NCPA - National Center for Policy Analysis

MORE EVIDENCE FOR FREE MARKETS IN HEALTH COVERAGE

October 4, 2006

Oddly enough, one of the freest markets for health care in the United States is run by the federal government.  The Federal Employees Health Benefits Program is the health insurance market in which federal workers, from lowly bureaucrats to senators, purchase coverage.  FEHBP participants have access to much more choice and are much more likely to be satisfied with their health coverage than other Americans, says the Heritage Foundation.

A week ago, the U.S. Office of Personnel Management, which administers the FEHBP, announced the program's 2007 premiums.  Here's the important part:

  • The U.S. Office of Personnel Management today announced premiums in the 2007 Federal Employees Health Benefits Program will rise an average 1.8 percent, marking the smallest rate increase in more than a decade.
  • Approximately 63 percent of FEHBP enrollees will not have a premium increase in 2007; another 15 percent will see a premium increase of less than 5 percent.
  • This increase in FEHBP premiums is below the rate of inflation.

Compare that to the third-party-payer market in which most Americans are insured.  With that market's lack of choice, lack of competition, and poor incentives, is this mixed news--reported by AP this morning--really so surprising?

Workers won't find much comfort in the smallest increase in health insurance premiums since 1999.  The 7.7 percent increase this year was still more than twice the rate of inflation.  Since 2000, health insurance premiums have gone up 78 percent; wages 20 percent.

So for the privileges of less choice and less control, American workers get to pay more, too, says Heritage. 

Source: Andrew Grossman, "More Evidence for Free Markets in Health Coverage," Heritage Foundation, September 26, 2006.

 

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