Mid-week update

Following up on Sunday’s FEHBlog about the sequestration, the Washington Post’s Federal Eye published a column discussing the latest Simpson / Bowle’s recommendations on cutting the deficit. Former Sen. Alan Simpson and Clinton White House chief of staff Erskine Bowles chaired a Presidential Commission in 2010 whose report was ignored but they keep trying. Anyway, the Federal Eye comments on the first report’s proposal to try out the premium support approach with the FEHBP.  Simpson / Bowles and House Budget Chairman Paul Ryan also have suggested using the defined premium approach for Medicare.

The FEHBP has used a defined contribution approach to setting the Government contribution in one form or other since its inception. Until about 15 years ago, the FEHB Act included a so-called Big Six formula which was 60% of the average of the Big Six plans (two government wide plans, two largest employee organization plans, and two largest HMOs). Since the FEHBA Act has included a so-called Fair Share formula which is 72% of the enrollment weighted average premium. The difference between premium support and the status quo is that premium support would be adjusted by an economic inflation factor rather than a plan premium adjustment factor. The outcome of premium support would be to accelerate the move of enrollees into lower cost plans.

2014 continues to be shaping up to be a year of steep premium increases for all health plans, including FEHB plans, due to Affordable Health Care Act mandates.  HHS unveiled the latest mandate yesterday — the final essential health benefits rule. The Wall Street Journal reports that

If anything, the final regulations released Wednesday beefed up the requirements for certain services beyond what regulators proposed in November. Neil Trautwein, a vice president at the National Retail Federation, said language regarding the scope of mental-health service that insurance plans must cover appears stronger than previously proposed.
“Just because you require an insurance plan to cover it doesn’t mean you can buy that coverage,” said Katie Mahoney, executive director, health policy at the U.S. Chamber of Commerce. Insurance plans offered by most large employers aren’t affected by the requirements.

While employer sponsored plans including the FEHBP are directly subject to these requirements. Those plans cannot impose annual or lifetime dollar limitations on those essential benefits.  The FEHBP already is in compliance with this rule. However, brand new DOL ACA FAQ XII explains that the rule turns the screw a little tighter by apply a new out of pocket maximum to all group health plans for 2014.