Federal health insurance premiums are expected to go up an average of 10 percent in January, just when retired federal workers will be getting an estimated 2.1 percent cost-of-living adjustment.

Many retirees have done the math and concluded that their tiny COLA will be swallowed up by higher insurance costs.

But federal officials who monitor federal annuities and health insurance premiums say the situation is not quite so bleak. The problem is that some people are comparing apples and oranges and getting sour grapes.

The average federal annuity is $1,665 a month, according to the Office of Personnel Management. A 2.1 percent increase would amount to almost $35 before deductions.

Most retirees are in the Blue Cross standard option health plan. The retirees now pay about $60 a month for single coverage and $135 a month for family coverage. A 10 percent increase would amount to $6 for single coverage or $13.50 for family coverage.

Moreover, federal retirees don't have to sit still for a premium increase. They have options. Federal workers and retirees in the Washington-Baltimore area can choose from about 22 plans. Some will increase premiums next year. Some will lower them. A few will remain the same.

Health premiums this year went up an average of 10.2 percent from 1998 rates. At the same time, retirees got a 1999 COLA of 1.3 percent. But even with the big premium jump, OPM said the average premium for retirees went up about $6.50 a month. The increase was more for those who stayed in high-cost plans and less--if any--for those who switched to a plan with lower premiums.

OPM data show that in dollar terms, retirees who were in the Blue Cross standard option plan paid about $3 a month more this year; the increase for the high-option plan was just over $4 a month.

Next year, some retirees--those with modest annuities who are in high-cost health plans--will wind up with annuity checks that are smaller than they were this year because of increased deductions for health premiums. That would be especially true for a retiree or survivor with a small annuity who remains in the very expensive Blue Cross high-option plan.

Health insurance experts Bill Smith, of the National Association of Retired Federal Employees, and Walton Francis, who writes the Washington Consumers' Checkbook federal health plan guides, urge people to steer clear of the high-option plan. The coverage is excellent, they say, but the premiums are too high.

Annuity increases for retirees are based on the rise in the cost of living (as measured by the consumer price index) from the third quarter (July, August, September) of one year to the third quarter of the next. Federal civilian and military retirees and those under Social Security get the adjustment beginning in their January checks.

The exact amount of next year's COLA will be known sometime next month. The health insurance premium changes for next year also will be known by then.

Federal retirees--and federal workers--who find that their health premiums will be too high next year will have the opportunity to change plans during the open season that will be held from late November through early December.

Although the small COLA (indicating low inflation) worries many retirees, it will still be enough--for most--to more than cover health premium increases.

Union Notes

* Members of the National Treasury Employees Union have ratified a five-year contract with the Food and Drug Administration. NTEU President Colleen M. Kelley said the agreement--to be signed next month--covers about 5,000 FDA workers nationwide.

* The Small Business Administration has signed a new contract--its first in five years--with the American Federation of Government Employees. Both sides describe the agreement--which like most other federal agency contracts does not cover wages--as "family-friendly."

Unions have taken advantage of Clinton administration directives to federal agencies to enter into partnership agreements with unions wherever possible. The White House has shaved pay raises promised employees and eliminated more than 300,000 federal jobs. But the emphasis on partnership--designed to give workers more input in working conditions--has successfully kept many of the unions in line.

Spend It or Lose It

Because the fiscal year ends Sept. 30, many savvy government contractors are pressing federal agencies to sign up and shell out for goods and services. In many cases, if agencies don't spend money allocated to them, their budgets can be reduced in future. Hence the use-it-or-lose-it practice, which is also popular in many private-sector organizations.

Mike Causey's e-mail address is causeym@washpost.com

Thursday, Sept. 2, 1999