Publisher's Perspective

If FEHB were to be made generally available, where would the major part of the premiums come from?

Stop me if you’ve heard this one before, but some political figures believe that the general public should have access to the same health insurance program that federal . . . OK! – you stopped me, got it. However, the idea of building off of the Federal Employees Health Benefits program as a model for expansion isn’t something to ignore.

What to do about health insurance for those who don’t have it is a legitimate policy question. It becomes a political question oh, every four years or so. In search of a solution, eyes turn to the FEHB, which is often called a model for broader application, with its range of choice between fee for service, health maintenance organization and various variant plans, its wide range of coverage, its use of a large enrollee pool to command discounts from health providers and other positive features.

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The “let’s build off this model” argument goes back decades, and for a long time was boosted by the argument that everyone should have the same kind of health insurance that members of Congress get. Some still make that argument even though members of Congress were kicked out of the program during the most recent major overhaul of health insurance law early in the first Obama term. (Incidentally, that’s a good way to tell the difference between those who are treating this as a matter of policy and those treating it as a matter of politics.)

Even as a matter of policy, there are serious questions that would have to be answered. First of all, the FEHB is not an entitlement program whose eligibility rules and benefits terms can be tweaked at will, it is employer-sponsored health insurance. It is designed specifically as part of an overall compensation package that includes pay, other forms of insurance, leave benefits and so on.

Fundamental to employer-sponsored health insurance is the principle that a large part of the premium cost is borne by the employer—or, in the case of retirees, by the former employer. In the FEHB, the formula works out to the government as the employer paying 70 percent of the total on average.

If FEHB were to be made generally available, where would the major part of the premiums come from? Some private sector employers pay more than 70 percent of the premium cost for their employees on average. For them (but not for their employees), getting into the FEHB would be a great deal. But what about employers that pay less than 70 percent, or that don’t provide health insurance at all?

And what about those unemployed or otherwise not working, who may not be able to afford to pay even 30 percent of a premium? Where would that part of the premium come from? If the answer you hear is “the government, because it already pays for federal employees,” remember that the reason is the employment relationship.

A second consideration that commonly is glossed over involves the pool of insured persons, which is a major determinant of premiums. The FEHB covers some 8 million people, about half of them current or retired federal employees and the other half their spouses and eligible children. Its participant pool’s demographics and claims rates are highly predictable.

What would be the impact of adding an unknown number of others, many of whom might not have had regular health care for years, into a program with no limitations on coverage for pre-existing conditions? No one knows, but employee organizations have always feared that the effect would be a negative one. More consumption of health care and related services and supplies inevitably means upward pressure on premiums.

And while 8 million is a large pool, it could be overwhelmed by the newcomers who wouldn’t necessarily have the same priorities and needs for health insurance. The FEHB program serves a workforce that is substantially older than that of the general American workforce plus retirees, which many private employer-sponsored plans don’t cover. And, in both cases, spouses who generally speaking are around the same age. Simply put, their health care needs differ from that of the general population, and the FEHB reflects that.

What would prevent the federal population from becoming second-class citizens in their own program, overwhelmed by new enrollees with different interests with different preferences for coverage and whose claims could drive up premiums?

The answer to that question is something you’ve never heard before.