Is FEHB A Good Model For Health Care Reform For All Americans? - ATC - Aviation Information

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Is FEHB A Good Model For Health Care Reform For All Americans?

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As part of the heated debate, President Obama and some members of Congress have stated the Federal Employee Health Benefits (FEHB) plan is a model for national health care reform for all Americans.

But is it?

The Urban Institute, a nonprofit, nonpartisan policy research and educational organization (originally chartered by President Johnson in 1968) released a new report this week that examines the pros and cons of using FEHB as a model of health care reform.

From the summary of the report:

"The Federal Employees Health Benefits Program (FEHBP) has insured federal workers, dependents, and retirees for over half a century. Health reformers have seen many of its features as improvements over current health insurance arrangements, and most federal reform proposals include some version of an insurance purchasing "exchange," a way to offer insurance choices like those of the FEHBP to a broader population.

"The FEHBP's central mechanism of enrollee choice among competing health plans is a popular way of providing access to health insurance. For its participants, the program has performed well, maintaining good benefits and wide choice of plan without fear of rejection or differential pricing by health status or age. Coverage is also portable across federal jobs and into retirement. For health plans, the FEHBP continues to be attractive enough to draw a large number of participants. Some HMOs have dropped out, evidently because of FEHBP's pricing policy, and once popular open access fee-for-service plans have not survived because they attracted too many high-cost enrollees, which raised their premiums relative to competitors.

"Politically, the program as a model for reform has appeal across the spectrum. Conservatives like the program's reliance on private health plans and market competition. Liberals like the prospect of expanding to everyone the FEHBP's large-employer-style benefits, community rating, and close oversight of insurer pricing. However, it does
not seem to be wise simply to open the existing FEHBP to non-federal enrollment nor feasible to precisely replicate the FEHBP and its national approach outside the context of federal employment.

"FEHBP experience suggests three main lessons for new reforms. First, selection issues can be severe and program altering. It seems very likely that stronger countermeasures will be needed for a new exchange than the FEHBP has as yet deployed. Second, it is challenging to maintain a wide spread of benefit packages for enrollees to choose among. Plausibly, better risk adjustment or other anti-selection mechanisms would assist in achieving this goal. Third, the FEHBP approach of negotiating with health plans and maintaining reserves that can be used to offset unexpected costs in a given year or temper year-to-year premium fluctuations is an alternative to direct public regulation of premiums."

To view the full report go to:
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