About Those 2015 Health Insurance Premium Rates

The average cost of health insurance premiums for 2015 is going up 3.2% according to OPM. How does this compare to the private sector?

The director of the Office of Personnel Management (OPM), Katherine Archuleta, wrote on a website posting this week that “I am excited to announce that the overall average premium increase for employee health benefits provided through the Federal Employees Health Benefits Program will be 3.2 percent for 2015.”

Her note also states: “The health insurance increase means employees with self-only coverage will pay an average $2.93 more in each bi-weekly pay period. Employees with family coverage can expect an average increase of $6.89 per pay period.” In 2015, there will be 257 health plans available under the federal program. 11 of these programs are available nationwide.

Predictably, some of the first notes we received from several readers were along the lines of: “Where did you come up with only a 3.2% increase in health insurance? My health insurance premium is going up a lot more than that. Get your head out of the sand.”

This is a similar response from some readers each year when the new health insurance rates are released. The 3.2% figure is provided OPM. Since that is an average, some plans are going up more than that and some insurance rates will actually be reduced. And, what may be more important than the cost to federal employees for their health insurance, everyone would be well advised to check out any changes in the coverage provided by your existing insurance plan and how your current plan compares to others available in your geographic area.

In 2014, the “Open Season” for health, dental and vision insurance, as well as for the flexible spending accounts, will be from November 10 to December 8. During open season, employees and retirees should review their current plans and make any changes for the following year. Eligible employees who are not currently a part of Federal Employee Health Benefits Program (FEHB) can also enroll in this program during the open season.

What About Self Plus One Insurance?

A question that is also arising from some readers is: “What happened to the ‘self plus one insurance option that we were promised?”

The self plus one option will be available during the 2015 open season and will become effective in 2016—not in 2015. No doubt, many readers are hoping this new option will save money as a couple is now paying the full family rate just as a family with several children pays under the FEHB. We do not know how much less the “self plus one” option will save but, presumably, it will be less expensive and save money each year for couples who do not have children.

Are FEHB Rates Going up More than in the Private Sector?

Some readers state that federal contractors have all of their health insurance paid for by their company and that it is not fair for federal employees to pay a fee for their health insurance. Other readers comment that many private sector employees do not have to pay for their health insurance and that federal employees are being treated as “second class citizens.”

The average increase in cost for health insurance in the private sector, according to a report from PricewaterhouseCoopers, is going up 6%. In at least one state, the amount of the increase is more than 10% for next year. Moreover, the 6 percent average increase tracks “very closely what the average [premium increase] is in the employer-based market,” which is where most Americans obtain their health coverage. 

Those of us in the federal community have several advantages in the health insurance arena. We are not required to enroll in what are often referred to as “Obamacare exchanges.” We can remain within the federal employee health benefits program where the changes are less dramatic than in some private sector plans.  The average cost of health insurance is going up less under the FEHB than for many in the private sector. We are also largely insulated from a number of unknown factors that are impacting many Americans. It is projected that up to 115,000 people who have signed up under the new health care program may lose health insurance coverage for not meeting some of the requirements and another 336,000 people are at risk of losing federal subsidies to pay for that coverage.

And, unlike the approximately 6 million Americans who lost their existing insurance because their plans fell short of the insurance that the law and agencies within the federal government determined to be appropriate, federal employees are not losing their health insurance coverage as a result of changes in the health insurance laws and regulations emerging from the federal system. Many middle class Americans have been surprised by substantial increases in their health insurance costs. At the same time, the cost to the government for the new health care law is estimated by the Congressional Budget Office to be about $1.4 trillion over a 10 year period.

The federal government pays up to 75% of the cost of health insurance under the FEHB. While no one likes to see the cost of health insurance going up, that subsidy for health insurance paid by Uncle Sam is a major benefit for the approximately eight million federal employees, retirees and dependents that use the FEHB.

Health Insurance and a Federal Employee Pay Raise

Federal employees received an across-the-board pay raise of 1% in 2014. A similar raise is expected for federal employees in 2015. At the same time, the cost of health insurance increased by an average of 3.7% in 2014 and going up another 3.2%, on average, in 2015. In 2013, health insurance under the FEHB went up an average of 3.4% when there was no across-the-board pay raise.

So, for those who believe that the cost of your health insurance under the FEHB is going up more than your pay raise, you are probably correct although for some the hit may be less of a problem as the 1% pay raise figure does not include pay increases due to within-grade increases, promotions, etc.

Economic prosperity has been hard to come by for many and federal employees have certainly suffered from an economic hit as there was no annual federal pay raise from 2011 until 2014. The median salary for federal employees in 2013 was $73,736. In fiscal year 2012, the median federal salary was $72,714—a difference of $1022 or an increase in one year of about 1.4%.

On the other hand, to put the economic status of the federal workforce into perspective, federal employees and retirees are not alone in noticing the lack of economic advancement as many Americans have also suffered an economic hit due to a slow economy. The median American annual household income rose 0.3% in 2013  (about $180) to an inflation-adjusted $51,939, according to the U.S. Census Bureau. The 0.3% increase leaves median household incomes at $51,939 or around 8% below their level of 2007. Since the recession ended in 2009, median incomes are down 4% or back to levels last seen in 1996.

In short, while no one likes to see an increase in health insurance costs, the rapid rise in insurance costs for those under the FEHB has slowed and federal employees still have access to a valuable health insurance program with significant subsidies from Uncle Sam by virtue of being current or former federal employees. (See Retirement Myths: FEHBP Enrollment)  In addition, new features and benefits have been added to the FEHB which adds to the cost for everyone including those that do not have need of any of the new benefits.

Keep in mind that insurance coverage under a plan may change from year to year. It is possible that your current plan does not have a significant increase in rates or that the rate will go down. It is also possible that the coverage offered by that plan has changed. Depending on your individual circumstances, these changes could be significant and every reader should check to see what changes will be effective for your plan in 2015.

You can search through the 2015 insurance premiums under the FEHB at FedsDataCenter.com.

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