Your money, your health

Wednesday - 10/6/2010, 11:14am EDT

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October 6, 2010 -- What do active and retired feds need to look for (and avoid) in a health plan?

Last week the Office of Personnel Management announced that the cost of the Federal Employee Health Benefits program will rise by 7.2 percent in fiscal 2011. But premiums alone don't tell the whole story.

David Snell, director of the National Active and Retired Federal Employees' Retirement Benefits Service Department, joined Mike Causey to discuss the rest of the premium increase story.

Co-pays will go up
Snell said enrollees must also be aware of copay increases.

According to OPM, for enrollees in the Blue Cross Blue Shield standard option, the calendar year deductible will increase by $50 for self and $100 for self and family.

For enrollees in the BCBS basic option, the urgent care copay increases from $30 to $50; the emergency copay from $75 to $125; and the surgery copay from $100 to $150. But there is a decrease in copays for mental health substance abuse treatments.

(To read more copay changes, click here for a document distributed by OPM.)

Why did premiums increase?
Inflation is flat and there is no cost-of-living adjustment for retirees in 2010 and 2011, but premiums are still rising.

"The cost of medical coverage and care has outstripped inflation by considerable amounts," Snell explained. " It costs more to cover those benefits that your plan provides for you and therefore premiums go up."

Snell said the goal is to prevent premiums from skyrocketing, which he said he believes the federal program has managed to do.

This year's increase is less than last year's increase of 8.8 percent, according to OPM.

With the passage of the Affordable Care Act, FEHBP coverage will be extended to dependents up to age 26, up from age 22, starting in 2011. This health reform bill accounted for 1.7 percent of the total average increase for next year, Snell said.

Shopping in open season
Snell likens the announcement of premium increases to "a magician who wants you to look at this hand while he's doing something with the other hand."

Snell emphasized the announced 7.2 percent increase is only an average. Enrollees may see a higher, lower or no increase depending on their individual plans and individual needs. Also, it's important to look at co-pays, which will also increase.

Overall, the two biggest considerations of whether or not to switch health options should be an individual's medical needs and the ability to afford coverage, Snell said.

For example, not everyone who turns 65 needs to enroll in Medicare Part B, but having the extra coverage, if you can afford it, offers an extra layer of cost protection, Snell said.

"It just gives you that assurance that you have two federal plans and you're going to be able to withstand most costs of your medical care, no matter what happens," Snell said.

Another option might be to suspend your federal plan and enroll in Part C Medicare Advantage, which includes drug coverage, Snell said.

"If it doesn't work, you can get out of Part C and re-enroll in the federal plan," Snell said.

When considering options for health benefits, it's also a good time to see if you can cut your premiums in life insurance, Snell said.

Will there ever be a self plus one option?
It's unlikely, Snell said.

"It's a group policy, folks. The basic premise of a group policy is the beneficial aspect of risk-sharing. You share the risk among a large group of enrollees, including those who are sick and high-risk, as well as those who are low-risk," Snell said."By spreading the risk, it's possible to obtain better coverage and lower premiums for the group as a whole," Snell said.

By splintering the group policy into a self plus one option or other options, the result may be to inadvertently raise premiums, Snell said.

If you have a question, call the show live (Wednesday, 10-11 a.m.) at 202-465-3080.