BLUE CROSS-Blue Shield has been singing the blues. In recent years the largest health insurer of federal workers has been plagued by sharply rising costs and declining enrollments. It even worried that it would have to drop out of the federal program entirely. Now, thanks both to larger trends in medical care and to corrective factors within its own system, Blue Cross-Blue Shield is offering -- it isn't final yet -- to return more than $750 million in excess reserves to the federal Treasury and to subscribers within the civil service.
Because of its large size, the federal government has always been able to offer its workers a broad range of health plans. But until recently most government workers and, especially, retirees opted for the broad coverage provded by Blue Cross-Blue Shield's high-option plan despite its somewhat higher cost. All that changed a few years ago when soaring medical prices drove premiums sky-high, and the Reagan administration, in a budget-cutting move, ordered its health insurers to cut benefits.
Federal workers pay a much higher share of the cost of their medical insurance than most private workers. As premiums in the more generous plans -- notably the Blue Cross-Blue Shield's high option -- shot upward, hundreds of thousands of workers shifted into lower-cost plans. These cheaper plans require workers to bear a larger share of medical expenses themselves so that patients have a greater incentive to economize on medical care. Other cuts in federal compensation, as well as continuing threats of layoffs and demotions, also prompted many workers to economize on health- care expenses.
For a time the flight out of high-cost plans only aggravated the insurer's troubles. People who stayed in the comprehensive high-option plan tended to be those, such as retirees and large families, with big expected medical expenses, so average costs in that plan rose. Moreover, since people moving from high-to lower-coverage plans tended to be bigger users of medical services than those already choosing low coverage, average costs rose in the lower-cost plans as well. In the last year, however, high-and low-option Blue Cross plans have experienced substantial savings, especially from fewer and shorter hospital stays.
The general slowing of medical price increases has been a major factor in these savings. But the fact that both Blue Cross plans now require patients to pay a larger share of hospital and other costs has certainly helped. Company officials also credit the general trend away from in-hospital surgery and treatment and greater public awareness of health-care costs and options. Government policies setting fixed limits on hospital costs for Medicare patients may also have helped make hospitals and doctors more cost-conscious with respect to all patients.
It's dangerous to read a trend from one year's data, but the savings will certainly be welcome to the administration, which can rightly feel that its drive for medical economy is paying off.