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Warning: Health coverage for two can cost more than for larger families for thousands

Federal Diary

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When you buy health insurance for just you and your spouse, you expect the policy to cost less than one covering a family with two parents and a bunch of kids.

So some folks were startled to learn that the new “self plus one” option in the Federal Employees Health Benefits (FEHB) program can be more expensive than family coverage, depending on the company. This option allows enrolled federal workers and retirees to purchase health insurance for themselves and one eligible family member.  Open season, when health plans can be chosen, begins Monday and runs through Dec. 14.

With health insurance costs for FEHB participants rising by an average of 7.4 percent next year, the most since 2011, enrollees are looking for any break they can get. Unfortunately for older people, health-care expenses rise with age and they are more likely to want self-plus-one policies.

[Federal health-care plan costs to rise by most in five years]

“There was both disappointment and anger that the new enrollment didn’t save them that much in premiums,” said David Snell, director of federal benefits services for the National Active and Retired Federal Employees Association. He attributes the costs largely to age demographics.

After Peter Storm, a FEHB participant in Vienna, Va., studied his options, he urged the Federal Diary to “please warn your readers not to automatically enroll in self plus one just because the logic would lead to the conclusion that it would be cheaper. Something is very wrong here.”

Terry Norman of Marfa, Tex., also was surprised, because plus one is so much more expensive than self-only coverage in his plan.

“I learned a few days ago that the self plus one would be more expensive than I assumed it would,” said Norman. He and his wife are retired from the Border Patrol. “I figured it would be a few dollars more than the self-only option.”

But when he discovered that the Blue Cross Blue Shield charge for self plus one “was only $15.01 less than the self and family, and $284.11 more than the self-only option, I was very unhappy.”

Contrary to Storm’s view, there really is nothing wrong here. The cost differences “would not surprise anyone who knows anything about health insurance,” Walt Francis said Saturday. He knows a lot of things about health insurance, particularly for feds. Francis is chief author of Checkbook’s annual Guide to Health Plans for Federal Employees & Annuitants.

Many people don’t know as much as Francis, so we asked the Office of Personnel Management to explain why coverage for two people can cost more than coverage for a larger family.

“There is a limit to how much the government will contribute towards the cost of a Self Only, Self Plus One, or Self and Family enrollment,” John O’Brien, OPM’s director of health care and insurance, said by e-mail. “The government contributes the lesser of the maximum contribution or 75 percent of the total premium. The remaining amount is the enrollee share (how much the enrollee must pay). In some cases, such as plans with a premium cost that is above the program average, this calculation may result in a higher enrollee share for a Self Plus One enrollment than a Self and Family enrollment.”

“Some cases” apply to only about 5 percent of the enrollees. Still, 5 percent is a lot of people – about 410,000 of the 8.2 million federal workers, retirees and family members covered by FEHB. How much more, on average, could self plus one cost for them?

“We have not done a calculation of how much more expensive on average [are] those plans where S+1 is more expensive,” an OPM statement says, “because in those cases, we think the enrollee should not chose that option.”

The reason for the price has a lot to do with age.

To be blunt, older people are expensive. Insurance is more costly for them because they need much more health care than younger folks. Family coverage can be priced relatively cheaply because children and younger adults need fewer services and don’t cost as much to cover as grandma and grandpa. Many people choosing self plus one are older couples whose kids are grown and gone.

“They cost a lot more than a 20-something,” Francis said. “It’s amazing it [self plus one] is only twice as high” as self-only policies.

The choices employees and retirees make during open season will take effect in January. For 2016, they can choose from 252 health plans. OPM said its negotiations with insurance companies “were geared to keeping premium increases as low as possible without asking enrollees to pay substantially more money out of their pockets each time they need health care.”

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

OPM acknowledged, however, that “federal workers generally pay a higher premium share than those in the private sector, but they have more choices among plans.”

As in all cases, it pays to do some homework and shop around.

“If S+1 is more expensive than family and the individual wants to stay in that plan,” OPM said, “they should chose the family coverage option.”