- The Washington Times - Monday, January 19, 2004

For people in the know, health savings accounts are a little like the most expensive caviar. It is either:

1) A treat that makes life all the more enjoyable and worthwhile, or

2) Salty fish eggs that belong in their original container.

Most federal workers and retirees probably don’t chow down on caviar all that often, but they soon may have the option of setting up health savings accounts, which, depending on who’s doing the talking, either will save or destroy the nation’s largest group health plan, the Federal Employee Health Benefits Program.

HSAs (once called medical savings accounts) are part of the new Medicare law. They permit people to set up tax-free accounts that could be used to pay health care costs. But they have high deductibles that would have to be paid fully by the policyholders.

Proponents of the HSAs — who tend to come from the conservative side of the political spectrum — argue that using their own money would make people more careful and selective consumers of medical services and prescription drugs.

Opponents of the HSAs, such as the powerful National Association of Retired Federal Employees, argue that HSAs are for the young and healthy. Introducing them into the federal health program would draw younger, healthy feds and families out of traditional health plans into those labeled as consumer-driven or consumer-friendly that used HSAs.

But since older, less healthy workers and especially retirees would be hit hardest by the high deductibles, they would remain in traditional health plans. The result, in a couple of years, would be that traditional health plan premiums would go up more, since they are based on usage. “It would split the risk pool,” NARFE warns, and would wreck the concept of shared risk in a program covering nearly 10 million people.

Feds and retirees should know soon whether the HSAs will be part of the federal health program.

Homeland Security

The young giant (180,000 employees from 22 different federal agencies) soon will divulge its blueprint for a personnel system that could include features such as a Defense Department-like pay-for-performance system.

Most federal agency heads like the idea of having greater flexibility that permits them to reward high performers and get the attention of those who either don’t get it or are just putting in time. Defense has the green light from Congress to proceed.

The General Accounting Office has its own pay-flexibility program. Officials say in a recent survey that 95 percent of the employees — who originally had reservations about performance pay — now say they are better off than when the program started. The Internal Revenue Service and Federal Aviation Administration have, or will, make changes.

Although most eyes are on Defense, the Homeland Security system — which was the first authorized by Congress — could serve as the master plan for smaller agencies.

Premium conversion

The bill that would permit retired feds to pay health premiums with pretax dollars carried over into the new session with a large number of co-sponsors. That’s the good news.

The not-so-good news is that the high cost of the bill — it would save the typical retiree $250 to $500 per year in taxes — would cut into tax revenue big time. All those co-sponsors won’t do any good if the House and Senate leadership — of both parties — doesn’t let the plan, by Rep. Thomas M. Davis III, Virginia Republican, come up for a vote.

Mike Causey, senior editor at FederalNewsRadio.com, can be reached at 202/895-5132 or [email protected]federalnewsradio.com.

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