REPORT ON PROGRESS ON THE FEDERAL EMPLOYEES HEALTH BENEFITS PROGRAM JUNE 3, 1960

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP86-00964R000100120031-0
• Release Decision: RIPPUB
• Original Classification: K
• Document Page Count: 6
• Document Creation Date: December 14, 2016
• Document Release Date: July 22, 2003
• Sequence Number: 31
• Publication Date: June 3, 1960
• Content Type: REPORT

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UNITED STATES CIVIL SERVICE CO4ISSION
BUREAU OF RETIREMEW AND INSURAN1E
REPORT OF PROGRESS ON
THE FEDERAL 34PLOYEES HEALTH BENEFITS PROGRAM
June 3, 1960
On June 1, 1960, the initial enrollment of employees in health
benefits plans being offered under the Federal Employees Health Benefits
Program began. The Commission considers this time opportune to issue
the third report on its implementation of the Federal Employees Health
Benefits Act of 1959.
There are 38 separate health benefit plans participating in the
program. These include two Government-wide plans, 15 plans sponsored
by Federal employee organizations, and 21 plans of the comprehensive
medical type. In the Commission's judgment, all participating plans
provide benefits commensurate with their premium rates.
Since its March 3, 1960 Report of Progress, the Commission has
pushed forward in all its areas of responsibility for the Health Bene-
fits Program. Some highlights of its activities follow:
HEALTH BENEFIT PLAN BROCHURES
The Commission, in cooperation with the carriers concerned, has
prepared informational brochures on all of the 38 participating plans.
A combined total of almost 15,000,000 copies of the brochures has been
reproduced. Except for a small quantity retained as stock to take care
of emergency needs, these brochures have been distributed to agencies
for dissemination to Federal employees stationed throughout the world.
To provide equal treatment of carriers and to facilitate comparison
of plans by employees, the brochures have been prepared in as uniform a
format as possible. Each brochure, objectively, as clearly as possible,
and without sales talk, sets forth the benefits offered by the particular
plan. In type of equal size, and side by side with the benefits, it
describes the limitations and the exclusions.
Strict adherence to the standard format and clear language princi-
ple had an effect on the contract negotiations which were going on at
the same time the brochures were being written. As the benefits, limi-
tations, and exclusions of the plans were laid bare in the draft brochures,
under a "PLAN PAYS -- YOU PAY" formula, carrier after carrier reconsidered
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the benefits actually being offered. In many cases, when the contract
was exposed to this "flood light" treatment, the benefits were improved
and contract language that defied interpretation was made unambiguous.
More than one carrier was still reconsidering his contract at the time
printer?s proof of the brochure on his plan was being prepared.
As a supplement to the brochures, the Commission has prepared and
distributed. to agencies for their employees a list of participating
plans. Agencies have been instructed to post the list on employing
office bulletin boards in addition to distributing it to each employee
with his copies of the brochures. The reverse side of this list sug-
gests to employees some of the factors they should take into considera-
tion in selecting a health benefits plan.
Special note is made here of the truly remarkable efforts the
Government Printing Office put forth to reproduce and help distribute
these and other informational or instructional materials needed for the
new program. without the cooperation of the Government Printing Office
and the individual employees involved in the printing and distribution,
the tight deadlines necessary could not have been met.
MROIJAN`PI__ACCOUN`IING AND REPCJRTING PROCEWR
The Commission estimates that during the June 1 - June 30 enroll-
ment period, 1,800,000 Federal employees and 2,200,000 of their depend-
ents will take advantage of one or another of the plans offered. Four.
Standard Forms have been developed to permit efficient handling of this
huge enrollment and the administration of the accounting and reporting
phases of the program. A combined total of 7,500,000 copies of the
forms have been reproduced and, again except for a reserve supply, all
have been distributed to agencies. Detailed procedural instructions
were prepared simultaneously with the forms and have been issued to
agencies through the medium of Departmental Circulars.
To accomplish this task, the Commission staff had to devise pro-
cedures, forms, and instructions capable of meshing together almost
2,000 Government payroll offices, some 10,000 employing offices, and
38 carriers. The procedures, forms, and instructions also had to antic-
ipate countless different situations sure to arise in any program involving
the personal circumstances, choice, and action of 2,000,000 persons and
members of their families.
During the development of these forms, procedures, and instructions,
y group meetings and individual consultations were held with repre-
sentatives of agencies and participating carriers, to obtain counsel and
agreement.
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DISTRIBUTION OF INSTRUCTIONAL AND INFORMATIONAL MATERIALS
The Commission estimates that it has distributed through Government
channels to agencies and employees throughout the world over 25,000,000
pieces of informational or instructional materials concerning the health
benefits program.
Normal methods of distribution by the Commission and agencies were
not suitable for dissemination of these materials. A master mailing list
which included the headquarters of all segments of the Federal Government
was not in existence. Further, the distribution pattern had to vary for
different items.
For example, the brochures on the Government-wide plans had to be
distributed to every eligible employee. Each comprehensive medical plan
brochure could be distributed only to employees working or residing in
the geographic area serviced by that plan. There are 21 comprehensive
medical plans with 21 different geographic service areas. The brochure
for each employee organization plan could be distributed by the Govern-
ment only to members of that organization -- except that each employing
office had to stock brochures of any employee organization plan if their
employees were eligible to join the sponsoring organization.
