Feds’ health care costs to increase on average by 6.4 percent

Federal employees on average will pay 6.4 percent more for health care in 2016.

The Office of Personnel Management announced the rate increase for the Federal Employee Health Benefit Program (FEHBP) Tuesday ahead of the open season, which starts Nov. 9.

This increase is double that of 2015 and is the biggest rate change in recent memory.

“This is, even with this higher increase than previous four years, which was a very low period, we are still in the midst of the lowest consecutive five-year period of premium increases in the FEHBP program. So while higher than last year, those by historic standards were very low increases, and we are still in a period of relatively modest increases,” said John O’Brien, OPM’s director of health care and insurance, in a call with reporters. “One contributing factor to the somewhat higher premium increase is the uptick in the growth of drug costs. Drug costs for the FEHBP program are a much larger factor than other employer sponsored programs because annuitants, for whom drugs are a majority of the benefits are included in our FEHBP risk pool. Drugs represent nearly 27 percent of the total spend in the FEHB compared to 10 percent for a typical employer.”

O’Brien said OPM encouraged insurance carriers in March to address the cost of prescription drugs anyway they could, including new contracts with providers and looking at more active management strategies.

He also emphasized that despite the average increase of 6.4 percent, federal employees will not see a change in their deductibles or the amount of money they have to spend on co-pays.

OPM said the average costs per enrollment option:

  • Self only: $5.50 more per pay period
  • Self-plus-one: $8.92 per pay period more than they previously paid for self and family coverage.
  • Self and family: $19.61 more per pay period.

O’Brien said for the vast majority of the people who move to self-plus-one from self and family, total costs will go down. He said self-plus-one is open to any federal employee or retiree plus one other designated family member — a child or a spouse.

“For over 95 percent of the enrollees [in self-plus-one option], the enrollees share, the amount of money the person pays out of pocket for insurance coverage, will be lower for the than the enrollees share for self and family in their current plan,” he said. “However, it is possible that in some plans, there will be a higher enrollee share for self-plus-one enrollment than for self and family enrollment. Therefore, OPM is encouraging enrollees to shop carefully before making a change. Switching to self-plus-one is voluntary. If someone is better off staying self and family coverage they are absolutely not only allowed to do so, but encouraged to do so.”

OPM released details of the rates for next year for all plans for U.S. Postal Service and non-USPS employees.

OPM finalized the self-plus one option in September in preparation for open season.

Health insurance providers have increased rates for each of the past three years, including 3.2 percent in 2015, 3.7 percent in 2014 and 3.4 percent in 2013.

Richard Thissen, president of the National Active and Retired Federal Employees Association (NARFE), released a statement saying the increase could mean reduced take-home pay for federal employees who had been expecting a 1.3 percent pay raise in 2016.

“Unfortunately, federal retirees are facing an even worse situation,” Thissen said. “Not only are their health insurance premiums increasing by 7.4 percent, it is unlikely they will receive a cost-of-living adjustment (COLA) to their annuities next year. Additionally, many federal retirees are facing a more than 50 percent increase in their Medicare premiums, further diminishing their ability to make ends meet. In a year in which health insurance costs are increasing substantially, we can clearly see a need for a new formula to calculate COLAs, one that accurately reflects the health care costs of our nation’s seniors.”

Thissen added that families switching from self-and-family to self-plus-one could save an average of $278 next year.

“However, as compared to their 2015 Self and Family premiums, they will see an average premium increase of about $232 for the year due to the overall increases in premiums,” he said. “That, of course, is preferable to the $510 average premium increase for Self and Family premiums for the year.”

Even with this significant increase for 2016, it pales in comparison to what feds saw in the 2000s. OPM has said previously that in the early 2000s, premiums increased on average by 10 percent to 12 percent annually.

O’Brien said OPM looked at several independent assessments of health care for the private sector and rate increases ranged from 4 percent to more than 7 percent, meaning changes to the FEHB program are in the range of other programs.

In addition to health care plan increases, federal employees also will see increases in their dental and vision insurance premiums.

OPM said the average dental plan will increase by 2.23 percent, while the average vision plan will go up by 3.1 percent in 2016.

OPM said 1.6 million employees have dental plans and 1.1 million feds have vision plans.

The American Federation of Government Employees said the increase inrates is unacceptable.

“The government is shifting more of the cost increase to enrollees, further eating away at their take-home pay,” said AFGE National President J. David Cox, in a release. “Our members take home an average of $500 a week. This is a significant and unfortunate cost that is being passed on to them at a time when they can least afford it.”

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