Review of OMB Circular A-76 Health Benefit Cost Factor Needed Page: 3 of 8
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In contrast, our review of the federal budget costs for FEHBP and the annual average
premium increases announced for FEHBP health insurance plans indicates that
civilian employee health benefit costs have increased substantially since OMB last
revised this cost factor. Our analysis of federal budget data shows that the
government's FEHBP costs in fiscal year 2005 have increased by more than
65 percent relative to fiscal year 1999.4 (See table 2.)
Table 2: Federal Government Gross Outlays for FEHBP, Fiscal Years 1999 to 2005
Dollars In billions (then-year dollars
1999 2000 2001 2002 2003 2004 2005b
Gross $18.5 $19.6 $20.8 $22.7 $25.0 $27.4 $30.7
Source: Budget of the U.S. Government.
aThe FEHBP fund provides for the cost of health benefits for (1) active employees; (2) employees who retired
after June 1960 or their survivors; (3) those annuitants transferred from the Retired Employees Health Benefits
fund program; and (4) the related expenses of the Office of Personnel Management in administering the
b2005 outlays are estimated.
Additionally, the annual open-season enrollment announcements from the Office of
Personnel Management (OPM) indicate that average FEHBP premium increases have
ranged between 7.9 and 13.3 percent per year during the period from 1999 to 2005.5
(See table 3.) The government-paid portion of FEHBP premiums averages 71
Table 3: Average FEHBP Premium Increases, 1999 to 2005
1999 2000 2001 2002 2003 2004 2005
Average percentage 9.5 9.3 10.5 13.3 11.1 10.6 7.9
Source: OPM announcements of FEHBP open season premium changes.
Despite these changes in federal employee health benefit costs under FEHBP, the
Circular A-76 health benefits cost factor, which is designed to reflect the health care
4This increase reflects both the increase in premiums paid by active federal employees and retirees and the increase in the
amount paid by the government for all participants. However, the insurance and health benefit cost factor used in Circular A-76
is based only on the costs borne by the government (not enrollee premiums) and only on behalf of active federal employees (not
retirees). Increases in government costs for retirees are reflected in the standard civilian retirement benefit cost factor.
5OPM develops two figures for annual FEHBP premium changes: one in the fall prior to open season enrollment, when
negotiations with the plans are complete, and the second after enrollment has occurred. The difference is that there may be
some change in enrollment following the open season, with some people leaving plans with higher premium cost increases and
joining plans with lower cost increases. In October 2005, OMB provided us OPM's post-open season enrollment FEHBP
premium changes between 1999 and 2005 which showed that premium increases ranged between 7.4 and 12.7 percent.
The implications of higher government-paid costs from increased FEHBP premiums since 1999 will have to be determined
through actuarial analyses based on other related changes over time, such as changes in the average salaries of active federal
employees and their participation rates in the FEHBP.
GAO-06-87R Circular A-76 Cost Factor
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United States. Government Accountability Office. Review of OMB Circular A-76 Health Benefit Cost Factor Needed, text, November 17, 2005; Washington D.C.. (digital.library.unt.edu/ark:/67531/metadc298451/m1/3/: accessed October 22, 2018), University of North Texas Libraries, Digital Library, digital.library.unt.edu; crediting UNT Libraries Government Documents Department.