Exchange supporters talk about the Exchange as the same model as government employees “enjoy” through the Federal Employee Health Benefit plan (FEHB). But it is not true.
The Affordable Care Act (ACA) of 2010 requires all 50 states to launch health insurance exchanges by January 1, 2014. If they do not, the federal government will do it for them. Exchanges, its supporters allege, will make health insurance more accessible for the masses.
FEHB officials brag that government employees have hundreds of insurance options from which to choose. True enough, at least for individuals that live in multiple states at the same time. But for real humans who can only live in one place at a time, there are only a handful of choices, just like normal non-government employees.
The FEHB plan uses what is called a defined contribution model (others call it a voucher). Simply, the government gives its employees a defined per-month amount that the employee can use to purchase their health insurance.
The federal employee can apply their voucher to the purchase of the few plans available to them in the state in which they reside. If the employee chooses an option that costs more than what the government allows, the employee pays the difference.
ACA-supporters claim that private employers and employees would relish the same opportunity afforded federal government employees in the FEHB plan.
The Massachusetts Connector, in its never-ending attempt to entice more people to enroll, modeled a program after the FEHB plan. “[Private] employers would offer employees a fixed ‘voucher’ and allow them to choose any plan or carrier [in the Connector]. This was a failure and was discontinued.”[i]
Why did the Connector’s private employer voucher system fail? It provides a clue as to why FEHB’s plans are different from those owned by normal, non-government employees.
Government employers pay much more of the employee’s health insurance cost than private employers pay for their employees. The Employee Benefit Research Institute (EBRI) found in 2008 that the employee health benefits paid by governments cost 235 percent more than those paid for by private employers. In other words, private employers insure 2.35 employees at the same cost as the government insures one.[ii] (Are you surprised?)
Perhaps just as startling are the differences in overall employee compensation. Government employees enjoy a 151 percent more generous compensation package than the private sector employees that pay the taxes to support them.[iii]
The government employee premium subsidy for FEHB plans is large enough to cover most of the cost of a family health insurance policy. Private employers cannot afford to subsidize family health insurance to the same extent as the federal government does in the FEHB plan.
In Minnesota, for instance, state taxpayers subsidize 100 percent of an employee’s health insurance cost for the basic plan, and the employee pays only 15 percent of the dependent’s premium. Total premiums for both exceed $16,000 a year – thank you taxpayers.
Private employers may pay 50-80 percent of an employee’s premium, but many pay far less for dependent coverage. And very few small group Minnesota employers provide family coverage at $16,000 a year. Only government employers can afford such luxuries.
An Exchange FEHB-type voucher plan could only work if it provided much less expensive coverage than Federal employees “enjoy.” Most private employers could never provide funding for the family coverage common to the FEHB plans .
The Massachusetts Connector has already demonstrated that a FEHB plan does not work for private employers. Soon after states or the federal government launches Exchanges, we will all understand the same fact.
After all, the primary purpose of the Exchange is to enroll people in tax-subsidized health insurance. The end game is to create more dependency on government.
[i] A Massachusetts’ government insider, whose identity is protected, provided this insight.
[ii] Fronstin, P. (2008) “Benefit Cost Comparisons Between State and Local Governments and Private-Sector Employers.” Employee Benefit Research Institute. Washington, DC. June 2008, Vol. 29, No. 6, p. 3.
[iii] Ibid.
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