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Washington, D.C.—The proposed addition of Health Savings Accounts (HSAs) to the federal health program threatens to change its fundamental nature into one where only the healthy will have access to reasonable health insurance coverage, the head of the nation’s largest independent union of federal employees warned today.

President Colleen M. Kelley of the National Treasury Employees Union (NTEU) reacted sharply to a decision by the Office of Personnel Management (OPM) to have insurers in the Federal Employees Health Benefits Program (FEHBP) offer the HSA option to federal employees and retirees next year. FEHBP covers more than eight million federal workers, retirees and their families, and is the largest health care program in the country.

HSAs combine a high-deductible health care policy with a tax-exempt savings account. Participants, who must be under age 65, may make tax-free withdrawals to pay medical costs.

President Kelley warned of the potential for adverse selection and the possibility that, within a short time, HSAs would split the pool of participants, with those remaining in traditional FEHBP plans—mainly the elderly and less healthy—facing skyrocketing premiums.

The potential for an HSA-driven rise in premiums for those remaining in traditional FEHBP plans would come on top of double-digit increases in federal health care costs in each of the past four years.

With HSAs, healthy enrollees would be tempted to join traditional plans in years they anticipate high health care needs, which would allow their insurance carrier to pick up the costs. Once their health needs have been met, these same individuals then would have an incentive to choose a high-deductible catastrophic health care policy with its tax-exempt savings account, postponing any further necessary medical treatment until the following year when they could once again enroll in a traditional health plan.

NTEU had suggested that those individuals selecting an HSA be required to remain in that plan for a set period of time to avoid individuals ‘gaming the system’ in this way; however, the OPM call letter to insurers does not address this important issue.

“All of this has the very serious and very real potential to threaten the stability of the FEHBP program,” Kelley said.

As the largest independent federal union, NTEU represents some 150,000 employees in 29 agencies and departments.