Federal Employees Health Benefits (FEHB)
Program: An Overview
Kirstin B. Blom
Analyst in Health Care Financing
Ada S. Cornell
Information Research Specialist
February 25, 2015
Congressional Research Service
7-5700
www.crs.gov
R43922
Federal Employees Health Benefits (FEHB) Program: An Overview
Summary
The Federal Employees Health Benefits (FEHB) Program provides health insurance to federal
employees, retirees, and their dependents. This report provides a general overview of FEHB. It
describes the structure of FEHB, including eligibility for the program and coverage options
available to enrollees, as well as premiums, benefits and cost sharing, and general financing of
FEHB. The report also describes the role of the Office of Personnel Management (OPM) in
administering the program.
Eligible individuals include federal employees, retirees, and their family members. As of calendar
year 2014, Members of Congress and certain congressional staff are no longer eligible to enroll in
plans offered under FEHB as employees but may be eligible to enroll in retirement. Coverage
options available to eligible individuals include individual or family coverage in an approved
health benefits plan. Beginning in calendar year 2016, individuals will have a third coverage
option: self plus one coverage for themselves and one eligible family member. Generally,
available health benefits plans fall into two broad categories: fee-for-service (FFS) or health
maintenance organizations (HMOs). FFS plans tend to be available nationwide, and HMOs tend
to be locally available. Premiums are shared between the federal government and the employee or
retiree. Benefits and cost sharing vary among FEHB plans, but all plans must cover basic services
such as hospital and physician care and may require cost sharing in the form of deductibles, co-
payments, or coinsurance. FEHB financing includes government contributions to premiums,
contingency reserves in the U.S. Treasury to offset unexpected increases in costs, and
administrative expenses incurred by OPM.
The report also discusses how FEHB interacts with the United States Postal Service (USPS) and
with Medicare as well as the impact of the Patient Protection and Affordable Care Act (ACA; P.L.
111-148, as amended) on FEHB. Like most federal agencies, the USPS offers health insurance to
its employees through FEHB. However, collective bargaining rights and prefunding obligations
for retiree health costs make the USPS unique among federal agencies with regard to health
benefits. Most federal employees or retirees aged 65 or older are automatically entitled to
Medicare Part A (Hospital Insurance, or HI). They also may choose to enroll in Medicare Part B
(Supplementary Medical Insurance, or SMI) and Part D (prescription drug coverage). For
individuals covered under an FEHB plan, Medicare is the primary payer, meaning it pays for
benefits first, and FEHB is the secondary payer. The ACA established new requirements for
FEHB plans in some cases. In others, it had no meaningful effect. For example, the requirement
to provide coverage to children up to the age of 26 on their parent’s plan was a new requirement
for plans, but many plans were already meeting the requirement not to deny coverage based on
preexisting conditions.
For information on the current plan year, such as premiums and cost sharing in FEHB and the
most recent open season (the period each year during which individuals can enroll or change
health plans), see CRS Report IF10004, The Federal Employees Health Benefits (FEHB)
Program: 2014 Open Season.
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Federal Employees Health Benefits (FEHB) Program: An Overview
Contents
Basics of the Federal Employees Health Benefits Program ............................................................ 1
Eligibility ................................................................................................................................... 1
Members of Congress and Certain Congressional Staff ...................................................... 2
Dependent Family Members ............................................................................................... 2
Retirees ................................................................................................................................ 3
Members of the Military ..................................................................................................... 3
Tribal Employees ................................................................................................................ 4
Temporary Continuation of Coverage ................................................................................. 4
Coverage Options ...................................................................................................................... 4
Health Plans ........................................................................................................................ 5
Health Plans Combined with Tax-Advantaged Accounts.................................................... 6
Enrollment Among FEHB Health Insurance Carriers ......................................................... 7
Other Programs: FSAFEDS and FEDVIP........................................................................... 8
Premiums ................................................................................................................................... 9
Payments to FFS Plans ...................................................................................................... 10
Payments to HMOs ........................................................................................................... 10
Benefits and Cost Sharing ....................................................................................................... 10
Benefits ............................................................................................................................. 11
Cost Sharing ...................................................................................................................... 11
Financing ................................................................................................................................. 11
Government Contributions to Premiums ........................................................................... 12
Contingency Reserves ....................................................................................................... 12
Administrative Costs ......................................................................................................... 12
How the USPS Interacts with the FEHB Program ......................................................................... 13
Premiums and Collective Bargaining ...................................................................................... 13
Paying for Retiree Health Care ................................................................................................ 13
FEHB Enrollees and Medicare ...................................................................................................... 14
Eligibility for Medicare ........................................................................................................... 14
Coordinating Medicare Benefits with FEHB .......................................................................... 15
Medicare Participation by FEHB Enrollees ............................................................................ 15
Impact of the Affordable Care Act ................................................................................................. 16
Figures
Figure 1. Top 10 FEHB Carriers, by Covered Policyholders, 2014 ................................................ 8
Tables
Table 1. FEHB Retirees Aged 65 and Older with Medicare Coverage .......................................... 16
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Federal Employees Health Benefits (FEHB) Program: An Overview
Appendixes
Appendix. OPM’s Role in Administering FEHB ........................................................................... 18
Contacts
Author Contact Information........................................................................................................... 22
Acknowledgments ......................................................................................................................... 22
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Federal Employees Health Benefits (FEHB) Program: An Overview
Basics of the Federal Employees Health
Benefits Program
The federal government is the largest employer in the United States, and the Federal Employees
Health Benefits (FEHB) Program is the largest employer-sponsored health insurance program in
the country. It provides more than $40 billion in health care benefits annually. In a typical year,
FEHB provides health insurance coverage to about 8.2 million federal employees, retirees,1 and
their dependents.2 Employees and retirees make up roughly half of that figure, or about 4 million
policyholders.3 Of these, about 50% are retirees.4 Participation in FEHB is voluntary. About 85%
of federal employees participate, and about 90% of retirees participate.5
The statute governing FEHB is in Title 5, Chapter 89 of the United States Code. It specifies that
the federal government and the employee or retiree will share the cost of health insurance, with
the federal government contributing 72% of the weighted average premium of all plans but no
more than 75% of any given plan’s premium, with the exception of employees of the United
States Postal Service (USPS), whose share of the premium is collectively bargained.6 The Office
of Personnel Management (OPM) administers the program. (For more detailed information on
OPM’s role, see the Appendix.) OPM has statutory authority to contract with health insurance
carriers7 that offer insurance coverage for comprehensive medical services and to prescribe
regulations to carry out that authority. For example, OPM coordinates the administration of
FEHB with federal agencies, manages contingency reserve funds for the health plans, and applies
sanctions to health care providers according to the prescribed regulations.
Eligibility
Eligible enrollees include federal employees, retirees, and their dependent family members.8 New
federal employees have 60 days from their start date to sign up for an FEHB plan, or they can
1 In the statute governing the Federal Employees Health Benefits (FEHB) Program, retirees are referred to as
annuitants. This report will use the term retirees.
2 Office of Personnel Management (OPM), “OPM Announces 2015 Federal Employees Health Benefits Program
Premium Rates,” news release, October 7, 2014, at http://www.opm.gov/news/releases/2014/10/opm-announces-2015-
federal-employees-health-benefits-program-premium-rates/.
3 Congressional Research Service (CRS) analysis of OPM data on FEHB enrollment, received from OPM’s
Congressional, Legislative, and Intergovernmental Affairs office on September 30, 2014. For purposes of this report,
policyholder refers to the individual who obtains coverage through FEHB for himself or herself and for any eligible
dependents.
4 CRS analysis of OPM data on FEHB enrollment, received from OPM’s Congressional, Legislative, and
Intergovernmental Affairs office on September 30, 2014.
5 OPM, “OPM Announces 2015 Federal Employees Health Benefits Program Premium Rates,” news release, October
7, 2014, at http://www.opm.gov/news/releases/2014/10/opm-announces-2015-federal-employees-health-benefits-
program-premium-rates/.
6 5 U.S.C. §8906(b). For more information on the United States Postal Service (USPS) and FEHB, see “How the USPS
Interacts with the FEHB Program” in this report.
