Civil Servants to Get $289-Million Health Refund

Blue Cross-Blue Shield said Monday that a sharp drop in hospital use will enable it to give $289 million in refunds to 1.5 million federal and U.S. Postal Service workers and retirees enrolled in health insurance programs.

Checks would go to 95,000 active and retired workers in California. In addition, $465 million would be refunded to the federal government and the Postal Service, which pay part of workers’ insurance premiums.

The refunds would be the first major health insurance rebates ever given to federal employees, and they reflect an unexpected drop in the inflation rate for medical care.

Medical Costs Slow

After virtually a half-century of uninterrupted increases, hospital admissions have begun to fall and medical bills have risen much more slowly than in the past. Competition among hospitals and doctors has helped restrain costs, as has the shifting of some operations from hospitals to less costly settings, such as doctors’ offices and clinics.

Bernard Tresnowski, president of Blue Cross-Blue Shield, told a news conference that checks could be mailed out by August if the federal Office of Personnel Management approves the plan quickly.

“We received that proposal today and we are looking at it,” said Len Killkelley, a spokesman for the federal personnel office. “It’s an innovative idea and we are looking at it seriously.”

The rebates would go to all federal workers, Postal Service employees and retirees who are enrolled in the government Blue Cross and Blue Shield Service Benefit Program. Amounts would vary, depending on whether the coverage is “standard” or “high option”--an expanded version in which the worker pays a smaller share of medical bills.

Range of Refunds

A single worker with standard coverage would receive a $73 refund, while those enrolled in a family program would get $179. For high-option programs, the refund would be $173 for single coverage and $374 for family coverage.

Refunds would be smaller for postal workers because the Postal Service pays a bigger share of insurance premiums. The refund would be $18 for standard coverage for single subscribers and $51 for family subscribers. The high-option refund is scheduled to be $140 for the single enrollee and $300 for the family.

The workers and retirees are “not going to the hospital as often or staying as long,” Tresnowski said. In addition, many medical procedures once performed exclusively in hospitals, such as hernia operations and cataract treatments, are being done at less cost in doctors’ offices, he said.

Hospital admissions among participants in the program declined by 14% last year, while the number of days spent in the hospital fell a dramatic 22%, he said.

“We did not anticipate the decline,” he said, explaining why the original premium rates produced a big surplus.

The health insurance program aims for a financial reserve equal to a month of premium income. Because spending dropped sharply as hospital admissions fell, the surplus grew to four months.

Blue Cross-Blue Shield decided to refund the money, rather than use the cash to reduce premiums for next year. Premium charges are based on anticipated expenses, and it is unclear whether the trend toward fewer hospital admissions will continue, Tresnowski said.

Capital Is Ranked Highest

California’s concentration of 95,000 active or retired federal workers ranks ahead of any jurisdiction other than Washington, D.C., where 199,205 persons would be eligible for refund checks.

The prospect of refunds at other Blue Cross and Blue Shield organizations depends on the particular health insurance contract and the availability of surpluses, Tresnowski said. In California, Blue Shield covers 1.3 million workers in private industry and Blue Cross 4 million. For federal government workers, the programs are combined.

“We have no plans at the present time to offer refunds,” said John Rodgers, public relations director of Blue Shield of California. “We wish we had that money.”

At Blue Cross of California, public affairs manager Larry Rodriggs said that “at the moment we have no refunds in prospect.”