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AIS's Health Business Daily
Featured Story November 12, 2008 BC/BS Assn.’s Federal Employee Program Plan Counters Its Rate Hike With New Drug Benefits Reprinted from The AIS Report on Blue Cross and Blue Shield Plans, a hard-hitting independent monthly newsletter on business strategies, products and markets, mergers and alliances, and financing of BC/BS plans. By Jill Brown, Managing Editor, (jbrown@aispub.com) Although premiums for the Blue Cross and Blue Shield Association's Federal Employee Program Standard Option will jump as much as 13.4% for the 2009 plan year, FEP hopes brand loyalty — as well as new features like enhanced generic drug coverage and online health risk assessments — will help it retain members. But competitors say they hope the unexpected rate hike will create an opportunity to woo members away from FEP. "The rates did increase slightly, and it's due primarily to the medical trend," explains FEP Vice President Jena Estes. "We have an experience-rated contract…and as you look across the overall health insurance market, you'll see that rates are going up across the country." Many other Federal Employees Health Benefits Program (FEHBP) carriers did not see such high rate increases, however. Estes says she cannot comment on competitors' medical cost trends. But she concedes that "there could be some" adverse selection in FEP plans, since their comprehensive benefits are so well-known. "There are times that the costs will go up," she says, "but it's not often that we've had to raise our rates, and certainly not at this level." FEP covers about 60% of FEHBP's approximately 8 million federal employees, retirees and dependents. The open-enrollment period for the 2009 plan year runs from Nov. 10 through Dec. 8. For 2009, member-paid biweekly premiums for FEP's Basic Option will increase 9% to $42.66 for single coverage and $99.91 for family coverage. For the Standard Option, biweekly single-coverage rates will jump 12.9% to $70.18, while family-coverage premiums will go up 13.4% to $164.58, according to the federal Office of Personnel Management (OPM). Across the board, FEHBP enrollees will see their share of premiums rise 7.9% in 2009. Estes says drivers of medical cost trends are "primarily in the prescription drug [category], but also we saw increases in hospital costs, so it's really been across the board." In response, FEP has created incentives to encourage members to use more generic drugs. For 2009, enrollees can receive up to four mail-order generic prescription fills at no cost. For members who are on maintenance drugs, "it's actually free for the year," since they can get a 90-day supply through mail order, Estes says. And after the first four fills, "if they go through the mail, they're only paying $10" per prescription. By comparison, enrollees who purchase prescription drugs in a retail setting will be responsible for a 20% coinsurance — down from 25% in 2008. FEP also made some minor tweaks to hospital coverage, but Estes says she can't divulge details until OPM releases the FEHBP brochure Nov. 3. Estes predicts that FEP members will remain loyal to the Blues brand. "A lot of our membership…have been with us for their entire career or a good portion of it," she says. "They can expect to continue to receive the same type of reliability" they expect from FEP, she adds. What's more, "over the past seven years, the Standard Option benefits really haven't changed. And the Standard Option copay, while it's increased by a slight $5,…that's the first time it has increased in seven years." Rivals Hope to Woo Blues Customers But some of FEP's competitors say they hope the Blues' high rate hikes will prompt some members to take a look at other choices. "For the first time in several years, the [largest federal insurer] has a few chinks in its armor," says Tom Bernatavitz, Aetna Inc.'s vice president of federal plans. Aetna provides coverage to about 316,000 federal members — up from 305,000 in 2007 — through FEHBP. The rate hikes open "a window of opportunity" for lower-cost options. Jennifer Simon,
a spokesperson for the American Postal Workers Union (APWU) Health Plan,
says its High Option plan is comparable to FEP's High Option, but is
about 40% less expensive. "We're not allowed to advertise the price
difference, so we're hoping that [enrollees] will do some shopping this
year and notice that we offer similar coverage at a lower cost,"
she says. APWU Health Plan covers 140,600 federal and postal lives.
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