Some employee groups say that a proposal to change how the government calculates its contributions to premiums in the federal government insurance program could make healthcare unaffordable for workers and retirees.
A report that includes a provision that supports changing how OPM formulates the governments’ maximum contribution to insurance premiums through FEHB was approved by a 216-209 vote in the House.
Current Calculation of Government Contributions
OPM currently calculates how much the government contributes to insurance premiums based on the average weighted rate of change of all FEHB plans. The House proposes changing that formula to one that would grow at the “rate of inflation for retirees”. The report also says that the budget proposes basing retirees’ health benefits on length of service. “This option would reduce premium subsidies for retirees who had relatively short federal careers. Together these two reforms would bring health benefits for federal retirees more in line with those offered in the private sector.”
Some groups that represent federal employees and retirees say this could damage the overall stability of FEHBP. “What you could see under this proposal is healthy people running to the cheapest plans. The enrollee would go from paying 28 percent of premiums to over 50 percent in just 8 years because inflation in the medical field far outpaces regular inflation/ It very easily eats it up,” the legislative director for National Active and Retired Federal Employees Association, Jessica Klement, said.
An OPM official said that the agency is “reviewing” the proposal but couldn’t provide estimates on how it would affect FEHBP.
Long-term Consequences
Policy director for the American Federation of Government Employees, Jacqueline Simon, estimated that if the idea is implemented, federal retirees would pay 80 percent of premiums within 20 years, provided inflation and healthcare cost trends continue as they have over the last two decades. She said, “It’s extraordinary. Premiums will go up much, much more than inflation, and that’s how the cost shift would occur. It would be rapid, and it would be large. Depending on if they eviscerate federal pensions as well, it would obliterate most people’s pensions.”
Simon went on to say, “It would be an incentive to go with the cheapest possible plans. But once that happens, then those plans become expensive too, because all the retirees would be in then, including older and sicker people. It’s a recipe for a costly program that basically wipes out people’s retirement and annuities.”
It remains to be seen whether this proposal is likely to be included in Congress’ fiscal 2018 budget.
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