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Speeches & Remarks FEHB Carrier Conference March 21 2013

Remarks of OPM Healthcare & Insurance Director John O'Brien

FEHB Carrier Conference

March 21, 2013

Thank you, it is my pleasure to be here. I’d also like to thank Candy Schaller and America’s Health Insurance Plans, our partner in hosting this conference for over 15 years now. I would also like to specifically acknowledge Ellen Gay, who pulls this together every year. Working out the agenda, logistics, presentations, and inevitable last minute adjustments is no small feat, and that this comes off so smoothly is a testament to her efforts.

When I think about this Conference every year, I am reminded of the enormity of the challenges that the Federal Employees Health Benefit Program faces. We need to deliver health care coverage to well over 8 million employees, annuitants and their dependents. These enrollees are scattered across every county in the country and overseas. Each enrollee has needs and preferences as broad and diverse as the population of the country. These are significant challenges and they require collaboration and coordination to address. The insight that drives the FEHB was that OPM, alone, cannot, and should not, figure out the best way to deliver coverage to such a group. Rather, the FEHB enlists the private sector as a partner to offer federal employees and retirees a range of options to choose from.

This model - settled upon when I was a toddler - has proven remarkably sturdy. As we are all well aware, the FEHB is often cited as a model for how affordable care exchanges will operate. We, who work on the FEHB program every day, take pride in its reputation. However, we are even more pleased with the reputation that the program has earned from those who use it, and therefore know it best. Survey after survey of federal employees returns the same answer – Federal employees are highly satisfied with their health benefits.

Since I last gave this talk a year ago there are several developments that I would like to highlight.

Last year we were touting the launch of a web portal that would allow the employees of tribes and tribal organizations to participate in the FEHB program. We even had a demonstration by an intrepid band of OPM thespians to show you how the data would flow. That program is now up and operational. The FEHB now provides quality, affordable and accessible healthcare coverage to over 20,000 tribal employees and their families, a number that we expect to grow as we continue to work with tribes and they learn more about the FEHB. While tribal enrollment is a small share of the total FEHB population, for those who now have it – it is a very big deal. So much so that the Director of the Indian Health Service, Dr. Yvette Robideaux, presented the staff of OPM with a Special Directors Award in recognition of our efforts.

We have successfully revamped how we negotiate premiums for community rated plans. Our new methodology builds on the Affordable Care Act and is based on Medical Loss Ratios. This approach accomplishes several goals. For plans that already participate in the FEHB, it provides a transparent set of rules, consistent with national standards – it will assure the FEHB of fair prices, and our plan of FEHB predictable revenues. For, carriers outside the FEHB who may be considering participation in the FEHB it presents a clear set of rules that allows those plans to make confident business decisions to enter this market.

Encouraging carriers who do not currently participate in the FEHB remains a major priority for me and OPM staff. While we are grateful, and rightfully proud, of the long term relationships that we have with most of our FEHB carriers – some of the these relations of more than 50 years in duration, the fundamental premise of the FEHB is that a competitive marketplace will yield better results to those we serve. Our goal is to assure that a vibrant set of competitive choices is available to all those that the FEHB serves, regardless of where we live. Toward that end, we are actively working with six new carriers who are seeking to offer on the FEHB, this is in addition to the four carriers that entered the program last year. Perhaps most important, is that for both 2012 and 2013 the overall premium increases in the FEHB were below 4%. That this was accomplished while maintaining the same level of benefits, is even more gratifying.

So thank you for all your hard work and all that you have accomplished. Now, I would like you to go back to work and do even better. These are challenging times for Federal Employees, tight budgets, sequesters and pay freezes are the reality of the day. Even a success that we are justifiable proud of - the two years of low premium increases - needs to be kept in perspective. Those two years of low premium growth overlap with a government wide pay-freeze for federal employees. So our low premium growth translates to roughly an additional $400 that federal employees had to pay to maintain their health coverage during that time. That $400 did not come out of a growing salary, but from existing family and personal budgets.

