Reg Jones Expert's View

One of the most valuable benefits provided to federal employees, retirees, and survivors is access to a wide variety of health benefit plans, the premiums for which are financed in part by the government. “In part” only tells a portion of the story. For most full-time federal employees, the government’s contribution is huge: 72 percent of the weighed average cost of all the plans in the FEHB program, not to exceed 75 percent of the cost of any specific plan. Note: Under its collective bargaining agreement, the Postal Service contributes more, further reducing the premiums for its employees. However, Postal Service retirees must pay the same amount as the employees and retirees of other agencies.

Of course, enrollees do have to pay the difference between the government’s share and the full cost of the premiums. It’s an amount that is almost always going up within each plan and option. This year the average premium increase is 6.6 percent. While it is a lower figure than the average premium increase felt by the rest of the nation’s citizens who have health insurance, it isn’t chump change.

Because FEHB plans are experience rated, what they had to pay out in the preceding year controls what they will have to charge in the following one. This can be affected significantly by the composition of their enrolled population. Any time a large number of healthy people move to a lower cost plan, the one they left will see its costs go up because it will be paying the bills of a less healthy population. Thus, the premiums will have to rise, sometimes dramatically. On the other hand, a plan enjoying an influx of healthy members will need only low or moderate premium increases, and that based largely on the always rising costs of health services.

A key point to remember: In the FEHB program, it’s the participant who is in the catbird seat, not the plans. You pick the plan or option you want; it doesn’t pick you. So be vigilant during the annual FEHB open season, making sure to balance premium costs against needed coverage. Moving around won’t affect you ability to take your health benefits coverage into retirement. You only have to be covered by the FEHB for five years before retirement, not a specific plan.

Next time I’ll talk about increases in Medicare Part B.