7 The term health insurance carrier refers to the health insurance companies with which OPM contracts and that offer
services through one or more health plans.
8 §8901 of the FEHB statute lists all the eligibility groups. Additionally, eligibility information is provided in the FEHB
Program Handbook, “Eligibility for Health Benefits,” at http://www.opm.gov/healthcare-insurance/healthcare/
(continued...)
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wait to enroll until the next open season (the period each year during which individuals can enroll
or change health plans). Part-time workers are eligible for coverage, but generally they are
required to pay a larger share of premiums than full-time employees. Certain temporary, seasonal,
and intermittent workers who are identified as full-time employees are also eligible for coverage.9
Enrollees can choose either individual or family coverage. Starting in calendar year 2016, there
also is to be a self plus one coverage option available to enrollees.10
Members of Congress and Certain Congressional Staff
Members of Congress and certain congressional staff no longer receive health benefits through
FEHB as a benefit of their employment but may be eligible to enroll in FEHB in retirement. The
Patient Protection and Affordable Care Act (ACA; P.L. 111-148, as amended) stipulates that the
only health plans the federal government can make available to Members of Congress and certain
congressional staff are those created under the ACA or offered through a health insurance
marketplace as established by the ACA.11 Specifically, according to a final rule issued by OPM,
members and staff must enroll in a health plan offered through the District of Columbia’s Small
Business Health Options Program (DC SHOP), known as the DC Health Link Small Business
Market, to remain eligible for an employer contribution toward their coverage.12
Dependent Family Members
Eligible dependent family members include a spouse, children under the age of 26, and qualified
disabled children aged 26 years or older who cannot support themselves because of a mental or
physical disability.13 Under the Civil Service Retirement Spouse Equity Act of 1984 (P.L. 98-
(...continued)
reference-materials/reference/eligibility-for-health-benefits/.
9 Temporary employees, employees on seasonal schedules working less than 6 months per year, and intermittent
employees will be eligible to enroll in an FEHB health plan if they are expected to work a full-time schedule of 130
hours or more per month. These employees will receive the same government contribution as full-time permanent
employees. For more information, see OPM, “Federal Employees Health Benefits (FEHB) Program Modification of
Eligibility to Certain Employees on Temporary Appointments and Certain Employees on Seasonal and Intermittent
Schedules,” Benefits Administration Letter 14-210, October 20, 2014, at https://www.opm.gov/retirement-services/
publications-forms/benefits-administration-letters/2014/14-210.pdf. The final regulation is available at
http://www.gpo.gov/fdsys/pkg/FR-2014-10-17/pdf/2014-24652.pdf.
10 §706 of the Balanced Budget Act of 2013 (P.L. 113-67) added the self-plus-one option. For more information about
implementation, see OPM, “Federal Employees Health Benefits (FEHB) Program: Self Plus One Enrollment,” Benefits
Administration Letter 14-203, March 24, 2014, at https://www.opm.gov/retirement-services/publications-forms/
benefits-administration-letters/2014/14-203.pdf.
11 §1312(d)(3)(D)(ii) of P.L. 111-148, the Patient Protection and Affordable Care Act (ACA), defines Members of
Congress as any Member of the House of Representatives or the Senate. It defines congressional staff as all full-time
and part-time employees employed by the official office of a Member of Congress, whether in Washington, DC, or
outside of Washington, DC.
12 OPM, “Federal Employees Health Benefits Program: Members of Congress and Congressional Staff,” 78 Federal
Register 60653, October 2, 2013, at http://www.gpo.gov/fdsys/pkg/FR-2013-10-02/pdf/2013-23565.pdf. For more
information, see CRS Report R43194, Health Benefits for Members of Congress and Certain Congressional Staff.
13 On June 26, 2013, the U.S. Supreme Court ruled that §3 of the Defense of Marriage Act (DOMA) is unconstitutional.
As a result of the decision, OPM has stated that all legally married same-sex spouses are considered eligible family
members under FEHB. Additionally, the children (including stepchildren) of same-sex marriages are treated the same
way as children of opposite-sex marriages for eligibility purposes. For more information, see http://www.opm.gov/
healthcare-insurance/healthcare/carriers/2013/2013-20.pdf.
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615), certain former spouses (of federal employees, former employees, and retirees) also may
qualify to enroll in FEHB.14 Typically, surviving eligible family members of deceased employees
or retirees can keep their enrollment in FEHB with the same level of benefits and government
contributions to premiums.15
Retirees
To be eligible for FEHB in retirement, an individual (1) must be entitled to retire on an immediate
annuity under a retirement system for civilian employees16 and (2) must have been continuously
enrolled (or covered as a family member) under FEHB for the five years of service immediately
before the date on which the annuity starts or for the full period(s) of service since the
individual’s first opportunity to enroll (if less than five years). The five-year requirement can also
be met by coverage under TRICARE, the health care program for uniformed service members
and their families, as long as the individual was covered under FEHB at the time of retirement.17
For information on Medicare coverage for FEHB retirees, see “FEHB Enrollees and Medicare.”
Members of the Military
FEHB retirees, survivors, and former spouses who are eligible for the Civilian Health and
Medical Program of the Department of Veterans Affairs (CHAMPVA), TRICARE, or TRICARE
for Life may suspend their FEHB enrollment. They may return to FEHB during the open season,
or they may return immediately if they involuntarily lose their non-FEHB coverage.18
Federal employee reservists who are placed in a leave-without-pay status when called to active
duty for more than 30 days in support of a contingency operation can keep their FEHB coverage
for up to 24 months.19
14 For more information, see CRS Report R42741, Laws Affecting the Federal Employees Health Benefits Program
(FEHBP).
15 For more information, see OPM’s website at http://www.opm.gov/healthcare-insurance/life-events/memy-family/
what-happens-if-i-die/.
16 This includes individuals retiring under the Federal Employees Retirement System (FERS) and the minimum
retirement age plus 10 years of service (MRA + 10) provision. A separating FERS employee who is eligible for an
immediate annuity under the MRA + 10 provision may receive the benefits immediately or postpone receiving an
annuity to lessen the age-related benefit reduction applicable to persons under the age of 62. If the individual is eligible
for an MRA + 10 annuity and is not applying for the annuity at the time of separation, he or she may reenroll in FEHB
when the annuity begins. However, if the individual applied for an immediate annuity under the MRA + 10 provision
and later decided to postpone the annuity starting date, he or she would not be able to enroll in FEHB. Individuals
retiring under the Civil Service Retirement System who qualify for an immediate annuity must retire on that annuity;
they cannot postpone receiving the annuity and therefore cannot postpone receiving FEHB.
17 OPM has the authority to waive the five-year requirement when it determines that it would be against equity and
good conscience not to allow a retiree to enroll in FEHB (P.L. 99-251). For more information, see “Annuitants and
Compensationers” in the FEHB Program Handbook at http://www.opm.gov/healthcare-insurance/healthcare/reference-
materials/reference/annuitants-and-compensationers/. See also “FEHB Enrollees and Medicare” in this report.
18For more information, see OPM, “Suspension of CHAMPVA or TRICARE or TRICARE-for-Life Eligibles
Enrollment in the Federal Employees Health Benefits (FEHB) Program,” 67 Federal Register 41305, June 18, 2002, at
http://www.gpo.gov/fdsys/pkg/FR-2002-06-18/pdf/02-15275.pdf.
19 For more information, see OPM, “Coverage for Federal Civilian Employees Called to Military Duty,” at
http://www.opm.gov/healthcare-insurance/healthcare/eligibility/#url=Reservists.
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Federal Employees Health Benefits (FEHB) Program: An Overview
Tribal Employees
Since May 1, 2012, eligible Indian tribes, tribal organizations, and urban Indian organizations
have been allowed to purchase FEHB for their tribal employees.20 The tribe or tribal organization
is required to pay at least the government’s share of the premium, and the enrollee pays the
remaining share. Tribes and tribal organizations are allowed to purchase this coverage only for
employees and their dependents; coverage is not available to retirees.21
Temporary Continuation of Coverage
Certain individuals may be eligible to temporarily continue their FEHB coverage after their
regular coverage ends under Temporary Continuation of Coverage (TCC). TCC is similar to
COBRA22 coverage offered to individuals in the private sector. Federal employees and their
family members who lose FEHB coverage because of a qualifying event, such as the loss of a job,
may be eligible for TCC. TCC enrollees may initially enroll in any FEHB plan and may change
plans during open season. They must pay the full premium for the plan they select (that is, both
the employee and government shares of the premium) plus a 2% administrative charge. In
general, TCC coverage is available to separating employees and their families for up to 18
months after the date of separation. Children aging out of their parent’s plan (at the age of 26) and
former spouses can continue TCC for up to 36 months.
