UnitedHealth challenges Blue Cross Association over federal employee coverage

More insurers could soon be able to compete among each other, vying for the ability to provide coverage to the current 8 million federal employees, a program worth $47 billion.

The Blue Cross Blue Shield Association currently has a stronghold on the Federal Employees Health Benefits Program run by the Office of Personnel Management, covering almost two-thirds of all federal employees, retirees and their families.

But UnitedHealth wants to change that by amending a 1959 federal law that let the Blues plans establish a "monopoly" while stifling competition and innovation of new insurance products, Tom Choate, chief growth officer for UnitedHealth, said in testimony during a House Oversight and Government Reform subcommittee hearing Thursday.

"Much has changed since 1959. We've moved from typewriters to laptops; from rotary dial phones to smart phones; from 45s to iTunes," he said, adding, however, that what hasn't changed is "the simple economic principle that customers and consumers benefit from increased competition."

The BCBSA opposes the potential change to the law, telling the House committee that there's already adequate competition among the 230 plans that offer coverage for federal employees. Of particular concern to BCBSA is UnitedHealth's proposal that OPM allow regional plans to compete for enrollees with national plans.

Bill Breskin, vice president for government programs at BCBSA, told the committee that regional plans could "cherry pick" low-cost regions and charge premiums based on the lower medical prices in the area. So if more enrollees choose the regional plans in their area, it would lead to higher overall premiums, he said.

"Assuming all PPOs were offered on a regional basis, 54 percent of federal employees and retirees are likely to see their premiums increase," Breskin added.

Speaking with Kaiser Health News, BCBSA Senior Vice President Alissa Fox said the company is "all for competition and welcome more competitors, but it must be on a level playing field."

To learn more:
- read UnitedHealth's testimony
- check out BCBSA's testimony
- read the Kaiser Health News article