Health benefits

The Democratic presidential candidates are suggesting that Americans should have access to health insurance just like members of Congress, and propose allowing them to enroll in the lawmakers’ program, known as the Federal Employees Health Benefits Program (FEHBP). And Reps. Jim Langevin, Rhode Island Democrat, and Christopher Shays, Connecticut Republican, recently introduced legislation that would create an FEHBP-like program that any individual or employer could join.

These politicians think the FEHBP is the way health insurance ought to work. For one thing, every employee is accepted for coverage, regardless of health status and everyone in the same plan pays the same premium — although that’s true for virtually all employer-provided health coverage.

Another reason some groups, especially the conservative Heritage Foundation, support an FEHBP model is choice: Federal employees get to choose from a wide range of policies with varying benefits and run by private-sector insurers — although the available choices depend in part on where the employee lives and what he does. Each year there is an “open season” for all government employees, allowing those dissatisfied with their current plan to switch to an alternative one.

That choice is supposed to produce competition among the health plans, keeping quality high and prices low. And it does to some extent. However, the government exercises pretty heavy oversight — which appeals to Democratic candidates — and may prevent plans from being too innovative in their benefit design. One former manager of the FEHBP’s traditional insurance plans once told me if it were up to him, he would make all the plans exactly the same in order to minimize gaming the system.

But the most appealing part of the FEHBP to many proponents is the heavily subsidized, rich benefits package — a package that comes with a really big price tag.

For example, the popular Blue Cross Blue Shield “standard family” plan costs $1,028 a month, or $12,336 for this year. So much for “affordable” health insurance coverage. Of course, the federal government (i.e., taxpayers) pays the lion’s share of the premium. A family in that Blue Cross policy will pay $314 a month out of pocket, while taxpayers subsidize the remaining $714 a month.

Not surprisingly, the Democratic presidential candidates have been characteristically vague about how much taxpayers would have to pay for this coverage. But not Mr. Langevin and Mr. Shays. Individuals would be responsible for up to 28 percent of the premium, or about $3,360 for a $12,000 family policy, with a sliding scale to help lower-income families. And employers would have to provide coverage or be “assessed” (read, taxed) up to $12,000 per employee. That’s a nearly 25 percent federally mandated raise for an uninsured family with the median household income.

Mr. Shays says his plan “would leverage the negotiating power of the federal government to extend a range of affordable health coverage options through private insurance carriers to every American.” But the federal government already “negotiates” on behalf of 8 million federal workers and their dependents. And yet the $12,000 annual premium for comprehensive coverage is just about equal to the national average for similar non-FEHBP coverage.

So, how is the federal government (that is, taxpayers) supposed to afford spending roughly $6,700 per uninsured family under the Langevin-Shays plan, with even more for the low-income uninsured? And how many currently insured workers struggling to pay their own premiums will drop their coverage to move into the government-subsidized plan? Previous estimates put the so-called “crowd-out effect” at perhaps 50 percent to 60 percent of those joining a new government-subsidized plan. Massachusetts’ top budget officer was recently quoted as saying about that state’s health care reform plan: “If we’re not only trying to insure the uninsured, but insure the previously insured, that’s going to blow the doors off.”

To be clear, there is nothing inherently wrong with comprehensive coverage. But it’s very expensive and it gives people little reason to be value-conscious health care shoppers. Yes, the FEHBP does offer some less expensive options, including health savings accounts. But most reform advocates are pushing comprehensive coverage, not high-deductible policies or those with limited benefits.

Covering the uninsured is going to cost money — a lot of it. In a time of tight federal and state budgets, is it prudent, or even honest, for politicians to promise to give the uninsured some of the most expensive coverage available? And is it reasonable to ask taxpayers, striving to cover their own insurance and medical care, to pay for it?

Merrill Matthews is executive director of the Council for Affordable Health Insurance and a resident scholar with the Institute for Policy Innovation.