"The time has come," the walrus said, "To talk of other things Of shoes and ships and sealing wax Of cabagges and kings."
On second thought, naw! Let’s talk instead about the Federal Employees Health Benefit program. This year it’s celebrating its 54th birthday. And at the risk of giving my age away, I was a GS-9 working for the Department of the Army when it went into effect.
In the words of the Congressional Research Service, "Since its creation, [the FEHB program] has provided private health insurance coverage to federal employees, annuitants, and their dependents. It is the largest employer-sponsored health insurance program in the country, covering about 8 million enrollees."
The general model of the program hasn’t changed since 1959. It’s still a program that allows competing private insurers to offer a variety of types of coverage within broad federal guidelines. And the government and employees have always shared the premium costs. Further, with the exception of the U.S. Postal Service, employees and retirees pay the same amount for their coverage. Postal Service employees pay a smaller share as a result of union contract negotiations.
Nevertheless, the FEHB program has been modified numerous times over the past half century. Among the changes have been the way the program has shifted a greater percentage of the cost to the government. And eligibility, services, and benefits have been expanded in a variety of ways, all to the benefit of enrollees and their families.
Over the next few weeks, I’ll highlight the basic features of the program and examine what’s new and different. This time I’ll focus on how premiums are determined.
It may surprise you to know that when Public Law 86-382 was enacted, the government’s share of the premiums was set at 50 percent. Not only that, but it had to fall in a specified dollar range. Things stayed that way until 1971 when something called the "big six" formula was developed. Here’s how that worked. Premiums were set at the simple average of the six biggest plan providers, with the government share being originally set at 40 percent, but moved up to 50 percent in 1974.
Various changes followed over, including increases in the government percentage and a dropout of one of the big six. That spurred creation of an imaginary, or “phantom,” plan that was used for years in the formula; I kid you not. It was only in 1997 when the current arrangement was established. In short, the government now contributes 72 percent of the weighted average premium for all plans, not to exceed 75 percent of the premium for any one plan. And that calculation is done separately for individual and family coverage.
Although it might be hard to detect when looking at those earlier premium setting mechanisms, the fact is that the government share of the cost of your FEHB program premium costs has increased with every twist and turn.
Next week, I want to tell you how the eligibility to be enrolled and covered by the FEHB program has changed over time.