Expert's View

Differing risk pools - Self versus Self Plus One, for example, has led to a desire to further carve up the risk pool. Image: sasirin pamai/Shutterstock.com

During the open season that ended a month ago, federal employees, retirees and survivors made their choices for Federal Employees Health Benefits program coverage for 2023, either staying where they were in 2022 or changing to other plans or options. If tempers over premium increases averaging nearly 9 percent haven’t cooled, the furor has at least abated.

So, I thought this might be a good time for me to make a few observations about the FEHB program, for which I was once the contracting officer.

First, when the FEHB became law some 60 years ago, I think it would have been better if there had only been a single risk pool. In other words, no Self Only, Self Plus One, and Self and Family options. Because there are these distinctions, enrollees have ever since wanted to further carve up the risk pool, creating subcategories, such as employees vs. retirees or retirees with or without Medicare as their primary insurer.

In my view, each and every subdivision was a bad idea. That’s because insurance that produces reasonable premium rates for all is the one that has the broadest possible risk pool. Unfortunately, a further subdivision is ahead in 2025 when postal employees and retirees will be carved out into their own risk pool. How that will affect them—and those left behind—is to be determined.

Second, I think each plan in the program should have been required to cover all medically proven procedures, a list that would be updated annually. Especially in the earlier years of the program, plans varied widely in what they would cover, which meant that an enrollee who guessed wrong about what the next year would bring in the way of medical needs could easily enroll in a plan that didn’t cover the very thing he or she ended up needing.

Another problem with having plans offer different coverage of the basics is that enrollees who did know what their needs would be during the upcoming year could jump from one plan to the other. Heavy utilization of those benefits would then drive up the plan’s premiums for the following year.

Unfortunately, the very people who had caused the premiums to rise would leave the plan because they’d gotten all they needed from it. While this effect—what they call “risk segmentation” in the industry—was good for astute enrollees, it was bad for the FEHB in general. It caused some plans to leave after their premiums went up and their enrollments went down, thus reducing competition among plans.

Third, extremes in co-insurances, deductibles, and catastrophic and lifetime limits should have been limited from the start. Some plans shifted more of their total costs to that side in order to hold down premiums, knowing that many potential enrollees focus mostly—or only—on premiums. When efforts were made to limit that, plans managed to get to the right committees on the Hill to block that effort.

Thankfully, that was an idea whose time has come. Lifetime limits have been eliminated and the difference between plans when it comes to co-insurances and deductibles has been narrowed.

Fortunately, over succeeding years the worst of the coverage imbalances have been corrected. Yet, understandably, each year plans still jockey for contract changes in their coverage and deductibles in hopes of improving their bottom line. Therefore, it’s always a good idea to follow the words of those wise old Romans: Caveat emptor. Let the buyer beware. If you weren’t aware during the fall 2022 Open Season, try to be aware in the one ahead this fall.

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