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AIS's Health Business Daily
Featured Story May 9, 2008 Shaky Economy Prompts a Slow Migration to Low-Cost Health Insurance CoverageReprinted from HEALTH PLAN WEEK, the industry's leading source of business, financial and regulatory news of health plans, PPOs and POS plans. By Steve Davis, Managing Editor, (sdavis@aispub.com) Carriers that offer health coverage through the Federal Employees Health Benefits Program (FEHBP) say enrollees are beginning to migrate to low-premium options as a result of the economic slump. HPW spoke with some of the largest health plans in the federal program about their 2008 enrollment results, new programs and trends they expect for the year ahead. About 8 million federal employees, retirees and family members have health coverage through the FEHBP. The Office of Personnel Management (OPM) will release 2008 FEHBP enrollment data in late May or early June. But several insurers tell HPW their overall federal enrollment increased from 2007 levels. By far the largest player in the federal insurance program is the Blue Cross and Blue Shield Association's Federal Employee Program (FEP). The plan says it added 55,000 contracts (110,000 lives) for the 2008 plan year — an enrollment increase of about 2.3%. The bulk of this year's enrollment growth was in FEP's Basic Option, a low-premium plan that does not offer out-of-network benefits. The more costly Standard Option is a PPO that includes out-of-network benefits. Enrollment in that plan grew by 13,261 contracts (less than 1%). Employees with single coverage, for example, will pay $1,017 in 2008 for the Basic Option — about $600 less a year than they will pay for the Standard Option. "In looking at the market and economy, I think this could be a harbinger of a trend," says Deb Shepard, FEP executive director for business development and benefits administration. "People are starting to be a lot more cost sensitive. The biggest trend that all carriers are likely to see going forward is price sensitivity. So we need to be very careful about cost increases and sustaining affordability." Shepard adds that efforts by the federal government to attract a younger work force are "only going to exacerbate the issue" because young, healthy people often don't see much value in costly health benefits. FEP, which provides health benefits to about 4.8 million federal employees, family members and retirees, says its enrollment in the federal program has increased for the past 23 consecutive years. Enrollment increased by 133,000 lives between 2006 and 2007. For the 2008 plan year, enrollment in the low-premium Standard Option plan offered by the Government Employees Hospital Association (GEHA) grew by 4,400 members to 91,000 members. Enrollment in GEHA's High Option plan — which covers 127,500 members — declined by approximately 2,500 members. GEHA President and CEO Richard Miles says it appears some federal enrollees migrated from the High Option plan because of the lower premiums tied to the Standard Option. While members pay $198.19 per month for self-only coverage under the High Option, they pay just $72.10 per month under the Standard Option. The High Option premiums were reduced by $6.76 for 2008, compared with 2007. Standard Option rates did not change. Tom Bernatavitz, Aetna Inc.'s vice president of federal plans, says he also has seen "some migration" to lower-cost plans. This, he explains, is likely due to "very low increases to the government subsidy amount, which has failed to keep pace with increases on high-option benefit plan offerings." Enrollment in all of Aetna's federal offerings increased from 302,000 in 2007 to 314,000 as of Jan. 1, 2008. Aetna has experienced net enrollment growth in its FEHBP plans for five years in a row, despite "increased challenges" such as higher premiums and more coverage options available to federal employees, Bernatavitz asserts. Account Plans Continue to Grow For the 2008 plan year, 32 account-based options were made available through the FEHBP — up from 29 in 2007. Enrollment in those plans, however, make up a tiny sliver of the overall enrollment, and they are offered alongside 251 more traditional coverage options. The American Postal Workers Union (APWU) Health Plan pioneered account-based coverage for federal employees in 2003 when it offered a health reimbursement arrangement (HRA)-based option from Definity Health, a venture capital-backed firm acquired by UnitedHealth Group in late 2004. For the 2008 plan year, APWU spokesperson Jennifer Simon says, enrollment in the HRA option grew by 2,588 federal and postal employees (about 5,200 total lives). Overall, 12,085 members (26,498 total lives) are covered by that option. For the 2008 plan year, 72,859 postal and non-postal members were enrolled in APWU's more traditional High Option plan. Enrollment in that plan grew by nearly 3,700 members, Simon says. APWU's total enrollment for 2008 is 84,944 — a net gain of 3,456 members, she adds. While enrollment in Aetna's HMO product for federal employees remained flat for 2008, the company's overall federal enrollment increased due to "continued strong growth" in its account-based plans, Bernatavitz says. As of Jan. 1, 38,000 lives were covered by one of Aetna's account-based options - up from 26,000 at the end of 2007, he says. The vast majority of those new enrollees (10,500) signed up for Aetna's HRA-based option, while just 1,500 selected a plan that includes a health savings account (HSA). Enrollment in the HSA-based plan, Bernatavitz explains, would likely have been more significant if not for a new policy that restricts the percentage of premium dollars used to fund the HSA from exceeding 25% of the total plan premium or 50% of the annual deductible. The rule, issued by OPM last spring, forced health plans to revamp their HSA-based options to comply. GEHA's Miles agrees with Bernatavitz and says the new rule kept enrollment increases in those plans to a minimum. Enrollment in GEHA's HSA-based option rose to about 2,300 members (4,600 covered lives) for 2008 - up about 10% from a year ago. Miles says enrollment in the option has grown by an average of 10% each of the past several years. A three-year, four-region HSA pilot offered through FEP attracted just 260 federal employees (520 total lives) for 2008. Once the pilot concludes, FEP will evaluate member experience and determine if the program should be expanded, or if it could be rolled out nationally as a stand-alone product. FEP offers two more traditional health coverage options to federal employees, but adding a third, such as an account-based plan, would have to be approved by Congress. The pilot plan, however, needed to be approved only by OPM. Carriers Urged to Add Hearing Benefits For the 2008 plan year, children of federal employees received hearing benefits. In its annual "call letter," last month, OPM urged health insurers that participate in the FEHBP to cover hearing aids, screening and testing services, and other hearing-related services for adults as part of the 2009 FEHBP. The hearing benefits follow the introduction of enhanced dental and vision services, which were made available to federal employees in 2006. In 2006, GEHA was one of four carriers selected to offer dental coverage. The carrier began its second year on Jan. 1, 2008, with 80,000 members in the dental plan — an increase of 28,000 from a year ago. "It's a relatively new program, and people are still finding out about it," says GEHA spokesperson Karen Schuler. FEP says enrollment in its BlueVision product, which was introduced for the 2007 plan year, increased by 17% this year. Shepard says 56% of the 500,000 members who receive their vision care through Federal Employees Dental and Vision Insurance Program) are enrolled in BlueVision.
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