FEHBP modernization plan receives cautious optimism from Hill

Thursday - 4/11/2013, 7:54pm EDT

Jason Miller, executive editor, Federal News Radio

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Lawmakers are far from satisfied with the White House's proposals to change the Federal Employees Health Benefits Program.

House Oversight and Government Reform Committee members Thursday wanted more details and data from the Office of Personnel Management before committing to any of the ideas.

Still, committee members expressed the belief that the 50-year-old law creating the FEHBP is in need of a major update.

"The proposal itself is inherently good. Let's open up the process, let's recognize that artificial, historic definitions need to be gone," said Rep. Darrell Issa (R-Calif.), chairman of the full committee, during a hearing of the subcommittee on the Federal Workforce, Postal Service and the Census. "I do believe, although I'm willing to support a law change that would create a regional opportunity and certainly a law change that would create a greater opportunity for nationals [insurance companies] to come in, I believe, as you go back today with your proposals from us, are you willing to go through a process that says, 'You can only do any of these if there is a finding scored by CBO or found by GAO to be an actual savings?'"

Issa said he's concerned about false estimates by OPM and that the changes could actually cost the government more in the long-run.

As part of the fiscal 2014 budget request sent to Congress Wednesday, the administration offered up three major changes.

The administration wants to:

  • Open the plan up to regional insurers instead of just national ones;

  • Give OPM the ability to negotiate prescription drug prices through Pharmacy Benefit Managers to take advantage of the bulk buying;

  • Offer domestic partner coverage, called the self-plus-one option;

  • Let employees who are healthier pay lower premiums.

Jonathan Foley, the director of planning and policy analysis for OPM, said the law creating the FEHBP in 1959 has not kept pace with the times.

"Missing from the current mix are regional plans that are widely available in the commercial market," he said. "If these regional plans were available, FEHBP enrollees would benefit from having greater choices that represent best practices in the private sector, and more closely resemble product combinations to private employees in state and local governments."

Foley said he wouldn't open the program up nor contract with every regional carrier. The proposed update just gives them the option if the agency determines it's in the best interest of the government, the employees and the retirees.

Foley said OPM estimates that, for example, changes to the prescription drug program could save $1.6 billion over 10 years, and the self-plus-one option would save another $5.2 billion over the next decade.

Trust, but verify

But Issa was not satisfied with those estimates alone. He said history has shown that trusting the word of the agency or administration that there are savings isn't good enough.

He said he would like to see a pilot program demonstrating how the regional preferred provider organizations (PPOs) or self-plus-one or prescription drug changes would work first.

Issa also said he would like to see an independent review from a third party in terms of how much money the government would save.

Other committee members wanted more clarification from OPM on how these proposals would work.

Del. Eleanor Holmes-Norton (D-D.C.) said she's concerned that OPM is heading into two different directions with these proposals.

Under the prescription drug plan, OPM is trying to take advantage of their large number of members to get better prices. But with the self-plus-one option and the regional PPOs option, it seems as if the agency is losing the value of having a large pool of customers.

Foley said OPM is not creating regional pools, but regional carriers whose prices would be based on the entire federal membership. He said, for example, if a regional carrier just wanted to work in Oregon and Washington states, OPM could require they also offer services in Alaska to ensure carriers are not "cherry-picking" only high premium or low-cost states.

Blue Cross-Blue Shield and the American Federation of Government Employees also questioned the administration's proposals.

Support from insurance companies mixed

Blue Cross-Blue Shield didn't support the regional PPOs or prescription drug ideas.

William Breskin, the vice president of government programs for the Blue Cross and Blue Shield Association, said OPM has underestimated the costs of the program and the regional PPOs. He said federal employees and the government would end up paying more — as much as $5.7 billion over 10 years.