OPM's annual financial and performance summary report released

OPM released its Fiscal Year 2009 summary of performance and financial information report on its website today. The report on page 5 contains the following FEHBP discussion:

Since 1959, the Federal Employees Health Benefits Program (FEHBP) has offered group health insurance to Federal employees. Federal retirees were added to the program in the 1960’s. The FEHBP currently offers 232 health plan options which cover nearly 8 million Federal employees, annuitants, and their dependents.

On average, the Government contributes approximately 70 percent of the total premium cost of enrollments within the FEHBP. Federal agencies, as employers, pay their share of premiums out of the same resources appropriated or otherwise available for the payment of employee salaries. The Government’s share of premiums is approximately $40 billion for both current employees and retirees.

While the FEHBP directly bears the cost of health services, it is currently difficult to analyze those costs and actively manage the FEHBP program to ensure the best value for both Federal employees and taxpayers. In the past, OPM has not routinely collected, or analyzed, program-wide claims data. The capacities to collect, manage, and analyze health services data on an ongoing basis will allow OPM to: 1) understand the drivers of cost increases for Federal employees; 2) determine the best approach to developing worksite wellness programs; and 3) model the potential effects of health system reform or environmental changes on Federal employees.

During FY 2009, OPM developed a plan to reorient the management of the FEHBP by capitalizing on the collection and analysis of program wide claims data. The planned implementation will include:

Data Collection and Maintenance—Establish regular data feeds from the ten largest FEHBP plans (and major Pharmacy Benefit Managers); develop/test front end edits to assure data integrity and consistency across plans; manage data flows; assure and maintain data quality and integrity; manage data storage and back-up.

Analysis Support—Design database and linking routines to link claims to demographics, provider files, and other OPM maintained data sets; create databases that analysts can use to run specific analyses.

Data Warehouse—Development of a data warehouse application that will allow flexible queries of the data set—not only general demographic queries, but also risk-adjusted profiles, comparison of chronically ill patients, and other useful analytics.

Developing such a database and analytical capability will better position OPM to negotiate effectively with FEHBP carriers to keep Federal premium increases below industry-wide levels. This initiative will build OPM’s knowledge base and expertise, strengthening its ability to strategically shape future benefits design, and better position OPM to negotiate with the carriers.

Over time, this initiative will result in contained premium growth. The magnitude of the savings is not concrete at this time; however, just a 0.1 percent reduction in annual premium growth for three consecutive years yields savings of approximately $1.25 billion to the Program over ten years, and more specifically, $400 million in payments from the Government’s general fund for annuitant premiums over the same period.

OPM sought funding for this initiative in its FY 2011 budget proposal which Congress is considering.