Under these circumstances the distribution system had to be capable
of a shotgun approach to reach all Federal installations in every corner
of the globe. It also had to provide for a rifle approach to reach small
installations which, again, were located in many areas of the world.
TRAINING
In April, the second phase of the Commission's training program on
health benefits was held. This phase dealt with the specific benefits
to be offered by the various plans and with the enrollment procedures.
A 4-day intensive indoctrination was given the Commission's Regional
Health Benefit Representatives. They then conducted a one-day session
for representatives of agencies in the Washington, D. C. area and then
returned to their respective regions to hold similar sessions for field
installation representatives. These representative in turn, conducted
counselling sessions for employees within their own establishments.
To assist in this training and counselling operation, the Commis-
sion's staff developed a variety of aids. Among these were summaries
of all participating health benefit plans, visuals, tests, and question
and answer sheets.
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REGULATIONS
On April 2, 1960, the Commission published in the Federal Register
the regulations governing the Health Benefits Program. Prior to their
publication the Commission had sought, received, and considered advice
and comment from a variety of sources. This advice and comment resulted
in many perfecting and two significant changes. The significant changes
are:
Reemployed annuitants are not excluded from enrollment in
a health benefit plan solely on the basis of such reemploy-
meat. They may enroll if they are not excluded by any pro-
vision of the regulations which would exclude other employees.
After the open period of October 1 through 15, 1961, during
which all eligible employees may belatedly enroll or change
their enrollment, open periods will be held not less often
than once every three years.
INFORMED CHOICE OF PLANS
The Federal Employees Health Benefits Act of 1959 requires that
"The Commission shall make available to each employee eligible to enroll
in a health benefits plan under the Act such information ... as may be
necessary to enable such employee to exercise an informed choice among
the types of plans .... "?
The Commission believes that this requirement of the law also
voices a Congressional intent that employees should be permitted to
make a choice free from emotional appeal or sales talk. To this end
the Commission has included in its regulations a provision requiring
the carrier of a participating plan to agree not to advertise his plan
or solicit enrollment of employees other than in accordance with in-
structions of the Commission.
The Commission has also stated its policy with respect to an agency's
function in the counselling of employees on selection of a plan: The Com-
mission has outlined the agencies' counselling responsibilities as limited
to
Familiarizing employees with the program in general
Answering questions about the application of specific pro-
visions of the Act, the regulations, and the brochures to
particular circumstances.
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CONTRACTS
The long and arduous job of negotiating contracts with the partici-
pating carriers continued through most of the period of time covered by
this report. To date, contracts have been signed for the Government-
wide Indemnity Benefit Plan, the Government-wide Service Benefit Plan,
and the Group Health Association Plan of Washington, D. C. The remain-
ing contracts are expected to be signed before July .1.
Prior to final Commission approval of the two Government-wide con-
tracts, the Commission retained Milliman and Robertson, Inc., a nationally
recognized firm of consulting actuaries, to study the rates and benefit
structures of the two plans, and give an independent, unbiased opinion
as to whether the rates of the plans, as required by law, "reasonably and
equitably reflect the cost of the benefits provided" and are "consistent
with the lowest schedule of basic rates generally charged for new group
health benefit plans issued to large employers." The report, prepared
by Wendell Milliman, founder and president of the firm, found that both
plans met these requirements of the law authorizing the program.
In the contract negotiations the Commission's staff placed para-
mount the interests of the Federal employees and the Government. The
staff negotiated on the basis that the rich benefits the law specifies
must be provided show an intention on the part of Congress to afford
Federal employees the type of real protection they should have and which
most employees do not now have. The Commission's staff also proceeded
on the assumption that the carriers must give for the employee-Government
dollar every possible benefit.
This attitude has resulted not only in benefits which are unique
or rarely found in other plans, but also in the risk charge, the only
item of potential carrier profit, being limited to 1.5 cents on each
premium dollar for the Blue Cross-Blue Shield and 1.3 cents for each
premium dollar for the Aetna Life Insurance Company. Because Aetna
must cede reinsurance to other group health insurance companies two-
tenths of a cent of each premium dollar is also set aside to cover the
reinsurers expense allowance. This attitude also resulted in setting
the maximum cost of administration of each Government-wide plan at 5.5
cents for each dollar with a requirement for strict accounting for
these expenses. Thus, more than 90 cents of each premium dollar will
be set aside to pay for benefits used by employees enrolled in the two
Government-wide plans.
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IN GENERAL
No other legislation enacted for the benefit of Federal employees
in recent years has aroused such keen and widespread interest as the
Federal Duployees Health Benefits Act of 1959.
Even before the Commission announced the approval of the two
Government-wide plans on March 31, it was bombarded by requests for
information from innumerable sources. Foreign governments, large
unions, private industry, educators, state and local governments, insur-
ance companies, and individuals flooded the Commission with requests for
information on the program. This interest has continued to increase.
The ;job that remains to be done now is the huge one of assuring
that the systems devised to operate the program function as intended.
The Commission, the agencies, and the carriers will keep alert to
detect any "bugs" that develop and will take action to eliminate them.
There also is the continuing task of evaluating the program in the
light of the experience which will be gained during the first 16-month
contract period. What changes in the program the Commission may make
administratively or may reco~nunend to the Congress cannot, of course, be
predicted now. But, if changes in operation or in the basic legislation
become necessary, they will be made or advocated by the Commission.
The Commission believes that employees could not have been enrol-
ling in health benefit plans today if the agencies, the carriers, and
others had not cooperated as wholeheartedly as they have done.
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