Federal health insurance costs rise slowly, outperforming private sector

The cost of health insurance premiums for federal employees has remained relatively stable over the past three years and continues to outperform large premium hikes in the private sector.

However, federal employees continue to pay more toward their health insurance premiums year after year, without much indication that the cost curve will bend more toward their favor in the future.

At a recent conference in Arlington, Virginia, the director of the U.S. Office of Personnel Management noted that for three consecutive years the average premium adjustment of all health care plans in the Federal Employees Health Benefits (FEHB) Program has held to annual increases of just under four percent.

“This is the first time in 20 years we’ve seen such stability,” Katherine Archuleta said at an FEHB conference on March 27.

In the three years prior to this stretch, these premiums rose more than 7 percent year-over-year, according to The Washington Post.

“But as we all know, these premium increases have come amidst difficult times for our federal workforce,” the OPM director said. “Federal employees have been through a sequester, furloughs, continued budget challenges and three years of pay freezes. In 2014, federal workers received a 1 percent pay increase. President Obama’s 2015 budget proposal includes another 1 percent salary hike.”

The FEHB is the largest employer-sponsored health insurance plan in the U.S., providing health care for approximately 8.2 million current and retired federal workers as well as their families. Nearly 9 out of 10 federal workers participate in the program.

This year, the change in health care premium costs for some federal workers fell below that four percent range, while others realized premium adjustments higher than the average. The cost differential depends on which plan the employee picks.

The government pays roughly 70 percent of a federal worker’s total premium cost. Employees pick up the remaining 30 percent. In 2014, the average premium increase for all plans will be 3.7 percent; however, because of the cost-sharing formula, on average a federal worker’s premium could increase by 4.4 percent, while the government’s portion of the premium will increase by 3.3 percent.

“There are no significant benefit changes for 2014 and more plan choices: 256, up by over 10 percent from 2013,” according to an OPM statement.

Still, averages aside, some federal workers may see very little change in their out-of-pocket cost of their premiums while others may have to absorb very large premium hikes in a range of about $100 to $200 a month.

Take a look at the chart of the premium adjustments. Rate changes for U.S. Postal Service workers are different because the agency pays more toward employee health care premiums.

Also, the OPM developed an online tool to help workers find plans by location, name and code.

During the director’s remarks, she noted that managing the cost of prescription drugs is “high on our list” as it accounts for 25 percent of FEHB spending.

“We need to continue to focus on ways to make prescription drugs as affordable as possible while ensuring that FEHB members are getting access to safe, high quality medications,” Archuleta said.

That is noted in the agency’s request for proposals “call letter” to health insurance companies that want to participate in the program.

The agency released the call letter on March 20.