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New federal employee health insurance option will mean savings for some, higher costs for others


Family coverage premiums in the health insurance program for federal employees and retirees will increase by 7 percent on average for 2016 because of the introduction of a new option covering only the enrollee and one family member. Meanwhile, current family plan enrollees who switch to that new option, called self plus one, will save 6 percent on average compared with current rates, the government projects.

The Office of Personnel Management plans to publish rules tomorrow that include those assumptions of how adding that option will affect premiums in the Federal Employees Health Benefits Program, separate from pending changes in premiums that occur year to year because of overall health-care costs.

In recent years, average premiums have increased by about 4 percent per year, although within that average, there is variation among plans — with some increasing more, others holding about steady and others decreasing. During an open season that this year will run Nov. 9-Dec. 14, employees and retirees may change plans or change levels of coverage for the following year.

Rates in the program for next year have not been announced — typically, that happens in late September after OPM and the insurance carriers finish negotiations over coverage and premiums — but for 2016 the addition of self plus one to the current options of self only and family coverage added a new factor that OPM is addressing first.

OPM said in an e-mailed statement: “The estimates that Self and Family premiums will rise by 7% and that Self Plus One premiums will be 6% less than Self and Family premiums were developed 2 years ago for the Congressional Budget Justification. They are used in the final rule for the purpose of modeling the potential effects of the new Self Plus One enrollment type. We will have more information on the differentials between enrollment categories when the 2016 rates are released.”

That report projected that adding the new option would have a neutral effect on program costs overall. However, it did not specify percentage changes among the options.

The option was added on the assumption that premiums would be lower than for family coverage and that family enrollees with only one eligible family member would benefit from switching to it — with the government’s cost for its share of the premiums decreasing, as well.

The rules reiterate that the new option, authorized in late 2013 and in development since, will not change who is eligible for coverage as a family member: spouses plus children under age 26, with no age limit for those with a disabling condition occurring before that age. That means, for example, that domestic partners will remain ineligible.

Employees and retirees with only one eligible family member have long argued that their family premium costs unfairly subsidize those with multiple eligible family members. Meanwhile, the latter group has expressed concern that family premiums “would rise dramatically” once two-person households switch to self plus one, OPM said in its notice.

However, the rules note a counterargument that self-plus-one premiums actually could be higher than family premiums as retirees make up a disproportionate share of family enrollees with only one eligible family member and older persons tend to consume more health care.

To prevent that from happening, OPM earlier this year set a one-year policy that a plan’s total self-plus-one rates cannot exceed family rates. However, because of the way the premium-sharing formula works, it is possible that the enrollee share of some plans for self plus one will exceed the family rates, OPM added.

As part of the rule-making process to launch the self-plus-one option, OPM was required to project the economic effect regardless of such uncertainty. It said there currently are 4 million FEHB enrollments, covering 8.2 million people, with 1.9 million of those enrollments for self only and the other 2.1 million for family coverage. Of the family enrollments, about half currently cover only two persons, and of those two-person enrollments, about 60 percent are retirees.

It projected that a third of active employees, and four-fifths of retirees, who currently have family coverage will switch to self plus one.

Many other complications could come into play, OPM added, including some employees who currently aren’t enrolled in the FEHBP because they have access to other health insurance choosing to join the program; or current self-only enrollees upgrading to self plus one by adding a spouse who currently gets coverage elsewhere.

The bottom line, OPM said, is an assumption that the “average premium for self plus one coverage will be approximately 94% of the cost of existing self and family coverage” and the “average premium for self and family coverage will be approximately 107% of the cost of existing self and family coverage,” the notice says. It made no projection regarding an effect on self-only coverage premiums.

The rules also cover numerous technical considerations, including situations in which enrollees may change levels of coverage outside of an open season because of life events such as marriage or divorce.