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GAO: Youth Helps Some Federal Plans Control Costs

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Demography differences skewed rate increase figures for the plans that participate in the Federal Employees Health Benefits Program.

An official at the U.S. Government Accountability Office gave that assessment today in a written version of testimony prepared for a hearing by the government management oversight subcommittee of the Senate Homeland Security and Governmental Affairs Committee.

Committee members had asked the GAO to tell it more about a report it had released in December 2006, which showed that the FEHBP, which covers 8 million federal employees, retirees and dependents, had cut its average premium increase to 1.8% in 2007, from a peak of 13% in 2002.

Many different health plans participate in the FEHBP, and the GAO figures showed that the rate of increase varied significantly from plan to plan.

Projected increases in the cost and use of health care services and the cost of prescription drugs could have increased premiums about 9%, but moves to offer less generous benefits and enrollee decisions to choose lower-cost plans helped offset the expected premium increases, according to John Dicken, GAO health care director.

But, when officials interviewed managers of plans with different increases in premium costs, they found that the percentage of older enrollees and early retirees in a plan was a key driver of premium growth.

“From 2001 through 2005, the average age of enrollees across all 8 plans with higher-than-average premium growth increased by 2.7 years–compared with an average increase of 0.5 years across all FEHBP plans,” Dicken said, according to the written version of his testimony.

At the plans at which costs held steady or increased more slowly than average, the average age of enrollees decreased by half a year, Dicken said.

A copy of the GAO report is on the Web


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