The federal employes' health insurance program, which helps pay the medical bills of 10 million Americans -- including nearly half the population of the Washington area -- is itself a candidate for the intensive care unit, according to a wide range of specialists.

What was praised 10 years ago by Stanford University Prof. Alain C. Enthoven as an exemplar of competition in health care has degenerated into a bewildering hodge-podge of 430 insurance plans.

"The Federal Employees Health Benefits Program, once a model for health care coverage, is on the brink of a major crisis," said Michael Schneider, author of a new book on the federal health insurance system. He estimates the system annually costs $2 billion more than it should.

"Twenty-five years ago two fee-for-service plans, Blue Cross and Aetna, with two options each (high or low), provided federal and postal employes with excellent medical care coverage," Schneider wrote.

Now, individual workers must choose from among as many as 40 competing health insurance plans available in some localities every year during an open season, which this year runs from Nov. 9 to Dec. 11. To make their choice, they rely on one of two $6 consumer guides, or slog through insurance brochures that are written in almost impenetrable language, or pick a sentimental favorite.

The multiplicity of options has bred plan-hopping. Having surgery? Join a plan that covers 100 percent of costs. Expecting psychiatric bills? Move into the one of the few plans that covers them. Need dental work? Switch into a plan with dental coverage.

Plan-hopping "violates the basic principle of insurance, which is the sharing of risk," Schneider said.

But workers are doing just that. And the resulting pressure on the health insurance companies has helped to drive up the cost of the average plan 31 percent, as much as $1,000 for the coming year alone.

Young, healthy workers who do not expect to need top-of-the-line -- and high-cost -- insurance have fled in droves to more modest health plans. That has left some of the most comprehensive plans full of the old and the sick, forcing their costs up.

Every year since 1981, enrollment has sunk in the Blue Cross-Blue Shield high-option plan until its makeup is 74 percent retirees, according to the Office of Personnel Management. As a result, the Blues raised their high-option premiums $800 this year -- to $2,700 annually -- to cover costs.

Most of Blue Cross-Blue Shield high-option customers, who are having $105.35 deducted from their checks every two weeks, are retirees, whose typical annual pension is $13,500.

The Blue Cross-Blue Shield standard-option plan has less than half retirees, according to OPM, and, while offering almost as generous benefits as the high-option plan, is far less costly.

Competition, instead of lowering costs, has "segmented" the market, in the view of James Gillman, vice president of the Blue Cross-Blue Shield Federal Employees Program.

"Risk selection" is what this phenomena is called and, according to specialists, the government actually contributes to it through its scheme for subsidizing health insurance costs.

The Federal Employees Health Benefits Plan "is not the competitive cost-containing insurance program people think it is," said OPM Director Constance J. Horner. "It is wasting too much money."

The payment strategy is complicated, but important. The government pays 75 percent of the cost of each plan up to a maximum. Some plans cost so much more than the maximum that the worker or retiree must pay fully half of the cost. Indeed, that is how cost-sharing is supposed to help drive down the cost of health care: by nudging workers toward cheaper insurance.

But what has happened, some specialists said, is that competition, instead of focusing on price, has led plans to lure healthy workers and repel the sick or the old.

At the same time, the expense to the government, which was $4.6 billion last year, is inflated because the maximum payment is based on a formula heavily weighted toward some of the high-cost plans.

Underlying all this is an unusual aspect: The federal health insurance system allows retirees to stay in the program after they leave the government, despite retirees' higher average medical costs. There is no sentiment in government for change on this point, although retirees now make up 38 percent of all customers and their numbers are growing rapidly while the work force's size remains stable.

OPM has hired consultants to study the program and to make recommendations early next year.

The multiplan program has its defenders. Walton Francis, author of the Checkbook consumer guide to health insurance plans for federal employes, said, "I think a very substantial argument can be made for keeping the system just the way it is. Why should some consumers subsidize the more expensive tastes" of those who want the broadest possible coverage?

Virtually all the money paid as premiums, Francis argues, goes toward paying medical bills; administrative costs are relatively minor. So if costs are rising, he said, that means workers are using more medical services.

As for the issue of risk selection, it is a religion to many federal workers. They see no reason why they should subsidize the higher costs of others.

Entire plans have been established to provide low-cost, top-quality coverage for selected groups of federal workers who are the best risks. It is no coincidence that the U.S. Secret Service Employees Health Association plan is the highest rated plan in the Checkbook consumer guide. The Secret Service has medical standards for employment, and the association plan is open only to Secret Service employes and retirees.

Enthoven scorns this practice as "social Darwinism. We are not running a system just for the healthy and wealthy. Most illness is involuntary misfortune. It is wrong for the sick to have to bear great expense because they're sick."

"I am opposed to the bewildering array of plans," he said. "They cost time, which is money."

"Too much choice is the same as having no choice," said Schneider, author of "Selecting the Right Federal Health Plan."

Francis argues that "it is easy to exaggerate the difficulty" of choosing plans. The greatest proliferation of choice has come from health maintenance organizations (HMOs) that are open only to employes in specific geographical areas. And they are an attractive option for many. Eighteen percent of all federal health plan beneficiaries now choose HMOs; that is an increase of 13.4 percent over last year.

Politics and economics encourage the creation of more and more plans. A federal employe union, for example, can charge "associate member" dues to every member of its health plan.

The National Post Office Mail Handlers, Watchmen and Messengers union, which has roughly 50,000 members, provides insurance for 488,500 federal workers and retirees. The union's $30 per associate membership provides at least $13 million in revenue from "members" that do not require representation in collective bargaining.

But union plans can also run into trouble. The National Treasury Employees Union, whose health insurance was set up primarily as a benefit for its members, killed its high-option plan this year after "risk selection" did it in.

"It priced our high-option plan right out of the market," said Terry Hale, director of the union's health coverage. "Last year, our high-option plan was one of only two governmentwide plans that paid 100 percent surgery" costs. "As a union, we believe in it," he said.

"We went up 180 percent in enrollment. Of the new people who joined our plan, 57 percent had surgery in the first three months of the year."

When last year's open season rolled around, Hale said, most of them dropped out.