2019 FEHB Program Changes

In recent years, there have been significant program-wide changes to the FEHB program. For example, under Affordable Care Act (ACA) rules plans have had to expand coverage and eliminate all cost sharing for preventive benefits. The effect on plan premiums has been small, because coverage was already so good in the FEHB program.

The ACA change that has been by far the most important to Federal employees is the new coverage of adult children until age 26. One effect of this change has been to raise slightly the cost of FEHB premiums, probably by about one percentage point. Importantly, adult children enrolled in their parents' FEHB plans will also benefit from future eligibility for temporary continuation of coverage for three years after they turn age 26. Of course, this only benefits a small fraction of Federal employee and retiree families, and then only if they pay for a self plus one or self plus family plan option. For single parents, it will in most cases be far less expensive for the adult child to enroll in his or her own employer's plan, if available, or in a private marketplace exchange plan.

Also, both private and public employees are subject to a legal obligation to enroll in health plans. At present, a substantial number of Federal employees, possibly several hundred thousand, are uninsured. They are probably disproportionately younger and healthier, and over time their participation in the FEHB program would tend to lower premiums. Penalties for failure to enroll are growing sharply.

Under another recent change, a very small group of employees—members of Congress and their personal staffs—were forced by a provision of the ACA to join marketplace exchange plans for coverage. An OPM regulation requires them to enroll in Gold plans on the DC exchange (many of these have national networks) and allows them to be reimbursed "as if" these were FEHB plans.

The FEHB program statute required each plan to offer separate premiums to families with only two members ("self plus one") and to families with two or more members ("self plus family"). Couples with no dependents and single parents with one dependent can enroll in either variation, depending on which premium is less costly. Plan benefits are usually identical under both. The fall 2015 Open Season offered eligible families the first opportunity to switch from self plus family to self plus one. Only about half of those eligible changed to self plus one plans.

Most self plus one premiums are lower than family premiums, primarily because fewer persons incur fewer expenses. The differences are small (and in some cases self plus one costs more) because "empty nesters" are typically much older and average health care costs rise rapidly with age. The proportion of annuitants in each plan, and the proportion of these with Medicare Parts A and B, also influence resulting premiums. The yearly premiums for those who enroll in self plus one will be on average about $200 a year less than for those enrolled in family plans, but the variations are wide, and in over ten percent of the plans self plus one costs more than self plus family. Hence, it is very important to check which premium is lower to decide on which way to enroll, or whether to remain in the more expensive option.

The savings under self plus one are relatively small compared to the multi-thousand dollar savings that can be achieved by switching to lower cost plans. The two sets of savings in combination, however, offer spectacular savings possibilities for the majority of federal employees and retirees.

Finally, OPM has asked plans to adopt cost-saving coordination with Medicare, a reform that saves money for the program because Medicare usually pays first, which reduces FEHB premiums, and also offers savings for retirees because their out-of-pocket costs are reduced. Most national plans already have such "wrap around" benefits. Dozens of local plans are adding them. Most retirees now can enroll in a wide range of all plan types—PPO, HDHP, CDHP, and HMO—that provide these savings.

An excise tax of 40 percent on health plan premiums in "high cost" plans above a certain amount (not on the entire cost of the plan) is scheduled to take effect in 2018. This is also known as the "Cadillac plan" tax.

The amount of premium excluded from the tax will not grow as fast as health care costs, so this will create major incentives for plans to take cost reducing steps in the future to avoid the excise tax.

Longer-term effects of these and other changes are impossible to predict with precision, and by definition do not affect individual enrollee decisions for the coming year, since premiums and benefit levels are already set. For now the effects of health reform are minor and for most Federal employees and retirees, with only minimal effects on plan costs or benefits. Our advice is to focus on making wise Open Season choices this fall, and to put aside concerns over future changes.