Strategies for Regulating the Federal Employees Health Benefits Program
HRD-87-10: Published: Mar 6, 1987. Publicly Released: Mar 6, 1987.
- Full Report:
In response to a congressional request, GAO provided information on: (1) Federal Employees Health Benefits Program (FEHBP) reserves over a 7-year period from 1979 to 1985, including a comparison of the reserve balances with targeted levels; and (2) the different strategies for regulating reserves and the advantages and disadvantages of each.
GAO found that: (1) FEHBP reserves have fluctuated widely from their targets, needing frequent and often substantial adjustment to keep them at, or near, the preferred levels; (2) between 1979 and 1985, the majority of the plans GAO reviewed held reserves that were more than 100 percent away from target; (3) the Office of Personnel Management (OPM) and the FEHBP health plans have three strategies to regulate reserves, including adjusting future premiums, modifying future benefits, and giving refunds; and (4) the best strategy is the adjustment of future premiums because it is administratively easier, less costly, and provides the fairest settlement, since it divides the reserve shortage or surplus by the amount contributed. GAO believes that: (1) OPM and the plans will have difficulty in accurately setting premiums to avoid the reserve fluctuations; and (2) modifying future benefits and giving refunds will cause cost-shifting between the government and enrollees.
Recommendation for Executive Action
Status: Closed - Not Implemented
Comments: OPM refuses to adopt this recommendation and considers the matter closed.
Recommendation: Unless Congress amends the Federal Employees Health Benefits Act of 1959 to provide program-wide adjustments in the government's contribution, the Director, OPM, should use future premium adjustments to regulate FEHBP reserves and avoid using refunds and benefit modifications as reserve adjustment strategies.
Agency Affected: Office of Personnel Management