But the FEHB never has been, and is not today, just about the cost of premiums. It is my and Director Berry’s firm belief that those who are served by the FEHB should not just have a variety of health coverage choices – they should have a variety of excellent health coverage choices. The FEHB program has an established track record of providing those excellent choices, but the past is not precedent and we must continue to prove ourselves.

The healthcare delivery system is continually changing and the challenges individuals face in trying to get the services they need are not static. What was good enough two years ago may not be good enough now. New treatments, new drugs, advances in Health IT, new delivery models – all present both opportunities and challenges for the FEHB and our carriers.

As the agenda for this conference took shape I found myself thinking about some quotes from Peter Drucker. As many of you may know, Peter Drucker was probably one of the greatest thinkers and writers about organizations and how they succeed or fail. He also had a gift for taking complex ideas and boiling them down into a pithy aphorism.

One of my favorite Peter Drucker quotes is “What is measured improves” By this he meant that by figuring out the elements of the effective delivery of a service and measuring those in a consistent, rigorous manner you will better understand what goes into delivering the service – in our case high quality health care – and make it better.

The tools for assessing and measuring the performance of health system performance have shown steady progress toward meeting this standard of rigor and consistency. HEDIS, CAHPS and other similar measures are widely accepted, understood and used, both in the public and private sectors. If the FEHB is to continue to deserve its place as a model for a healthcare market, we must be leaders in the application of these tools.

In that vein, Jon Foley the Director of Planning and Policy Analysis at OPM and Dr. Chris Hunter, our Chief Medical Officer and will shortly be presenting a session on Assessing Performance in the FEHB program. The underlying theme of both Jon and Chris’s presentations is our commitment to measuring the performance of FEHB carriers, and holding those carriers accountable for meeting the high standards that we expect for those we serve.

On a similar note, we will also be doing a session on hospital readmission rates. As those who work with me know – and are bored by – I am a former hospital regulator, and hospital readmissions is an issue I feel very strongly about. An unnecessary readmission is failure of the delivery system – whether by the hospital, which discharged a patient without proper follow-up plans, or by providers in the community that did not properly provide that follow up care, or some other reason. These unnecessary readmissions add billions to the cost of care nationally, and we all have a strong financial incentive to minimize them. But, more important to me is what they represent from the patient’s perspective: a second trip to the hospital because you were too sick to be at your home; a failure to recover properly from an illness and move on and resume your life. All of the delivery system – hospitals, physicians, pharmacies, and case managers – must be knit together to best serve the enrollee.

As you listen to the presentations over the next two days and discuss them with your colleagues, those of you who have been coming to these conferences will notice that we continue to return to the same themes again and again.

Perscription drugs represent 30% of total FEHB spending and proper adherence to prescription instructions and proper utilization of more advanced drugs offers great opportunities to improve individuals quality of life. There are significant opportunities to better serve FEHB participants in this area and we will be pushing you to do the best you can.

As the science and practice of wellness continues to advance, we are committed to making wellness integral to the FEHB and the federal workforce writ large. We have been saying this for the last several years, and will continue pushing in this area. As someone who has had one job or another in healthcare for the past 30 years, I am struck by how the lines between health care delivery and population health - lines which once seemed so clear and uncrossable - have blurred. I am also struck by how wrong the previous bifurcation of population health and service delivery was. Obesity is not merely the by-product of a lifestyle choice; it is a national health crisis with enormous implications for the delivery of health services. Estimates from the Center for Disease Control tell us that nearly one-third of US adults are obese. In 2008, Medical Costs associated with obesity were estimated at $147 billion dollars—nearly $1,500 dollars higher per person than those of normal weight. Heart disease, stroke, type 2 diabetes, and certain types of cancer are some of the leading causes of preventable death, and they are all exacerbated by obesity. To treat the consequences of obesity without making every effort to creatively and effectively address the root problem is folly. We will be challenging you to do more to improve the health of all our enrollees.

So, I look forward to the next two days with you all. I will leave you with another quote from Peter Drucker – which he meant to be applied to people, but which I feel applies equally well to the FEHB and the carriers that participate in it.

“A person can perform only from strength. One cannot build performance on weakness, let alone on something one cannot do at all”. As I think about the challenges before us, I am comforted by the fact that we are, in fact, performing from strength.

Thank you.

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