Posted on Thursday, 12th September 2013 by

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This is a follow-up to my last article which talked about the potential impact the new health care legislation may have on our FEHB plans. I was going to title this article “The Unintended Consequences of the Affordable Health Care Act” however that really isn’t the case. Those who drafted this plan knew full well the consequences even though few if any of our representatives read the plan including Nancy Pelosi who famously stated in a press conference that “we have to pass the law to find out what is in it.”  It is the workers and retirees that find this unexpected and not sure which direction this will take, the impact on our health care services, and how much it is going to cost all of us.

Unfortunately new laws are often drafted through second and third parties that have vested interest and agenda and receive little scrutiny.  I personally down loaded the law and the language was confusing to say the least and open ended leaving the details for new agencies to develop. Now thousands of pages of regulations have been written as the plans are being implemented and modified as problems and issues arise.  

There is much uncertainty among all groups concerning the impact going forward as evidenced by delays, granted exceptions, and objections that arise. Three major unions that supported implementation stated in July that “the Affordable Health Care Act will shatter not only our hard-earned health benefits, but destroy the foundation of the 40 hour work week that is the backbone of the American middle class.”  The administration is considering offering subsidies to union members and if that does happen the costs for the Affordable Care Act will increase dramatically. Subsidies are reserved for low income families in the new law.   

I understand that many in the Congress that must join public exchanges this year and are eligible for retirement are considering retiring now so they can retain their FEHB coverage after they leave. It’s too soon to tell how many will take advantage of that option.  The downside that I discussed in “The FEHB Program and the Affordable Care Act” is that as employees leave the FEHB program the pool of ensured drops and costs go up. Even if all federal employees are moved to local public exchanges federal retirees could still remain in the FEHB program. However, the FEHB program would lose over half of their participants, more than 2 million workers.  Remaining retirees could conceivably see their FEHB costs double or triple in a few short years.  

Recently over 300 companies including IBM, Dupont, and Caterpillar announced that they are moving Medicare eligible retirees to privately run local exchanges to cut costs. The companies are providing fixed payments through health retirement accounts that retirees can use to buy coverage. The privately run exchanges such as Extend Health offer polices from various insures similar to the FEHB program with a broad range of options, deductibles, and features. The privately run exchanges are not affiliated with the public exchanges that start in October and are administered by the government.  Company’s health care costs are skyrocketing and this move eliminates their cost to administer the program for retirees.

The Wall Street Journal reports that “only 28% of large companies that offer health benefits to employees offered retiree coverage in 2013, down from 34% in 2006 and 66% in 1988.”

I mentioned in my last article that many companies were eliminating coverage for spouses if they are employed. This can cause significantly higher costs for couples with children because one spouse would have to retain family coverage even though the spouse isn’t covered. The uncovered spouse would have to purchase single coverage though their employer or a local exchange.  In this case couples with children would be paying a penalty!  So far I’ve heard nothing about this spreading to the federal sector, at least not yet.

It is just too early to tell how this will all shake out but I must say I’m apprehensive and fear that the excellent medical care and services we now receive may be compromised.  My preference is to stay in the FEHB program. Maybe it’s just because the FEHB has worked well for my family for over 4o years now. The old saying “If it isn’t broke don’t fix it” may apply here.  

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The information provided may not cover all aspect of unique or special circumstances, federal regulations, and financial information is subject to change. To ensure the accuracy of this information, contact your benefits coordinator and ask them to review your official personnel file and circumstances concerning this issue. Retirees can contact the OPM retirement center. Our article is not intended nor should it be considered investment advice and our articles and replies are time sensitive. Over time, various dynamic economic factors relied upon as a basis for this article may change. The advice and strategies contained herein may not be suitable for your situation and this service is not affiliated with OPM or any federal entity. You should consult with a financial or human resource professional where appropriate. Neither the publisher or author shall be liable for any loss or any other commercial damages, including but not limited to special, incidental, consequential, or other damages.

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