Concerns About the Rising Cost of the Federal Employee Health Insurance
The health insurance prices for federal employees and retirees rise each year, and 2022 will be no exception. In a recent statement, the Office of Personnel Management (OPM) said that enrollees in the Federal Employees Health Benefits Program (FEHBP) may expect to pay around 3.8% more toward their health premiums in 2022.
Premiums will rise by 2.4% on average next year, with the government’s contribution increasing by around 1.9% in 2022. This is a rather minor increase compared to more recent years. Participants in the FEHBP paid an average of 4.9% more for their health plans in 2021 than they did the previous year, and 5.6% more the year before.
In 2016, the rates were considerably higher. Nothing has yet to surpass the year 2019, when FEHBP participants paid only 1.5% more for their health insurance. It was the smallest total rate hike since 1996 and the smallest increase in participant premiums since 1995.
The Office of Personnel Management (OPM) referenced what this news would mean for the average employee’s paycheck in 2022. If non-postal federal employees get their projected 2.7% pay raise, the average worker will make $3,599 monthly next year. So health insurance will cost employees an average of $171.74 every pay period, or about 4.8% of their income.
According to OPM, employees paid $165.52 toward health insurance in 2021, or 4.7% of their wages. It needs to be stated again that these are only averages. Some plans will have higher rates in 2022, while others will have lower rates.
Take a look at the statement from OPM about next year’s premiums. A member in the Blue Cross and Blue Shield Basic plan will pay $3.42 more per month for insurance, while an employee with a family plan will pay $23.88 more per month.
The typical Blue Cross and Blue Shield plan will increase by $8.71 per month for individuals and $30.31 for families.
OPM also mentioned that the cost of obtaining a Government Employees Health Administration (GEHA) plan for a person will reduce by $7.11 per month, while the cost of a family plan will drop by $25.74 per month.
OPM determines premium rates every year based on how federal employees and federal retirees used the healthcare system the previous year.
OPM attributes the increases to rising expenses of treating chronic illnesses, prescription medications, and developments in medical technology that are driving up healthcare expenditures. The pandemic has also made estimating annual FEHBP premium prices challenging.
Some carriers told OPM that the price of treating and testing COVID-19 individuals influenced their rates, though not a sign in the big picture.
COVID-19 testing and treatment cost FEHBP roughly $1 billion in 2020, accounting for about 2% of all claims. OPM expects those costs to decrease over time, especially as more employees are vaccinated. When we pressed for further information on why the rates for 2022 remained so low, OPM said:
“Actual 2020 trends were less than expected when 2021 rates were set, partly due to the COVID-19 pandemic’s unknown future trajectory. The 2022 rates take into account current 2020 patterns and 2021 experience, as well as cost forecasts for the rest of the year and into 2022. The projected savings from multiple carrier renegotiations with their pharmaceutical benefit managers offset the 2022 rate hike.”
In other words, during the first year of the pandemic, federal employees used the healthcare system less frequently as they postponed elective operations and other semi-optional procedures.
This is beginning to change. According to OPM, FEHBP participants are beginning to file more claims as they plan more regular doctor’s visits or operations that were previously postponed. This trend is expected to continue until 2022, with implications for premiums in subsequent years.
“With the pandemic, we’re still in a unique scenario,” Greg Klingler, CEO of the Government Employees’ Benefits Association (GEBA), said. “We haven’t seen a pandemic like this since 1918, and the FEHB plan was not in place at the time.” “I believe we’re all treading water for the first time here.”
Contact Information:
Email: [email protected]
Phone: 6232511574
Bio:
I grew up in Dubuque, Iowa, where I learned the concepts of hard work and the value of a dollar. I spent years in Boy Scouts and achieved the honor of Eagle Scout. I graduated from Iowa State University and moved to Chicago and spent a few years managing restaurants. I then started working in financial services and insurance helping families prepare for the high cost of college for their children. After spending years in the insurance industry, I moved to Arizona and started working with Federal Employees offing education and options on their benefits. I became a Financial Advisor / Fiduciary to further help people properly plan for the future. I enjoy cooking and traveling in my free time.
Disclosure:
Investment advisory services are offered through BWM Advisory, LLC (BWM). BWM is registered as an Investment Advisor located in Scottsdale, Arizona, and only conducts business in states where it is properly licensed, notice filed, or is excluded from notice filing requirements. BWM does not accept or take responsibility for acting on time-sensitive instructions sent by email or other electronic means. Content shared or published through this medium is only intended for an audience in the States the Advisor is licensed in. If you are not the intended recipient, you are hereby notified that any dissemination, distribution, or copy of this transmission is strictly prohibited. If you receive this communication in error, please immediately notify the sender. The information included should not be considered investment advice. There are risks involved with investing which may include market fluctuation and possible loss of principal value. Carefully consider the risks and possible consequences involved prior to making an investment decision. Confidential Notice and Disclosure: Electronic mail sent over the internet is not secure and could be intercepted by a third party. For your protection, avoid sending confidential identifying information, such as account and social security numbers. Further, do not send time-sensitive, action-oriented messages, such as transaction orders, fund transfer instructions, or check stop payments, as it is our policy not to accept such items electronically. All e-mail sent to or from this address will be received or otherwise recorded by the sender’s corporate e-mail system and is subject to archival, monitoring or review by, and/or disclosure to, someone other than the recipient as permitted and required by the Securities and Exchange Commission. Please contact your advisor if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services. Additionally, if you change your address or fail to receive account statements from your account custodian, please contact our office at [email protected] or 800-779-4183.
