President's Budget Proposal Draws Mixed Reviews from NARFE

By on February 6, 2007 in Current Events, Retirement with 0 Comments

The National Active and Retired Federal Employees Association (NARFE) today favors the Administration’s commitment toward modernizing the federal retirement claims process system, but has concerns about other proposals in the President’s fiscal year (FY) 2008 budget.

Of particular concern to the organization is a plan to expand Health Savings Accounts (HSAs) in the Federal Employees Health Benefits Program (FEHBP) and a proposal to reduce the share the government pays toward the FEHBP premiums of certain future federal retirees.

NARFE says that the Administration’s budget enlarges a proposal to allow Blue Cross/Blue Shield (BC/BS) to offer Health Savings Accounts (HSAs) in the FEHBP by requiring the “Indemnity Benefit Plan” — a second systemwide option — to offer the controversial option. Although included in the statue authorizing the FEHBP program, the Indemnity Benefit Plan has not been available since the Aetna plan insurance carrier left the FEHBP in 1990. NARFE is concerned that the Bush Administration is ready to revive the plan as a way to jump start HSAs, which relatively few federal workers and retirees have joined.

BC/BS’s current health plans are the largest and most popular in the FEHBP. As a result, the insurance carrier’s brand loyalty and marketing capability could result in significantly increasing HSA enrollment in federal health benefit plan if the company decided, and were allowed, to offer this as an option.

“NARFE opposes HSAs because they could increase premiums for comprehensive plans since relatively healthy enrollees with higher incomes could be siphoned off into HSAs,” according to NARFE President Margaret Baptiste. In fact, a January 2006 report of the Government Accountability Office (GAO) found that HSAs tended to attract younger and wealthier FEHBP enrollees.

The organization is also opposed to a proposal to reduce the government’s share of FEHBP premiums for new retirees with less than ten years of federal service. Their concern is that the effort will be counter productive at a time when the government is trying to recruit mid-career professionals who might be penalized. The NARFE President stated in a press release that " We fear the Administration’s plan may discourage some of the best and brightest talent from considering federal service and it sets a bad precedent.”

The organization also favors the Administration’s commitment to speeding up processing of full annuity payments to new retirees and survivors and as well as the proposal to allow federal workers to contribute bonuses to the Thrift Savings Plan (TSP).

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