Health Benefits, Federal Employees and Money

Young versus old and increasing cost for better medical care for Americans provides the basis for proposed changes to the federal employee health benefits program. It’s expensive and there are likely to be winners and losers with the final outcome.

Any reader who participates in the health benefits plan for federal employees knows that health insurance premiums are high and going up every year.

People are living longer, more drugs and medical procedures are available and we are all enjoying the benefits of better care. Participating in the medical revolution isn’t free. And the increasing costs are not restricted to those of us in the federal employee community.

Here’s an example. Most readers appreciate the value of their federal health benefits program but, occasionally, we get comments such as this one from readers who see themselves as a victim: .”[t}he cashier who bags my groceries at the supermarket or rings me up at Walmart has better benefits than I do, and pays less for them!!…nobody can tell me…federal employees are already well-paid, have excellent benefits, have much greater job security than private sector employees, and they don’t work very hard.”

The reality is that health insurance benefits in the private sector are under considerable pressure. As a federal employee, you get to carry your health insurance benefit with you after you retire and the government still pays much of the cost. What about some of the gold-plated benefits programs in the private sector?

No doubt some still exist and some are much more generous than the federal system. But the reality is that the social welfare system of large corporations is collapsing. If, for example, you were a white collar worker at General Motors hired afer 1993, your health benefits do not follow you into retirement. And, as the company is dealing with rumors of bankruptcy and confronting the reality of retreating from being the world’s largest auto manufacturer into an also-ran behind some of the Japanese firms, it is also cutting back on health care spending for all other retirees who were salaried.

On top of that, the pension plan for these long-term employees is in trouble. GM may follow the airlines, Verizon, IBM and numerous other companies which have also made significant changes in their benefits program to save money and to try and survive in the global marketplace.

According to the Wall Street Journal, the percentage of companies with over 200 employees that now offer health insurance for their retirees is down to a little over 30%. In 1988, about 68% of companies offered this benefit. If you are considering a comfortable retirement, this is a significant change and it means that many of those employed in the private sector will be working at Wal-Mart for the “better benefits” while you, as a retired federal employee, will be shopping there at a time of your convenience.

In short, health care costs are a big problem for all Americans. Federal employees are fortunate in that the government is not going out of business, doesn’t have to show a profit and is not dealing with global competition in the marketplace in the sense that private companies must do. We don’t have the best plan in the country but it could be much worse. The taxpayers who are suffering job losses and decreasing benefits are continuing to pay for our health benefits plan which is increasingly superior to what most Americans get.

That still leaves the problem of how to deal with the increasing cost of the health benefits program. There is no simple solution.

The 900-pound gorilla of the federal health benefits program is Blue Cross and Blue Shield. It covers more than half of the people enrolled in the health program.

Here is a change that may impact you if you subscribe to the Blue Cross plan and if the proposal becomes a reality. The president’s proposed budget would allow Blue Cross and Blue Shield to add a high-deductible plan with a tax-preferred health savings account. In other words, it gives employees more options by adding the ability to have a higher deductible in return for lower premiums. For current federal employees, it also means the money can be “before tax dollars” through a health savings account.

The administration says that this change could save about $3.4 billion over five years.

So what is wrong with this picture, if anything? Why would anyone oppose a plan to save money and also offer employees more options?

As is often the case, there are other concerns as well.

The National Active and Retired Federal Employees Association (NARFE) says that the proposal is not a good idea. Charles L. Fallis, the president of NARFE, has issued a press release that says “We are troubled that ‘increased price competition’ could be code words for driving federal workers and retirees into the most basic and least comprehensive plans, forcing us to pay more out-of-pocket costs. It is no accident that health care policy experts believe the competition and choice available in the FEHBP makes it the best employer-sponsored health insurance system in the nation. It would be shame if the current market forces in the program were undermined by stacking the deck in favor of one particular type of plan.”

NARFE is concerned that the proposal will help younger workers at the expense of older ones and result in reducing the overall benefits of the health insurance program.

NARFE opposes any “plans to create separately rated health plans for Medicare-participating retirees and survivors. We remain concerned that ‘cost-conscious choices for retirees’ means encouraging, or even forcing, annuitants into HMOs or so-called ‘customer-driven’ options. And even worse, we suspect some would argue that retirees’ prescription drug coverage should get short shrift now that the Medicare drug benefit is in place.”

A large percentage of the federal workforce will be retiring in the next few years. These employees are going to be replaced by younger workers. The people retiring would like to keep the benefits that have been in place for some time. The younger ones will surely like the appeal of lower cost insurance and more options without having to foot the bill for the older retirees.

In short, the federal workforce is not immune from the cost pressures and changes in society that are impacting our ability to receive the highest quality health care possible. Private companies may go broke and cut back significantly on benefits prior to try and avoid being forced out of business. Uncle Sam is not going to go out of business anytime soon but a system that provides better health care for federal employees than other Americans are getting will not survive on the political battlefield either.

Watch what happens with this issue. There are likely to be winners and losers before the issue is resolved.

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