Reference no: EM13999400

Federal Employees Health Benefits Program as the Model for Marketplace Plans Many Americans have little choice about health insurance. For the majority, the choices are to accept the plan offered by their employer, by their state Medicaid agency, or by Medicare, or to do without. Even Americans who have a choice lack the information needed to choose wisely. In many respects, the Federal Employees Health Benefits Pro-gram is superior. Its structure reflects the concept of managed competition first advocated by a Stanford University economist (Enthoven 1984):• Each year employees choose one of several private insurance plans in an online exchange.• Employees pay the marginal cost of choosing more expensive coverage.• Insurance providers must accept everyone and must charge everyone the same premium. How has this program worked? Compared to private employer plan premiums, federal plan premiums have risen more slowly in some years and have risen more rapidly in others (Liu and Jin 2013). The overall pattern, however, is similar to the patterns of other private insurer plan premiums. Although the Federal Employees Health Benefits Program served as model for ACA marketplace plans, it differs from those plans in several ways. The most important difference is that federal employees are typically well-paid professionals. Nearly two-thirds of federal employee households have incomes that are at least four times the federal poverty level; only 11 percent of uninsured households do (Bovbjerg 2009). Not surprisingly, given that their customers are apt to be very sensitive to insurance premiums, ACA marketplace plans have been aggressive in taking steps to keep premiums low. Many excluded high-priced providers from their 2014 networks, and they appear poised to implement additional steps to bring down costs. Discussion questions: 1. One plan costs $8,000. The government will pay $6,500. How much would a $10,000 plan cost the employee? 2• Is equal government payment important, regardless of the plan the employee chooses? 3. How does equal payment affect employees’ choices? 4.Would varying premiums (such as premiums based on age) work better, so that older employees would be attractive risks for insurers 5. What problems would varying premiums cause? 6. Why didn’t insurers for the Federal Employees Health Benefits Program take aggressive steps (like creating narrow networks) to bring down premiums? 7. Why do the high incomes of federal employees affect their choices? Its chapter 3 case study in Economics for Healthcare Managers, Third Edition.