Medpage Today reports on two interesting studies —

• Better surgical outcomes significantly reduce hospital revenues, and 
• Doctors become cost sensitive when they know the prices of the diagnostic tests they are ordering (duh!),

Federal News Radio had the most informative article about the FEHBP oversight hearing held last week. The FEHBlog remains puzzled by claims that the Program needs to be modernized — refined perhaps but not modernized.  As the FEHBlog has previously mentioned the law relies on the participating carriers to keep the Program modern and they have. For example, Blue Cross executive Bill Breskin noted at the hearing that by the end of 2013 the Blue Cross Federal Employees Plan will offer its enrollees in all 50 states and DC the opportunity to join a patient centered medical home.

The FEHBlog has discovered that the Congressional Research Service on February 13, 2013, issued a report on the evolution of the FEHBP.   By the way. the FEHBlog learned something else tonight. He thought that the FEHBA’s comprehensive medical plan provisions in 5 U.S.C. § 8903 were added when Congress passed an HMO law in the early 1970s. However, the staff model and individual practice model CMP provisions are found in the original law. Since enactment of the law in 1959, Congress did recognize a new type of comprehensive medical plan (the mixed model plan) . Live and learn.

Congress also added a new type of employee organization plan in the mid-1980s (5 U.S.C. § 8903a). About a dozen employee organization plans joined the Program at that time. With the benefit of the retrospectoscope, we now know that the mid to late 980s was a time of sharp health care cost increases (due in the FEHBlog’s view to Medicare’s prospective pricing system for hospital claims that kicked in around 1985 — big time cost shifting there.)  That’s not a good environment in which new health plans to grow.  All of those plans eventually dropped out of the program. The last of those plans, the Secret Service Association Plan, merged into SAMBA in the middle of the last decade.

It’s worth noting though that employee organizations that left the FEHBP can ask OPM for permission to rejoin the Program after they have been out of the Program for three years under a change to the law that Congress made 15 years ago (5 USC § 8903b). But no employee organization plan has rejoined the program under this authority.

Congress will be in session again this week as the Hill’s Floor Watch explains.

OPM Director John Berry’s term of offfice ends today. Executive Gov reports that the interim OPM Director will be Elaine Kaplan who has been serving as OPM’s General Counsel during Mr. Berry’s directorship.  President Obama recently nominated Ms. Kaplan to a judgeship on the U.S. Court of Federal Claims.

The Washington Post reported on last week’s FEHBP oversight hearing  as did Fierce Healthpayer.com. The Post article notes that “Rep. Darrell Issa (R-Calif.) [who chairs the House Oversight and Government Reform Committee that oversees the FEHBP] and Del. Eleanor Holmes Norton (D-D.C.) both expressed concern about cherry-picking by regional PPOs if those plans are allowed to participate in the benefit program.”  The FEHBlog heard Mr. Issa suggest at the hearing that OPM initiate a pilot program. 


Govexec.com reports that the federal employee unions are lambasting the President’s budget proposals relating to federal employment compensation and benefits.  Of course, the President’s FEHBP budget proposals were a topic of discussion at the oversight hearing last week. The article notes that 

Obama’s budget would shift costs of the Federal Employees Health Benefits Program to require employees to pay more in order to save the government $8.4 billion over a decade while also seeking to modernize the program. The Office of Personnel “would be given authority to make adjustments to premiums based on an enrollee’s tobacco use and/or participation in a wellness program,” the proposal said. Union officials said they worried the government could charge higher rates to sick or obese employees.

This horse, however, already as left the barn as the Affordable Care Act permits exactly such adjustments to be made to group and individual health insurance premiums. The ACA regulators recently issued proposed regulations implementing this law for 2014 which healthcare.gov trumpets as protecting the interests of consumers.

Reuters reports a very troubling development. Reuters reports that a Nevada jury socked United Healthcare affiliates with a $524 million damages judgement in a case brought by two women who contracted Hepatitis C due to the unsafe injection practices of their gastroenterologist.  United Healthcare was drawn into the case because the doctor was in a UHC affilates’s provider network. Counsel and Heal News notes that  “The defense of the insurance companies was hurt when the judge refused to let them show evidence that their administrators had not uncovered any proof of wrongdoing in the doctor’s office or that the administrators had followed accepted practices.” Bloomberg News further reports that the defendants could not introduce evidence that the doctor is being put on trial for second degree murder. Bad cases do make bad law. Health plans need to proclaim the independent contractor relationship that exists between their network providers and themselves and publicize their accreditation procedures. (For all I know UHC took these steps but cases like this should lead health plans to engage in risk management analysis.)

The FEHBP oversight hearing testimony is available at the Committee’s website. The full committee’s chairman Darrell Issa (R CA) took an active role in the hearing. Kaiser Health News and Govexec.com  offer their perspectives on the hearing. The FEHBlog will be sure to keep an eye out for fallout from the hearing.

