Welcome and Thank Yous

Good morning.  I want to thank Frank Titus, Acting Associate Director of the Retirement and Insurance Service, for that kind introduction.  We are so fortunate to have the talent and dedicated professionalism that Frank and Abby Block, Assistant Director for Insurance Programs, bring to this critical program.

And I want to thank Candace Schaller,Vice President for Regulatory Affairs, and the American Association of Health Plans for their leadership and partnership in putting on this outstanding conference.

Events of 9-11

I want to begin this morning by thanking you all our carrier partners for your extraordinary cooperation as we responded to the murderous attacks of September 11^th.  As the horrific events unfolded on that tragic day, it was clear that members of our federal family would be impacted directly men and women who worked in the Pentagon, in the World Trade Center, and those on the doomed flights.  Some of our FEHB carriers and their employees suffered losses; Empire Blue Cross had its offices in the World Trade Center, for example.  You have our deepest sympathies.

Recognizing that the last thing victims or their families needed was endless red tape when trying to deal with their medical expenses related to the attacks, we immediately turned to our partners the insurance carriers. We asked for your assistance in assuring a compassionate response to the national disaster. 

On September 12^th, we encouraged you to provide every assistance and every consideration to the victims and their families and to be particularly sensitive to claims filed as a result of the tragedy. We asked that you administer flexibility under your contracts, promptly paying claims that might later be reimbursed under Workers Compensation Programs. 

We asked you to relax requirements such as notice for emergency admissions and benefit payment levels.  This was important for victims taken to non-plan and/or non-PPO hospitals or other disaster treatment centers.  Many plans went the extra mile to provide services to disaster victims.  It was noticed, and it was greatly appreciated.

You see, as FEHB carriers you provide a very, very important service.  I want you to think about that for a minute.

Obviously, your service is important to the nine million federal employees, retirees, and their families for whom you are providing access to affordable health care.  You give parents peace of mind.  Your benefits pay for the tests that detect illnesses early, when they can be treated and even cured; provide medicine to ease pain and suffering; and save lives through surgery.  You make a real difference in peoples lives every single day.

On another level and I do not believe it is any exaggeration to say this your service is important to the people of America. 

In recent months, we have been painfully reminded how important it is to have excellent people in government.  And right now, there are many needs that must be filled.  We need people to staff the new Transportation Security Agency.  We need them in law-enforcement and in any number of positions that protect public health and safety.  And we need people who perform the vital and sustaining work of government.

The demographics of the federal workforce mean that we can anticipate substantial retirements in the next few years.  Some have called it a human capital crisis.  I see it as an opportunity to reshape the federal workforce to respond to 21^st Century demands, an opportunity to bring in the knowledge workers and people with technical skills we need in the age of e-Government.  As you know, these skills are in high demand.

What is important for you to understand is that right now, we are hungry for talent; the competition among employers for the best and the brightest of this new generation is intense.  The federal government must compete energetically for a high-quality workforce.

As Director of OPM and even going back to my days in corporate HR I can tell you from first-hand experience that in the hiring process, after you discuss salaries, the first thing prospective employees ask about is health benefits.  People truly care about their health benefits. 

So I want to state this in no uncertain terms.  You will see very, very tough negotiations from OPM this year.  Given the importance that health care benefits play in the federal governments ability to recruit and retain the workforce we need to deliver results for the American people, this is critical.  We need the best and the brightest, and that means we need the best, most attractive health benefits package.  We are competing with the private sector.

Principles for FEHB Program

Because of the events of September 11^th, this conference is being held in March, rather than its usual fall timeframe.  As you know, this is the time of year when we issue our annual call letter to carriers for the next contract year.  So this is an excellent time for me to share with you the things I believe are important as we take the FEHB program into the 21^st Century.

For more than 40 years, the Federal Employees Health Benefit Program has been a pacesetter.  Since its inception in 1959, the program has operated according to a decentralized model, a model characterized by market-based competition and consumer choice. 

Today, FEHB is the nations largest employer-sponsored health insurance program.  OPM contracts with over 180 carrier partners for the processing and paying of claims to beneficiaries that total about $25.5 billion annually.

The fact that close to 85% of the eligible federal workforce participate in the Federal Employees Health Benefits Program attests to its popularity and to the success of our partnership.  And we can all be very proud that FEHB Program reports one of the highest levels of customer satisfaction of any health care program in the country

Ladies and Gentlemen, as the custodian of this program on behalf of the public servants who work for America, I am here to tell you that there will be no backing down from the high standard the FEHB program has set in the past. 

Together, as partners, we will nurture the FEHB program and make it even better.  Indeed, I believe the federal government and the program it offers to its employees should be the model that all other employers look to.

Employees Come First

From our perspective of course at OPM, the first and foremost concern is our employees.  We want our federal workers and retirees enrolled in highly rated plans that deliver quality care in a cost-effective manner.  That means keeping insurance affordable. 

Five years of successive increases above the rate of inflation pose a real burden.  I hear about it from our employees, and especially from retirees on fixed incomes.

I realize that there are many factors that drive the rate increases.  This is not simple math; it is complex stuff.  The FEHB Program is not immune to market forces, including health care cost trends and health plan consolidation. Advances in medicine and medical technology are helping people live longer, healthier lives, but they also increase costs.  Prescription drugs both greater utilization and the rising cost are a factor.  Mandates I am very concerned with their effect on insurance affordability.  And in the FEHB program, we have a covered population that continues to age.