Coverage Options
FEHB enrollees choose a health plan from a health insurance carrier participating in FEHB. Each
carrier offers one or more plans.23 There are typically more than 250 different health plans to
choose from. As a practical matter, depending on where an enrollee resides, his or her choice of
plans is limited to about 15 different plans. Generally, health insurance carriers and their health
plans fall into two broad categories: fee-for-service (FFS) plans or health maintenance
organizations (HMOs). FFS plans are generally available nationwide, and HMOs tend to be
locally available.24
The most popular insurance carrier in FEHB is Blue Cross and Blue Shield (BCBS). It has the
highest level of FEHB enrollment (see Figure 1) and offers two popular FFS health plans
available nationwide: a Standard Option health plan and a Basic Option health plan. It also
includes local HMOs.
Individuals may enroll or change plans during designated annual open season periods.25 Plan
offerings in terms of benefits and premiums may change during each open season. Special
20 OPM, “Indian Tribe Participation in the Federal Employees Health Benefits Program,” FEHB Program Carrier
Letter 2012-04, February 16, 2012, at http://www.opm.gov/healthcare-insurance/healthcare/carriers/2012/2012-04.pdf.
21 25 U.S.C. §1647(b).
22 For more information on COBRA, see archived CRS Report R40142, Health Insurance Continuation Coverage
Under COBRA.
23 The statute, 5 U.S.C. §8903, specifies the types of health plans with which OPM may contract for FEHB.
24 There is variation between fee-for-service (FFS) plans and health maintenance organizations (HMOs), and even
within plans, but both types of plans contract with networks of providers that offer services to enrollees. A key feature
of FFS plans is that they generally allow more flexibility than HMOs in enrollee use of out-of-network providers.
25 For current open season dates, see OPM, “Open Season,” at http://www.opm.gov/healthcare-insurance/open-season/.
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enrollment periods are also allowed for those with a qualifying life event, such as marriage.26
Details for all FEHB plans are available on OPM’s website at http://www.opm.gov/healthcare-
insurance/healthcare/plan-information/.
Health Plans
FFS plans and HMOs are structured differently. Enrollees may base their decision to join a FFS
plan or an HMO based on a variety of factors, such as whether they already have a preferred
medical provider and where they live. There are many differences between FFS plans and HMOs,
including whether the plans are available nationally or locally, how OPM pays the plans, how
health plan performance is measured, and financing for each type of plan. However, a key
difference for enrollees is the flexibility that FFS plans usually provide around the use of out-of-
network providers. FFS plans are more likely to allow access to out-of-network providers, with
increased out-of-pocket costs, than HMOs. Each of these differences is discussed in later sections.
FFS
FEHB typically offers about 15 FFS plans that are available nationally across the federal
government (although some are open only to certain types of federal employees). Nationwide
FFS plans include the BCBS Standard Option and Basic Option plans and plans sponsored by
unions and employee organizations, such as those offered by the Government Employees Health
Association (GEHA), the National Association of Letter Carriers (NALC), the Mail Handlers
Benefit Plan (MHBP), the American Postal Workers Union (APWU), and the Special Agents
Mutual Benefit Association (SAMBA).27
Most FFS plans have a preferred provider organization (PPO) whereby medical providers have
contracted with the health plan to offer discounted charges.28 Enrollees may choose providers
outside of the PPO but will pay a larger share of the cost of services from these providers.29
HMO
HMOs are associated with a particular geographic area and are not available nationwide. In an
HMO plan, FEHB enrollees receive care through a network of providers in a specific location.
Generally, enrollees must see a provider within the HMO’s network for their medical care to be
26 OPM, “Changes You Can Make Outside of Open Season,” at http://www.opm.gov/healthcare-insurance/healthcare/
plan-information/changes-you-can-make-outside-of-open-season/.
27 OPM, “Non-Postal Premium Rates for the Federal Employees Health Benefits Program,” at http://www.opm.gov/
healthcare-insurance/healthcare/plan-information/premiums/2015/nonpostal-ffs.pdf.
28 See OPM, The 2015 Guide to Federal Benefits for Federal Civilian Employees, November 2014, p. 31, at
http://www.opm.gov/healthcare-insurance/healthcare/plan-information/guide/2015-guides/70-1.pdf.
29 Enrollees can choose providers outside of the preferred provider organization (PPO), with the exception of the Blue
Cross and Blue Shield (BCBS) Basic Option plan, which requires enrollees to use PPO providers. Enrollees in the
BCBS Basic Option plan who choose a non-PPO provider will be responsible for the full cost of services. See OPM,
The 2015 Guide to Federal Benefits, pp. 31 and 33, at http://www.opm.gov/healthcare-insurance/healthcare/plan-
information/guide/2015-guides/70-1.pdf.
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Federal Employees Health Benefits (FEHB) Program: An Overview
covered. Eligibility to enroll in an HMO typically depends on where a prospective enrollee
lives.30
Health Plans Combined with Tax-Advantaged Accounts
Within the FFS and HMO arrangements discussed above, many FEHB insurance carriers offer
consumer-driven health plans (CDHPs) and high-deductible health plans (HDHPs). Depending on
which arrangement they fall under, CDHPs and HDHPs can be either nationally or locally
available. These health plans are often combined with tax-advantaged accounts such as health
reimbursement arrangements (HRAs) or health savings accounts (HSAs).31 These accounts are
designed to help enrollees save for future health care expenses, and both the health plan and the
enrollee can make contributions to them, in the case of HSAs. The combination of CDHPs or
HDHPs and tax-advantaged accounts is intended to help control costs by exposing enrollees to
more risk for their health care expenditures. Generally, enrollees in health plans with tax-
advantaged accounts have higher cost sharing (the amount an enrollee pays out of pocket, which
includes deductibles, coinsurance, and co-payments) than in other types of plans but pay lower
premiums. They also tend to have greater flexibility in spending their health care dollars. For
example, contributions to an HSA can be used to cover medical expenses32 that are not usually
covered by a health plan, such as the costs of eyeglasses or contact lenses. HSAs can also be used
to pay for cost sharing including deductibles. In addition, in CDHPs or HDHPs, enrollees have
the flexibility to use providers in or out of the plan’s network, although they may pay more for
services when using an out-of-network provider. This flexibility is intended to provide incentives
for enrollees to shop around for the most cost-effective services. CDHPs and HDHPs offer full
coverage for preventive care obtained in their networks at no cost to the enrollee.
Consumer-Driven Health Plans
CDHPs can be difficult to define because they use a variety of different approaches designed to
give enrollees more control over their health care expenses. OPM describes CDHPs as health
plans that offer full coverage for in-network preventive care as well as flexibility for enrollees in
spending on their health care. This flexibility includes using providers outside of the plan’s
network, although enrollees would pay more to do so. In exchange for that flexibility and full
coverage of preventive services, enrollees face higher cost sharing. CDHPs have annual limits on
out-of-pocket expenses that may be higher than those in other types of plans, although these
limits vary by plan.33
30 Other options available to enrollees include health maintenance organization (HMO) plans with a point-of-service
product. Under this arrangement, enrollees can see providers who are not in the plan’s network but will pay more for
doing so. For more information, see OPM, “Plan Types,” at http://www.opm.gov/healthcare-insurance/healthcare/plan-
information/plan-types/ or OPM’s 2015 Guide to Federal Benefits, p. 37, at http://www.opm.gov/healthcare-insurance/
healthcare/plan-information/guide/2015-guides/70-1.pdf.
