Expanding FEHB Coverage: What Will it Cost Agencies and Is it Legal?

By on July 29, 2014 in Current Events with 20 Comments

The Office of Personnel Management (OPM) is issuing for comment a proposal to expand coverage under the Federal Employees Health Benefits (FEHB) Program. The proposal defines working full-time as working 130 hours per month. The change is based on Internal Revenue Service and Treasury Department regulations implementing the Affordable Care Act.

The proposal raises two major issues: How much will this cost agencies and is it legal?

Who Would Be Covered Under New OPM Regulation?

The proposed OPM regulation would include the following employees:

  • Employees on temporary appointments;
  • Employees on seasonal schedules who will be working less than six months per year;
  • Employees working intermittent schedules if the employee is expected to work a full-time schedule of 130 or more hours in a calendar month.
  • If the employing agency expects the employee to work at least 90 days, the employee is eligible to enroll upon notification of the employee’s eligibility by the employing office.

Under the proposal, this new regulation would make FEHB coverage available to these newly eligible employees no later than January 2015.

What is the Cost of the Proposed Change?

Currently, most federal employees on temporary appointments become eligible for FEHB coverage after completing one year of current continuous employment. Once eligible for coverage, they do not receive an employer contribution to their health insurance premium.

The cost of the proposed change—which will be absorbed by agencies—is potentially significant. OPM did indicate it expects that the rule will cost less than $100 million to implement. This figure is significant because, if the estimated cost is greater than $100 million it is considered “economically significant” and would trigger a broader review of the proposal by other agencies.

OPM estimates it costs $700 a month or $8,400 per year to place a worker in an FEHB plan. OPM reaches its conclusion, in part, on the cost of the change by assuming that only 10 to 20 percent  of currently ineligible federal workers would sign up for the FEHB insurance. The OPM data are obtuse switching between 300,000 “full-time employee-months currently ineligible for FEHB (0.9 to 2 percent of the Federal workforce)” and the average cost per month for each FEHB  employee. The number of FEHB ineligible employees is probably between 25,000 and 50,000 with a federal workforce of about 2.6 million people but that is not delineated in the proposal.

Agencies footing the bill for this new benefit cost will presumably diligently obtain more specific cost information and the actual cost impact on individual agencies. If the OPM estimate of a maximum of 20% of eligible employees will participate in this program proves incorrect, and a much higher number choose to participate, the actual cost to agencies will be significantly higher—especially in those agencies with more of these newly eligible FEHB employees.

OPM does put this warning in the proposal that agencies already feeling a budget squeeze will want to take as fair warning:  “We lack exact data to quantify rule induced public health benefits or to refine our estimates of costs and transfers. We therefore request comments on any of this proposed rule’s impacts.”

According to the Congressional Research Service, in 2013 the federal government spent about $32.4 billion on FEHB premiums for about 8 million people enrolled in the program. Currently, for full-time federal employees, the government contributes 72% of the weighted average premium of all plans, not to exceed 75% of the premium for any one plan (calculated separately for individual and family coverage).

Is the Proposed Regulation Legal?

As noted in one report on the OPM proposal, the proposed change appears to be in conflict with current law that, according to the Congressional Research Service, does not make temporary or intermittent federal workers eligible for the FEHB program. And, in fact, it is not clear how an OPM regulation can override the conflicting requirements of a 1978 law (Public Law 95-437, also known as the Federal Employees Part-time Career Employment Act of 1978). This law, in part, legislates the issue of government payment of health insurance benefits for part-time employees.

The 1978 law defines part-time employment as “part-time employment of 16 to 32 hours per week under a schedule consisting of equal or varied number of hours per day, whether in a position which would be part-time without regard to this section or one established to allow job-sharing or comparable arrangements, but does not include employment on a temporary or intermittent basis.”

This law also defines how the federal contribution for health benefits will be made for these part-time employees which is different from the OPM proposal.

The new OPM regulation is changing the definition of a full-time employee to 130 hours per month. It would also change the amount of the FEHB premiums based on this new definition, based on regulations issued by the IRS and Treasury. In other words, according to its proposal, OPM is using the authority of regulations issued by other agencies to override the current federal law which is still in effect.

The Federal Register notice does not address the current federal law or why OPM believes it has the authority to issue a regulation to override Title 5 without additional Congressional action. Perhaps OPM is just assuming that there will not be any challenges to the proposal, despite the conflict with current law, as unions are not likely to object nor will employees who obtain the new coverage are not likely to object either.

Comments on OPM Proposal?

OPM must receive comments on or before August 28, 2014.

Send written comments to:
Louise Yinug, Senior Policy Analyst, Planning and Policy Analysis, Office of Personnel Management, Room
3415, 1900 E Street NW., Washington,DC; or FAX to (202) 606–0036 Attn: Louise Yinug.

You may also submit comments using the Federal eRulemaking Portal: http://www.regulations.gov.

Proposal to Expand FEHB

© 2016 Ralph R. Smith. All rights reserved. This article may not be reproduced without express written consent from Ralph R. Smith.

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About the Author

Ralph Smith has several decades of experience working with federal human resources issues. He has written extensively on a full range of human resources topics in books and newsletters and is a co-founder of two companies and several newsletters on federal human resources.

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