Civil Service Federal Employees Federal Employees Federal Employees

Retirement Group Life Health Benefits Retirement

System Insurance Program System

United States

Office of Personnel Management

Retirement and Insurance Service

Benefits Administration Letter

Number: 97-209 Date: September 29, 1997 

Subject: Health and Life Insurance Changes under the Balanced Budget Act of 1997

Background

New FEHB

Contribution Formula 

Current Big-6 Formula

This explains provisions relative to the Federal Employees Health

Benefits (FEHB) and the Federal Employees' Group Life

Insurance (FEGLI) Programs in the Balance Budget Act of 1997,

Public Law 105-33 approved on August 5, 1997. A description

of provisions relative to Federal employee retirement systems is

in Benefits Administration Letter 97-106 dated August 13, 1997.

______________________________________________________ 

A new method for calculating the Government contribution

toward FEHB enrollment costs will become effective in January

1999. In place of the "Big-6" formula, the Government

contribution will be based on the program-wide weighted average

premium rates for self only or self and family enrollments,

respectively. This will permanently maintain the level of

Government contributions, as a percent of the total program

costs, regardless of the configuration of health plans.

______________________________________________________

The "Big-6" formula specifies that the Government share of

premiums for any FEHB plan or option is the lesser of: (1) 60

percent of the average premium for self only or for self and

family high option benefits under six large plans described in

law, or (2) 75 percent of the premium for any particular plan. 

One distinct component of the Big-6 formula, the

Governmentwide Indemnity Benefit Plan, lapsed at the end of

1989. Because average premiums for the five remaining plans

would have resulted in lower Government contributions,

Congress enacted temporary legislation to continue the "Big 6"

calculation based on premiums for the five remaining formula

plans and a so-called phantom premium in place of the lapsed
Benefits Administration Letter 97-209

2

New Weighted Average

Formula

Insurance Eligibility

For Certain District of

Columbia Employees 

plan. The phantom formula effectively held the Government

share of total program costs near 72 percent, but that authority

will expire at the end of 1998.

______________________________________________________

For 1999 and after, the Office of Personnel Management (OPM)

must determine the weighted average of subscription charges in

effect under all plans with respect to self only and self and family

types of enrollment. The Government contribution will be 72

percent of the weighted average subscription charge for each

enrollment type, subject to a maximum of 75 percent of the

premium for any specific plan. OPM must determine FEHB

Government contribution rates no later than October 1 preceding

each FEHB contract year. 

To calculate program-wide weighted average subscription

charges for self only and for self and family enrollments,

respectively, the law directs OPM, first, to multiply rates for

each plan or option for the upcoming contract year by the

number of enrollees with the same coverage as of the previous

March 31 who are eligible for a Government contribution. 

Then, OPM will divide the total of subscription charges for self

only and for self and family enrollments, respectively, by the

corresponding total number of enrollees eligible for a

Government contribution.

______________________________________________________

Section 11246 of Public Law 105-33 amends the District of

Columbia Code to provide that judges and employees of the

District of Columbia Courts will be treated as Federal employees

for purposes of workers compensation, FEGLI, and FEHB, on

and after October 1, 1997 (the first month beginning after OPM

issues implementing regulations). Non-judicial court employees

also will be treated as Federal employees for retirement

purposes, and the D.C. judges' retirement system and the system

providing benefits to judges' survivors are deemed to be Federal

employee retirement systems for purposes of continuing FEGLI

and FEHB after a D.C. judge retires or dies. 

Section 11202 of Public Law 105-33 directs the U. S. Attorney

General to designate a Corrections Trustee who, as an

independent officer of the D.C. Government, will oversee

financial operations of the D.C. Department of Corrections
Benefits Administration Letter 97-209

3

New Medicare Choices 

during a phased-in transfer of functions to the Federal Bureau of

Prisons. A former Federal employee who is appointed

Corrections Trustee, or becomes employed by the Trustee,

within 3 days of separation from Federal employment will be

treated as a Federal employee for purposes of the FEHB,

FEGLI, and Federal retirement laws. 

______________________________________________________

Public Law 105-33 also authorizes the Secretary of Health and

Human Services to implement a new "Medicare+Choice"

Program, modeled on the FEHB Program, which will let eligible

Medicare beneficiaries choose from a wide array of private

health plans as alternatives to traditional Medicare fee-for-service

benefits. 

Medicare+Choice will also include a Medical Savings Account

(MSA) demonstration project. This coverage combines a health

plan with a very high deductible, and thus low cost, with an

individual Medical Savings Account (MSA) which accumulates

excess Medicare contributions on a tax-free basis and is available

to pay out-of-pocket medical expenses of the account owner. 

However, the law expressly excludes anyone enrolled in the

FEHB Program from participation in the demonstration, unless

OPM can provide assurances that access to MSA-linked health

plans would not increase Government FEHB costs (by

encouraging the healthiest enrollees to leave other plans).

______________________________________________________________________________

Abby L. Block, Chief

Insurance Policy 

 and Information Division