31 For more information on health savings accounts (HSAs) or health reimbursement arrangements (HRAs), see CRS
Report RS21573, Tax-Advantaged Accounts for Health Care Expenses: Side-by-Side Comparison, 2013.
32 See Internal Revenue Service (IRS), Health Savings Accounts and Other Tax-Favored Health Plans, Publication
969, January 22, 2014, at http://www.irs.gov/pub/irs-pdf/p969.pdf and IRS, Medical and Dental Expenses, Publication
502, December 31, 2014, at http://www.irs.gov/pub/irs-pdf/p502.pdf.
33 For example, see Aetna’s 2015 brochure for its consumer-driven health plan (CDHP) at http://www.opm.gov/
healthcare-insurance/tribal-employers/plan-information/plan-codes/2015/brochures/73-879i.pdf. Also see the American
Postal Workers Union’s 2015 brochure for its CDHP at http://www.opm.gov/healthcare-insurance/healthcare/plan-
(continued...)
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CDHPs are often combined with HRAs. Employer contributions are not taxable and do not earn
interest. Enrollees cannot contribute to an HRA. In general, unused balances in an HRA may be
carried over into the next year. However, balances are forfeited when an enrollee leaves the plan.
The HRA also can be used to meet the plan’s deductible.
High-Deductible Health Plans
OPM has more clearly defined the structure of an HDHP. In an HDHP, enrollees have deductibles
for self-only coverage or family coverage of at least $1,300 or $2,600, respectively, in calendar
year 2015.34 Those deductibles must be met before the plan will provide coverage for services,
with the exception of preventive care obtained in the plan’s network. As with CDHPs, enrollees
may have the option to use providers outside of the plan’s network but will pay more if they do.
Unlike CDHPs, some HDHPs will provide coverage only for services obtained through the plan’s
network. OPM sets specific annual limits on the amount an enrollee pays out of pocket. These
limits include deductibles, co-payments, and coinsurance and cannot exceed $6,450 for self-only
coverage and $12,900 for family coverage in calendar year 2015.35
As with CDHPs, HDHPs can be combined with an HRA. However, they also can be paired with
an HSA. HSAs are only available to HDHP enrollees who are not enrolled in Medicare, covered
by another health plan, or claimed as a dependent on someone else’s federal tax return and who
have not received Department of Veterans Affairs health benefits or Indian Health Service
benefits in the past three months. Both the enrollee and the health plan can contribute to an
enrollee’s HSA, but their combined contribution cannot exceed the statutory limit adjusted
annually by the Internal Revenue Service.36 Enrollees aged 55 to 65 can make “catch-up”
contributions of up to $1,000.37 An enrollee’s contribution is tax deductible, and both the plan’s
contribution to the HSA and any interest earned are tax free. All unused funds in the HSA, as well
as any interest earned, may be carried over each year without limitation.
Enrollment Among FEHB Health Insurance Carriers
FEHB enrollment is concentrated among 10 health insurance carriers. Of the 4 million FEHB
policyholders, about 66% are enrolled in BCBS, as shown in Figure 1. An FEHB carrier is
defined in statute as a “voluntary association, corporation, partnership, or other nongovernmental
organization ... engaged in providing, paying for, or reimbursing the cost of health services ... in
consideration of premiums or other periodic charges payable to the carrier.”38 Each carrier
(...continued)
information/plan-codes/2015/brochures/71-004.pdf.
34 See IRS, Rev. Proc. 2014-30, at http://www.irs.gov/pub/irs-drop/rp-14-30.pdf.
35 Ibid.
36 For calendar year 2015, the limit is $3,350 for self-only coverage and $6,650 for family coverage. See IRS, Rev.
Proc. 2014-30, at http://www.irs.gov/pub/irs-drop/rp-14-30.pdf.
37 OPM, “Comparison Chart for Health Savings Account, Health Reimbursement Arrangement, Health Care Flexible
Spending Account, and Limited Expense Health Care Flexible Spending Account,” at http://www.opm.gov/healthcare-
insurance/healthcare/health-savings-accounts/comparison-chart/.
38 5 U.S.C. §8901.
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Federal Employees Health Benefits (FEHB) Program: An Overview
contracts with OPM after a negotiation process that begins when OPM issues its annual call letter
in March asking carriers for benefit and rate proposals.39
Figure 1. Top 10 FEHB Carriers, by Covered Policyholders, 2014
BCBS
2,634,807
GEHA
308,034
Kaiser Permanente
234,090
Mail Handlers
139,091
NALC
115,936
APWU
110,063
Aetna
109,626
United Health
48,647
EmblemHealth
30,441
Rural Carrier Benefit Plan
28,874
0
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
Number of Policyholders
Source: Congressional Research Service (CRS) analysis of FEHB enrol ment data received from the Office of
Personnel Management’s (OPM) Congressional, Legislative, and Intergovernmental Affairs office on September
30, 2014.
Notes: Total enrollment in the top 10 carriers shown above is about 3.7 million people, or more than 90% of all
Federal Employee Health Benefits (FEHB) program policyholders. Policyholders include federal employees and
retirees who obtain coverage for themselves and their dependents. This figure does not include dependents.
BCBS = Blue Cross and Blue Shield; GEHA = Government Employees Health Association; NALC = National
Association of Letter Carriers; APWU = American Postal Workers Union.
Other Programs: FSAFEDS and FEDVIP
In addition to choosing a health plan, federal employees have the option to set up a flexible
spending account (FSA) through the Federal Flexible Spending Account Program (FSAFEDS) to
pay for out-of-pocket health care expenses on a pretax basis. Anyone eligible for FEHB also has
the option to purchase supplemental dental and vision coverage through the Federal Employees
Dental and Vision Program (FEDVIP).40
39 OPM’s most recent call letter was released on March 20, 2014. See http://www.opm.gov/healthcare-insurance/
healthcare/carriers/2014/2014-03.pdf.
40 Members of Congress and certain congressional staff are also eligible for the Federal Flexible Spending Account
(continued...)
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Federal Employees Health Benefits (FEHB) Program: An Overview
FSAFEDS
Federal employees eligible for FEHB (even if they are not enrolled) may participate in
FSAFEDS, which offers several different types of FSAs. The Health Care FSA (HCFSA) and the
Limited Expense Health Care FSA (LEX HCFSA) allow employees to save money for health care
expenses on a pretax basis.41 Funds in an HCFSA can be used to pay for qualified medical
expenses including coinsurance amounts, co-payments, deductibles, dental care, glasses, and
hearing aids.42 Funds in an LEX HCFSA can be used to cover qualified dental and vision care
expenses. FSAFEDS also offers a Dependent Care FSA (DCFSA) that employees can use to save
money for child care or adult dependent care expenses.43 FSAs are not available to retirees.
Employee contributions to FSAs are voluntary and funded from the employee’s pretax salary. The
federal government does not contribute to FSAs.
FEDVIP
Since 2007, those eligible for FEHB (even if they are not enrolled) have been eligible to enroll in
FEDVIP, which provides supplemental dental and vision insurance. More information on
FEDVIP is available at https://www.benefeds.com.
Premiums
Many health insurance carriers, such as BCBS, offer two or more health plans with different
features and different premiums. A premium is the cost of enrollment in the health plan, charged
on a regular basis (e.g., biweekly, monthly). Premiums are the same for retirees and employees
(except employees of the USPS), but employees have the option of paying their share of
premiums on a pretax basis through a payroll deduction.44 Premium costs are shared between the
federal government and the employee or retiree. The government’s share of premiums for all
retirees and for non-postal employees is set in statute at 72% of the weighted average premium of
all plans in the program, not to exceed 75% of any given plan’s premium.45 For part-time workers
(individuals working between 16 hours and 32 hours per week), the government’s share is
generally prorated. Premiums differ depending on whether an enrollee chooses self or family
coverage. The percentage of premiums paid by the government is calculated separately for
individual and family coverage, but each uses the same formula. OPM negotiates payments to
(...continued)
Program (FSAFEDS) and the Federal Employees Dental and Vision Program (FEDVIP).
41 Employees who have an HSA cannot also have a Health Care Flexible Spending Account (HCFSA). They can
instead enroll in a Limited Expense Health Care Flexible Spending Account (LEX HCFSA).
