Expert's View

The Federal Employees Health Benefits program is one of the most valuable benefits provided to federal employees. It provides comprehensive coverage for medical needs and does so through a wide range of fee-for-service, HMOs, and other private sector providers.

The cost of coverage is shared by the enrollees and the government, which by law pays the lion’s share of the premiums. Predictably, premiums go up each year, and just as predictably there are complaints that the Office of Personnel Management did not do enough to limit the increase.

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Are those complaints valid? Let’s look at how those rates are set.

Early every year, the OPM sends a “call letter” to all those entities that are currently approved to participate in the FEHB program. That letter spells out the basic health services that OPM expects all plans to cover for the following calendar year. Among them may be treatments or services that were either optional in the past or will be new to the program.

This year’s letter was just recently released and followed that pattern, for example telling carriers they will have to comply with new limits on “surprise billing.”

The plans that wish to continue in the program then make a proposal to OPM that spells out the benefits they want to provide and what they want to charge for covering them. Each plan’s submission comes in two parts: a benefits proposal and a cost analysis. The benefits part is reviewed by OPM’s benefits specialists; the complete package is reviewed by its actuaries.

You’re probably wondering why the benefits specialists don’t review the cost data. The answer is simple. It’s the function of the benefits specialists to make sure that every benefit that was called for is included and at the ideal level of coverage.  On the other hand, the actuaries are looking hard at three aspects of the plan’s proposal: what they are offering, how they are pricing their package, and the effect on premiums.

The benefits specialists are working in the interest of those who enroll in each plan, making sure that they get what they need. There’s a touch of idealism is their work, but it’s based on years of experience that includes handling and resolving thousands of claims filed by enrollees who feel they’ve been deprived of a needed – and sometimes promised – benefit.

On the other hand, actuaries examine each element of a plan and determine if the benefits offered are in line with the prices a plan wants to charge. They also have years of experience and access to a world of actuarial data from the public and private sector.

The last stage of the process usually involves face-to-face meetings between OPM’s benefits and actuarial staff and representatives of each fee-for-service carrier; the vast majority of federal employees and retirees are enrolled in that type of plan. During these COVID-19 times, other methods will be used, including video meetings. Meetings with HMOs and other private sector providers, typically not in person even pre-COVID, also will continue to be carried out.

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During these meetings, clarifications are sought, end-runs by the plans to shut out the sick in favor of the healthy are scotched, and shifts from ideal coverage to practical coverage are hammered out to avoid having enrollee premiums shoot through the roof.

The end result is a balance of costs and benefits announced in the fall in advance of the open season for the upcoming year. While that end result is never perfect, in my view it is the best that can be accomplished under the law. And the quality of those effort can be seen in the fact that each year federal employees and retirees enjoy better benefits at a lower cost than can be found in the private sector.

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FERS Retirement Guide 2021