Ineligible family members receiving FEHBP benefits remains a Top Management Challenge for OPM. Image: slexp880/Shutterstock.com
Following is the section of a report by the inspector general’s office at the OPM on key management challenges that agency faces focusing on two issues related to the FEHB program, the rising costs of prescription drug coverage and the continued coverage of ineligible persons.
OPM, as the administrator of the FEHBP, is responsible for negotiating contracts with health insurance earners covering the benefits provided and premium rates charged to over 8.2 million federal employees, annuitants, and their eligible family members. The increasing cost of health care, especially the cost of prescription drugs, continues to be a challenge for OPM. OPM’s previous work to address prescription drug pricing transparency and low-value care are examples of the agency’s positive efforts in this area, but OPM must continue to improve the FEHBP for federal employees, annuitants, and their eligible family members.
Prescription Drug Benefits and Costs
Prescription drug costs continue to increase in the FEHBP. From contract years 2022 to 2023, prescription drug costs increased almost 18 percent for the FEHBP’s fee-for- service and experience-rated carriers (one of the highest increases in drug costs ever seen). For contract year 2023, the total prescription drug costs were over $19 billion, which represents approximately 31.6 percent of total health care charges in the FEHBP.
Most FEHBP health insurance carriers report an increase in ding costs per member each year. Greater utilization of existing dings and the high cost of specialty medications contribute significantly to FEHBP premiums. The average age of FEHBP members is climbing, and prescription ding utilization and costs will continue to increase as a result. Contributing to the rising costs are new pharmaceutical advancements and the exponential growth of specialty dings in the industry. With this much change in prescription ding costs, an effective, long-term strategy to mitigate and manage FEHBP prescription ding costs, while maintaining overall program value and effectiveness, should be a high-priority area for OPM.
In recent years, the OPM Office of the Inspector General (OIG) has had significant questioned costs related to pharmacy benefit managers (PBMs) not complying with the FEHBP transparency standards. In one of the OPM OIG’s most recent PBM audits, we questioned over $45 million in overcharges where the PBM did not comply with the FEHBP PBM transparency standards. In addition, the OPM OIG issued an FEHBP Prescription Drug Benefit Costs Management Advisory Report to the Director of OPM in 2020. The Management Advisory Report identified variances among several of the FEHBP fee-for-service health insurance carriers with respect to contractual arrangements with PBMs. We found that the discounts and other financial terms differed significantly among FEHBP health insurance carriers, with those that have higher enrollments receiving the best deals, reducing the likelihood that the FEHBP is maximizing prescription drug savings in a $60-plus billion annual program.
The 2020 Management Advisory Report recommended that OPM conduct a comprehensive study by seeking independent expert consultation on ways to lower prescription drug costs in the FEHBP. In FY 2024, OPM received funding to conduct this comprehensive study, and the agency is currently working with a consultant in planning the study. This recommendation has been identified by the OPM OIG as one of its three high priority open recommendations.
Federal Employees Health Benefits Program Enrollment and Eligibility
Ineligible family members receiving FEHBP benefits remains a Top Management Challenge for OPM. This issue has been reported on by both the OPM OIG and the U.S. Government Accountability Office (GAO). OPM has taken or has plans to take appreciable steps towards addressing this issue, including issuing further and more robust guidance in Benefit Administration Letters as well as monitoring recommendations from GAO. However, ineligible member enrollment in the FEHBP remains an ongoing difficulty for the agency.
Primarily, OPM hopes to use a centralized enrollment portal that will allow a federal employee or annuitant to submit valid documents (e.g., birth certificates, adoption certificates, marriage certificates) proving that family members are eligible for FEHBP benefits. A smaller-scale version of this centralized enrollment portal is already under development for the PSHBS. However, when and at what cost OPM will be able to implement a centralized enrollment portal is not clear.
Without a centralized enrollment portal, the process for validating FEHBP member eligibility currently remains the responsibility of a federal employee’s employing office or the FEHBP health insurance carrier that provides health insurance benefits to that federal employee and their eligible family members. The recently issued OPM Benefits Administration Letter 24-201 improved and reiterated the responsibility of employing offices and health insurance carriers to attempt to validate eligibility documents. While Open Season still broadly allows for FEHBP members to add family members without the same level of validation as there is during the rest of the year, Benefits Administration Letter 24-201 requires employing offices to review a random minimum of 10 percent of Open Season enrollments of Self Plus One and Self and Family enrollment types. This is a significant and positive step in protecting the program from ineligible members. Additionally, language in the Benefits Administration Letter is encouraging: “OPM will provide further guidance on verification of Open Season elections in subsequent years, including expectations for increasing the percentage of elections subject to verification. Furthermore, OPM plans to provide guidance to require all federal employees to provide eligibility documentation for family member changes during Open Season in subsequent years.” The OPM OIG will continue to engage with the agency as the agency evaluates further actionable steps.
OPM does not have a comprehensive understanding of the financial impact or improper payments caused by ineligible FEHBP family members. Understanding the scope of this issue was a recommendation in GAO’s report, and something the OPM OIG has raised as a concern. OPM is reviewing data included in their Master Enrollment Index to better understand the scope of ineligible covered family members specific to the FEHB Program. However, it should be noted that these reviews are in their infancy and the data set has not been shared with the OIG. Also of concern, related to FEHBP program enrollment and eligibility, is that the initial transfer of members from the FEHBP to the PSHBP is planned to occur without a centralized enrollment portal being active. This “lift-and-shift” strategy will move more than a million members to the new program, including an unquantified number of fraudulent family member enrollments. Once OPM has a centralized enrollment portal, the agency would need to apply the portal to these debut members. Not doing so—and not being prepared to do so at some point with any similar FEHBP centralized enrollment portal—would allow existing undiscovered fraud to continue and some federal employees may go decades before retirement without being required to use the centralized enrollment portal. For the initial PSHBP open season, OPM is planning on collecting enrollment verification documentation for new family members. Also, starting on January 1, 2025, OPM will require member eligibility verification documents for any new Postal employee and for Qualifying Life Events. While these are positive steps going forward to provide a better control environment, the majority of the population in the PSHBP will be at a higher risk level since the membership will not have been validated. OPM recognizes this issue but the agency has said it would need further funding to verify enrollment on the over 700,000 members that will transfer from the FEHBP to the PSHBP.
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