Friday highlights

Federal News Radio reported on the AEI conference that I discussed in Wednesday's FEHBlog post. Federal News Radio who had a reporter at the event did a good job capturing the concerns that the panelists made about the Administration's proposal to carve out FEHBP prescription drug contracting from the carriers -- who bear the underwriting risk -- to OPM. The report further states that

The Office of Management and Budget did not respond to a request for comment on why it believes the FEHB proposal makes economic sense. The American Federation of Government Employees supports the proposal because carving out the pharmacy benefits is the only way to get better prices because there is little competition and less transparency, said Jackie Simon, the union's public policy director. She said in an email to Federal News Radio that statutory pricing is what the VA and DoD and Bureau of Prisons and the Indian Health Service have, and can do direct negotiations for maximum prices.

The FEHBlog wishes to assure that OPM contractually has imposed on fee for service plan carriers a transparent pricing initiative applicable to prescription drug pricing that just took effect this year. That initiative which is still being implemented is stronger than that found in the private sector.  Moreover, statutory pricing simply shifts costs to other employer sponsored plans and does not work unless the government clamps down on utilization.

Govexec.com picks up on FEHB expert Walt Francis's opposition to the Postal Service's effort to carve out its employees from the FEHBP. The Postmaster General has told Congress that he could cut USPS healthcare costs in half. That's unlikely because the Postal Service's demographics are worse than the Civil Service's.  The Govexec.com article explains

If the Postal Service leaves FEHBP, its health care expenses would rise by about 10 percent, Francis said, largely because of the agency's aging workforce, which currently benefits from being in the larger and more age-diverse FEHBP pool.

What's more the FEHBP's competitive model has done a very good job controlling costs -- 3.8% increase for 2012 versus Mercer's 5.4% estimated increase for private sector employer sponsored plans. Group health insurance principles embraced by the FEHBP work over time. Caveat -- the Postal unions have the right to collectively bargain a USPS only plan with the Postal Service. Everyone should respect that right.