Beginning January 1, 2016, the Federal Employees Health Benefits Program (FEHBP) will include a self plus one enrollment option for its members. For 2015 and previous years, federal employees and annuitants enrolling in FEHBP plans had only two options, self only or self and family. The change was initially mandated by the 2013 Bipartisan Budget Act, and the U.S. Office of Personnel Management (OPM) published regulations on September 17, 2015 finalizing implementation of the self plus one enrollment type.
The new self plus one option will allow FEHBP members with one eligible dependent to enroll in a potentially less-expensive plan option than self and family. The rule does not impact eligibility for FEHBP benefits, either for employees and annuitants or for dependents, nor does it generally change the processes for members to enroll in coverage or modify coverage during the year. Premium conversion members—that is, FEHBP members whose shares of premiums are paid with pre-tax dollars, including most active employees—may enroll and change enrollment either during the open season in November and December of each year or upon the occurrence of a Qualifying Life Event (QLE). Like newly enrolling or changing from one plan to another, switching a covered family member will be permitted only during open enrollment or following a QLE. In addition to during open season and after QLEs, non-premium conversion members, including annuitants, may decrease enrollment type at any time by moving from self and family to self plus one or self only or from self plus one to self only. To address the novelty of the self plus one enrollment type and mitigate the effects of member confusion, in early 2016, OPM will allow a special “limited enrollment period” that will allow premium conversion members to decrease coverage from self and family to self plus one.
OPM began implementation of the self plus one enrollment type in early 2014. In a Carrier Letter in March of 2014, OPM instructed carriers offering FEHBP plans to prepare for the self plus one enrollment type to begin for plan year 2016, including by modifying systems and processes. OPM then proposed regulatory amendments in December 2014, setting forth some details of how the new enrollment type would be implemented and requesting comments on those details. 79 Fed. Reg. 71695 (Dec. 3, 2014).
The proposed rule noted that the addition of the Self plus one enrollment type “will align the FEHB Program with the commercial market and serve to spread costs across different enrollment types; in other words, it will shift costs among program participants.” Id. at 71696. In particular, OPM expressed its expectation that Self plus one enrollment options would have lower premiums than self and family, and noted that the result of the rule would likely be to shift program costs among participants—increasing premiums for members in a self and family enrollment and decreasing premiums for employees and annuitants who shift from self and family to self plus one. The agency reiterated this position in March 2015 in its Call Letter for 2016, stating that it “expect[s] proposals for Self Plus One rates to be lower than Self and Family rates. In no event can Self Plus One rates be higher than Self and Family rates.”
Several carriers submitted comments to OPM noting that the unique makeup of the FEHBP population may not support OPM’s assumptions that costs for families of two are higher than for families of three or more. Specifically, under the FEHBP, annuitants share a risk pool with active employees. Members who will move from a self and family enrollment to self plus one will, in many cases, be annuitants with grown children rather than young families without children—annuitants with far higher health care costs than younger families of three or more. Therefore, correctly-priced premiums for the self plus one enrollment type may actually exceed those of self and family premiums for the same benefit package.
OPM partially addressed this concern in its final rule. The preamble acknowledges that per-member costs for self plus one enrollment may exceed those of self and family enrollment, stating that “[i]t is possible that two-person families are, on average, less healthy than larger families; indeed, multiple comments to the docket provided evidence that some plans’ expenditures for two-person enrollments are higher than for enrollments with three or more total family members.” 80 Fed. Reg. at 55732. OPM also noted that the rule “does not set price differentials, nor does it impose caps on premium growth. Under the three tier system, carriers will set rate differentials between tiers that are appropriate for the expected population, just as they do under the two tier system,” and provides that plans with higher self plus one costs will “presumably set equal premiums for self plus one and self and family enrollment types.” Id. at 55730, 33. Such an outcome may diminish the impact of the self plus one enrollment type. OPM noted that it cannot measure cost shifting until rate negotiations have been finalized for 2016, and that “[a]s enrollees shift from self only and self and family enrollments, OPM will closely monitor the effect on premiums.” Id. at 55732.