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NTEU Warns of HSA Impact; Urges Increase in Government’s Share Of FEHBP Premiums

Washington, D.C. — While the increase in Federal Employees Health Benefits Program (FEHBP) premiums for 2005 is below the 10.6 percent increase of 2004 and the 11.1 percent increase federal employees faced in 2003, it will still place a burden on federal employees. Equally concerning for federal workers is the introduction of l8 controversial new plans into the FEHBP coupling Health Savings Accounts (HSA) with high deductible catastrophic insurance.

That was the reaction today of the leader of the nation’s largest independent union of federal workers to the Office of Personnel Management (OPM) announcement of an average 7.9 percent increase in FEHBP rates for 2005 and the introduction of HSAs into the program.

President Colleen M. Kelley of the National Treasury Employees Union (NTEU) called the 7.9 percent increase “another burden” on federal employees, noting the critical importance of the approval of a 3.5 percent pay increase for federal employees in 2005. “The last few years have been tough on federal employees who have seen their health care costs increase at a much higher rate than their pay,” she said.

She also expressed particular concern about the inclusion, for the first time, of 18 controversial HSA plans in FEHBP for 2005. HSAs combine a high-deductible health care policy with a tax-exempt

savings account. Participants may make tax-free withdrawals to pay medical costs.

The problem, Kelley said, is “the very real potential” that within a short time, HSAs could split the pool of participants. The impact on those remaining in traditional FEHBP plans could be even higher premiums.

With HSAs, healthy enrollees would be tempted to join traditional plans in those years they anticipate high health care costs, which their insurance carrier would pay. But once those needs have been met, those same people would then have an incentive to choose a high-deductible catastrophic health care policy with its tax-exempt savings account.

They could postpone any further medical treatment until the following year, at which time they could once again enroll in a traditional health plan. Kelley warned that this would threaten the stability of the FEHBP—which covers more than eight million people, including federal workers, their families and retirees.

The increase for 2005 “is yet another reason” Congress should move forward with a proposal, strongly supported by NTEU, to raise to an average of 80 percent from the current average of 72 percent the amount of employee health care premiums paid by the government.

“This is more than just a recruitment and retention problem,” President Kelley said. “There are opportunities here for the government to do the right thing—first, by keeping premium increases to a reasonable level by using FEHBP’s enormous marketing clout, and second, by not introducing HSAs that have the potential to increase the cost of coverage for the majority of federal workers—and yet, neither the administration nor Congress has seen fit to address either of these issues in meaningful ways.”

As the largest independent federal union, NTEU represents some 150,000 employees in 30 agencies and departments.