Opening Up the Federal Employees Health Benefits Program

Prologue: A popular rallying cry among persons who actively sought health system reform in 1994 was, “Americans should have the same coverage to which their members of Congress are entitled.” Put into operational terms, this would mean opening up the Federal Employees Health Benefits Program (FEHBP) to persons other than federal workers. The FEHBP, which offers a network of more than 400 health plan options, provides health care coverage for millions of federal workers, retirees, and their dependents nationwide. Satisfaction with FEHBP coverage is high, as evidenced by a 1994 survey by the Office of Personnel Management. As Frank McArdle explains in this paper, opening up the FEHBP to other Americans (including employees of small businesses and uninsured persons who are not eligible for other federal or state assistance) has considerable political and administrative appeal. As evidence of this, President Clinton proposed that small businesses be allowed to buy into the FEHBP, as a part of the Clinton administration's scaled-down health care reform package that was unveiled in June 1995. Among other advantages, opening up the FEHBP would mean minimal disruption of the health care arrangements of the majority of working Americans, while offering affordable coverage to those lacking it. McArdle stresses that this approach should be considered in the context of a package of incremental reforms, because it is not without its faults. McArdle is a principal of Hewitt Associates LLC and directs its Washington, D.C., research office. Before joining Hewitt Associates, he was director of education and communications with the Employee Benefit Research Institute (EBRI). He consults frequently on long-term trends in federal health policy that affect the design and the costs of benefit programs offered by public and private employers. McArdle holds a doctoral degree from the University of Virginia. Abstract: The Federal Employees Health Benefits Program (FEHBP) can serve as a vehicle to extend access to private health insurance to nonfederal workers. Opening up the FEHBP may also be a politically feasible incremental change because it potentially appeals to those at both ends of the political spectrum. Each of the various ways of enabling nonfederal workers to participate in the FEHBP has its pros and cons. This paper looks at using the FEHBP as a voluntary buy-in opportunity to help those who lack health insurance—without displacing or disrupting existing sources of health coverage or creating an expensive federal program.