President Reagan vetoed a bill yesterday that would have authorized health insurance firms to give refunds ranging from $20 to $400 to more than 2 million government workers and retirees, including 300,000 in the Washington-Baltimore area.
Reagan said he "fully supported" giving refunds to federal retirees, but would not sign the bill because of a feature added by the House that would "add to government personnel costs" even as federal agency budgets have been cut by the Gramm-Rudman-Hollings Act.
Congress approved the bill authorizing the refunds in mid-December. But the version it passed contained language by Rep. Mary Rose Oakar (D-Ohio) to raise the government share of health premiums starting in April. The government can now pay up to 75 percent of the premium. But under the complicated formula the government uses to determine the premium split, the government actually pays 61 percent of the premium for the typical worker and retiree.
Oakar's provision would have removed the ceiling on government premium payments and made it possible, in some cases, for the government to pay most or all of the total premium for some people with low-cost plans.
Premiums paid by workers and retirees now range from a few hundred dollars a year to nearly $2,000, depending on the plan chosen and coverage offered.
The refunds were proposed last spring by Blue Cross-Blue Shield, the nation's largest health insurance company.
The firm said it had experienced a big buildup in financial reserves because employes and retirees were not using their insurance as much as in past years and were paying a bigger share of their own medical bills.
After the Reagan administration endorsed the refunds, six other health plans said they also would be giving refunds on 1985 policies. Most of the refunds -- estimated at more than $1 billion -- would go to the government.
But the Justice Department said that while refunds were permissible for civil service workers, Congress would have to pass special legislation to allow retirees to get them. Insurance companies said they would delay making any refunds until all eligible policyholders -- workers and retirees -- could get them.
The federal employe health benefits program is the nation's largest "company" health plan. It helps pay the medical and hospital bills for about half the people in the Washington area, ranging from members of Congress to government clerks and their families.
Insurance companies now have two options in light of the veto: They can wait for Congress to approve another refund bill that ensures that retirees also get checks or they can go ahead and send out refund checks to current federal employes. That effort, however, is also in doubt because Blue Cross-Blue Shield is being sued by a group of former federal policyholders. They maintain they should get a portion of the refund, which is now offered only to 1985 policyholders, because the drop in insurance usage began as early as 1983.
An aide to Oakar expressed "shock" at the veto and said he expected she would try again to get refund legislation through Congress.
Ludwig Andolsek, president of the 500,000-member National Association of Retired Federal Employees, said, "If the president doesn't object to refunds, I hope he will give us another chance to get a bill through Congress that deals only with refunds."
In addition to Blue Cross-Blue Shield, health plans offering 1985 refunds include the National Association of Letter Carriers, Aetna, Foreign Service Plan, Government Employees Benefit Association, Government Employees Hospital Association and the American Federation of Government Employees.