News Release

FOR IMMEDIATE RELEASE February 25, 2003

Contact: Michael Orenstein (202) 606-2402

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OPM Director Notes Innovation, "Choice" as Holding the Line on FEHB Costs

Washington, D.C. - Kay Coles James, Director of the U.S. Office of Personnel Management, today said the Bush Administration is dedicated to holding the line on premium increases and other health-care costs in the Federal Employees Health Benefits Program.

James, whose agency administers the FEHB Program for approximately eight million federal employees, retirees and dependents, addressed the American Association of Health Plans National Policy Forum at Washington's Grand Hyatt Hotel.

During her two-year tenure at OPM, James has approved initiatives, including a new health-care option and Flexible Spending Accounts, designed to keep the FEHB Program affordable, yet maintain its status as a cutting-edge provider of health-care services.

The OPM Director, who last year met with each of the FEHB carriers to encourage innovation, noted the 2003 introduction of the American Postal Workers Union's Consumer Driven Option. Under this health plan, enrollees receive an up-front credit of up to $2,000 before they pay the first dollar in out-of-pocket costs.

"This cutting-edge option reflects the kind of fresh thinking we had in mind when we asked plans to use their creativity and ingenuity to imagine every solution for containing costs and keeping health care affordable," said James.

In essence, the Consumer Driven Option challenges enrollees to shop for medical providers who provide cost-effective, quality health care.

"Once again, the FEHB is pioneering new territory that holds promise for the general health-care market," said James. "We are putting a new focus on personal responsibility and expanding the consumer's role in driving both quality and affordability."

In independent surveys, the FEHB Program scored higher in customer satisfaction than the industry average. New web-based tools that help federal employees and retirees compare benefits and premiums, as well as obtain other health-related information, provide a basis for high customer satisfaction.

"The distinctive feature of the FEHB is its nationwide coverage," said James. "No matter where federal employees live across the country, they have choices."

James also pointed to the use of Flexible Spending Accounts, which will soon be available to federal employees. Under this program, employees can use the contributions they make to their FSA accounts to pay for the uncovered portions of qualified medical costs, as well as for dependent-care expenses. Employee contributions to FSAs are made from pre-tax earnings, thereby reducing taxable income. The program will become available to federal employees in July.

Premiums in the FEHB Program rose, on average, 11.1 percent this year. The increase was much less than increases experienced by most other large programs.

"The heart and the guts of our rate increases related to the advances in medicine and medical technology and pharmaceuticals that are helping people live longer, healthier lives, but which also make health care more expensive," said James.

The FEHB Program began providing benefits in 1961. James said the program's ability to offer affordable health care is steeped in its ability to be innovative and to create market-based competition, as well as offer consumers a choice of health-care options. She added that these characteristics of the FEHB Program dovetail with President Bush's belief that government should not attempt to centralize or control the delivery of medicine, but should leave such decisions to patients and their doctors.

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OPM oversees the federal work force and provides the American public with up-to-date employment information. OPM also supports U.S. agencies with personnel services and policy leadership including staffing tools, guidance on labor-management relations and programs to improve work force performance.

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