The Office of Personnel Management has released its annual “call letter” to carriers that invites them to propose benefits structures for the upcoming plan year and which kicks off a period of negotiations between OPM and the carriers over benefits and premiums. Following are excerpts:
High Deductible Health Plans
Last December 8, President George W. Bush signed the MMA. At that time, Director James made a commitment to identify ways to provide access to Health Savings Accounts (HSA) and expand the options available to Federal enrollees under the FEHB Program. Director James said, “Money that individuals put into HSAs is not taxable and individuals can sock away the amount of the deductibles on their health plans up to $2,600 for individuals or up to $5,150 for families. And just as important, these HSAs are portable, owned by the employee, so if the employee changes jobs, the HSA goes with them. HSAs would offer greater flexibility for the Federal team members and their families to make decisions on how to spend their hard-earned dollars on health care. The Bush Administration supports competition and consumer choice, and we will lead the charge by finding ways to provide HSAs in the largest insurance program in the world.”
The introduction of HSAs to the Federal team has been the source of both great excitement and significant concern among both employees and stakeholders. The Director has met with the presidents of the American Federation of Government Employees, the National Treasury Employees Union, the National Association of Retired Federal Employees, manager associations and numerous other stakeholders over the past month. As you prepare to develop products and plans which will operate within an environment marked by HSAs, understand the Director will be working closely and on an ongoing basis with stakeholders to continue listening to their concerns and seeking opportunities to address issues such as potential adverse selection. As this process continues, the Director is looking forward to an open season in which employees can choose not only their preferred plan, but also the vehicles through which they will be able to pay health costs for themselves and families – FSAs and/or HSAs.
By law, tax-favored HSAs are available for people who are not eligible for Medicare and who have a qualifying High Deductible Health Plan (HDHP). We estimate there are about 3.1 million individuals covered by FEHB who would be eligible to have an HSA if they were enrolled in an HDHP. According to Internal Revenue Service (IRS) guidance, an HDHP must have an annual deductible indexed each year of at least $1,000 for self only coverage and annual out-of-pocket expenses (deductibles, co-payments, etc.) that do not exceed $5,000. For family coverage, an HDHP must have an annual deductible of at least $2,000 and annual out-of-pocket expenses that do not exceed $10,000. An exception is available for preventive care services since a plan may offer first-dollar coverage for preventive care (or have only a small deductible) and still be considered an HDHP. However, generally, an HDHP may not provide benefits for any year until the deductible for that year is met. More specifics will become available through IRS rule-making.
By law, HSAs are not available to people who are eligible for Medicare (generally age 65 and over). Our statute prohibits exclusions based on age. Therefore, in keeping with the spirit of our underlying legislation, and to help ensure there are no perceptions of exclusion based on age, we will require carriers who are proposing an HDHP and an HSA to also offer a health reimbursement arrangement (HRA) of equivalent value or other alternative benefits for those ineligible for an HSA. The HRA would be used for medical expenses, which may include Medicare premiums.
For FEHB carriers that make a proposal for a combined HDHP and HSA/HRA, there are two alternatives for implementation. Carriers or underwriters that meet IRS fiduciary requirements may manage the HSA and HRA accounts themselves, or they may enter into partnership arrangements with fiduciary institutions or approved non-bank trustees or custodians. (IRS Bulletin 2003-40, dated October 6, 2003, http://www.irs.gov/irb/2003-40_IRB/ar21.html provides a comprehensive list of approved non-bank trustees and custodians.)
All proposals should clearly state how you intend to meet IRS requirements pertaining to HSA and HRA fiduciary responsibilities. In addition, we require that at a minimum, the trustee/fiduciary be rated by a major financial rating service in one of its two highest categories for the most recent available rating period. This also applies if a carrier is acting as a fiduciary. Please see Appendix B for information on FEHB criteria.
For IRS guidance on HSAs, carriers may refer to IRS Notice 2004-2 at: http://www.ustreas.gov/press/releases/reports/1061notice20042.pdf. For information on health reimbursement arrangements, please see IRS Notice 2002-45.
Your proposal should specify a deposit from premium, not to exceed the maximum Government contribution in 2004, to be deposited into the HSA or HRA of the enrollee. It should also include a description of your proposed deductibles, and the benefit design after deductibles, and include any preventive services. The rates you propose should include an amount sufficient to cover the designated amount to be deposited/credited to the HSA/HRA, as well as the cost of your high deductible plan. We would expect any proposal for an HDHP to provide for sufficient access to in-network providers. We also expect the proposal will include sophisticated health education and consumer education components. We will provide additional guidance in the 2005 Technical Guidance and Instructions for carriers.
Once again, please bear in mind that OPM will be working closely with stakeholders, including unions, retirees, and managers to address issues related to OPM’s institutional role in overseeing the impact of HSAs within the FEHB Program.
