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Washington, D.C.— President Colleen M. Kelley of the National Treasury Employees Union (NTEU) today criticized both the federal Office of Personnel Management (OPM) and some of the nation’s major health insurers for their roles in what she called “a pattern of outrageous increases” in health care costs for federal workers, retirees and their families.

Kelley, who is the leader of the nation’s largest independent union of federal employees, was reacting to today’s announcement by OPM of an average13 percent increase in premiums in 2002 for those enrolled in a Federal Employee Health Benefits (FEHB) Plan. Some plan increases are as high as 20 percent.

“For the fifth year in a row,” Kelley said, “federal employees will experience astronomical increases in health care costs.” FEHB is the largest employer-sponsored health care plan in the nation, covering some nine million federal employees, retirees and their families. “Clearly,” Kelley added, “something is wrong when a health care plan of this size fails to use its marketing clout to help keep premiums in line.”

Premiums for those enrolled in health maintenance organizations will rise an average of 14 percent, while those in fee-for-service plans face premium increases averaging 13 percent. These increases will boost monthly costs by an average $9 for those with individual coverage, and by an average of $24 for those with family coverage.

While OPM blamed the premium hikes on increased prescription drug costs and medical services, along with advances in medical technology and an insured population that continues to age, Kelley said OPM needs to look at the process by which negotiations are conducted and premiums are set as part of the problem.

She was particularly critical of OPM’s decision—without offering federal employees or their representatives any chance for discussion—to merge two current Blue Cross/Blue Shield plans and to add a new, untested Blue Cross/Blue Shield plan. Kelley called these steps “an important contributing factor” to the rising premiums.

Since 1998, Blue Cross Standard Option premiums have increased 43 percent. During this same period, federal salaries have increased an average of 13 percent. “It’s time to involve federal employees and their representatives in this process,” Kelley said.

In a letter to OPM Director Kay Coles James, Kelley said NTEU was “understandably shocked” to learn not just about the magnitude of the premium increases for 2002, but that those enrolled in the current Blue Cross Standard Option plan will have to absorb even greater costs because of the merger into that plan of those in the more costly Blue Cross/Blue Shield High Option plan.

Kelley also noted that last year, three major pharmaceutical companies refused to participate in an OPM-run pilot program that would have allowed one small FEHB plan to purchase prescription drugs at a discount from the Federal Supply Schedule.

Because the three drug manufacturers supplied 90 percent of the medications purchased by that plan’s 16,000 enrollees, OPM had to drop the pilot program, even though it would have saved taxpayers some $2.4 million.

“Now,” Kelley said, “we find ourselves blaming higher drug costs for this five-year run of unacceptable premium increases, yet we fail to take even the most obvious steps to address the problem.”

The NTEU president urged passage of H.R. 1307, bipartisan legislation sponsored by Rep. Steny Hoyer (D-MD) that would increase the government’s share of FEHB premiums from the current 72 percent to 80 percent—a level that would match that paid by most state and local governments and private sector employers. She called H.R. 1307 “an important first step in addressing the federal government’s human capital crisis.”

NTEU represents some 150,000 federal employees in 25 agencies and departments.

September 2l, 200l

The Honorable Kay Coles James

Director

Office of Personnel Management

l900 E Street, N.W.

Washington, D. C. 204l5

Dear Director James:

On behalf of the more than l50,000 federal employees and retirees represented by the National Treasury Employees Union, I am writing to express my serious concerns regarding recent changes and premium increases the Office of Personnel Management has outlined in the Federal Employees Health Benefits Program (FEHBP).

As you may know, earlier this year NTEU expressed concerns over OPM plans to possibly merge the current Blue Cross High and Standard Option plans and create a new Basic plan in letters to members of the House Government Reform and Senate Governmental Affairs Committees. NTEU shared with the Committees its concern that such changes could lead to premium increases or negatively impact enrollees and we expressed our hope that before decisions as important as this were made, input from the organizations and unions that represent employees choosing coverage under the FEHBP would be solicited. NTEU was given no opportunity for input and received no information.

We are understandably shocked to learn that not only will premiums increase an average of l3% in 2002, enrollees in the current Standard Option plan will absorb premium increases as a result of more costly High Option participants being absorbed into that plan. If OPM determined that the High Option plan was no longer viable, the federal government, not the Standard Option enrollees should absorb the costs of making that decision.

Moreover, I am very concerned that employees making decisions in the upcoming Open Season understand that more than just the Blue Cross plan names have changed. High option did not just get renamed Standard Option and Basic is not just another name for Standard. Although we have been provided with little information about the new Basic plan, I understand that benefits will be substantially different from the Standard plan and employees who are not educated by OPM about these changes may find themselves with inadequate health insurance coverage. I encourage you to immediately convene a working group that includes NTEU to discuss how best to educate employees and retirees on these changes.

I am furthermore concerned that it appears OPM may be introducing the new Blue Cross Basic plan with very little analysis of the impact its introduction will have on future rates, the stability of the FEHB program or even the need for such a plan in the FEHB. As the world's largest employer sponsored health plan, I am sure you would agree, decisions such as this that will impact almost half the population of the FEHB program must be made with the benefit of thorough analysis and research.

Thank you very much for your attention to these important matters. I look forward to discussing these issues with you at your earliest convenience.

Sincerely,

Colleen M. Kelley

National President