Fedweek

The Trump administration has proposed changing the formula for setting the government contribution toward FEHB premiums to make that contribution variable depending on a plan’s quality ratings.

A document explaining an FEHB related proposal in the recent budget proposal notes that the government contribution to premiums is currently 72 percent of the weighted average of all plan premiums, not to exceed 75 percent of any given plan’s premium. Under the proposal, the government contribution could range between 65 and 75 percent depending on a plan’s score in the FEHB Program Plan Performance Assessment, which includes 19 measures of health outcomes, quality, and efficiency.

“This proposal would encourage enrollment in high-performing health plans,” it says. “Under the current structure, enrollees have few incentives to choose less expensive, higher value plans. This proposal would incentivize enrollees to select high-performing, high-value plans by making them more affordable. The proposal would also provide carriers with greater incentive to compete on price and quality, help driving down overall program costs.”

The proposal is a variant on an idea that has appeared numerous times in congressional budget plans and in CBO reports on deficit-cutting options: to base the government share on a dollar amount and then increase it by increases in general inflation, not the usually much higher inflation in health care costs. Proponents of that idea argue that it would act as an incentive for enrollees to consider lower-cost plans, but such a change has never come close to enactment, largely because of concerns that it would shift more of the premium cost onto enrollees.