OPM advocates for innovations to FEHB

By Jason Miller
Executive Editor
Federal News Radio

The Office of Personnel Management will give federal employee health insurance carriers a gentle push Friday to make changes to their plans.

OPM Director John Berry said he will issue the 2011 Call Letter detailing specific new services carriers should consider over the next year.

“We are asking you to continue encouraging people to adopt healthy lifestyles by providing concrete incentives to participate in wellness and prevention activities,” Berry said Thursday at the American Health insurance Plans conference in Washington. “Your efforts through FEHB and ours in the workplace should combine to provide powerful messages to employees. The letter also gives support to integrated health care systems, reducing obesity and addressing racial and ethnic disparities in health status and care. The call letter is a concrete multi-pronged approach moving to a future we all know is possible.”


OPM issues Call Letters several times during the year to update insurance providers on policy and legislative changes to insurance coverage.

Walt Francis, a FEHB expert and principal author of Checkbook’s Guide for health plans for federal employees, said most Call Letters are pretty basic.

OPM has used them in the past to ask carriers to offer pre-preventive health care benefits to enrollees at no cost or offer coverage for hearing aids.

“OPM normally asks for one or two things new each year,” Francis said. “Last year they told health plans to get ready for the new medical data warehouse they are launching this year. It’s usually about management improvement or coverage improvements.”

Francis said one likely candidate in this year’s Call Letter would be offering affinity coverage to domestic partners of federal employees. Berry said he is encouraging carriers to do so as a pre-cursor to getting the law changed.

“This is a matter of recruitment and retention,” Berry said. “We are competing with the Fortune 500 companies and three-quarters of them already offer this as a benefit. Affinity coverage doesn’t cost the government any money.”

Berry added he’s hopeful to get a law passed this year to give domestic partners of federal employees full benefits, including health insurance, dental and vision benefits, retirement and disability, medical, family and emergency leave as well as long term care insurance and other benefits.

“We will work with both Republicans and Democrats to get this done,” he said. “I don’t look at this as a partisan issue.”

Along with the Call Letter, Berry detailed several other changes coming to FEHB.

Berry wants to open the FEHB up to employees of Native American tribes. OPM also will stop requiring carriers to mail plan brochures to federal employees.

“We expect to save roughly $5 million in premiums,” he said. “The full brochures will be accessible online and they can still be mailed upon request if someone doesn’t have access to a computer. This will save us a heck of a lot of money and certainly a lot of trees.”

These changes are part of how Berry wants to add innovative ideas to improve FEHB.

He said OPM will use two new types of data analysis to better understand trends across the insurance plans.

One way is through a new centralized data warehouse of medical claims. Berry said OPM will launch the repository with more than 8 million users in 2011.

“FEHB operates on a simple principle: that competition drives better performance and lower prices,” Berry said. “To maintain a robust market and honor that principle, we need a greater understanding of plan performance and the factors driving cost.”

OPM announced the claims data warehouse in October. Privacy and security groups immediately expressed concern over the centralized database.

Center for Democracy and Technology led a group of 15 privacy and security groups that sent a letter to OPM asking for more details on how the agency will secure the information.

Harley Geiger, policy counsel with CDT, said there were two major concerns the coalition outlined.

He said one is the increased risk OPM is putting federal employees under by creating a centralized data warehouse instead of a system that pulls from all the existing databases, known as a federated database.

Geiger said CDT and others met with OPM to try to explain why a federated approach makes more sense.

“We think there is less risk with a federated database,” he said. “By having the information in a centralized format it increases the severity of the risk because the number of people who access the data increases. In many ways, a central database is unnecessary.”

Geiger added that OPM can perform all the data analysis they want in a federated database, including tracking patients through the health care system over time.

“There are several examples throughout the government of a federated database,” he said. “The Food and Drug Administration’s Sentinel Initiative is a query system that surveys post market medical devices. It has been a success so far.”

Geiger said during the meeting with OPM, agency officials explained how they plan to ensure the information is secure and kept private. He said he expects OPM to issue a Federal Register notice in the coming months detailing the steps they will take to secure the database.

Francis said OPM had been using the claims warehouse run by Blue Cross, Blue Shield that included about half of all federal employees under FEHB. He said feds shouldn’t worry any more than they do now.

“The main purpose is to lower costs,” Francis said. “OPM will look for areas where they can find where money is being spent, talk to the health plan providers or see if there is an increase across board in a certain benefit and the carriers can deal with it. It will be useful to pinpoint areas of concern for cost increases.”

Francis, however, is not so excited about OPM’s use of medical-loss ratio.

The Affordable Healthcare Act requires insurers to spend 80-to-85 percent of consumer premiums on direct care for patients and efforts to improve quality of care and less on administration costs, including salaries and overhead.

Berry didn’t offer much detail about how OPM would use this controversial approach.

“And while OPM’s job is to push for the greatest value for the taxpayers and our beneficiaries, it’s not a one way street,” he said. “We’re interested in hearing from you about how we can better operate and manage the FEHB marketplace. For instance, a number of our community-rated plans have raised questions about our current methodology for setting rates. My staff and I are undertaking a thorough review of the methodology. We’re building off provisions in the Affordable Care Act defining medical loss ratios and we look forward to working with you on this effort.”

Francis said OPM should be careful in how they use medical-loss ratio.

“It’s rather a poor measure of how a good plan is,” Francis said. “It penalizes a health plan that is good at keeping overutilization down. So if you spend more on overhead to make sure money isn’t wasted and you keep waste down, your medical-loss ratio gets worse because the ratio between overhead and medical spending gets worse. Similarly, if your health plan is detecting fraud by careful network management to keep doctors, who are more likely to be fraudulent, off your preferred provider list that costs money. Network management costs will count against health plans even though they can reduce waste, reduce fraud and improve the quality of the covered providers.”

He added instead OPM should use the data to find weak spots in current plans.

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