Expert's View

Now that the Federal Employees Health Benefits program open season is over, employees, retirees and survivors have made their choice of plans, and tempers over premium increases have cooled, I thought I’d respond to a pile of e-mails I received with a few observations about health insurance.



First, when the FEHB became law some 50 years ago, it would have been better if there had only been a single risk pool. In other words, no self and self and family options. Because there was such a distinction, enrollees have ever since wanted to further carve up the risk pool, creating subcategories such as couples/no children, employees and retirees, or those retirees with and without Medicare as their primary insurer. Each and every one is a bad idea. Why? Because the insurance that best levels the playing field and produces reasonable premium rates for all is the one that has the broadest possible risk pool.


Second, from the beginning each plan in the program should have been required to cover all medically proven procedures, a list that would be updated annually. For years, plans varied 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 ended up needing.


Another problem with having plans offer different coverage of the basics is that enrollees would jump from one plan to the other depending on what they knew their needs would be during the coming year. Heavy utilization of that benefit then drove 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 was good for astute enrollees, it was bad for the FEHB because it caused many plans to leave after their premiums went up and their enrollments went down. The net result was reduced competition.


Third, extremes in coinsurances, deductibles, and catastrophic and lifetime limits should have been limited from the start. When efforts were made to do that, plans managed to get to the right committee on the Hill to block that effort. However, it was an idea whose time came. Lifetime limits have been eliminated and the difference between plans when it comes to coinsurances and deductibles has been narrowed.


So much for my end-of-open-season thoughts.