FEHBlog

The FEHBlog continues to enjoy life in Estes Park Colorado which is near the Rocky Mountain National Park. Back to DC tomorrow night.

The House of Representatives is working in the home districts this week while the Senate is in session on Capitol Hill.  On Wednesday at 10 am the Senate Homeland Security and Governmental Affairs Committee will hold a confirmation hearing on the President’s nominees for OPM Director, Jeff T.H. Pon, and OPM deputy director, Michael Rigas.  The Senate Health, Education, Labor, and Pensions Committee will hold hearings on prescription drug costs and improving health outcomes on Tuesday and Thursday respectively.  Here’s a link to the Week in Congress’s report on last week’s activities on Capitol Hill.

Following up on last Friday’s post, here’s a link to Avrik Roy’s Forbes article that knowledgeably breaks down the President’s recent ACA actions. He concludes

What the White House has done, in effect, is to send the ball back into Congress’ court, where Congress has the authority—and the interest—in appropriating funding for cost-sharing subsidies. They should do so, if they can pair that funding with other reforms that would provide relief to those facing unaffordable Obamacare premiums.
Is this Congress capable of doing that? The jury is out.

The Motley Fool offers a useful article projecting 2018 Medicare Part B premiums that builds on the TGIF post.  Here’s the nub:

The Trustees of the Medicare program project that the for 2018 will remain [$134 monthly for Medicare Part B]. That’s good news for those who have been paying the base amount. 

However, there are millions of Americans who are paying less than $134 currently for their Part B premiums, and they can expect 2018 premiums to be higher than what they’re paying now. The reason for the disparity is the Medicare law’s hold harmless provision * * *.

For 2017, Social Security recipients got a small COLA of 0.3%. That allowed Medicare premiums for those protected by the hold harmless rule to rise slightly, but not to the full base amount. The average premium under the hold harmless provision this year was $109 per month. 

Social Security anticipates a much larger cost-of-living increase of between 1.5% and 2% to take effect in 2018. If that turns out to be the case [and it did turn out to be 2%], then many Medicare participants will have to pay the full $134 per month, resulting in a substantial increase.

The article explains that Medicare premium surcharges on higher income folks also will increase. CSRS retirees and new Medicare enrollees are not eligible for the hold harmless provision’s protection.

Last Thursday, OPM released the results of the latest federal employee viewpoint survey.  The results were favorable to the government managers. Here’s a link to the Federal Time’s graphic view of the survey results.

The FEHBlog is in lovely Estes Park Colorado with Mrs. FEHBlog for the wedding of our friends’ daughter. It’s a great place for the FEHBlog to lick his wounds following the Nationals loss to the Cubs last night.

The Social Security Administration announced today that Social Security beneficiaries will receive a 2% cost of living adjustment (COLA) in 2018. This means that all Medicare beneficiaries will be subject to the Part B premium and other cost sharing changes for 2018. Recently, existing FERS annuitants were held harmless against the Medciare increases because there was no Social Security COLA. CSRS annuitants were not protected because their Part B premiums are deducted from the government annuity checks, not Social Security checks. (CSRS annuitants who retired after 1983 are eligible for Medicare Part A but don’t receive Social Security benefits.)  Congress made some changes to the hold harmless law last year to soften the blow, but that hold harmless law doesn’t kick in for 2018 because a COLA will be paid. Medicare Part B premiums and other Medicare cost sharing will be announced in the next month or so.

The Trump Administration has taken two significant ACA-related actions over the past couple days, but the actions are directed at the individal and small group markets, not the large group market which includes the FEHBP.  Here’s a link to yesterday’s Executive Order (and a summary thereof) and here’s a link to the HHS press release on termination of cost sharing reduction payments to insurers in the individual and small group markets. The Congressional Budget Office issued a report discussing the impact of this action last August.

Today, the IRS announced that beginning with the next tax season (2018 for 2017 returns) it will beging rejecting individual income tax returns that do not state whether or not the taxpayer complied with the ACA’s individual mandate.

Last week, the Senate confirmed the President’s nomination of Eric Hargan to be Deputy Secretary of the Department of Health and Human Services per the Hill. The Hill explains that

Hargan, previously a Chicago-based lawyer, served at HHS in the Bush administration. He held various roles within the department, such as deputy general counsel, principal associate deputy secretary and acting deputy secretary. He was part of President Trump’s HHS transition team.

Yesterday, the President named Mr. Hargan as acting HHS Secretary, replacing Donald Wright in that role.

Also yesterday, the President made the following nomination to fill the vacant slot of OPM Inspector General:

John Edward Dupuy of Virginia to be the Inspector General for the Office of Personnel Management. Mr. Dupuy was appointed as deputy inspector general for investigations at the U.S. Department of Energy (DOE) in November 2016, having previously served as the assistant inspector general for investigations at DOE beginning May 2015. Mr. Dupuy has been part of the Office of Inspector General (OIG) community since 1991, and has served in a variety of leadership positions throughout his career. Before DOE, Mr. Dupuy worked in the OIG for both the Department of the Interior and Department of Housing and Urban Development. At those agencies, he held several positions, including special agent and assistant inspector general for investigations. Mr. Dupuy graduated from the University of California Los Angeles with a B.A. in 1987. He served in the United States Army on active duty as a military intelligence officer from 1987 to 1990. Mr. Dupuy later attended Golden Gate University School of Law and the American University Washington College of Law. He is a member of the Virginia and Washington, D.C. bars and has been an adjunct professor at the American University School of Law.

The nomination requires Senate confirmation.

Thousands of FEHBP members are Medicare eligible. OPM offers a useful website that discusses the relations between the two programs.  This post builds on that information.

