For the second consecutive year, federal employees are getting a big break on their health insurance premiums.

The average cost of health insurance for employees and retirees will increase 2.1 percent in 2008, the Office of Personnel Management announced yesterday. That's up slightly from this year's increase of 1.6 percent.

In contrast, private-sector employees' employer-provided coverage has gone up an average of 6 percent this year, and some analysts predict that private-sector premiums will rise by more than 6 percent next year.

OPM officials said they held down the rate increases by dipping into the financial reserves of the Federal Employees Health Benefits Program, which provides about $35 billion in health-care benefits annually. The increase in premiums for 2008 will also be slowed by having employees pay more for some deductibles, officials said.

"If history is any kind of indicator, we expect that we will continue to compare favorably, and federal employees will continue to experience a smaller percentage increase, on average, in their premiums than what their counterparts outside of the federal plan will experience," said Linda M. Springer, OPM director.

The federal program will offer 283 plans for health-care coverage next year and will provide insurance coverage to about 8 million Americans -- civil service and postal workers, retirees, and family members. The government picks up about 70 percent of premium costs.

The OPM administers the federal health insurance program, a dental and vision insurance program, and flexible spending accounts for employees. Employees and retirees can elect to continue their coverage or change insurance plans during an "open season" that runs from Nov. 12 through Dec. 10.

Springer said the average premiums for dental insurance will rise 6.1 percent and vision coverage 0.7 percent. Dental and vision benefits were offered for the first time a year ago and have attracted 750,000 enrollees, far more than the OPM initially projected.

OPM officials said the jump in dental premiums was prompted by a change in methodology for how enrollees in one large plan are reimbursed for expenses. The change will bring that plan in line with the practices of other dental insurance plans, they said.

The formula used to calculate health insurance premiums, which limits how much the government can contribute and requires enrollees to pick up the difference, will leave some employees with premium increases higher than the overall average for total premiums of 2.1 percent.

For example, employees who choose two Blue Cross and Blue Shield plans -- which have attracted 6 of every 10 federal enrollees -- will see their share of premium costs go up at least 3 percent and as much as 8.5 percent.

Enrollees in the Blue Cross standard option will pay $62.15 per two-week pay period, $4.85 more than this year. Families covered by the standard option will pay $145.14 biweekly, $10.84 more than this year.

The Blue Cross basic option, which requires enrollees to stay within the Blue network, will raise premiums after three years of steady rates. The enrollee cost will be $39.13 biweekly for individuals, up $1.14, and $96.66 biweeky, up $2.67, for families.

Some plans are holding the line on premiums in 2008. The Government Employees Health Association, known as GEHA, will not increase premiums for its standard option and will reduce premiums for its high option.

If the OPM had not been able to dip into the federal health insurance program's cash reserves, officials said, the premiums would have gone up by 3 more percentage points. That applies only to fee-for-service plans. The program's health maintenance organizations do not build up reserves because they operate on fixed-price contracts each year, according to officials.

All this means that federal employees end up with an advantage, not only over the private sector but also over other public programs.

The average cost of private-sector, employer-provided health insurance rose 6.1 percent this year, according to a survey released this week by the Henry J. Kaiser Family Foundation.

Mercer Health & Benefits, a part of the global consulting company, projects that private-sector premiums in 2008 will increase by 6.7 percent, based on a survey of 1,557 employer plans.

The California Public Employees' Retirement System, which covers 1.2 million state and local government employees and retirees, has approved a 6.3 percent premium increase for 2008.

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By Stephen Barr

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