“It’s a very opaque rule,” said Francis. The rule goes into effect immediately, covering the bids coming in now for next year’s plans “and it only effects the community rated plans, which are basically HMOs, and only some of them.”
According to Francis, most plans in the FEHB Program are experience-rated. They are not affected by the rule. Community-rated plans are affected. These plans, explained Francis, are generally not national, they are almost all HMOs, and they provide OPM the lowest bid that they provide any other employer. “So if, for example, if an HMO has IBM as a customer in its local area, and they give IBM a certain rate for enrollees, they’d have to give OPM the same rate for federal employees,” he explained.
Francis said he believes the intent of the rule is to provide coverage at the lowest possible cost. “What I think OPM is saying in this interim final rule is called the ‘most favored nation clause’ okay, by the HMOs themselves. They don’t like it very much because it’s a pretty frugal way of doing business.”
The problem, said Francis is that “it’s unclear. OPM doesn’t really explain what it expects to have happen.”
Some of the plan premiums are going to go up, said Francis, “maybe a little more than they would have, but hey, maybe they would have dropped out of the program entirely, in which case people wouldn’t have even had the choice, and I think that’s what OPM is trying to avoid. They’re trying to give the plans a little more flexibility to keep them in the program.”