The open season for enrollment in Medicare Advantage and Medicare prescription drug plans (“PDP”) begins on October 15. Today, the Centers for Medicare and Medicaid Services released the Star ratings for those plans “which comes on the heels of the recent release of [2019 Medicare Advantage and PDP] benefit and premium information.”

The Chicago Tribune today projects Medicare Part B premiums for 2018. The article advises that the government will announce Part B premiums and other traditional Medicare cost sharing amounts for 2018 in the next four to six weeks.

U.S. News and World Report ranks the best States in the U.S. for aging. The FEHBlog’s state, Maryland, is 28.

Fedsmith has posted a perspective on 2018 federal health insurance costs. The FEHBlog respectfully disagrees with the Fedsmith article’s perspective for the following reasons:

• Fedsmith’s article unfavorably compares FEHBP premium increases to other employer sponsored health plans. However, the article does not consider the FEHBP’s unique demographics. The FEHBP’s enrollment breaks down to 50% employees and 50% annuitants and the average age of federal employee — late forties — is substantially older than the average age of most employer sponsored plans. Demographics have a significant impact on benefit costs.
• Fedsmith’s article states that “KFF noted that premium increases for employer-provided health insurance in private industry were similar to the rise in workers’ wages (2.3%) over the same period.  For Federal employees and retirees, the experience is different as they cannot expect as large a percentage increase in their income as the percentage increase in FEHB premiums.”  The percentage comparison drives the FEHBlog batty. Percentage comparisons are only valid when the you are comparing apples to apples.  The employee share of health insurance premiums in total are smaller amounts than salaries or annuities. The percentage comparison is invalid in this situation. 
• It should not be forgotten that carriers hold the risk on providing this coverage. 

The House of Representatives will be in session for a shortened week while the Senate will be on a district work break for this week which begins with a federal holiday, Columbus Day. Here’s a link to the Week in Congress’s report on last week’s actions on Capitol Hill.

In other news

• OPM released advice to federal employees on the opioid abuse crisis.  
• The Society for Human Resource Management discussed the latest IRS guidance on large employer and insurer ACA reporting for calendar year 2017 required to be issued in early 2018.
• It’s worth noting that United Healthcare prevailed last week in a False Claims Act lawsuit in which the federal government alleged that UHC and other insurers had misrepresented Medicare Advantage risk adjustment scores. The FEHBlog noted this lawsuit last year in a post noting that the FEHBlog was glad that the FEHBP did not have complicating factors like risk adjustment. Indeed the House Ways and Means Committee is sponsored a Medicare Red Tape Relief Project.  But all health care payers and providers continue to have their regulatory crosses to bear. 

Rates charged under [FEHB] health benefits plans *** shall reasonably and equitably reflect the cost of the benefits provided.

OPM has developed the community rating policy by regulation and contract.  Essentially, community rated FEHB HMOs must price their plans to achieve an 85% medical loss ratio for their FEHBP contract in a contract year (including a three month claim run out period). In contrast, the ACA requires insurers in the large group market to achieve an 85% medical loss ratio market wide over a three year period. Community rated HMOs that fail to reach the 85% threshold must pay the surplus to a penalty fund that is distributed pro-rata among the FEHB community rated plans. OPM indicated in the latest semi-annual regulatory agenda that it plans to propose a new community rating rule in the near future.

A nice way to finish the week – a favorable article about our beloved FEHBP in the Washington Post.

The FEHBlog will be attending the Washington Nationals playoff games against the Cubs this evening and late tomorrow afternoon. Hope springs eternal.

This is the time of the year when the FEHBLog receives comments. Because the FEHBlog is a lawyer who represents FEHB plans, he won’t comment any particular plans rates. He is willing to explain rate development.

All of the fee for service plans develop their rates based on experience rating. The carrier negotiates the rate with OPM. OPM adds a 4% load to the negotiated rate in accordance with the FEHB Act. The net to carrier premium is paid into a U.S. Treasury account. The carrier can draw down on that account to pay benefits, administrative expenses that the government is willing to reimburse up to an annual ceiling, and a service charge awarded by OPM under their plan performance assessment system.

The financing mechanism causes plans to build reserves when experience, meaning health care costs, is good and lower reserves when experience is bad. OPM requires a minimum level of reserves. Excess reserves can be use to moderate premium changes.

Because the reserves are held in the U.S. Treasury, the government enjoys the investment return on the reserves and if an experience rated carrier drops out of the FEHBP, its surplus plan reserves are distributed pro-rata among the remaining plans in the FEHBP.

HMO participating in the FEHBP can elect to use experience rating or community rating, which requires a separate blog post.

Here are links to the OPM 2018 rates announcement and the Federal Times, Govexec, and Federal News Radio articles about that announcement.

A reader asked the FEHBlog why the employee / annuitant contribution for self plus one can be higher than the employee / annuitant contribution for self and family coverage. The reader pointed out a particular plan.

The FEHBlog looked at the 2018 rate chart for that plan and as he expected the total premium for self and family coverage is higher than the total premium for self plus one coverage. OPM does not permit the total premium for self plus one coverage to exceed the total premium for self and family.

It’s the government contribution that can skew the employee / annuitant contribution. The maximum government contribution toward self plus family coverage ($521 bi-weekly) is $30 higher than the maximum government contribution for self plus one coverage ($491 bi-weekly). If the case of the plan in question there is less than a $30 difference between the total premiums for self plus one and self and family coverage. Hence the flip flop.

In the FEHBlog’s view, Congress should not have added a self plus one option to the FEHBP because the average family size (2.3 to 2.4 members) is small. That’s why there’s generally a small difference in total premiums for the two levels of coverage.  But no one asked the FEHBlog.

Here you go.