Allocation Inequities in the Federal Employees Health Benefits Program
HRD-86-52: Published: Jan 27, 1986. Publicly Released: Jan 27, 1986.
- Full Report:
In response to a congressional request, GAO: (1) reviewed the Federal Employees Health Benefits Program (FEHBP) reserves; (2) discussed the Office of Personnel Management's (OPM) proposed method for dividing approximately $1 billion in excess program funds between the government and the enrollees; and (3) proposed a method to distribute each plan's refund equitably.
Enrollees and the government share FEHBP costs through regular premium contributions. The government's contribution is generally fixed regardless of the enrollee's salary or the plan he joins. FEHBP premiums must cover claims and overhead costs and maintain surplus funds, or reserves, as protection against unexpected costs. Due to an extraordinary reserve excess in 1985, 11 plans decided to refund over $1 billion on a pro-rata basis between the government and the enrollees. GAO found that this method would cause inequities because: (1) in some plans, enrollees would overpay for their health care coverage, and the government would receive too much of the refund; and (2) in other plans, enrollees would underpay, and the government would receive too little of the refund. GAO proposed a refund method which would: (1) refund to both enrollees and the government their actual premium overpayments rather than an arbitrary amount; (2) keep the government's contribution consistent for each refund plan; and (3) be consistent with traditional practices of subsidizing premiums.
Recommendation for Executive Action
Status: Closed - Not Implemented
Comments: This recommendation was not adopted. It applies specifically to the 1985 refund situation.
Recommendation: The Director, OPM, should divide the refund so that the government and the enrollees receive their respective premium overpayments. OPM should use the method described in this report to allocate the FEHBP refunds.
Agency Affected: Office of Personnel Management