42 The ACA changed the definition of qualified medical expenses, beginning in 2011. The ACA does not allow over-
the-counter medicines to be covered by these tax-advantaged accounts unless they are prescribed by a physician, with
the exception of insulin. FSAFEDS provides a complete list of covered medical expenses on its website at
http://www.fsafeds.com.
43 For more information on flexible spending accounts (FSAs), see CRS Report RS21573, Tax-Advantaged Accounts
for Health Care Expenses: Side-by-Side Comparison, 2013.
44 For more information on USPS employees and FEHB, see “How the USPS Interacts with the FEHB Program” in this
report.
45 5 U.S.C. §8906(b).
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health plans differently depending on whether a plan is a FFS plan or an HMO, according to
detailed regulations.46
Payments to FFS Plans
During premium negotiations between OPM and carriers offering experience-rated FFS plans,47
the service charge or profit paid to plans by OPM (a component of the premium paid by the
federal government for each policyholder) is calculated according to detailed regulations.48 OPM
monitors plan performance throughout the year and maintains data that are used to evaluate
performance and determine profit. Profit is based on six factors: (1) contractor performance on
accurate and timely claims processing, handling of claims disputes, and general beneficial
innovations; (2) contract cost-risk factors, including group size (smaller enrollments receive
credit for higher risk), certain enrollee demographics, and the plan’s willingness to assume risk;
(3) federal socioeconomic programs, such as programs to deter drug abuse, which are evaluated
by considering the quality of the contractor’s policies and procedures and the extent of unusual
effort or achievement demonstrated; (4) capital investments (this is a general federal acquisition
factor but seldom applicable under FEHB); (5) cost control, such as contractor-initiated efforts to
improve benefit design, cost sharing, or innovative peer review procedures; and (6) independent
development of administrative systems that improve cost efficiency and for which the contractor
assumed the development costs. Each of these profit factors is scored with regard to the plan’s
performance in the previous year, and the sum of the scores determines the profit percentage.
Payments to HMOs
For community-rated plans,49 OPM negotiates with the HMOs to establish a capitation rate, a
payment to the plan for each federal enrollee. The payment amount is based on comparable rates
offered to other plans in the community, plus any negotiated changes to the community benefit
package. HMOs may compute their community rates using factors such as age and sex. HMOs
generally estimate their rates in the spring and negotiate their contracts with OPM in August. The
plan year begins the following January. If there are changes in the program or the community
benefit package between the time at which the plan estimated the rates and the plan’s
implementation in January, OPM reconciles those changes with the previously established
premiums and negotiates an adjustment. (OPM allows adjustment only for specified reasons,
excluding a plan’s underestimate of costs based on group demographics.) The profit rate HMOs
receive based on the community rate may be higher than that available to FFS plans under FEHB.
Benefits and Cost Sharing
Deductibles, co-payments, and coinsurance amounts vary across specific health plans. Even
within individual plans, enrollees may be offered a lower deductible and coinsurance amount if
they choose to use services in the plan’s network. Benefits and cost sharing vary among FEHB
46 48 C.F.R. §1615.4.
47 Fee-for-service (FFS) plans are experience rated, meaning the premiums are based on the claims experience of
federal enrollees in the plan in preceding years. Premiums are also based on administrative costs and profit (limited to a
maximum of 1.1% of claims and administrative costs).
48 48 C.F.R. §1615.4.
49 Community-rated plans are generally HMOs.
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plans. OPM relies on statutory requirements and may establish additional requirements during
contract negotiations with plans.
Benefits
Although there is no standard benefit package required for plans participating in the FEHB
Program, by statute all plans must cover basic hospital, surgical, physician, and emergency care.
These basic services include childhood immunizations; screenings for cancer, diabetes, and high
blood pressure; and tobacco-cessation services. Furthermore, OPM requires that plans cover
certain benefits, such as prescription drugs and mental health parity with general medical care
coverage. Other benefits are optional, such as applied behavior analysis for children with autism,
which plans could choose to cover beginning in 2013.
Cost Sharing
Cost sharing refers to the expenses an enrollee might pay out of pocket for health care. These
expenses can include co-payments, coinsurance, and deductibles. Co-payments are a fixed
amount that enrollees pay when they obtain services; coinsurance is a percentage of the total cost
of the visit that the enrollee could be billed for; and deductibles are an annual amount that an
enrollee must pay before the health plan begins paying for services. Deductibles may not apply to
all services. For example, many plans do not require that deductibles be met before covering
preventive services.
Although cost-sharing requirements vary by plan, there are limits on how much an enrollee can
be required to pay out of pocket each year. This limit varies by plan. Generally, once an enrollee’s
expenses reach the out-of-pocket limit, the plan pays 100% of covered medical expenses for the
remainder of the year. For some services, such as the preventive care services outlined in the
ACA, plans are not allowed to impose cost sharing.50 In addition, plans are required to include
certain cost-containment provisions in the proposals they submit annually as part of contract
negotiations with OPM, such as PPO networks in FFS plans and hospital preadmission
certification.
Financing
FEHB is funded through discretionary spending, which is subject to appropriation, and mandatory
(or direct) spending. Agency payments for government contributions to their employees’
premiums are classified as discretionary spending. Payments for the government share of non-
postal retiree premiums are classified as mandatory spending. The federal government
contribution for FEHB enrollees, or the government share, is set in statute.
In the event of unexpected increases in costs or premiums, OPM maintains a contingency reserve
fund that can be used to disburse funds to plans to offset those costs. OPM also incurs
administrative expenses for administering the program.
50 For more information on ACA benefits, see CRS Report R43854, Overview of Private Health Insurance Provisions
in the Patient Protection and Affordable Care Act (ACA).
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Government Contributions to Premiums
The agency responsible for paying the government share of an enrollee’s FEHB premium
depends on whether the enrollee is an employee, a retiree, or a USPS employee or retiree. For an
employee, the agency at which that employee works pays the government share of his or her
FEHB premium out of the agency’s appropriations for payment of salaries. Because this type of
spending is subject to appropriation, it is classified as discretionary in the federal budget. For
non-postal retirees, OPM pays the government share of FEHB premiums through an appropriated
entitlement it receives for that purpose. This spending is classified as mandatory in the federal
budget.
The government share of premiums for all non-postal employees and all retirees is fixed in statute
at no more than 75% of any given plan’s premium. However, for postal employees, the
government share is negotiated between the USPS and the postal unions through collective
bargaining. For non-postal employees and non-postal retirees, the government share is paid from
general revenues. For postal employees and postal retirees, the USPS pays the government share.
Contingency Reserves
OPM maintains in the U.S. Treasury contingency reserve funds for all FEHB plans. In general,
contingency reserves are used to offset unexpected increases in spending or premium increases in
later years. How these reserves are maintained and used differs for FFS plans and HMO plans.
For FFS plans, OPM is authorized to charge plans up to 3% of their premium to establish and
maintain contingency reserves.51 The preferred minimum fund balance is 1½ times the sum of the
plan’s paid claims in an average month plus the plan’s administrative expenses in an average
month. FFS plans can use their reserves to offset larger-than-anticipated claims, or, if the balance
becomes larger than necessary, the reserves can be drawn down and used to offset a premium
increase in the subsequent year. FFS plans can draw down these reserves as claims are paid.
For HMO plans, OPM also charges plans up to 3% of their premium to establish and maintain
contingency reserves. However, unlike those for FFS plans, the contingency reserves for HMO
plans can be used only by OPM if OPM approves an adjustment during an annual reconciliation
process that usually takes place in March. OPM pays the plans specified amounts in installments
throughout the year.
Administrative Costs
The only explicitly identifiable administrative costs to the federal government for FEHB are the
costs of OPM’s headquarters staff. OPM employs about 103 full-time equivalent employees who
are responsible for FEHB.52 This staff includes the actuaries and employees who negotiate with
carriers, monitor plans and contracts, and generally oversee all aspects of program administration.
OPM adds a charge to each plan’s premium, limited by law to 1% of the premium, to cover these
51 5 C.F.R. §890.503.
52 OPM, Congressional Budget Justification Performance Budget: Fiscal Year 2015, March 2014, at
http://www.opm.gov/about-us/budget-performance/budgets/congressional-budget-justification-fy2015.pdf.
