At swimming pools, it’s common for lifeguards to sound two short tweets and one long one once an hour, meaning it’s time for children to get out of the pool to rest — even if they don’t want to — although adults can stay in.
The overseers of the Federal Employees Health Benefits similarly may soon to clear some people out of the pool – the premium pool, that is – regardless of whether they would want to get out. And the change will not affect just them but also everyone else in the pool.
Premium pool is the health insurance term for the covered population, whose demographics largely drive claims rates and therefore premiums for coverage year to year. The general rule is the bigger the better, to spread risk as widely as possible. The FEHB has the largest such pool of any employer-sponsored health plan in the nation, with 8.2 million persons covered, roughly evenly split between enrollees and eligible family members.
The FEHB also stands out among employer-sponsored health plans for continuing to provide coverage for retirees—who need only to have been covered for the prior five years—and family members on the same premium and benefit terms as when they were actively employed.
But the latest of the postal reform proposals being considered on Capitol Hill would pull some people out of the pool. Postal employees, retirees and family members would move to a new Postal Service Health Benefits program whose coverage terms would mirror those of the FEHB. Further, postal retirees generally would be required to enroll in Medicare Part B when they become eligible, typically at age 65.
Similar ideas have been proposed before and have faltered along with similar broader bills affecting postal operations containing them. That may happen again, but it’s notable that the bills now have bipartisan support in both the House and Senate, which is certainly a rarity for any legislation these days.
What would that mean? Let’s first look at the last time there was a major change in the FEHB premium pool, with the creation a decade ago of the “self-plus-one” option in addition to the self-only and family coverage options. That was largely a response to the fact that couples with no eligible children had to pay the same premium for covering two people as enrollees with a Brady Bunch-sized family.
It was widely projected that the result would be substantially lower premiums for self-plus-one. But that never played out. In some plans there is only a negligible saving and in some, self-plus-one actually has proven more expensive.
The reason? Self-plus-one enrollees are disproportionately retirees who have no children eligible for coverage (that is, under age 26) and retirees consume a disproportionate amount of health care.
Prospects similarly appear mixed for the new postal plan, according to the Congressional Budget Office, which emphasized the importance of requiring most postal retirees to enroll in Medicare Part B.
Many federal retirees already do add Medicare to their FEHB coverage when eligible, since each covers some care that the other doesn’t. In that case Medicare acts as the first payer and the FEHB plan becomes a secondary payer—sort of like a Medicare “supplement” plan.
Those who do so must pay Medicare premiums–$148.50 a month this year—in addition to their FEHB premiums, which are not reduced even though they are now charging less health care to the FEHB. However, many do not enroll in Medicare, viewing that as simply paying an extra premium for coverage that largely duplicates FEHB.
Requiring postal retiree enrollment in Medicare would add to their costs while meanwhile shifting $5.6 billion over 10 years of costs currently paid by FEHB as the first provider onto Medicare.
That would mean lower premiums in both FEHB and the new Postal Service Health Benefits program, right? According to the CBO, “Because Medicare covers most of their health care spending, FEHB plans have lower costs associated with those enrollees. FEHB premiums would rise slightly after those enrollees moved to the PSHB program, CBO expects.”
Note that: CBO expects premiums to rise for those left in the FEHB premium pool, at least for an unknown period of years.
It added, “Over time, as USPS workers and annuitants enroll in a PSHB plan rather than in an FEHB plan, CBO expects that FEHB premiums would decrease because non-USPS enrollees in FEHB would have lower expected health care costs, on average, than enrollees joining the PSHB program,” it said.
Note that last statement too: postal employees and retirees cost more to cover in the FEHB than other federal employees and retirees. Put postal employees and retirees in a carve-out program with their own premium pool, and it’s clear what would happen to premiums for them.
Could be that it’s time to blow the whistle on this idea.