A FEDERAL APPEALS court has given Donald

Devine, director of the government's Office of Personnel Management, permission to postpone this year's "open season"--the time during which federal workers can shop among health insurance plans to find the one that suits their needs and pocketbooks. As a result, federal workers will have to absorb, at least temporarily, an average 40 percent increase in health insurance costs. Much of this could have been avoided by switching plans.

It may strike you as strange that an administration so committed to the rigors of the competitive market would find itself on the wrong side of the competition issue in dealing with its own employees. That curious position arises from a series of blunders beginning last August, when Mr. Devine discovered that some of the six largest government health insurance carriers were seeking such large increases that budget costs would rise by 30 percent. Because medical costs rose sharply this year, substantial increases could be expected. But, as James Doherty points out on the opposite page today, many plans--because of difference in operation and coverage--were proposing only modest increases and some were actually proposing reductions.

At that point, Mr. Devine could have chosen to negotiate only with the over-expensive plans. Better yet, he could have asked Congress to change the way the government's share of premium costs is set and then let workers decide how much insurance they wanted to buy and on what terms.

Instead the OPM director ordered most plans to cut premiums by increasing patient sharing in medical costs or by reducing mental, dental and other services that OPM felt were less important. Mr. Devine then confused things further by ordering that abortion coverage be stopped--a decision clearly based on considerations other than cost since abortion, whatever you think of its other merits, is clearly much less expensive than the alternative medical costs of childbirth and subsequent care.

Shortly after the plans were resubmitted, Mr. Devine decided that further savings were needed. On Oct. 14, he ordered an across-the-board cut in all plans--including the least expensive ones. A month ago, after losing court battles on both abortion coverage and the additional cuts, Mr. Devine canceled this year's open- season for changing plans. A big factor in this decision was fear that widespread switches out of the high-cost plans would jeopardize their financial stability.

The immediate losers from this mismanagement are federal workers. But there are larger losses as well. As Mr. Doherty notes, federal insurance plans should offer an ideal opportunity for the government to demonstrate better ways to encourage workers, insurance carriers and health care providers to limit unnecessary health expenses. So far, all that Mr. Devine has demonstrated are some of the worst ways.