The President’s Budget describes the following legislative initiatives for the FEHBP:

EMPLOYEES AND RETIRED EMPLOYEES HEALTH BENEFITS FUNDS
(Legislative proposal, subject to PAYGO)

The health insurance marketplace has changed significantly since the FEHBP was enacted in 1959 and the current governing statute leaves little flexibility for the program to evolve with the changing market. The 2014 Budget proposes that beginning in 2015: 

(1) employees would be given the option to enroll in a self plus one coverage option rather than being limited to just self or family options [Note — the FEDVIP statute provides for three tiers — because the family size in FEHBP enrollment is not large — the savings from three tiers may be small];
(2) domestic partners of Federal employees and new retirees would be eligible for health benefits [Note — even if the Supreme Court strikes down the Defense of Marriage Act, the majority of States do not recognize same sex marriage currently];
(3) OPM would be authorized to contract with modern types of health plans rather than being limited to the current four statutorily-defined plans reflective of the 1950s insurance market;
(4) OPM would be authorized to contract separately for pharmacy benefit management services; and
(5) OPM would be given authority to make adjustments to premiums based on an enrollee’s tobacco use and/or participation in a wellness program [Note — the Affordable Care Act (“ACA”), HIPAA, and the genetic non-discrimination act permit this latitude in the private sector].

In the FEHBlog’s view it is erroneous to suggest that the FEHBP is outdated as it served as a model for the ACA’s exchanges and it operates under a flexible law that — in contrast to traditional Medicare — historically relied on the carriers to keep the Program up to date through private sector initiatives. The carriers continue to offer their initiatives, but the ACA has shifted much control over insurers to the government.

There is a lot of misunderstanding about the FEHBP which the House oversight hearing hopefully will clear up tomorrow. For example, the Federal Times reports today that

The budget would enable OPM to strike is own deals with pharmacy benefit managers, or PBMs, for prescription drugs. PBMs are companies that negotiate prescription drug prices with pharmaceutical companies on behalf of FEHBP’s insurance providers. But PBMs are not considered subcontractors, and as a result, OPM has little oversight of them and cannot be sure they pass on rebates to FEHBP enrollees.

In fact the trend among private sector employers is to carve in their prescription drug program because of the importance of coordinating care, particularly expensive specialty drugs.  In any event, while OPM does not consider PBMs to be subcontractors, it does consider them to be large providers whose contracts are subject to OPM audit. Moreover, OPM amended the experience rated plan contracts in 2011 to require fully transparent pricing and 100% return of rebates and other manufacturer payments to the FEHBP. Around 80% of FEHBP enrollees participated in experience rated contracts like Blue Cross, GEHA, NALC, APWU, Mail Handlers, and SAMBA.  

The excitement about Thursday’s House FEHBP oversight hearing is becoming palpable The Federal Workforce subcommittee has posted an advisory and a witness list, and the Hill’s Healthwatch also weighed in with a report headlined “House hearing will scrutinize FEHBP.”  According to the advisory, 

The hearing will give Members an opportunity to learn more about the FEHPBP’s current benefits, categories of enrollment and premium fees, as well as proposed legislative changes designed to improve the program. The Obama Administration is expected to propose several changes to the program in the president’s FY2014 budget [to be released tomorrow], including granting OPM the authority to offer additional health plan types and contract with prescription drug providers directly.

Rep. Blake Farenthold (R-Texas) chairs the subcommittee. The hearing begins at 10 am on Thursday in the Oversight and Government Reform Committee’s hearing room,  2154 Rayburn House Office Building.


In the final essential health benefits rule, HHS applied to all group health plans an annual dollar cap on out-of-pocket expenses for in-network care beginning in 2014.  The ACA regulators allowed a one year phase in period for separately administered benefits such as prescription drugs and dental benefits in FAQ XII, Q&A 2. The doctors and consumers groups now are screaming foul according to Kaiser Health News.  It’s no wonder that premiums are expected to skyrocket next year. 


OPM released the Fiscal Year 2012 Common Characteristics of the Government report today. This annual report “serves as an overview of the size and characteristics of the Federal civilian workforce. For example the average ave of full time permanent employees is 47.1 years, up .2 from the average age in 2008 and 2011 and the gender mix is 57.3% male and 42.7% female.  


When the merger of Medco Health and Express Scripts was announced, the FEHBlog (who since then generally has stopped making predictions) expected the federal government to block this merger of two of the three largest prescription benefit managers. In the end, the merger went through, and a recent Forbes article suggests why (extensive legwork). 

Congress is in session this week, and the Hill’s Floor Watch provides a look ahead. On the agenda is week is a House Federal Workforce subcommittee hearing titled “The Federal Employees Health Benefit Program: Is It a Good Value for Federal Employees?” Hopefully the subcommittee staff recognizes that this is question that answers itself. Of course it does. The Program has kept premium increases below the national average for the past two years, notwithstanding an older population (average age of an FEHBP enrollee is around 60).  The FEHBlog will be in attendance.

