Spotlight on FEHB: What Washington Has in Mind for Your Health Benefits

(National Federation of Federal Employees)

Late last year, the President’s Commission on Fiscal Responsibility and Reform, an advisory group of 18 current and former members of Congress tasked with identifying policies to reduce the federal budget deficit, issued a highly anticipated report detailing their vision for our nation’s fiscal future. As NFFE reported at the time, numerous proposals put forth by the commission targeted the federal workforce for deep cuts in pay, benefits, and workforce size.

This week, we want to focus on one proposed cut that is sure to hit close to home: the Federal Employee Health Benefit Plan (FEHB).  Under the current system, federal employees have the majority of their health care expenses covered by their employer, and pay the remainder out of pocket. This defined benefit plan has lead to one of the most affordable and efficient health care systems in the nation; so much so that it was used as a model for the President’s health care reform initiative last year.

The Budget Commission’s report, however, calls for major reforms to FEHB, transforming it from a defined benefit program into “a defined contribution premium support plan that offers federal employees a fixed subsidy that grows by no more than GDP plus 1 percent each year.” The reform, estimated to gouge $18 billion dollars from the program over the next ten years, will replace the defined contribution plan with a yearly health care voucher that can be used to buy insurance.

Though the commission touts this as a cost-saving proposal, the real issue here is the gradual deterioration of the quality and quantity of federal workers’ health care. According to the American Medical Association, health care spending growth averaged more than 5% per year from 1975 to 2005, compared to just over 3% annual growth for the US economy. With FEHBP premium increases averaging 8.8% in 2010, and 7.2% for 2011, it is apparent that a “GDP plus 1” system will quickly balloon federal workers’ health care bills.

What this recommendation really means is that federal employees will receive less and less assistance each year for health care expenses, regardless of how fast premiums increase. It is abundantly clear that the commission’s health care voucher is nothing more than a health care coupon.

To date, there is no pending legislation targeting FEHB. However, Chairman of the powerful House Budget Committee Paul Ryan (R-WI), has been supportive of such a measure in the past and may pursue it in the now-Republican House of Representatives. It is crucial that we understand the threat posed by this harmful proposal, and inform our fellow federal workers of what is at stake.