If a House Budget Resolution proposal becomes law, federal retiree health insurance premiums could rise significantly over time because growth in the government’s subsidy would be limited to the increase in inflation.
“Federal retirees earned their retiree health benefits through years of hard work for this country. Shifting more of the cost of the premiums onto their backs now — when they have already entered retirement — fails to honor the commitments and promises made to them in exchange for their service,” said Richard Thissen, president of the National Active and Retired Federal Employees Association.
Linking the government’s subsidy to inflation sounds reasonable, until you realize that health-care costs rise much faster than the general inflation rate.
“As a rough estimate, it would raise annuitant premiums by about 2 percent a year more than they would otherwise rise,” said Walton Francis, a health-care economist and lead author of Checkbook’s annual Guide to Health Plans for Federal Employees. “After 10 years, that would be about a 20 percent increase in costs to annuitants.”
Jacqueline Simon, policy director of the American Federation of Government Employees, predicted FEHBP would be “vastly more expensive for retirees” under the House plan.
Currently, the government pays about 70 percent of federal health insurance premiums, while enrollees pay 30 percent. Under the House plan, that could flip, Simon said, with employees and retirees paying 80 percent of their health insurance costs after 20 years.
“This proposal imposes substantial financial harm,” she added.
The retirees know it.
Linda Kurz, 77, who retired from the Veterans Health Service after 37 years, said the House plan “will probably at least double or triple my premium for standard individual coverage. … All of us need insurance because one never knows what lies ahead. I hope and pray that I don’t need more than occasional doctor visits and the least necessary medication for a long time.
“It will likely make federal recruitment more difficult. It is a shame that federal employees are repeatedly asked to fund reduction of the deficit or to fund the ‘wall’ or tax cuts including for those who earn more than enough.”
Joanne Pedersen, who worked for the Navy Department for more than 30 years, said she “was promised health care for life. It would create a great hardship should my premiums increase.”
Federal employees also were promised a good retirement program. But Trump’s proposal would undercut it by increasing out-of-pocket employee payments and decreasing retirement benefits.
The House plan would further deteriorate federal employee compensation by, in the words of the proposal, “basing Federal employee retirees’ health benefits on length of service. This option would reduce premium subsidies for retirees who had relatively short Federal careers.”
With the inflation and length of service provisions, “these two reforms would bring health benefits for Federal retirees more in line with those offered in the private sector.”
House Republicans think that’s a good thing.
Yes, federal benefits are better than many in the private sector. That comes with Uncle Sam’s desire to be a model employer. Instead of seeking better benefits for all, under the House plan Sam wouldn’t be much better than the bottom feeders.
“Over the past few decades, the share of large employers offering retiree health benefits has dropped fairly dramatically,” said Tricia Neuman, a senior vice president of the Kaiser Family Foundation, a nonpartisan, nonprofit organization that analyzes health-care policy. “With fewer and fewer large employers offering retiree health benefits, we’re now seeing a clear decline in the share of seniors with retiree health benefits.”
If they can’t afford to buy insurance to supplement Medicare, one possible result of a decline in retiree health benefits is a decline in health care for seniors who need it the most.
Is that what Sam wants for his annuitants?