FEHBP Premiums to Rise 13.3% Next Year

The Bush administration said last Friday that health insurance premiums for federal employees and retirees will rise an average of 13.3% next year, making rates about 50% higher than what government workers paid in 1998, the Washington Post reports. Federal Employees Health Benefits Program officials attributed the increase to rising prescription drug costs, increasing use of medical services and aging enrollees. According to William Flynn, associate director for retirement and insurance at the Office of Personnel Management, which administers FEHBP, federal employees with family coverage will pay $92.10 in biweekly premiums next year, an $11.57 increase. Those with individual coverage will pay about $40.89, a $4.32 rise. Leaders of two large federal unions "denounced" the increased premiums and urged the Bush administration to "rethink the rate-setting process." Colleen Kelley, president of the National Treasury Employees Union, said, "Clearly, something is wrong when a health care plan of this size fails to use its marketing clout to help keep premiums in line." Bobby Harnage, president of the American Federation of Government Employees, added, "This year marks a new low in OPM's abject capitulation to insurance company demands." However, OPM officials "vehemently denied" they had "gone easy" on the insurance companies in 2002 contract negotiations. The 2002 premium rate hike marks the fourth consecutive year of "substantial" increases, including increases of 10.5% in 2001, 9.3% in 2000 and 9.5% in 1999, the Post reports. In addition, Flynn said that the 2002 increase represents the largest in the program since the late 1980s, when premiums "jumped" about 19% percent one year.

The Blue Cross and Blue Shield Association, which covers about half of FEHBP enrollees, plans to raise premiums for the insurer's standard option by 17.2% for family coverage and by 20% for individual coverage. In addition, Blue Cross Senior Vice President Steve Gammarino said that the insurer will merge the standard option plan, which covers about four million Americans, with the high-option plan, which charges higher premiums but smaller co-payments and deductibles. Blue Cross also plans to establish a basic option plan, which will limit coverage to the insurer's hospital and physician network, to help reduce out-of-pocket costs for enrollees (Barr, Washington Post, 9/22). The basic option has a three-tiered prescription drug benefit, which includes co-payments of $10 for generic drugs, $25 for some brand-name medicines and 50% of the cost for brand-name treatments that "do not meet Blue Cross price and quality criteria." In addition, enrollees must use retail and Internet pharmacies in the insurer's network to fill prescriptions. The basic option offers dental benefits, chiropractic care and mental health benefits. The plan also guarantees access to specialists and does not have annual deductibles. However, some FEHBP health plans have "objected" to the Blue Cross basic option, "contending" that the plan will "stifle competition" in the program, the Post reports (Barr, Washington Post, 9/24).