Is What I Hear True?

I heard that...

...the Federal Employees Health Benefit Plan (FEHBP) could be a model for healthcare reform. Is that true?

This may be true, in that some see the FEHBP program, with its emphasis on employee choice of plans, would help increase competition and affordability. In fact, the FEHBP is the idea behind the insurance exchanges described in some reform proposals. On the other hand, FEHBP is still too costly for some federal employees, and some features of the plan are not considered ideal.

The Federal Employees Health Benefit Plan (FEHBP) is the largest employer-sponsored health insurance plan in the U.S. It is available to federal employees and their dependents and retired federal employees. There are 8 million people currently enrolled.

FEHBP is not a single insurance policy. Instead, it is a plan that offers employees a choice among multiple private health insurance policies. The private plans offered through FEHBP include fee-for-service plans, preferred provider organizations, health maintenance organizations, and high-deductible health plans. Different plans have different premiums, and there is no minimum benefit package. The federal government subsidizes enrollees at 75% of the actual premium or 72% of the average premium, whichever is lower (RAND, n.d.). The types and costs of plans available to an employee depend on where that employee lives.

The federal government approves and monitors the private plans, negotiates the benefits offered, and determines the premiums employees will be asked to pay. A trust fund holds employer and employee contributions, pays the private insurance companies chosen by employees, and retains some funds to buffer premium increases and plan losses.

Enrollee satisfaction with FEHBP is relatively high, but it provides neither extraordinary benefits nor low-cost care (Shapiro, 2009). The per capita costs of FEHBP are rising slower than most employer-sponsored health insurance but faster than Medicare (Merlis, 2003). Some federal employees are uninsured because they cannot afford the premiums, deductibles, and co-payments (Shapiro, 2009). There are other design issues that make FEHBP less than ideal, including the fact that there are areas of the country with few participating plans and therefore little competition to hold down costs in those areas (Merlis, 2003).

FEHBP has been discussed as a model for health care reforms for about 15 years. John Kerry’s presidential campaign platform in 2004 included a proposal to allow uninsured Americans to join the plan. Supporters of a “Medicare for all” system have included FEHBP as an option for universal coverage (RAND, n.d.). The plan has also been suggested as a model for reform of the Medicare program itself (Merlis, 2003).

Federally regulated access to the private insurance market is attractive to many Americans who want neither a fully public or fully private healthcare system and who value the opportunity for choice among plans. The FEHBP is also the idea behind the health insurance exchanges that figure prominently in current healthcare reform proposals. Some believe, however, that an insurance exchange can only offer adequate coverage at an affordable price if there is real competition among insurance companies, including a public plan. At the same time, attracting a sufficient number of private plans into an exchange will probably require significant changes to the FEHBP model, including a system of risk adjustment (paying higher premiums for more costly enrollees) and subsidized reinsurance to protect plans from catastrophic losses (Davis et al., 2003).

Sources

Davis, Karen, Barbara S. Cooper, Rose Capasso. 2003. The Federal Employee Health Benefit Plan: A Model for Workers, Not Medicare. November 1. www.commonwealthfund.org/Content/Publications/Fund-Reports/2003/Nov/The-Federal-Employees -Health-Benefit-Plan-A-Model-for-Workers-Not-Medicare.aspx.

Merlis, Mark. 2003. The Federal Employee Health Benefit Plan: Program Design, Recent Performance, and Implications for Medicare Reform. May. www.kff.org/medicare/upload/The-Federal-Employee-Health-Benefit-Plan-Program-Design-Recent-Performance-and-Implications-for-Medicare-Reform.pdf.

Rand Compare. n.d. Overview of Allow Open Access to the Federal Employees Health Benefit Program (FEHBP) Policy Options. www.randcompare.org/options/mechanism/open_enrollment_in_fehbp.

Shapiro, Joseph. 2009. For Federal Employees, Insurance Plan Offers Choice. Morning Edition. National Public Radio. September 21. www.npr.org/templates/story/story.php?storyId=112893393.

 

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