Pharmacy Benefit Management Arrangements
For several years, FEHB carriers have had contractual arrangements with large providers, including Pharmacy Benefit Management arrangements (PBMs). A recent General Accounting Office (GAO) report stated that PBMs produce savings for FEHB health plans by obtaining drug price discounts from retail pharmacies and dispensing drugs at lower costs through mail-order pharmacies, passing on certain manufacturer rebates to the plans, as well as operating drug utilization control activities.
Prescription drug costs represent an increasing percentage of total FEHB costs. Therefore, to increase our oversight of FEHB carriers’ large provider agreements, we published a proposed regulation on August 15, 2003. This regulation would bring large provider agreements under the umbrella of the FEHBAR and subject them to audit requirements, currently applicable to carriers and their subcontractors. We are reviewing the comments we received on this proposed rulemaking and expect to publish the final regulation later this year.
We also plan to explore additional measures for the future, including FEHB carrier contract standards for PBM contracts, requiring FEHB carriers to provide for more transparency in their PBM contracts, and to obtain expert reviews of their PBM contracts. In the meantime, we strongly encourage FEHB carriers to strengthen their own oversight of their PBM arrangements. It is important that you inform us now of the steps you are taking to strengthen your PBM arrangements.
Director James believes that, fundamentally, carriers must take a leadership role in providing more vigorous oversight of PBM’s. The Director, working closely with the Inspector General of OPM, will do everything within her authority to make certain that Federal employees, their families, and Federal retirees are protected from price increases that result from inadequate administrative oversight.
Care Management
We encourage you to continue your emphasis on care management for members with chronic conditions, including flexible benefit options and diagnosis-based programs. Care management programs help educate affected members about their chronic conditions and help ensure that they are getting appropriate services. It is generally accepted that a relatively small percentage of members – primarily those with chronic conditions – use the greatest percentage of benefits. By addressing the needs of your chronically ill population, your results will help to improve the quality of care and promote the effective use of benefit dollars.
It is important that care management programs show a reasonable return on your Plan’s investment. We expect you to periodically evaluate the cost and benefits of your programs and share your findings with us.
We also believe that your care management program should establish a relationship with Federal Long Term Care Insurance Program (FLTCIP), so that enrollees with FLTCIP coverage can experience a smooth transition to long term care when necessary.
We ask that you provide detailed descriptions of the different types of care management programs you offer your members and aggregate program results to date. Please also describe any proposals to enhance and expand on your care management programs for the 2005 contract year.
We will send specific requirements for submitting your benefit and rate proposals later in April. In May, we will provide you with information on how to prepare your brochure. As a reminder, only your brochure, provider directories or lists, and any other marketing materials or other supplemental literature which were prepared in accordance with FEHBAR 1652.203-70 may be distributed at or through Federal facilities.
As in the past, we will not accept proposals for benefit increases unless they are cost-neutral through offsetting benefit reductions. And, any savings from managed care initiatives must accrue to the FEHB Program. Also, when you prepare your benefit proposal, please review the effect of any proposed benefit changes on language throughout your brochure (e.g., cost sharing, catastrophic protection and lifetime maximums).
HealthierFeds
The HealthierFeds campaign places emphasis on educating Federal employees and retirees on healthy living and best-treatment strategies. It is well established that physical activity, nutrition, preventive screenings and healthy lifestyle choices all reduce demand on the health-care system. In January last year, OPM kicked off the campaign with a health fair at the Theodore Roosevelt Building. OPM held monthly HealthierFeds events throughout the year to educate our workforce on how to take greater responsibility for their personal health. The OPM initiative supports the President’s HealthierUS Initiative which follows a simple formula: every little bit of effort counts. The Administration’s initiative has identified four keys for a healthier America:
Be Physically Active Every Day
Follow a Nutritious Diet
Get Preventive Screenings
Make Healthy Choices
We appreciate your efforts to promote the goals of the HealthierFeds initiative to encourage the Federal population to adopt healthier lifestyles. The Director has tremendous confidence in Federal employees and their interest in working hard to stay informed and to change behavior based on sound preventative strategies. Educating your members may lead to more patient involvement in health care decision-making and, subsequently, more consumer responsibility.
Fraud and Abuse
The Director is continuing OPM’s work with our Inspector General to prevent fraud and abuse in the FEHB Program and are addressing this issue through a three-pronged approach:
1) Raising consumer awareness. To increase enrollee awareness of fraud and to help enrollees better prevent, identify, and report fraud, OPM has developed a revised consumer information piece, “Stop Health Care Fraud!” This message is being provided to consumers in FEHB health plan brochures, the FEHB Guide used by enrollees to choose plans during open season, and on the FEHB website.
