Employee share of health insurance premiums to climb 10 percent

For Immediate Release:

September 15, 2005

Contact:

By Karen Rutzick

GOVEXEC.COM

Enrollees in the Federal Employee Health Benefits Program will see an estimated 10 percent average increase in premiums for fiscal 2006, the Office of Personnel Management announced Thursday.

In dollar amounts, the average FEHBP single enrollee will pay $5.30 more every two weeks, which amounts to an additional $137.80 for the year. An enrollee with family coverage will pay an extra $12.79 biweekly, or $332.54 annually. FEHBP provides health care coverage for about 8 million federal employees, retirees and their families.

Because FEHBP is a choice-operated plan - with enrollees using more than 200 separate providers - the actual premium increase will depend on the provider. OPM said that excluding extreme outliers who will pay much higher or much lower premiums next year, 80 percent of employees will fall in the 2.5 percent to 15 percent premium increase range.

The government, which subsidizes about 72 percent of total FEHBP premiums, will see a smaller increase this year, amounting to 5.2 percent. OPM said the difference in premium increases is a result of oversubsidizing in fiscal 2005. The office said because a large number of enrollees moved to less expensive plans last year, the government's estimate was too high. The premiums for fiscal 2006 will rebalance the government's subsidy back to 72 percent, OPM officials said.

"That just gets us back to the right balance, so we're not oversubsidizing," said OPM Director Linda Springer in a news conference. According to these estimates, the government will pay an addition $7.71 in premiums for individuals and $16.83 for families.

Colleen Kelley, president of the National Treasury Employees Union, said the trend among workers to shift to less expensive plans worries her.

"These lower-premium plans can mask hidden costs for federal employees," Kelley said in a statement. "The cheaper premium is usually coupled with higher deductibles, meaning federal workers will simply pay higher out-of-pocket costs or avoid visiting the doctor."

Rep. Steny Hoyer, D-Md, who introduced legislation (H.R. 633) earlier this year to increase the government's share of premiums from 72 percent to 80 percent, said he is "very concerned by OPM's announcement tonight of a significant increase in health insurance premium costs."

The total premium increase, combining the government's 5.2 percent and enrollees' 10 percent and weighting for government's larger piece of the pie, is 6.6 percent. That number represents the smallest average overall increase in nine years. Premium increases peaked into fiscal 2002, when they reached 12.7 percent between employees and the government.

Springer attributed the overall decrease primarily to more affordable prescription drugs, especially enrollees' use of less expensive generic drugs.

Federal employees and retirees can change their health insurance plans during the open season, which will run from Nov. 14 to Dec. 12. The open season will correspond exactly with the open season for Flexible Spending Accounts, which allow employees to put a fixed amount of money aside for health and dependent care costs, free from tax. The number of health plans will rise to 279, with 30 new insurance plans joining the FEHBP in 2006.

OPM said it will not post any information regarding fiscal 2006 - such as prices for individual plans - on the FEHBP Web site until closer to the November open season.