Washington, D.C.- U.S. Senator Daniel K. Akaka (D-HI), Chairman of the Subcommittee on Oversight of Government Management, the Federal Workforce and the District of Columbia, held a hearing today titled, "Up, Up, and Away! Growth Trends in Health Care Premiums for Active and Retired Federal Employees."
The Federal Employee Health Benefits Program (FEHBP) is the nation's largest employer-sponsored health care program in the country, with over eight million participants. It is regarded as a model program for the public sector and Medicare. Every year, OPM uses its leverage as the nation's largest employer-sponsored health plan to keep premiums as low as possible for our enrollees and their families while maintaining high quality care services.
In 2006, Senator Akaka requested that GAO conduct a review of the trends in FEHBP premiums. The report, "Federal Employee Health Benefits Program: Premium Growth has Slowed, and Varies among Participating Plans," was released in December 2006. Today's hearing reviewed the results of the GAO report, and the impact of FEHBP premiums on the administrators, providers and enrollees.
The following is Senator Akaka's opening statement from the hearing:
"Today, the Subcommittee on Oversight of Government Management, the Federal Workforce and the District of Columbia meets to consider the average growth rate of health care premiums for active and retired Federal employees and their families. The Federal Employee Health Benefits Program (FEHBP) is the nation's largest employer-sponsored health care program in the country - boasting a hefty eight million participants. It is regarded as a model program for the public sector and Medicare.
"This is something for which we can all be very proud.
"I believe that as we look to the future of the Federal workforce, it is critical that the FEHBP continue to provide quality care choices at the lowest cost to employees and retirees possible. It is critical to attracting and retaining top flight talent. Without a doubt, the FEHBP is competitive with the private sector and other areas of the public sector. Federal employees and retirees have roughly 280 health care plans to choose from. Every year, OPM uses its leverage as the nation's largest employer-sponsored health plan to keep premiums as low as possible for our enrollees and their families while maintaining high quality care services.
"From 1998 to 2005, premiums rose, on average, more than 7 percent a year. From 2001 to 2003, average premiums grew by double digits. While this was mostly in line with overall premium growth in the marketplace, active and retired employees still feel the impact on their wallets. After years of growing premiums, OPM used reserve funds to reduce the average premium growth rate by 7%. Over the last two years, premium increases were kept lower. This was especially helpful to retirees on fixed incomes who do not get to choose what prescription drugs or services they need.
"However, premium growth is a problem because it consistently outpaces the cost of living adjustments and average annual pay raise. What really concerns me is that premiums fell not because OPM negotiated better rates or market forces drove down health care costs, but because they dipped into reserve funds. Premiums would have been lower if OPM had applied for the drug subsidy.
"OPM has a good story to tell. They would have had a better story to tell, and federal workers and retirees would have paid less if OPM had used all of the resources available to them.
"Last year, I requested that GAO conduct a review of the trends in FEHBP premiums. The report, Federal Employee Health Benefits Program: Premium Growth has Slowed, and Varies among Participating Plans, was released in December 2006. Today's testimony will review the results of the GAO report to me and discuss the impact of FEHBP premiums on the administrators, providers and enrollees.
"I disagree with OPM's decision not to apply for the Medicare subsidy. I was also disappointed that OPM denied the Postal Service, an independent agency which does not receive appropriated funds, the subsidy as well. I believe we all have a common goal to offer a range of comprehensive health care plans and ensure the lowest possible premiums. So, I thank you all, again, for being here today."
Witnesses at today's hearing included, Ms. Nancy Kichak, Associate Director and Chief Actuary for the Strategic Human Resources Policy Division of the U.S. Office of Personnel Management; Mr. John Dicken, Director of the U.S. Government Accountability Office's Health Care Team; Mr. Stephen Gammarino, Senior Vice-President of National Programs for Blue Cross Blue Shield Association; and Mr. Alan Lopatin, Legislative Counsel for the National Active and Retired Federal Employees Association.
More information on the hearing can be found on the committee's website: http://www.senate.gov/~govt-aff/index.cfm?Fuseaction=Hearings.Detail&HearingID=446
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