- The Washington Times - Monday, October 11, 2004

I am pleased with the exciting additions to the 2005 Federal Employee Health Benefit program. Next year, the federal work force get 249 health-plan options, including high-deductible health plans with Health Savings Accounts (HSAs).

HSAs, made possible by the Medicare Improvement Act signed by President Bush last December, combine a health insurance policy for large medical expenses with an investment account from which money can be withdrawn tax-free for routine medical care. Since unveiling of the new Web site, www.opm.gov/ hsa, there have been more than 40,000 visits to the site and more than 6,000 employees have registered for advance information updates on HSAs.

The HDHPs offered in the FEHB Program next year all provide for a contribution to the enrollee’s HSA account from premium. In addition, participating individuals may add to their HSA up to a maximum limit, with their contribution for the year an “above the line” tax deduction. Money in the HSA can be used to pay for qualified medical expenses such as medical expenses before the plan deductible is met, long-term care premiums, LASIK surgery and some nursing services. Unused money grows — with tax-free interest — until retirement, when it can be withdrawn for any purpose simply by paying normal income taxes. For those who are interested, HSAs represent a powerful wealth accumulation vehicle.

HSAs, along with a High Deductible Health Plan, provide federal employees flexibility and discretion over how their health care dollars are spent. This provides federal employees additional health plan options that empower their 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.

The ability to add this new option demonstrates the strength of the market and the Federal Employees Health Benefit program. Every spring, the Office of Personnel Management sends out a “Call Letter” providing guidance — not mandates — on coverage health plans in the FEHB might consider proposing for the next year. The Call Letter for 2005 encouraged plans to consider offering a HDHP with an HSA component. The response was very enthusiastic.

Eighteen high-deductible health plans (HDHP), including a faith-based HDHP, will be offered by the FEHB Program in 2005. These health plans, which include two nationwide offerings, incorporate a Health Savings Account component for individuals not enrolled in Medicare or covered by other insurance.

Additionally, in response to concerns raised by federal retirees and their representatives, OPM created a special option, a Health Reimbursable Arrangement (HRA) to be available to those enrolled in Medicare, making this innovative new product available to the broadest enrollee base possible.

The combination of a contribution to the HSA or HRA, a solid benefits package once the deductible is met, and a catastrophic limit that protects against all out-of-pocket costs for major medical expenses should mitigate concerns over potential adverse selection.

HSAs make good sense, on both a policy and a personal level, depending on an individual’s health care needs. While health-care costs are escalating, an HSA that rewards consumers for using their health-care dollars wisely should reduce overutilization of health-care services. As HSAs become more prevalent, health-care providers will be required to compete for consumers seeking the best value for money.

The addition of these new products means federal employees and retirees will have more options, providing more personal decisionmaking, freedom, incentives and responsibility. It maximizes their ability to put more of their hard-earned dollars to work for them and their families.

And, as President Bush says, “If you own something, you have a vital stake in the future of America.”

Kay Coles James is director of the Office of Personnel Management.

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