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administrative costs.53 Generally, the charge is less than 1%. There is no separate accounting for
the costs associated with agency personnel who carry out administrative tasks associated with
FEHB and other pay and benefit programs for federal workers.
Plan carriers’ administrative costs are included in their premiums. To the extent that plans
compete for enrollees on the basis of premiums, there may be an incentive for administrative
efficiency. However, OPM does not ask for detailed administrative cost data, although it
periodically audits certain overhead charges.
How the USPS Interacts with the FEHB Program
Similar to most other federal agencies, the USPS offers health care benefits to its employees,
retirees, and their dependents through FEHB. However, as an agency, the USPS is governed by
arrangements that are unique within the federal government in regard to its contributions to health
care benefits.
Premiums and Collective Bargaining
USPS employees have collective bargaining rights, including for compensation and benefits. The
Postal Reorganization Act of 1970 (PRA; P.L. 91-375) gives USPS employees these rights and
requires that fringe benefits, including health insurance, offered to employees be at least as
favorable as the fringe benefits that were in effect when PRA was enacted in 1970. As a result, the
USPS contribution to employees’ premiums is determined through collective bargaining
agreements (unlike at other federal agencies, where premium contributions for employees and
retirees are determined by a formula set in law).
The USPS generally pays a larger share of employees’54 health insurance premiums than most
other federal agencies.55 According to a recent U.S. Government Accountability Office report, the
USPS’s contribution rates will decrease in coming years under current agreements with its unions
and management associations. Under the current collective bargaining agreements and arbitration
awards, the USPS contribution to health care premiums for employees covered by collective
bargaining will decrease to approximately 76% in 2016, as compared with a maximum of 75% of
any given plan’s premium for other FEHB enrollees.56
Paying for Retiree Health Care
In most federal agencies, the government contribution to health benefits for retirees is paid not by
the agency but by OPM, through an appropriated entitlement it receives for that purpose.57
53 5 C.F.R. §890.503.
54 For retiree coverage, the USPS contribution to premiums is the same as it is in other federal agencies.
55 U.S. Government Accountability Office (GAO). U.S. Postal Service: Modernization and Restructuring Needed to
Address Financial Challenges, GAO-11-428T, March 2011, at http://www.gao.gov/new.items/d11428t.pdf.
56 GAO, U.S. Postal Service: Proposed Health Plan Could Improve Financial Condition, but Impact on Medicare and
Other Issues Should Be Weighed before Approval, GAO-13-658, July 2013, at http://gao.gov/assets/660/656011.pdf.
57 5 U.S.C. §8905(g)(1).
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However, the Consolidated Omnibus Budget Reconciliation Act (COBRA; P.L. 99-272) requires
the USPS to pay the government share of health benefits for USPS retirees. Additionally, the
Postal Accountability and Enhancement Act (PAEA; P.L. 109-435) creates for the USPS a
prefunding obligation for its retiree health care costs. PAEA requires the USPS to pay more than
$5 billion annually from FY2007 to FY2016 to the Postal Service Retiree Health Benefits Fund,
from which retirees and employees will be paid starting in FY2017. The USPS has defaulted on
these payments in recent years. The last payment that occurred was in 2010. As a result, there
have been proposals in both the House and Senate to change the way the USPS provides health
benefits to retirees, current employees, and their dependents.58
FEHB Enrollees and Medicare
Federal retirees and employees aged 65 or older have the option of enrolling in Medicare in
addition to continuing coverage in FEHB. Although most FEHB enrollees continue their coverage
into retirement, not all enrollees take up the Medicare coverage available to them. Several
coverage options are available through the Medicare program: the Hospital Insurance (HI)
program in Medicare Part A, the Supplementary Medical Insurance (SMI) program in Medicare
Part B, and prescription drug coverage in Medicare Part D.
Eligibility for Medicare
Most FEHB enrollees (retirees and employees) aged 65 or older are entitled to Medicare Part A
because they or their spouse paid Medicare payroll taxes for at least 40 quarters. As a result, they
are automatically enrolled when they become eligible. Federal workers and their employers each
pay 1.45% of earnings for Medicare payroll taxes. Most enrollees do not pay any premiums for
Part A coverage.
Participation in Medicare Parts B and D is voluntary, and qualified individuals choosing to enroll
must pay a monthly premium. Generally, individuals who do not enroll in Parts B or D when they
are first eligible are subject to a penalty if they enroll at a later date. However, for Part B,
individuals covered by an FEHB plan, either through their own or a spouse’s current employment,
may wait until they or their spouse retires before enrolling without incurring a late-enrollment
penalty. Upon retirement, individuals must enroll in Part B or be subject to a late-enrollment
penalty. For Part D, OPM has determined that the prescription drug coverage included in FEHB
plans is comparable to Medicare Part D, on average.59 There is no late-enrollment penalty if an
individual maintains FEHB coverage and at a later date decides to enroll in Part D coverage.60
Another option available to FEHB enrollees who are eligible for Medicare is a Medicare
Advantage Plan (sometimes called Part C). Medicare Advantage Plans are private plans that
contract with Medicare to provide Part A and Part B coverage. Retirees or former spouses
enrolled in Medicare Parts A and B may suspend their FEHB coverage to enroll in a Medicare
58 See CRS Report R43349, U.S. Postal Service Retiree Health Benefits and Pension Funding Issues.
59 OPM, “Letter from OPM about Medicare Part D,” http://www.opm.gov/healthcare-insurance/healthcare/medicare/
letter-from-opm-about-medicare-part-d/.
60 The same rules for Medicare late-enrollment penalties also apply to those with coverage through a private-sector
employer.
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Advantage Plan (e.g., a Medicare HMO or regional PPO), with the option to reenroll in FEHB
during open season. They can reenroll sooner if they involuntarily lose coverage or move out of
their Medicare Advantage Plan’s service area.
Coordinating Medicare Benefits with FEHB
When a retiree enrolled in Medicare also has coverage under FEHB, Medicare’s coordination of
benefits policy specifies that Medicare is the primary payer and FEHB is the secondary payer.
This means that Medicare pays first and then FEHB pays for care not covered by Medicare
(assuming that care is covered under the FEHB policy). As the secondary payer, FEHB may cover
an enrollee’s Medicare deductibles and coinsurance for care covered by both programs. For
retirees (or their spouses) over the age of 65 who do not have either Medicare Part A or Medicare
Part B (or both), FEHB is the primary payer. For individuals who have Part A but choose not to
take up Part B, FEHB is the primary payer for Part B services but Medicare is the primary payer
for Part A services.
When FEHB is the primary payer, the FEHB plan pays hospitals and physicians based on
Medicare rates. The benefit payment for inpatient hospital services is equivalent to what
Medicare Part A would have paid for those services; that is, the amount of the Medicare payment
(before the Medicare deductible, coinsurance, and lifetime limits are applied) reduced by any
FEHB deductible, coinsurance, or co-payment that is the responsibility of the FEHB enrollee or
any hospital readmission penalty.61 Hospitals may not collect, from either the FEHB program or
retirees, more than the amount determined to be equivalent to the Medicare payment. The benefit
payment for physician services is the lower of the amount that Medicare Part B would have paid
for those services or the actual billed charges. The payment is then reduced by any FEHB
deductible, coinsurance, or co-payment that is the responsibility of the FEHB enrollee.62
Medicare Participation by FEHB Enrollees
Approximately 1.2 million FEHB retirees aged 65 and older had Medicare coverage in FY2013.63
Table 1 shows the proportion of those retirees with coverage in Medicare Part A and the
proportion who chose to enroll in Medicare Parts A and B, by type of plan over time. Although
Medicare Part A is an entitlement, enrollment in Medicare Part B is voluntary. The proportion
choosing to enroll in Part B varies depending on how eligible individuals receive their benefits,
either through a FFS plan or an HMO.
61 §3025 of the ACA established the Hospital Readmissions Reduction Program, which required the Centers for
Medicare and Medicaid Services to reduce payments to hospitals with excess readmissions beginning on October 1,
2012. See also http://cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Readmissions-
Reduction-Program.html/.
