The Clinton administration will announce tomorrow that health insurance premiums for federal employees and retirees will rise an average of 9.3 percent next year, the third consecutive year of substantial rate increases by the nation's largest employer-sponsored health plan.
The Office of Personnel Management, which administers the health plan, said spending on prescription drugs and expanded use of technology in hospitals and doctors' offices account for the bulk of the rate increases.
The OPM's director called the three-year run of premium increases unacceptable and said she will ask Congress to give her agency the power to tighten program standards and to more effectively control costs. In an interview, director Janice R. Lachance said, "Anyone who looks at the steady increases that this program has experienced has to come to the conclusion that something bold and dramatic must be done."
The Federal Employees Health Benefits Program (FEHBP) estimates that, nationwide, the total premium will be about $18 billion next year. The FEHBP provides coverage to approximately 9 million federal workers, retirees and their families worldwide, including 803,647 people in the Washington area.
About 300 health plans participate in the FEHBP. Seven are fee-for-service plans available worldwide and the remainder are health maintenance organization plans and point-of-service plans that operate on a local basis. In the Washington area, federal employees may choose from 15 plans during an annual "open season," which this year will run from Nov. 8 to Dec. 13.
The government pays 72 percent of the average premium. The average FEHBP enrollee with self-only coverage will pay $33.04 every two weeks -- $2.94 more than in 1999. An enrollee with family coverage will pay $71.76, or $7.09 more.
In recent years, the bulk of federal workers and retirees have enrolled in Blue Cross and Blue Shield plans. The OPM said the biweekly "standard" coverage premium for individuals will rise by $2.22 to $30.04 next year. For families, the standard coverage premium will go up $4.46, to $66.78.
The biweekly premiums of Kaiser Permanente, a popular HMO in this area, also will rise. Individual coverage will go up $1.67, to $23.50 next year. Family coverage will increase $2.83, to $58.10.
Not all FEHBP plans will raise their premiums in 2000. The George Washington University Health Plan, for example, will reduce the amount enrollees pay biweekly for individual coverage by $9.68, to $24.36. Family coverage will drop $8.78, to $62.91.
In the interview, Lachance said she fears that marketplace competition no longer holds down premium increases. FEHBP premiums increased by 9.5 percent in 1999 and by 7.2 percent in 1998. Rate increases slowed earlier in the 1990s, hitting a low of 0.3 percent in 1996.
The announcement of the premium increases comes just days after Congress approved a 4.8 percent pay raise next year for federal workers. That amounts to $2,856 for the typical white-collar government worker in the Washington area and raises the average annual salary to $62,365. On average, the health insurance premium for family coverage will rise $184, to $1,866.
Federal unions in recent months have pressured the OPM to step up its efforts to contain health care costs, arguing that the premiums have become so expensive that as many as 200,000 federal employees choose to go without insurance.
Bobby Harnage, president of the American Federation of Government Employees, called the premium increases "too high" and "just not acceptable."
"I think we can do better, and we have to do better," Harnage said.
Lachance said she plans to consult with insurance companies, federal unions and members of Congress on legislative proposals that could slow premium growth.
She said the OPM will ask Congress next year to allow it to set higher standards for health care plans in the FEHBP. Under current law, health plans may enter the program if they meet minimum standards based primarily on state licensing and solvency requirements. The OPM wants to set performance standards on how quickly insurance companies resolve disputed claims and pay benefits.
Lachance also said the OPM wants the authority to contract directly with providers of certain benefits, such as dental care and vision care. OPM officials believe that the FEHBP's buying power would enable the program to save money by seeking discounted rates from such providers. Currently, insurance companies in the FEHBP contract separately to provide such benefits through their medical care plans.
At some point, OPM officials said, the FEHBP will study whether to carve out prescription drugs or other "cost drivers" for separate negotiations.
The 1959 law that created the FEHBP lists a broad range of services that should be provided to federal employees and requires the government to enter into contracts with health insurance companies. It does not allow the OPM to contract with providers of specific products or services, officials said.
FEHBP premiums often are harbingers of rate trends facing private-sector employers. Paul Fronstin, a research associate at the Employee Benefit Research Institute here, said he thinks the overall FEHBP increase "is in line" with what other large employers will face in the coming year.
"People are still not going to be happy with 9 percent, but if you think about it, in terms of growth rates, it is not indicating that health care costs are starting to increase faster and faster," Fronstin said.