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Washington, D.C.—The National Treasury Employees Union (NTEU) opposes the introduction of so-called “cafeteria benefit plans” into the federal health care program. Its president called them a step “that, in reality, will have the effect of limiting employee choice by shifting health inflation costs away from the government as the employer and onto its employees.”

In testimony submitted to a key House subcommittee, NTEU President Colleen M. Kelley said that with simple inflation averaging between 2 and 3 percent in recent years and annual health insurance premiums for federal workers rising between 10 and 13 percent, “it would not take long before employees would be required to forgo other benefits just to continue to maintain the health insurance coverage they now have.”

She urged the House Civil Service Subcommittee on Government Reform to “firmly reject” the use of cafeteria plans, which are often referred to as flexible benefit plans.

Under them, employees usually are given a pool of money to spend on an array of benefits the employer has chosen to include in the plan, such as health insurance, life insurance or additional vacation. These plans, President Kelley said, are often used by employers to control employer costs of benefits.

This is most often accomplished, she told the subcommittee, by limiting increases in the annual pool of money employees are given to purchase these benefits—frequently by using the increase in the Consumer Price Index as the benchmark for annual increases in the amount of money provided for the purchase of benefits.

The NTEU leader called the FEHB unsuited to the introduction of flexible benefit plans for another important reason: it covers both current and retired federal workers, and under present tax law, only current federal workers are eligible to participate in flexible benefit plans.

That, she said, would mean necessarily separating health insurance programs for current and retired federal workers. “In our view,” she said, “the introduction of a flexible benefits plan would only serve to further destabilize the FEHB program."

Premium increases in double-digits the past two years and near double-digits in each of the two years prior to that have made the FEHB “prohibitively expensive” for lower paid employees and “unattractive to prospective employees,” the union leader said.

A far better course would be congressional approval of bipartisan legislation that would boost the government share of FEHB premiums from the current average of 72 percent to the most common industry standard of 80 percent, President Kelley said.

NTEU is the largest independent union, representing some 150,000 employees in 25 agencies and department.