Playing Politics with the FEHBP

There are plenty of strong views on the federal health benefits program. Here are several of them.

The Federal Employees Health Benefit Program may be up for grabs in the presidential election this year. The issue is not necessarily what would make it a better or more effective program. The underlying issue is who can use the program to get the most votes.

We will state up front that we are not (yet) arguing in favor of any one position as to how the health benefits program should be changed, or if it should be changed at all.

But the rhetoric is certainly interesting and for those employees and retirees who use the program, the results of the debate could be important to your future health care.

We previously outlined the positions of some of the presidential candidates and how they would like to change the program.

A president John Kerry would expand the insurance system for federal employees to private citizens through tax credits and subsidies. The unemployed would get 75 percent tax credit to help pay for insurance.

We don’t know what impact this would have on insurance premiums and insurance coverage for federal employees and retirees. But one likely possibility is that there would be a large number of new participants, many of whom are in need of health care because they are older or have not had health care in the past. This could potentially have a serious impact as it would cease becoming primarily an employee benefit and, instead, become part of the nation’s welfare system. The impact on the program could be significant both in terms of the impact of the changes on the quality of the program and the overall costs.

The Bush administration has been in favor of health savings accounts for federal employees. The president of the National Association of Retired Federal Employees, Charles L. Fallis, says “We continue to be concerned about the Office of Personnel Management’s (OPM’s) repeated advocacy for adding controversial, new Health Savings Accounts (HSAs) to the Federal Employees Health Benefits Program (FEHBP).”

NARFE thinks that premiums under the federal program could double if health savings accounts are enacted. Here is NARFE’s position:

“NARFE is very wary of the Administration’s strong support for high deductible-catastrophic health insurance policies coupled with HSAs, and OPM’s search for easy and early ways to bring these hybrids into the FEHBP. The association believes such an amalgamation would further increase the premiums federal workers, retirees and taxpayers pay for comprehensive FEHBP coverage by siphoning off healthy enrollees into catastrophic/HSA plans. The nonpartisan Congressional Budget Office (CBO) says that legislation to make the savings accounts and high deductible insurance available in the FEHBP would cost taxpayers nearly $1 billion over five years. In addition, research by the nonpartisan RAND Corporation, the Urban Institute and the American Academy of Actuaries indicates that premiums for traditional health insurance coverage could at least double if HSA use becomes widespread.”

If what NARFE contends is true, this change to the federal program would certainly not be good for this valuable employee benefit.

But, as noted above, this is an election year and there are plenty of positions and arguments to choose from. An organization called the Galen Institute argued in very strong terms that the NARFE position is incorrect. Here is their position:

“This is going to be an ugly election, full of lies and distortions. A couple of weeks ago we reported on the e-mails the National Association of Retired Federal Employees (NARFE) was sending to members of Congress. The e-mails claimed several studies support the idea that allowing federal workers to have HSAs would “siphon off healthy enrollees” and double FEHBP premiums for everybody else….We sent out an open letter to Congress … showing how NARFE has misrepresented the studies it cites, and how the studies were mostly written before the MSA law was enacted, so are speculative in any case. By all means let’s have critical discussion of HSAs, and every other reform proposal, but let’s base that discussion on honest evaluation instead of distortions and misrepresentations.”

You can download the Galen Institute letter from the link on the left hand side of this page.

Who is right and who is wrong? We are not sure. But pay attention to the election issues. The outcome may impact your future health benefits and the quality of your health care.

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. Follow Ralph on Twitter: @RalphSmith47