While last years 13.3% average FEHBP premium increase looked fairly reasonable compared to the 13-50% increases that private companies reported nationwide, I was still very disappointed.  I want to do better for the men and women who are working so hard for America.  I want them to be able to choose a quality health care plan that meets their needs at affordable prices.  And I know you want the same thing too.

Thats what we are going to be looking for, incidentally, in negotiations.  So come to the table with some innovative ideas, because that is going to be the key to cost-containment.

Look to the Market for Creative, Cutting-Edge Options

Indeed, my challenge to you is to put your thinking caps on and develop some new options to keep the federal governments program a model of consumer choice and on the cutting edge of employer-provided health benefits. 

There are some principles that need to be followed the principles President Bush outlined at the Medical College of Wisconsin when he unveiled his health care agenda in February.  Many of you, I am sure, are familiar with that speech.  This is a new Administration with a significantly different philosophy on health care. 

This President recognizes that it is not the governments role to centralize; nor is it the governments role to control the delivery of medicine.

The President believes in trusting patients, working with their health care professionals, to decide which treatment is best for them.  He believes in giving workers choices as we do in the FEHB Program because when health care plans compete for business, it means higher quality and better coverage.  The President also believes in an environment that encourages and rewards quality.  He has called for patient protections and better information for patients, as well as support for health care professionals working to improve quality.

We are conscious that the choices that we make for the FEHB Plan have tremendous implications for the private sector as well.  If your proposals are consistent with the Presidents vision patient-centered health care, choice, and quality you will find OPM very receptive.  Our job is to provide consumers protection; it is not to dictate choices.

We are not going to tell you what to do because the best ideas for helping to contain costs and promote quality are going to come from you in the marketplace.  You will have to convince employees that your product is best.

That is the advantage of the kind of market-based, public-private partnership that is the hallmark of the FEHB program.  And it is one of the reasons I want to make sure that our program continues to offer the most options of any employer-provided health insurance plan in the nation.

So dont be afraid to be creative.  It may have seemed in the past that we were reluctant to look at new options; let me assure you that this is not the case today.  We welcome new ways of structuring offerings.  And we will work with you.

We have already seen it in the last few years.  Carriers are proposing and OPM is accepting new options like the Government Employees Hospital Association Standard Plan that was introduced in 2001 and the Blue Cross/Blue Shield Basic option in 2002.  These options are proving popular with our members.  As of February 20^th, Blue Cross/Blue Shield Basic had over 79,000 members.

We have seen it in changes in prescription drug benefits.  We welcome your ideas for designing prescription drug benefits that encourage use of generics, as well as proper dosing.  Look for ways to encourage proper utilization. 

We will be encouraging you to increase emphasis on care-management for individuals with chronic conditions.  Programs that provide education about chronic conditions and ensure that patients are getting appropriate services not only can improve the quality of care but also can help use benefit dollars more effectively.

Increasing CompetitionBenefit Options

At OPM, we are exploring ways to increase the health care options available to federal employees, thereby increasing competition within the program.  We are looking into further flexibilities that will enable you, our partners, to produce the most cost-beneficial benefits to our employees and retirees. Given the innovative benefits being offered in the private sector, we must tailor and adapt the benefits available to Federal employees.

Better integration of the FEHB Program and Medicare is an ongoing Administration goal. In thinking about the design of new products tailored for Medicare-covered Federal retirees, consideration might be given to including appropriate levels of member cost sharing in order to discourage excess utilization of services.  In addition, these products should always include protection against catastrophic illness and prescription drug coverage. Beyond those basic features, plans may come up with suggestions that would be attractive to potential members and cost-effective at the same time.

The President has called for lifting the excessive restrictions on Medical Savings Accounts (MSAs) so that more Americans can choose insurance for major medical coverage accompanied by personal health savings accounts.  Expanding OPMs contracting authority to include MSAs is another potential enhancement to the programs structure that could help maximize resources. 

While that may be down the road, at OPM we also are looking at flexible spending accounts, an option many private companies already offer to their employees.  FSAs would allow federal employees to establish a savings account with pre-tax dollars that then can be used for certain expenses.  Obviously, FSAs involve coordination with the FEHB program.

Increasing Competition Quality

FEHB Program plans compete based on price and benefits.  But there is another essential dimension to the competition that is quality and performance. 

Yes, we are negotiating, and negotiating hard on price.  But we are going to be just as tough on quality quality of care and quality of customer service.

This includes things like patients getting needed care in a timely manner, getting in to see the doctor and getting referrals to specialists.  It includes how well the doctors explain things, whether they spend enough time with their patients. 

When customers call, they should always be treated courteously and have their questions answered and their problems resolved promptly.  The Federal government as an employer brings nine million people into this program; these are important customers who ought to be treated accordingly, whether it is the OPM Director calling or a file clerk.  Make your system easy to navigate and the materials easy to use and to understand.  And make sure that claims are processed correctly and in a reasonable amount of time.

Through our strong relationships with independent accrediting organizations such as the National Committee for Quality Assurance and the Joint Commission on Accreditation of Healthcare Organizations, we provide information on plans' accreditation status, something we expect to expand on.  We also provide customer satisfaction information from the survey you do every year using the Consumer Assessment of Healthcare Performance Survey instrument that has become the industry standard.