Two of the nation's largest federal employee unions announced yesterday that they will pull out of the health insurance business at the end of this year, leaving more than 20,000 civil servants to search for new insurance this fall.
The American Federation of Government Employees (AFGE), the largest of the federal unions, said the flawed nature of the government's health insurance program, under which 400 plans compete for members each year, made continued participation impossible.
The National Federation of Federal Employees (NFFE) said it too will abandon its insurance plan.
The government's health insurance program covers about 9 million federal workers, retirees and dependents, including about half the population of the Washington area, at a cost of $11.6 billion a year.
The union withdrawals, coming on the heels of the pullout of the Aetna Insurance Co. at the beginning of this year, add to the controversy surrounding the Federal Employees Health Benefits Program.
The Bush administration and Rep. Gary L. Ackerman (D-N.Y.) have proposed competing reform plans, but both face serious obstacles in Congress. The administration's program would shift $850 million in insurance costs to the beneficiaries; Ackerman's would cost taxpayers about $3.7 billion more than the current scheme.
John N. Sturdivant, president of AFGE, said the union's insurance plan was "not competitive any- more."
"We wanted to provide our members with the best and most comprehensive health insurance benefits available. . . . This meant that our plan was selected by those who most needed health insurance protection -- the sick, the elderly and families -- while younger healthy singles sought out cheaper, less comprehensive insurance.
"By enrolling those most likely to incur health care costs, premiums for AFGE's plan . . . have continued to skyrocket until it is no longer financially feasible for a federal employee to afford the benefits we offered," he said.
AFGE, which had 33,929 purchasers of its insurance five years ago, now has 18,341. These workers and retirees will be required to choose a new plan this fall.
NFFE now has between 2,500 and 3,000 enrollees, according to a spokesman, down from about 11,000 in 1987.
Office of Personnel Management (OPM) estimates show that the four largest federal insurance plans gained roughly 240,000 participants in the past three years while the union plans and Aetna lost about 310,000.
Curtis J. Smith, OPM's director of the retirement and insurance, said the unions "made a business decision."
Sturdivant said that the only way the union could have found an insurance company to underwrite its plan was to "offer less benefits."