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News Release

FOR IMMEDIATE RELEASE
Monday, September 13, 2004
Contact: Michael Orenstein
Tel: 202-606-2402

OPM Director Kay Coles James Announces a Single-Digit Average Increase in Premiums for the 2005 Federal Employees Health Benefits Program

7.9 percent increase is the smallest in eight years and represents tough negotiations; new FEHB features, including the introduction of HSAs, bring greater choice to federal employees and retirees

Washington, D.C. - U.S. Office of Personnel Management Director Kay Coles James today announced a 7.9 percent average premium increase in 2005 for federal employees and retirees enrolled in the Federal Employees Health Benefits Program. James' announcement of a single-digit increase is positive news for federal enrollees and runs counter to expectations that private-sector employees across the country will face higher premium increases.

The average increase in premiums represents a significant decrease in the size of recent increases and follows another year of tough negotiations OPM has conducted with health carriers to contain premium hikes and maintain benefits levels. Today's announcement diverges from a five-year trend of double-digit premium increases for the more than eight million federal employees, retirees, and family members covered by the program.

"The work of OPM and the Administration to create new choices and options for the American health-care consumer has helped us hold the average increase in FEHB premiums to the lowest level in years," said James. President Bush signed the Medicare Prescription Drug, Improvement and Modernization Act of 2003, which made it possible for new, cost-efficiency features, such as Health Savings Accounts (HSA) and Health Reimbursement Arrangements (HRA) to be offered in next year's FEHB Program. "This is a positive sign for consumers, for the FEHB Program, and for the open marketplace which works best when it is free. Ideally, we will keep working and will not be satisfied until cost increases, and their root causes, are minimized to the extent possible."

Highlights of the 2005 FEHB Program:

o 7.9 percent average premium increase is the lowest in eight years

o second consecutive year of increased health-care options for enrollees

o introduction of High Deductible Health Plans (HDHP), including a faith-based HDHP, plus Health Savings Accounts (HSA) and Health Reimbursement Arrangements (HRA)

o lowest number of plan cancellations (3) in years, with only 2,247 enrollees affected

o higher utilization rates are the primary cause for the rise in premiums

o health carriers are being encouraged to introduce programs focused on healthy lifestyles, care management and disease prevention

James also announced that federal employees and retirees will have additional choices that emphasize personal decision-making and maximize their ability to put more of their hard-earned dollars to work toward their own medical needs and those of their families, a cornerstone of the Administration's health-care policies.

Eighteen high-deductible health plans (HDHP), including a faith-based HDHP by OSF Health Plan of Illinois, will be offered by the FEHB Program in 2005. These health plans, which include two nationwide offerings (GEHA and Mailhandlers), incorporate a health savings account (HSA) component for individuals not eligible for Medicare. Also, a health reimbursement arrangement (HRA) component will be available to those who are Medicare-eligible, bringing this instrument to the broadest enrollee base possible and mitigating concerns over adverse selection. HSAs are a new consumer choice made possible by the Medicare Prescription Drug, Improvement and Modernization Act.

"President Bush's health-care agenda relies on a strong health-care system generated in the private markets," said James. "We are empowering FEHB Program consumers by giving them more opportunities to make choices in the private sector. This year, we are providing even more options from which families can select their health benefits coverage, and the new high-deductible health plans with savings accounts are one such choice."

Tax-favored HSAs are generally available for people who are not eligible for Medicare and who have a qualifying high-deductible health plan. OPM estimates there are 3.2 million enrollees who would be eligible for an HSA if they enroll in an HDHP. By law, HSAs are not available to individuals, generally those who are age 65 and over, who are eligible for Medicare. Therefore, several FEHB carriers will offer HDHPs and an HSA for eligible individuals, as well as a health reimbursement arrangement for those who are ineligible for an HSA. The HRA can be used for medical expenses, which may include Medicare premiums.

During her tenure as the OPM Director, James has made significant changes in the way federal benefits are administered, seeking to provide more flexibility and consumer choice for federal employees and retirees. Last year, for instance, OPM announced that for the first time in five years there would be an increase in the number of FEHB plan choices available to enrollees. In 2005, consumer choice expands further, with a total of 249 choices; 13 fee-for-service choices, including the two nationwide, high-deductible health plans, are available to any enrollee, and many enrollees can choose a local HMO. In the Washington, D.C., area, there are 21 choices for enrollees. The 249 health-plan options available in 2005 represent a 38 percent increase from the 180 choices offered in 2002.

For 2005, eight new health plans have been added to the FEHB Program.  They are: Coventry Health Care of Delaware; Coventry Health Care of Georgia; Coventry Health Care of Nebraska; Community Health Plan; NevadaCare; GlobalHealth, Inc.; Carolina Care Health Plan; and, Prevea Health Plan. Also, 12 new standard options have been added.

SAMBA, with 12,530 enrollees, and SSEHA (Secret Service), with 2,433 enrollees, are merging. Next year, SAMBA will have two options and members of both organizations will be able to join either option. Secret Service enrollees will be enrolled in the merged SAMBA second option unless they switch to another plan or option during the open season.

The new FEHB premiums take effect in January 2005. FEHB enrollees who have self-only coverage will pay on average $4.32 more biweekly, while those with family coverage will pay on average $9.99 more biweekly.

During the FEHB open season, which runs November 8 through December 13, eligible federal employees and retirees can elect a new health plan or stay with their current plan.

Enrollees are encouraged to use the FEHB website (www.opm.gov/insure) to review Open Season information and select the health plan that best meets their needs. Federal enrollees are encouraged to review the Open Season guide and health plan brochures, also available on the website.

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