This could come from the “why mess with a good thing” department.
The Obama administration is considering fundamental changes to the Federal Employees Health Benefits program (FEHB), which is generally regarded as something Uncle Sam does right.
Joe Davidson
Joe Davidson writes the Federal Diary, a column about the federal workplace that celebrated its 80th birthday in November 2012. Davidson previously was an assistant city editor at The Washington Post and a Washington and foreign correspondent with The Wall Street Journal, where he covered federal agencies and political campaigns.
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Yet, the Office of Personnel Management (OPM) thinks the good thing could be even better by giving workers more choice in health insurance companies. The OPM wants to do that by reviving legislation proposed during the George W. Bush administration.
“While the FEHB model has withstood the test of time and influenced the direction of health reform, the competitive environment is not as robust as it could be,” says an unsigned OPM briefing paper obtained by The Washington Post. “The health insurance market has changed dramatically over the last 50 years, but . . . the FEHB program lacks the flexibility to adjust in response to the changing market.”
Specifically, the OPM paper, which has circulated recently among congressional and industry officials, expresses concern about the growing dominance and market concentration of Blue Cross Blue Shield and the departure or diminished role of other health plans. The OPM did not respond to questions about the paper. Four government and industry sources attributed it to the agency.
The OPM is getting an assist, perhaps unintended, in its argument from Health Affairs, a health policy journal. In a June article about health exchanges under the Affordable Care Act, Health Affairs says that although insurance plans are widely available in FEHB, “enrollment was concentrated in plans owned by just a few organizations, typically Blue Cross/Blue Shield plans.” Health insurance premiums, the article continued, were lower “where competition was extremely high” and higher “where competition was extremely low.”
Two Blue Cross Blue Shield plans, standard and basic, together serve about 62 percent of the federal employee market. The next five largest plans cover 22 percent. In 1987, the Blues had 37 percent, about the same portion as the next five largest plans.
At the same time, other companies are fading from the FEHB scene. United Healthcare, for example, operated in 21 states in 1999, according to the OPM, and seven in 2010.
But, as you might expect, this is fine with Blue Cross Blue Shield, which takes an “if it ain’t broke, don’t fix it” attitude. OPM and Blue Cross Blue Shield competitors, however, see danger in concentration.
“It is well documented that health insurance markets are becoming increasingly concentrated and that this concentration is contributing to premiums rising faster than inflation,” the OPM paper says.
The OPM would like congressional authority to offer the option of health plans provided by regional preferred providers such as Aetna, Cigna, Humana and United Healthcare. “Allowing OPM to negotiate with these organizations as regional entities will enable them to participate in the most efficient and effective way while at the same time providing FEHB enrollees with greater choice,” the OPM said.
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