The U.S. Court of Appeals yesterday cleared the way for the Office of Personnel Management to order a 6.5 percent cutback in 1982 federal employe health care benefits to carry out a $220 million reduction in the government's contribution to its workers' insurance coverage.
The appeals court decision, which affects about 340,000 federal workers in the Washington area, reversed a ruling by a lower court judge and found that OPM acted within its authority when it first ordered the rollback in October.
The appeals court rejected the lower court finding that OPM had failed to consider the impact on employe health benefits and said that the reduction order was issued "in a reasonable manner in light of the serious projected budget deficit caused by unprecedented increases in costs in the health benefits field . . . ."
Donald J. Devine, OPM director, said the appeals court decision "completely vindicates" his agency's efforts to keep a lid on rapidly escalating costs of federal employe health benefits.
OPM has been engaged in a running battle with employe unions and the federal courts in Washington over planned reductions in health care benefits. OPM spokesman Pat Korten said that, while the appeals court decision did not specifically order OPM to carry out the 6.5-percent cutback, "you can safely assume we will in fact carry it out."
Meanwhile, James M. Peirce, president of the National Federation of Federal Employees (NFFE) which first challenged the reduction in court, said, "Morale among federal workers will hit new lows when this news spreads."
Peirce said the union, representing 150,000 federal employes, expects to ask the full 10-member appeals court to review yesterday's decision. Peirce characterized the three-judge panel that made the ruling -- Judges Edward A. Tamm, George A. MacKinnon and Roger Robb -- as the "three most conservative members of the court."
U.S. District Judge Aubrey E. Robinson Jr. had ruled in October that OPM was required by law to consider the impact of cutbacks on health benefits available to federal employes, but had nevertheless admitted that the only consideration in the October order was to save money for the government.
Robinson's order pertained only to NFFE and the American Federation of Government Employees, which had filed a separate lawsuit, but another 15 lawsuits, on behalf of more than 60 of the 120 federal health insurance plans, were subsesquently filed in federal court here on the strength of Robinson's decision. Robinson then began issuing additional orders, blocking the 6.5-percent reduction, including one for Blue Cross/Blue Shield, the largest insurer of government employes.
The appeals court found yesterday, however, that there was considerable evidence that OPM did consider the interest of federal employes while trying to keep its contribution to the health insurance program within the $2.2-billion ceiling set by Congress.
The appellate judges agreed that some health plans may not have had enough time to consider how to make the reductions, which OPM had demanded they submit within 48 hours of the Oct. 21 cutback order. As a result, the appeals court told OPM to give the insurers seven days, until next Monday, to submit new or modified health benefit plans to conform to the 6.5-percent reduction.
After OPM considers the plans and finally approves them, it could set a date for the start of the so-called open season, an annual period when federal employes can shop around for health insurance coverge.