Expert's View

Among the more intriguing of the recommendations made by the Congressional Budget Office in a March report on how to reduce the deficit, is to offer a voucher that would cover about $5,000 of an individual FEHB premium and $11,000 of a family premium beginning on January 1, 2013. Those numbers are based on the average of the government’s expected contributions to the FEHB program in 2012. Increase in the amount of the voucher would be based on the consumer price index for all urban consumers rather than the weighted average of the change in FEHB premiums.


The other side of the coin is this. Employees who select FEHB plans that cost more than the voucher amount would pay the full additional cost of the plan. It is expected that “this option would increase the incentive to choose lower-premium plans and would strengthen price competition among health care plans participating in the FEHB program. In particular, because enrollees would pay nothing for plans that cost as much as the value of the voucher, insurers would have a greater incentive to offer lower-premium plans whose cost approached or matched that value.”

If recommendation were to be accepted, CBO estimates that it would reduce federal agency discretionary spending by $8 billion over the 2012-2016 period and $42 billion over the 2012-2021 period. Reductions from other savings over the same time periods would be $6 billion and $32 billion.

The downside would be that federal contributions to the FEHB program would grow more slowly that the premiums, effectively reducing enrollee benefits. For example, an enrollee’s contribution would increase by an average of more than $2,000 by 2021. Not surprisingly, CBO notes that “this option would cut benefits that many current federal retirees and federal employees looking ahead to retirement may believe that they have already earned.” Duh!

Next time I’ll talk about a CBO proposal to raise the eligibility age for Medicare.