Expert's View

It wasn’t that long ago that I told you to thank your lucky stars because federal employees are blessed with an opportunity to enroll in the Federal Employees Health Benefits program and carry that coverage into retirement. While their private sector counterparts have good health benefits while employed, they rarely have coverage after they retire that matches ours, if they have it at all.

 

This year the average increase in FEHB premiums was a surprisingly low 2 percent. However, it may not have looked that way to you. According to OPM, individual premium changes ranged from minus 47 percent to plus 132!

 

While premium swings that wide are fairly uncommon, they can happen because each plan and option in the FEHB is experience rated. In other words, what it costs a plan to provide benefits in the previous year serves as the baseline for setting the following year’s premium. Added to that are estimates about future changes in health care costs. Because each plan has a certain level of reserves, it’s possible for a plan’s expenses to exceed its budget. Making up the deficit then becomes part of the new rate-setting process.

 

To the extent that healthy enrollees leave a high-premium plan to go to another with lower premiums, the original plan can become overloaded with unhealthy enrollees whose expenses force the plan to further increase its premiums. There comes a point when such a plan enters a death spiral and is forced to leave the program. It has happened before. It will happen again. On the other hand, a plan that has an influx of healthy enrollees will be able to reduce premiums, at least until the day when the tide turns against it.

 

Just remember one thing. In the FEHB program, you are in the catbird seat, not the plans. You pick the plan or option you want; it doesn’t pick you. So be vigilant during future federal benefits open seasons, making sure to balance premium costs against needed coverage. Moving around won’t affect you ability to take your health benefits coverage into retirement. You only have to be covered by the FEHB for five years before retirement, not covered by a specific plan.