Health premiums up 3.7 percent -- or is that 4.4 percent?

Thursday - 9/26/2013, 2:00am EDT

Did you ever go to a carnival, a county fair or a funhouse and stand in front of one of those trick mirrors that make you fat, thin or very tall or short? Sometimes all at the same time.

The government equivalent of the funny mirror appears each September. That's when Uncle Sam traditionally announces new health insurance premium rates for nearly 9 million federal workers, retirees and family members. All are covered by the Federal Employee Health Benefits Program.

Next year those premiums will go up an "average" of 3.7 percent, or 4.4 percent, depending on whose average you use. But the change will vary plan-by-plan. A few will have very modest increases, or actually reduce premiums a little. Others will go up $12 to $30 biweekly. Most of the increases are moderate. But to feds who have been under a 3-year pay freeze, any increase can be a problem.

Although many employees are unhappy with the program, the FEHBP is considered the best in the country. The employer, Uncle Sam, pays about 70 percent of the total premium. Even more for postal workers. Nobody can be denied coverage because of age, health, preexisting conditions or lifestyle. Coverage is for life and survivors keep their protection.

Because it is the largest employer-group plan in the country, many people watch the FEHBP for trends. And prices. Medical inflation is always higher than the regular rate of inflation, so premium increases of 7 percent were not unusual in the past.

Office of Personnel Management officials dutifully report, as under every administration, that the price hikes could have been worse save for the frugality and wisdom of the current president. In this case, they say that competition created by the Affordable Care Act (Obamacare) kept the increases to a minimum.

The government share of the premium (the percentage it pays) is based on a complex formula that uses the premiums of the five largest (as in most popular) plans in the program. This makes it almost impossible for the average premium-payer to figure out what the government is talking about when it explains how much premiums are going up. According to OPM, the average premium will increase 3.7 percent. But the average premium employees and retirees will pay will rise about 4.4 percent. That's because one figure is the total increase in premiums (3.7 percent) while the other (4.4 percent) is the actual amount the "average" FEHBP premium-payer's payments will increase.

The Open Season when feds can switch to another health plan, or make changes in other optional benefits, begins Nov. 11 and runs through Dec. 9.

The bottom line is that the government subsidizes most of the health premiums and that percentage — again roughly 70 percent — never changes. But what you pay, the actual premium and your share of it, depends on you. Premiums will depend on which plan you pick. Benefit changes, if any, will be announced later. Meantime, to look at the full spread of 2014 FEHBP premiums, you can click here. Remember that the premiums paid by federal workers and retirees are different (higher) than those paid by postal workers:

What usually happens is this: Despite the lengthy (by private sector standards) open season and despite premium changes, most workers, and virtually all federal retirees do nothing. They stay with the same plan year after year, even if premiums go up and benefits are changed.

Next year, the number of plans and options will increase. There will be 15 nationwide fee-for-service plans and dozens of localized HMOs to choose from.

We'll begin full-bore coverage and analysis of the plans when open season starts. That will include special reports and radio shows featuring experts like Consumer Checkbook's Walton Francis, and David Snell from the National Active and Retired Federal Employees. But the bottom line is that the final choice is yours alone. If you choose to sleepwalk through the Open Season (not that there's anything wrong with that!), you'll be stuck with the same old, same old health plan even though you might get a better deal (in coverage and premiums) if you do your homework.


NEARLY USELESS FACTOID

Compiled by Jack Moore

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(Source: Improbable Research)