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Déjà vu and the FEHBP

December 8th, 2009

By jeremy.engdahl-johnson

The year was 1994. Sen. Edward Kennedy had an idea:

I have felt for years that every American should have the opportunity to have the same health coverage on the same terms as members of Congress and the president. This proposal guarantees that opportunity and also builds on the private sector.

While this idea has been echoed in the years since, it had not yet been a major provision of the reform bills moving through Congress. And so the Federal Employee Health Benefit Program (FEHBP) has largely been left out of the healthcare reform debate…until now.

We’re now making up for lost time as the Senate debate turns to the idea of an FEHBP-like program as an alternative to the public option. Not everyone is enthusiastic about the suggestion that the Federal Office of Personnel (OPM), which oversees FEHBP, should manage such a plan. We expressed our perspective about an FEHBP-type model early last year; many of the same concerns remain today. Here’s an excerpt:

If the FEHBP were made more widely available, it could result in selection problems. People who could find affordable insurance in the commercial market would select those options, leaving the more expensive population to opt for the FEHBP—and thereby making the program more expensive. The FEHBP works when it is restricted to federal employees, but when you open it up to a wider market the program is selected against and the most expensive people buy in.

While there may be lessons to draw from FEHBP in developing some kind of federal coverage for the uninsured, no program will work if it is too expensive. Cost is a barrier to entry for many of the uninsured. Unless plans are made affordable, the uninsured will remain uninsured. With its rich benefits, FEHBP does not seem to be a clear cost fit for the uninsured.

This isn’t the first time we’ve seen anachronisms during this healthcare reform conversation.

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