Little-known federal agency could shoulder big healthcare responsibility

A little-known federal agency with a relatively small staff and budget is a surprising new player in the debate to reform the nation’s healthcare system.

A series of compromises hammered out by key liberal and centrist Senate Democrats includes a provision that would direct the Office of Personnel Management (OPM) to negotiate insurance plans on behalf of consumers. That would replace the public option — the signature yet contested feature of Democrats’ healthcare proposals.

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Details of that new compromise, announced Tuesday night, remain scant, and support for it in the Senate seems equally unclear. But the OPM’s possible involvement in that process merely calls into question what healthcare reform might mean for this nearly 31-year-old agency — the federal government’s equivalent of a human-resources hub.

Overseeing the OPM’s more than $200 million budget is John Berry, the highest-serving openly gay official in President Barack Obama’s administration. He and his staff manage the federal civilian workforce: hiring new employees, handling salary data and administering benefits for retired federal workers, among other tasks.

But OPM’s chief responsibility is the Federal Employees Health Benefits Program (FEHBP), the insurance plan available to federal workers, members of Congress and their families. OPM specifically oversees the bidding process in which insurance companies compete for the ability to offer their plans through the federal program.

That system enrolls about 8 million current and former federal workers, according to the Government Accountability Office (GAO).

But the Senate’s new healthcare compromise could grant OPM considerably more power in a field in which it has so far had limited interaction: the nonfederal workforce. Under its new mandate, the OPM would manage a separate bidding process for all workers, negotiating the best plans and rates in the private sphere. However, OPM would have little jurisdiction over the plans themselves, forcing private insurers to compete for access to the market.

While some Democrats are heralding this idea as an adequate healthcare compromise, critics are likely to charge that OPM’s previous troubles administering bidding processes — health insurance in particular — hardly bode well for the future.

A 2007 GAO report found premiums for the 10 largest federal insurance health plans that year increased anywhere between zero and 15.5 percent.

Those monthly fees jumped again on average in 2008 and 2009, and OPM itself predicted this September they would again rise by 8.8 percent in 2010.

“An 8.8 percent increase is not an increase that we feel comfortable with,” Nancy Kichak, an OPM associate director, told reporters in September. “It’s not one that we would like to see our enrollees bear, but unfortunately we’re a victim of the market.”

OPM directors were unavailable to comment on what those numbers might mean if healthcare reform passes with Senate Democrats’ compromise intact.

The agency has also fielded considerable criticism for its handling of the federal employees retirement program. For two decades, the GAO has docked the agency for failing to modernize its system in a cost-efficient manner — a problem Berry, in particular, promised to fix upon beginning his new job. Still, watchdogs maintain the program is riddled with inefficiencies that ultimately cost both the agency and federal government money.

Consequently, those old obstacles could be difficult for the tiny agency to overcome, should Senate Democrats task it with managing a new, nonfederal healthcare system.

“I flat-out think that OPM doesn’t have the capacity to do this type of role,” Linda Springer, the director of OPM under then-President George W. Bush, told Federal News Radio this week. “Furthermore, I don’t believe that OPM has the statutory authority to do it as well. But on both those counts, I don’t think it would be a good call.”

Springer added, “This would just magnify their role beyond what their capacity is.”

If OPM were to administer the new health benefits, Congress would likely significantly increase the agency’s resources. And officials at the Department of Health and Human Services, which administers many health programs, would probably transfer to the OPM.