The average annual growth in Federal Employees Health Benefits Program (FEHBP) premiums declined each year from 2003 through 2007 and was generally lower than the growth for other purchasers since 2003. Premium growth rates for the 10 largest FEHBP plans by enrollment ranged from none to 15.5 percent for 2007, according to testimony by John E. Dicken, director of health care, in a United States Government Accountability Office report.
The average annual growth in FEHBP premiums was faster than that of CalPERS and of employers generally from 1997 through 2002 — 8.5 percent compared with 6.5 percent and 7.1 percent, respectively. However, beginning in 2003, the average annual growth rate in FEHBP premiums was slower than that of CalPERS and surveyed employers — 7.3 percent compared with 14.2 percent and 10.5 percent, respectively.
Administrators of FEHBP plans with higher-than-average premium growth rates cited increases in the cost and utilization of services as well as a high share of elderly enrollees and early retirees. Plans with lower-than-average premium growth cited adjustments made for previously overestimated projections of cost growth, and some officials cited benefit changes that resulted in less generous coverage for prescription drugs. The plans with lower-than-average premium growth also experienced a decline of 0.5 years in the average age of their enrollees compared with an increase of 0.5 years in the average age of all FEHBP employees.
Sources: U.S. Government Accountability Office Report using OPM, CalPERS, and Kaiser/HRET
Note: The 2007 average premium growth rate for plans in the Kaiser/HRET surveys was not available in time for the GAO report.