September 16, 2003

Federal employees face insurance premium hike in 2004

By Tanya N. Ballard
tballard@govexe.com

Health insurance premiums for federal employees will increase by an average of 10.6 percent next year, the Office of Personnel Management announced Tuesday.

Government workers with self-only insurance coverage will pay an average of $5.01 more per pay period, or $130.26 annually. Workers with family coverage will pay an average of $11.95 more per pay period, or $310.70 annually. The Federal Employees Health Benefits Program (FEHBP) provides health care coverage for 8.3 million federal employees, retirees and their families.

The premium hike for 2004 is the fourth consecutive annual increase above 10 percent, for the FEHBP, but OPM Director Kay Coles James said the increase is one of the lowest in the country. According to a December 2002 General Accounting Office report (03-236), FEHBP premiums increased an average of 6 percent a year from 1991 to 2002, a rate similar to those of other large health plans.

"Even with nationwide reports citing health insurance premium increases ranging as high as 18 percent, OPM has been able to keep its average premium increase at 10.6 percent, making many choices in the consumer and market-driven FEHB [program] among the most reasonably priced in the nation," James said. "I believe the FEHB program is a model of efficiency and effectiveness."

OPM said increased costs for prescription drugs, greater use of medical services and an aging workforce led to the double-digit increase.

Federal employees and retirees can change their health insurance plans during open season, which runs from Nov. 10 to Dec. 8. The number of health plans will rise to 205, with 17 new insurance plans joining the FEHBP in 2004. However, many plans have changed their benefits or premiums for 2004, leading some union and congressional leaders to renew the call for increasing the government's contribution to federal employees' health insurance premiums.

"Other large employers in the public and private sector contribute between 85 and 100 percent of the premiums for their employees," said American Federation of Government Employees President John Gage. "Yet, because of the current formula used to calculate federal employees' costs, the federal government pays only 70 percent of health care premiums."

House Minority Whip Steny Hoyer, D-Md., introduced legislation (H.R. 577) in February that would raise the government's contribution to federal employee insurance premiums.

"If we expect the federal government to compete with the private sector for skilled workers, it is time we give serious consideration to raising the government's contribution level and provide employees with a benefit most have asked foródental insurance," said Sen. Daniel Akaka, D-Hawaii, following OPM's announcement.

Aetna and Humana are introducing new insurance options in 2004. Similar to the American Postal Workers Union insurance plan first offered this year, enrollees will get a credit to spend on medical services before they have to make any out-of-pocket payments.

This summer OPM began offering flexible spending accounts to federal employees, and more than 30,000 government workers signed up for the benefit. Participants can use money in the accounts to pay for health services not covered by standard insurance, such as certain dental and vision services. On Tuesday, OPM officials said they anticipate enrollment numbers in the program to jump during open season.

OPM will post the 2004 premium rates on its Web site at http://www.opm.gov/insure/health/index.asp.