surprise to employee benefits analyst William Falk, who said the increase "is reflecting the realities of what is happening in the health care marketplace this year." Paul Fronstin, senior research analyst at the Employee Benefit Research Institute said, "None of this surprises me. Health care costs are going up in general."

Cost Pressures
      The FEHBP premium adjustment precedes a 1999 "complex cost-sharing formula, based on a weighted average of all program premiums," as outlined in the 1997 Balanced Budget Act. As part of the transition to the new formula, "the government will pick up a larger share of the premium increase as a one-time event" this year, but by next year, the Post reports the government will revert back to its policy of absorbing half of the premium increase each year. OPM attributes rising premiums for next year to several factors, including the recent rise in prescription drug prices. Officials noted a 17% annual rise in the cost of drugs, and "said there is an increasing use of expensive drugs to avoid surgery or other costly treatments." In addition, OPM cites reduced reserves in the FEHBP trust fund and the aging federal work force. The Post reports that the average federal worker is 45.3 years old and the average federal retiree is 71 years old.

Added Benefits
      FEHBP members will see improved coverage for mental health care next year, as the program is moving to put coverage of such services on par with physical ailments. In addition, Lachance noted that FEHBP is adopting President Clinton's "Patient's Bill of Rights" (Barr, 9/13).