OPM’s FEHBP legislative proposals from the FY 2019 budget

As promised, here’s the FEHBlog’s take:

1. Medical liability — OPM wants to make a number of reforms to medical malpractice litigation affecting FEHBP members, e.g., capping non-economic damages to $250,000. First off, medical malpractice litigation cases typically are heard in state courts.  This proposal strikes the FEHBlog as being outside OPM’s authority. In any event, the FEHBP has eight million members while the U.S. population is 325 million. The FEHBlog can’t imagine that these changes would have an impact on medical malpractice insurance premiums or defensive medicine. How would the doctor know that he had a looser leash because the patient is covered under the FEHBP?

2. Modify the government contribution based on plan performance — From the inception of the program in 1960 until 1997, the government contribution toward FEHBP coverage was based on the so-called Big Six formula. The government contribution was 60% of the average premium taking into account the two government wide plans (Blue Cross and at the time Aetna), the two largest employee organization plans, and the two largest HMOs participating in the FEHBP (usually the California Kaisers).  The government contribution was capped at 75% of the selected plan’s premium.  In 1990, Aetna terminated its government wide indemnity benefit plan. Congress provided an Aetna fix to the Big Six formula — a “phantom” Aetna rate was included in the formula. In 1996 for 1997, Congress replaced the Big Six formula with the so-called Fair Share formula.  The Fair Share formula sets the government contribution at 72% of the enrollment weighted average premium capped at 75% of the selected plan’s premium. OPM is proposed to set the government contribution at 70% of the enrollment weighted contribution. The employee will continue to pay at least 25% of the selected plan’s contribution. OPM will give each plan up to five additional percentage points for a good plan performance assessment score or subtract up to five additional percentage points based on a poor plan performance assessment.  The FEHBlog is not a fan of the plan performance assessment. Leaving that aside, assuming for the sake of argument that this proposal actually will save the government money, OPM should allow for raise the 75% cap to 77% or even higher.  Otherwise the plans with lower premiums and higher plan performance scores will be hurt as they already are at a 75% government contribution.

3.  Incorporate portions of the federal health programs anti-kickback act into the FEHBP — This is an Inspector General objective which would be very disruptive to the FEHBP if adopted by Congress as the FEHBlog has previously explained. The anti-kickback act is designed to prevent providers from screwing around with government set pricing for Medicare, Medicaid and Tricare. FEHBP carriers negotiate their pricing with providers contractually. For that reason, Congress exempted the FEHBP from this law in 1996 when it applied this Medicare law to Medicaid, Tricare, and certain other federal healthcare programs. The FEHBP is not a public program. The FEHBP is employer sponsored healthcare / commercial program. Similarly, in 2013 the Departments of Health and Human Services exempted the qualified health plans participating in the Affordable Care Act marketplaces. The FEHBlog could go on at greater length. This very bad idea would create a ton of work for lawyers. OPM should move the FEHBP toward the commercial marketplace not toward Tricare.

4. Modify the government wide indemnity benefit plan definition — The government wide indemnity benefit plan slot in the FEHBP has been vacant for over 25 years. OPM now wants to modify the definition such that the insurer filling the slot does not have be licensed in all States and the District of Columbia, which is a surprisingly high bar currently. However, in the FEHBlog’s view, the slot has remained vacant because OPM requires the government wide carriers to use an archaic financing method as required by the 1959 statute. OPM should ask Congress to be given authority to adopt a financing mechanism that is commercially appropriate for 2018. That might attract a new carrier.

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