62 For physician services, (1) Medicare participating providers may not collect from either FEHB plans or Medicare-
eligible enrollees more than the total Medicare payment under the Medicare participating physician fee schedule, and
(2) Medicare nonparticipating providers may not collect from FEHB plans or Medicare-eligible enrollees more than the
Medicare limiting charge amount. (Under Medicare, nonparticipating physicians can balance bill the Medicare enrollee
up to 15% higher than the fee schedule amount, but they are paid a slightly lower amount by Medicare.)
63 The 1.2 million does not include retirees under the age of 65 or those without Medicare coverage. In total, there are
about 2 million retirees in FEHB in a typical year.
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Table 1. FEHB Retirees Aged 65 and Older with Medicare Coverage
Medicare Coverage by
FY1998 FY2003 FY2008 FY2013
Type of FEHB Plan
FFS Plan
Part A only
8%
8%
10%
14%
Part A and B
92%
92%
90%
86%
HMO Plan
Part A only
37%
39%
42%
44%
Part A and B
63%
61%
58%
56%
Source: Congressional Research Service (CRS) analysis of Office of Personnel Management (OPM) data,
received from OPM’s Congressional, Legislative, and Intergovernmental Affairs office on October 14, 2014.
Notes: This table includes federal retirees aged 65 and older who are enrol ed in the Federal Employees Health
Benefits (FEHB) Program and have Medicare coverage. Federal retirees under the age of 65 and those without
Medicare coverage are excluded. Federal employees aged 65 and older who are still working are also excluded.
Of those retirees enrolled in an HMO plan in FY2013, roughly 56% had coverage under both
Medicare Part A and Medicare Part B. That rate was higher, at about 86%, for retirees receiving
benefits through a FFS plan. As shown in Table 1, the proportion of retirees with coverage under
both Medicare Part A and Medicare Part B has declined over time, from about 92% to about 86%
in FFS plans and from about 63% to about 56% in HMO plans. In contrast, coverage rates for
Part A alone have increased.
Various actors have shown interest in encouraging FEHB beneficiaries to enroll in Medicare Part
B to reduce FEHB spending. For enrollees who choose not to take up Part B, FEHB pays for
services that Medicare otherwise would have paid for because Medicare is the primary payer
when a beneficiary is enrolled in both programs. In its annual call letter for the 2015 plan year,
OPM encouraged health plans to submit proposals that will allow members to maximize benefits
by having Medicare Parts A and B coverage in addition to FEHB. OPM noted that some health
plans offer cost-sharing reductions for members who enroll in Part B. In addition, there has been
congressional interest in encouraging Part B enrollment. Recent legislation to reform the USPS
included enrollment in Part B as a condition of obtaining health coverage in retirement for USPS
retirees.64
Impact of the Affordable Care Act
The ACA passed in 2010 and included a number of provisions that established new requirements
for all private health plans, including FEHB health plans. For example, the new law allowed all
adult children (including those who are married) to enroll in or remain on their parents’ plan until
the age of 26. However, many ACA provisions had no meaningful effect on FEHB because many
FEHB plans already met the requirements established under the law, such as the provision that
people with preexisting conditions cannot be denied health coverage.
64 For example, in the 113th Congress, the Senate introduced S. 1486, the Postal Reform Act of 2014. 104 of the bill
included a requirement to enroll in Medicare.
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In some cases, how an ACA provision could impact FEHB is unknown. For example, it is unclear
how many FEHB health plans could be subject to the ACA’s excise tax on high-cost health plans,
often referred to as the Cadillac tax, which goes into effect in 2018.65 In addition, the employer
mandate could result in penalties to FEHB, starting in 2015, if any full-time federal worker
obtains a subsidy for health insurance on the exchange.66 The employer requirements and penalty
will be phased in—the requirement will apply to large firms with 100 or more full-time
equivalent (FTE) employees in 2015 and employers with 50 or more FTE employees in 2016.67
OPM has published guidance on implementing ACA provisions, and in some cases it has
expanded the scope of those provisions. For example, although most FEHB plans do not impose
annual limits on what they will pay for essential health benefits,68 some plans had established
such limits prior to passage of the ACA. Beginning in plan year 2013, OPM directed all FEHB
plans to eliminate annual limits on essential health benefits.69 That deadline for FEHB plans came
a full year earlier than the effective date specified in the ACA. For a detailed list of the ACA
provisions that affect FEHB, see CRS Report R42741, Laws Affecting the Federal Employees
Health Benefits Program (FEHBP).
65 §9001 of the ACA added an excise tax on high-cost employer-sponsored coverage. Beginning in 2018, health
insurers and health plan administrators are to pay a 40% excise tax for coverage that exceeds certain thresholds.
66 The Employer Shared Responsibility provisions under 4980H of the Internal Revenue Code, as amended by the
ACA, require that certain large employers offer affordable health coverage or pay a penalty if a full-time employee
receives a premium tax credit toward a plan offered through an exchange. This requirement also applies to government
entities, according to the IRS. See IRS, “Questions and Answers on Employer Shared Responsibility Provisions under
the Affordable Care Act,” at http://www.irs.gov/uac/Newsroom/Questions-and-Answers-on-Employer-Shared-
Responsibility-Provisions-Under-the-Affordable-Care-Act.
67 CRS Report R43854, Overview of Private Health Insurance Provisions in the Patient Protection and Affordable
Care Act (ACA).
68 §1302 of the ACA established requirements that health plans offer at least 10 benefits as part of an “essential health
benefits package.” These 10 essential health benefits (EHBs) are as follows: ambulatory patient services; emergency
services; hospitalization; maternity and newborn care; mental health and substance use disorder services, including
behavioral health treatment; prescription drugs; rehabilitative and habilitative services and devices; laboratory services;
preventive and wellness services and chronic disease management; and pediatric services, including oral and vision
care.
69 Specifically, the ACA prohibits lifetime and annual limits on the dollar value of EHBs. Plans that do not have to
offer the EHBs (such as FEHB plans) are asked to make a “good faith effort” to comply with a reasonable
interpretation of EHBs with respect to their own plans.
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Appendix. OPM’s Role in Administering FEHB
The Federal Employees Health Benefits (FEHB) Program is administered by the Office of
Personnel Management (OPM) in accordance with the statute (Title 5, Chapter 89of the U.S.
Code) and its implementing regulations (Title 5, Part 890 and Title 48, Chapter 16 of the Code of
Federal Regulations). The FEHB statute establishes the basic rules for benefits, enrollment, and
participation, among other general requirements, while still allowing OPM broad authority to
implement regulations, contract with plans, establish benefits, and administer the program. In
general, OPM, federal agencies, and the health insurance carriers each have defined roles in
FEHB.
OPM is authorized to contract with health insurance carriers; approve health plans for
participation in the program; negotiate with carriers about benefit and premium levels; determine
the times and conditions for open seasons during which eligible individuals may elect coverage or
change plans; make information available to employees concerning plan options; apply
administrative sanctions to health care providers that have committed certain violations; and
administer the program’s financing. OPM is responsible for maintaining the funds that hold
contingency reserves for the plans and the fund that receives premium payments from enrollees
and federal agencies, from which premiums are disbursed to participating plans.
OPM supervises all health insurance activities for retirees. It determines whether retiring
employees or survivor retirees meet the requirements to continue health insurance coverage; takes
the action necessary to terminate, accept, or continue enrollment; oversees the automatic
deduction of premiums from monthly annuity checks and credits the premiums, along with the
applicable government contribution, to the proper account; processes all enrollment changes;
notifies affected carriers of enrollment changes; and keeps enrolled retirees advised of rate and
benefit changes within their plan.
Annual Cycle of FEHB Activity for OPM
OPM enters into an annual contract with carriers following a negotiation process. Each spring,
that annual negotiation process begins when OPM sends all health plans a call letter to advise
them on goals and procedures for negotiating contracts for the following calendar year and to
request that participating health plans submit their benefit and rate proposals for the next year.
The call letter includes any changes in the services OPM seeks to make available for federal
workers and retirees, as well as notification of services that OPM discourages.
