Assessing health-care costs

Joe Davidson
Tuesday, October 5, 2010; B3

The good news is that the price federal employees and retirees will pay for their health insurance next year won't go up as much as premiums did this year.

The bad news is that the 7.2 percent increase for 2011 is much greater than inflation or any pay increase or cost of living adjustment they might get.

The other news is that employee organizations say premiums in the Federal Employee Health Benefits Program could be lower if the Office of Personnel Management would stop refusing a subsidy.

"FEHBP premiums could have been lowered if it were not for the Administration's decision to decline a payment available to other public and private employers who provide drug coverage as generous as Medicare's," National Active and Retired Federal Employees Association President Margaret L. Baptiste said in a news release Friday. "Once again, this year, the Administration left $1 billion on the table - a subsidy available to and accessed by private employers in the marketplace, which could be used to lower worker and annuitant premium costs."

The subsidy was created in 2003 to encourage employers - including Uncle Sam - to keep their retiree prescription drug coverage even though a new Medicare prescription program had been created.

Sounds good at first blush, but federal organizations should be careful what they ask for.

Given the current climate in which Republicans are pushing for caps on federal employment and pay, drawing attention to a strong compensation package by saying it should be further subsidized could backfire. That may be one reason other employee organizations are not making a big issue out of the subsidy.

The Bush and Obama administrations have rejected past calls for OPM to accept the money. In response to several organizations that asked OPM Director John Berry about the subsidy last year, he wrote that federal employees could do without the subsidy "because there is no plan to eliminate drug coverage for Federal retirees."

Furthermore, he wrote, "applying for the subsidy is administratively costly and burdensome, lowering the net return for applicant organizations by approximately 20%."

But NARFE points to a 2006 Government Accountability Office study that said the subsidy could lower premiums.

"Officials from two large plans with higher-than-average shares of retirees stated that the subsidy would have lowered their plans' premium growth - officials from one plan claimed by at least 3.5 to 4 percentage points for their plan," GAO reported. "We estimated that the subsidy would have lowered the growth in premiums across all FEHBP plans for 2006 by more than 2 percentage points on average, from 6.4 percent to about 4 percent."

In the context of health insurance prices leaping faster and higher than other products and a health insurance system that still can't control costs, federal employees get a relatively good deal even without the subsidy.

"The rates are actually much lower than our counterparts in the private sector," Berry told my colleague Ed O'Keefe on Monday. "You also have to factor in that we're providing three [new] benefits this year, so we're increasing the benefits while our rate increase is lower than it is in the private sector." OPM expects premiums for private-sector plans to rise between 8.9 percent and 10.5 percent.

FEHBP for the first time will cover the children of enrollees up to age 26, and fully cover the costs of preventive care services and tobacco cessation classes.

"Look, I wish there were no increase - so does everybody - but the fact of the matter is health-care costs are still going up around the country," Berry said. "The fact that they're going up less is a good sign for our employees, and I think it's a testament to the quality of the staff we have at the Office of Personnel Management who negotiate those rates with the private sector. They did a great job, and I'm extremely proud of them."

Manager of the year

The Federal Managers Association named Carolyn D. Bohlen as the winner of the organization's Manager of the Year award.

Bohlen is acting director of the Office of Civil Rights for the Environmental Protection Agency's Region 5. She has been with the EPA since 1987.

In announcing the award, the association said Bohlen "has enhanced the opportunities for staff and managerial training, skills development, career advancement, and diversity for the betterment of the organization through her outstanding achievement in redesigning and rewriting the Region 5 Mentoring Program, its application form, and the Region 5 Mentoring Manual. . . . This effort went well beyond the responsibilities of her immediate position."

Added association President Patricia Niehaus: "Carolyn exudes the mission of FMA, advocating excellence in public service, through her work at EPA. She took the initiative to resuscitate the agency's mentorship program, having learned the benefits a strong mentorship program can provide to rising employees. Combined with her selfless charity work and desire to give back to her community, Carolyn is an example to us all."

Staff writers Ed O'Keefe and Eric Yoder contributed to this report.

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