Why Not Open Up FEHBP?
Given the possibility that Obamacare will be declared unconstitutional in total or in part, what happens next? Returning to the status quo prior to Obamacare is unacceptable, so I want to suggest an approach and request your reactions. First, any plan must be capable of meeting the following objectives and operational criteria:
- Understandable (to average Americans)
- Effective (at offering a choice of competitively priced private insurance options)
- Supportable (by a significant majority of Congress)
Open up optional participation in the Federal Employees Health Benefits Program (FEHBP) to individuals and private employers throughout the country, using a defined contribution model, and with coverage purchased at continuation of coverage (similar to COBRA) rates.
Why? What Is The Rationale?
Let me offer the following 10 reasons why I think it makes sense to adopt this approach and request your questions, comments, and suggestions:
- FEHBP is an existing program throughout the United States with approximately 8 million participants and the following desirable characteristics:
- Private health insurance companies compete to sign up enrollees based on the cost and quality of their products.
- Individuals have purchase options that range from higher cost, rich benefit plans to low cost, high-deductible HSA model plans.
- Competition leads to lower cost and higher quality products and services.
- This program has been acknowledged to be an effective model for competition and consumerism. See “CHECKBOOK’s Guide to Health Plans for Federal Employees” by Walton Francis.
- The program can and will function effectively without an individual or employer mandate. To avoid “adverse selection”, there would be a once-a-year open enrollment period (as currently exists with FEHBP).
- FEHBP could be relatively easily adapted to a “defined contribution” model. Private employers who wish to participate can decide to pay $X per employee per month, with the difference paid by the employee. Individual participants would pay the full premium.
- State governments would be encouraged to continue developing and offering their own solutions, as Massachusetts, Utah, and others have done. This brings health reform closer to the local level, and further enhances competition.
- Individuals and businesses from states without a state health reform plan, or if the state plan is ineffective and/or non-competitive, can access both FEHBP and the traditional health insurance market.
- There would be no individual underwriting—individuals and small groups have access to a large risk pool benefiting from economies of scale and the “law of large numbers”. More participants from a cross section of America does not compromise FEHBP’s ability to operate and compete effectively.
- With some time and effort, FEHBP is relatively understandable and allows its participants to make an informed, annual choice of an insurance plan from competing options.
- This approach will have the added advantage of bringing the health benefits and costs for Federal employees more into line with what is available and affordable for the general population.
- This approach does not exclude other aspects of health reform which should continue, such as competition across state lines, fixing Medicare and Medicaid, increased transparency, tort reform, and so forth.
Certain people believe that this approach cannot work. Why? Is it a problem in concept or of political will? A different approach to the use of FEHBP was considered by the framers of Obamacare but rejected as too expensive (NOTE: the approach they considered was not the competitive, defined contribution model as outlined herein). I believe that this approach is understandable, effective, and supportable. What do you think?