Next, OPM reviews proposals for rates (premiums) for the fee-for-service (FFS) plans in relation
to many factors, including the cost of covered services, managed care initiatives, a plan’s past
experience, health care utilization patterns of the enrolled group, and health care cost inflation in
general. Pursuant to the negotiations, OPM and the plans (including both FFS plans and health
maintenance organizations, or HMOs) agree to specific terms and conditions that each party is
obligated to meet in the next contract year. Descriptions of both covered and excluded services
are incorporated into the final contracts, and the plans print brochures describing the benefits and
costs according to a standard format specified by OPM. The brochures are binding statements of
benefits and exclusions that plans must follow as parties to FEHB contracts. OPM then
announces an open season (which generally runs for one month, beginning in early November).
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OPM prints and distributes to personnel offices and retirees a guide describing the major features
and premiums for all participating plans. This guide includes the findings of surveys of enrollee
satisfaction with the different plans and information about the factors participants should consider
in making their selection. Personal advice is not provided, although OPM’s website provides
information about how to select a plan (http://www.opm.gov/insure). Employees are responsible
for obtaining from their personnel office a copy of OPM’s general guide and the detailed
brochures of the specific plans in which they are interested. Retirees are responsible for obtaining
detailed plan brochures by contacting the individual carriers. Information about the different
plans also is available on OPM’s website at http://www.opm.gov/healthcare-insurance/.
Following is a summary of the annual cycle of OPM’s activities regarding plan contracts:
• End of March/early April—Call letter distributed to plans
• May 31—Plan responses due to OPM (electronic format)
• June through August—Contract negotiations
• September/October—Print and distribute OPM guides and plan brochures
• November/December—Open season
• Early December/January 1—Enrollment data distributed to plans
• January 1—Plan year starts
• March—Reconciliation of HMO premiums
OPM’s Role with Federal Agencies
Personnel offices in every federal agency manage participation in FEHB for their employees
according to procedures prescribed by OPM. They administer the annual open seasons and adjust
coverage and payroll withholding when workers’ family or employment situations change and
when new workers enter. Agencies are responsible for withholding employee premium payments,
adding the government share (which is appropriated to agencies annually), and providing
documentation of these actions to OPM. They keep records and information on withholdings
from employee salaries and agency contributions, enrollment statistics, and other necessary data.
OPM’s Role with the Plans
FEHB plans are required to allow eligible individuals to enroll during open season and other
special election periods and may not discriminate on the basis of health status, race, sex, or age.70
The carriers process and pay claims, answer enrollee questions, respond to claims disputes, print
annual open season brochures according to a format specified by OPM, and maintain data
regarding enrollment, claims, and other financial information required by OPM. In addition,
carriers assume all insurance risk.
70 5 C.F.R. §890.201.
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Contracts
The contracts OPM enters into with FEHB plans are for at least one year and may be
automatically renewable in the absence of notice by either party of intention to terminate. OPM
may terminate a carrier’s contract at the end of the year if the carrier did not have 300 or more
enrolled employees and retirees, exclusive of family members, at any point during the preceding
two contract terms. Each contract must contain a detailed statement of benefits. Contracts must
offer enrollees and their family members temporary extension of coverage with an option to
convert to a nongroup contract without requiring evidence of good health. Plans that are
discontinued, other than through a merger, may reenter after three contract years from the time
they left the program.
Licensure
An FEHB plan must be licensed to sell group health insurance under state law in every area of a
state in which it operates as an FEHB plan. Nationwide plans must be licensed in every state.
HMOs must have an internal quality-assurance program and must credential and periodically re-
credential participating providers. OPM requires that each FEHB plan submit copies of its state
license(s) with its application to participate in FEHB; in addition, as part of the plan’s contract
with FEHB the plan is required to inform OPM if a state has withdrawn, or intends to withdraw,
the plan’s license.
Quality
Each year, FEHB plans with 500 or more subscribers must mail the Consumers Assessment of
Health Plan Survey (CAHPS) to a random sample of plan members. For HMOs and point-of-
service plans, the sample consists of all commercial plan members, including nonfederal
members. For FFS or preferred provider organization plans, the sample includes federal members
only. The CAHPS survey consists of a set of standardized health plan performance measures that
evaluate members’ satisfaction with their health plans. Independent vendors certified by the
National Committee for Quality Assurance administer the surveys. OPM sets CAHPS
requirements for the plans each year, which include instructions to send OPM a copy of any
survey results.
All plans also must complete quality-assurance reports as well as fraud and abuse case reports
and submit these reports to OPM. Additionally, HMOs with more than 500 FEHB enrollees must
complete the Health Plan and Employer Data Information Set (HEDIS), which includes clinical
performance measures based on information such as members’ medical records. Each year, OPM
outlines the procedures for collecting the HEDIS measures; these measures help to compare how
well plans prevent and treat illness.
Provider Networks
OPM reviews applications for health benefit plans for evidence of a plan’s ability to provide
reasonable access to and choice of quality primary and specialty medical care throughout the
service area, specifically (1) in the individual practice setting, contractual arrangements for the
services of a significant number of primary care and specialty physicians in the service area; and
(2) in the group practice setting, compliance with statutes, preferably demonstrated by full-time
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providers specializing in internal medicine, family practice, pediatrics, and obstetrics and
gynecology.
Other Administrative Responsibilities
OPM’s other administrative responsibilities include data warehousing, considering appeal of
denials of coverage or payment, applying sanctions against providers, and determining
applicability of state and local laws.
Data Warehousing
OPM is creating a new health information management system that will, among other things, be
used to collect, manage, and analyze health services data for FEHB.71 Generally, OPM analysts
will use de-identified data for analytic purposes, such as examining health trends, developing
risk-adjustment methodologies, and conducting oversight of pharmacy pricing and negotiation.
Data with personal identifiers also may be used within OPM, in accordance with applicable
privacy standards, for the purposes of a congressional inquiry, for judicial and administrative
proceedings, and for investigations by law enforcement officials.72
Grievance and Appeals
All plan brochures include an explanation of the procedures enrollees should follow if they
disagree with a denial of coverage or payment. An enrollee must first submit a written request to
the plan for reconsideration within six months of the denial of coverage. Within 30 days of
receiving the request, the plan must approve the claim, request additional information, or provide
a written statement explaining the denial.73
If the plan decides against the enrollee, a written appeal can be filed with OPM within 90 days of
the plan’s second denial. If OPM determines the enrollee is entitled to coverage, the plan must
provide or pay for the care. If OPM decides against the enrollee, he or she can appeal in federal
district court.
Sanctions
OPM may, and in some cases must, apply sanctions to health care providers.74 These sanctions
include debarment, suspension, civil monetary penalties, and financial assessments. The
71 OPM, “Privacy Act of 1974: New System of Records,” 76 Federal Register 35050, June 15, 2011. OPM, “Privacy
Act of 1974: New System of Records,” 75 Federal Register 61532, October 5, 2010.
72 Under the privacy rule of the Health Insurance Portability and Accountability Act (HIPAA; P.L. 104-191),
identifiable information refers to data that are explicitly linked to a particular individual and data items that reasonably
could be expected to allow individual identification. Potential identifiers include, but are not limited to, name and social
security number; voice and fax telephone numbers; email addresses; medical record numbers, health plan beneficiary
numbers, or other health plan account numbers; biometric identifiers, including finger and voice prints; and full face
photographic images. Only de-identified data will be released outside of OPM.
73 5 C.F.R. §890.105.
74 5 C.F.R. §890.1001.
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regulations establish the circumstances under which these sanctions may occur, along with
procedures for appeals.
State and Local Laws
The terms of a contract relating to coverage or benefits, including payments, supersede and
preempt any state or local laws and regulations relating to health insurance or plans. Although
OPM requires HMOs to provide their FEHB plan enrollees with the mandated benefits of the
state in which they live, OPM has the authority to override these state requirements if it
determines that doing so would be in the best interest of federal enrollees.
Author Contact Information
Kirstin B. Blom
Ada S. Cornell
Analyst in Health Care Financing
Information Research Specialist
kblom@crs.loc.gov, 7-2397
acornell@crs.loc.gov, 7-3742
Acknowledgments
Annie Mach provided valuable insights into the structure and content of this report.
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