FOR IMMEDIATE RELEASE September 26, 1997

CONTACT: Sharon J. Wells (202) 606-1800 sjwells@opm.gov

This is the first significant increase in federal health insurance premiums in five years, and in two of those years the average premium actually decreased, said OPM Acting Director Janice R. Lachance. We expect that the 1998 increase will be significantly lower than the average private sector increase as it has been through most of the 1990s.

In 1996, the last year for which data is available, the average federal premium was $3,699 while in the private sector, the figure was $3,915. During the first three years of the decade, when federal enrollees paid increases of 8.7, 4.7 and 7.4 percent respectively, the average private sector premium increased 17.1, 12.1 and 10.1 percent. In 1995 and 1996, private sector premiums went up while federal plan costs decreased.

As widely predicted by health insurance experts, the trend toward higher health care costs continues. Industry trends indicate a double digit private sector increase next year compared to the federal hike of less than 9 percent.

For 1998 the FEHB Program will have a number of new benefits. All plans will provide at least 48 hours of inpatient care for normal childbirth and 96 hours of inpatient care for caesarean deliveries. Mastectomy patients must have the option of inpatient care and must be permitted to stay at least 48 hours.

As stipulated in the Mental Health Parity Act, OPM also eliminated maximum dollar limits on covered mental health care. OPM sought to bring about more improvements in mental health benefits, but because all plans were faced with premium increases to cover higher health care costs, success was limited.

As we look toward the next century, our goal is to make sure federal employees can choose among health plans that provide high quality care and service, including improved mental health coverage, at competitive prices, said Janice Lachance. We will continue to work hard to achieve that goal."

The managed care component of the FEHB Program continues to grow in both size and strength. The 1998 program will contain additional point-of-service products. These products allow enrollees to minimize their out-of-pocket costs by using selected panels of providers. Enrollees also retain the freedom to choose other providers, but at additional cost. These point-of-service products have proven successful in reducing the rate of premium increases by facilitating the transition to managed care.

Because the current formula for dividing premium increases between the government and employees is based on a simple average premium of specified health plans, federal employees and annuitants will, on average, see a biweekly increase of about $3.32 for self coverage, from $24.42 to $27.74 and about $8.64 for family coverage, from $54.15 to $62.79. The maximum biweekly government contributions in 1998 will be $65.96 for self coverage and $142.27 for family.

For 1999, the share of premiums paid by employees and the government will be calculated under a new formula. The so-called Phantom Formula gives way to a Fair Share formula recently enacted by the Congress. The Fair Share formula will divide premium costs based on a weighted average of the premiums of all plans in the program.

Federal employees may select new health plans during the annual Open Season which runs from November 10 through December 8. Worldwide, federal employees and retirees will have over 350 plans from which to choose, including some plans that are new to the program.

We encourage all FEHB enrollees to carefully review the 1998 premium and benefit changes to assure that they continue to receive the maximum value for the dollars they invest in their health care, Lachance added. Federal employees, annuitants and their families have a wide choice in plans. We hope theyll take advantage of that choice.

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