The Wall Street Journal’s weekend edition lead with a story headlined provocatively  “When Your Boss Makes You Pay for Being Fat.”

Until recently, Michelin awarded workers automatic $600 credits toward deductibles, along with extra money for completing health-assessment surveys or participating in a nonbinding “action plan” for wellness. It adopted its stricter policy after its health costs spiked in 2012.

Now, the company will reward only those workers who meet healthy standards for blood pressure, glucose, cholesterol, triglycerides and waist size—under 35 inches for women and 40 inches for men. Employees who hit baseline requirements in three or more categories will receive up to $1,000 to reduce their annual deductibles. Those who don’t qualify must sign up for a health-coaching program in order to earn a smaller credit.

The Affordable Care Act promotes this trend by increasing the maximum penalty from 20% to 30% of premiums. According to HHS’s proposed rule, the penalty can reach as high as 50% for tobacco cessation efforts. Federal employees won’t be subject to these penalties, however, unless Congress changes the government contribution formula to incorporate this ACA provision. The article concludes

For now, employers are trying to balance the carrot and the stick. Plenty of companies will be watching to see if inflicting a little financial pain leads to change in the long run. “What are the right pain points?” asks Paul Keckley, executive director of Deloitte LLP’s health-care research arm, the Center for Health Solutions. “Ultimately, you have to make behavior change automatic. We’ve got to make this like brushing your teeth.” 

It will be interesting to learn whether or not this issue crops up at the hearing on Thursday.

Well the FEHBlog will be off to visit New York City for the weekend shortly and there’s not much to report.

The New York Times makes some prognostications about the President’s delayed budget proposal, suggesting that unlike prior years it may be not dead on arrival on Capitol Hill this year.

Mr. Obama’s proposed spending reductions include about $400 billion from health programs and $200 billion from other areas, including farm subsidies, federal employee retirement programs, the Postal Service and the unemployment compensation system.
In Medicare, the savings would mostly come from payments to health care providers, including hospitals and pharmaceutical companies, but Mr. Obama also proposes that higher-income beneficiaries pay more for coverage. 

The options include tighter regulation of premiums, forcing insurers to cut costs or operate at a loss; financial assistance to consumers, in addition to subsidies that will be provided by the federal government; and programs to ensure that the costs of the sickest patients are shared by all insurers.

That’s a head scratcher.

Also Kaiser Health News is reporting that Walgreens is expanding its clinical offerings to chronically ill people. That should please the AMA.

The International Foundation of Employee Benefit Plans has named today National Employee Benefits Day. Here are the ten top ways to celebrate. My favorite is #10.

Health insurers are celebrating today because HHS backed off on its plan to use the sustainable rate of growth formula to cut Medicare Advantage rates for 2014. The Washington Post explains how the insurers won this uphill battle.

Govexec.com reports that “Office of Personnel Management Director John Berry’s [four year long] term expires in less than two weeks, and he is expected to announce his departure from OPM soon.”  Director Berry is expected to be named U.S. Ambassador to Australia.

The FEHBlog finds it interesting to track second and third bounces of the ball. For that reason, he read with interest this Insurance Broadcasting report about how casualty insurance actuaries are evaluating how the roll out of the Affordable Care Act will impact medical malpractice and workers compensation premiums.

The AMA News takes a closer look at the Robert Wood Johnson Foundation’s U.S. county by county health rankings.

The comparison underscores a key finding in the 2013 survey: Gaps
between the healthiest and unhealthiest counties in individual states
are large and continue to grow. The survey highlighted the fact that
residents in the healthiest counties are 1.4 times more likely to have
access to a primary care physician than those in the least healthy
counties. Unhealthy areas also had higher rates when it came to a host
of other negative indicators of overall health, including child poverty,
teen pregnancy and premature death.

All health care remains local. The article notes that the rankings now in their fourth year are spurring useful competition. The FEHBA does provide expanded coverage in areas that OPM deems medically underserved (5 U.S.C. § 8902(m)(2)).

Happy Easter and Passover! Congress continues to be on recess this coming week. The President will release his FY 2014 budget on April 10, over two months late, and an FEHBP oversight hearing will occur on Capitol Hill the next day.

The FEHBlog was intrigued to read in the Wall Street Journal that retail drugstores are pressing state legislatures, most notably in Oregon, to require prescription drug managers “to turn over arcane pricing data that would help drugstores negotiate bigger reimbursements.” Of course, the laws would help the large chains too and push to old cost curve up. PCMA, the PBM trade association has more details here.

While on that topic, the Hill’s Healthwatch reports on a Consumer Reports price comparison of generic drug prices. For example, it found that reported that a month’s supply of generic Lipitor, the anti-cholesterol drug, cost $17 at Costco and $150 at CVS.  Of course, generic lipitor could have been a loss leader at CostCo that month. Most consumers of course don’t pay retail for generic drugs because they have health plan or Medicare Part D coverage.  That brings us back to the Oregon bill. Have a good holiday.