2) Raising health plan awareness. We have developed a list of Industry Standards for health plan fraud and abuse prevention and detection programs at http://www.opm.gov/carrier/carrier_letters/2003/2003-23.pdf. We will continue our work with FEHB plans to ensure that these essential program components are in place. We will also highlight other features that plans may implement to further enhance their fraud prevention and detection programs.
3) Enhancing systematic reporting requirements. We have updated our FEHB health plan fraud and abuse reports to better identify and prevent fraud and abuse based on current industry practices. We will continue our discussions with you as we enhance our focus on this important topic.
Quality Initiatives
We are continuing our work to provide FEHB members with the information and resources that will help them to choose high quality health plans. Our work includes the following:
Health Plan Accreditation Ratings. We provide FEHB members with the accreditation status of participating health plans in our annual Guide to
FEHB Plans. Accreditation demonstrates an organization’s commitment to providing quality, cost-effective health care. Providing FEHB members with accreditation information allows consumers to choose a high quality health plan.
Health Plan Satisfaction Ratings. We provide Federal employees and retirees with individual health plan ratings based on the results of our annual Consumers Assessment of Health Plans Survey. This Consumer Survey allows current plan members to rate their health plans and providers in several key areas, including overall satisfaction, satisfaction with their providers, access to care, customer service, and claims processing. Providing FEHB members with this Consumer Survey information allows them to consider the feedback of other consumers when choosing a health plan.
E- Initiatives
We continue to expand our use of the Internet as a communications and resource tool. During the 2004 Open Season, we will continue to provide comprehensive Program information, including health plan brochures, FEHB Guides, premiums and other useful information our customers need to choose a quality health plan. The FEHB website links to a report card designed by the National Committee for Quality Assurance (NCQA). This report card helps users learn more about the quality of care and service provided by HMOs. FEHB consumers also have access to an OPM health plan-comparison tool. Our HealthierFeds website also provides information consumers can use for healthier lifestyles.
Beginning with the 2003 Open Season, the U.S. Postal Service automated their enrollment process, and we appreciate the efforts you have made to coordinate with this important segment of the FEHB population. Also, Employee Express is planning for year round enrollments and changes based on qualifying life events. We will let you know more on this initiative as it evolves. E-payroll is going strong. There are about 20 agencies still doing their own payroll. Under E-Payroll, these agencies are expected to move their payroll functions to one of the four E-Payroll providers by the end of this year. This means you will need to plan for changing payroll office numbers in your enrollment systems. Again, we will keep you informed on this important initiative.
Flexible Spending Accounts
Last year, OPM made available Flexible Spending Accounts (FSAs) to employees of the Executive Branch and other agencies that chose to adopt our program. The Federal FSA program, known as FSAFEDS, has been very well received by Federal employees. SHPS, a major FSA vendor, is the contractor administering FSAFEDS for the Federal Government.
Director James was an advocate for the creation of the FSA benefit for Federal employees. FSAs allow employees to increase their disposable income because the amounts contributed by them are not subject to Federal income, FICA, State or local income taxes. FSAs may only be offered to active civilian Federal employees because Internal Revenue Service rules currently require that qualified pre-tax benefits come from salary. With the exception of insurance premiums, employees can use the Health Care FSA for expenses that are tax-deductible, but not reimbursed by any other source, including out-of-pocket expenses and non-covered benefits under their FEHB plans. Examples include many over-the-counter medicines (but not vitamins) and products, non-covered dental services, vision services, including routine exams, eyeglasses, lasik surgery, and hearing aids, health plan deductibles, and co-payments and coinsurance. (An FSA for dependent care is also available for employees with dependent children or qualifying dependent adults when the care is necessary to allow the employee to work, look for work, or attend school full time.) The FSA Open Season for the 2004 tax year was held in conjunction with the FEHB Open Season for CY 2004. We will continue to work with you this year on your health plan brochures to help employees understand FSAs and how they complement your benefit packages. We will also highlight the convenience of paperless reimbursement, a program that allows carriers to interface their claims systems with SHPS, our FSA administrator, so that FSA participants can be reimbursed without filing claims.
Patient Safety
During the past few years, the healthcare community has stressed the importance of a culture of patient safety. While there have been mixed results in implementing effective strategies in dealing with safety, we believe it is an important topic for FEHB consumers. Therefore, we are asking that you provide an update on your patient safety initiatives and programs, and we will add them to the FEHB website. Since we need a consistent format in order to compare the patient safety efforts of different plans, we are asking you to use our framework:
Describe, in plain language, suitable for web posting, the activity you want FEHB consumers to know about.
Explain the goal or expected outcome you anticipate from this activity.
Describe the specific tools you will use to evaluate the results of this activity.
Please include the description of your patient safety activities with your benefit and rate proposals.
