A Health Insurance Option Coming to Federal Workers

Aetna, one of the nation's largest insurers, would take the lead, providing the insurance and administering the plans for federal employees in 32 states and the District of Columbia. Seventeen other insurers, including the Government Employees Hospital Association and the Mail Handlers Benefit Plan, will also offer the savings plans, as will Coventry Health Care in several states.

The new plans, which are a centerpiece of the Republican election platform and President Bush's campaign, will also be available to members of Congress and judges under the Federal Employees Health Benefits Plan, the nation's largest purchaser of health insurance.

Health savings account plans, which were enacted by Congress as part of sweeping Medicare legislation last December, are meant to let people decide for themselves whether to pay for high-priced drugs or treatments. Those with few immediate medical problems get a tax-sheltered way to save against future needs. But health policy experts say people with moderate to high intensity medical problems would risk having to spend more of their money in a year after using up the account.

In the new federal employees plan, government money would flow into the accounts. But many private employers will make limited contributions, if any, to such accounts.

Government employees unions, some health policy experts and Democratic officials criticized the administration's adoption of such a plan as an option for federal employees. The critics predict that the savings plans will mainly attract people who are healthy and do not expect to require much medical care in the near future. That, critics say, could lead to higher costs for traditional insurance plans that would be left to cover sicker members.

The House of Representatives yesterday voted 221 to 183, largely along party lines, to reject a measure sponsored by Representative James P. Moran, a Virginia Democrat, that would have prohibited the savings accounts for federal employees. The measure was supported by the National Association of Retired Federal Employees and two federal unions, the American Federation of Government Employees and the National Treasury Employees.

But Kay Coles James, director of the Office of Personnel Management, said in a briefing on Monday that by offering the savings account plans, the administration was "empowering" members of the federal employees' plans by offering more choices.

Under the Aetna plan federal employees in New York will pay a few dollars more in premiums than traditional Blue Cross plans in the state. The Aetna premiums will be $83.27 a month for individual coverage and $191.53 for families. The government will bear most of the cost, contributing $2,998 a year for individuals and $6,895 for families.

Aetna said that in New York and elsewhere it would deposit $1,250 for individuals and $2,500 for families in each of the federal health savings accounts, which workers can use tax-free for medical outlays and roll over unused amounts for future needs. Under the plans, there will be no charge for preventive care by doctors in the Aetna network.

John Rother, policy director of AARP, formerly the American Association of Retired Persons, said that health savings accounts, which often carry lower premiums than conventional plans, can be attractive for people who would otherwise not have insurance because they cannot afford it. But he said that for a group, like federal employees, that is already well covered, "it is a potential threat to the affordability of more traditional plans."

The money that employers or workers put in health savings accounts is not taxed initially, nor are there any taxes on any investment growth while the money remains in the accounts. And no federal tax is charged if the money is eventually used for medical needs. "The potential revenue loss to the government is quite large," Mr. Rother said, "threatening to curtail health programs for everyone else."

The new federal health savings account plans are not available to retired federal workers who are eligible for Medicare. Aetna will offer those retirees a somewhat similar plan with narrower tax advantages.

In another potentially controversial wrinkle, federal employees in 31 downstate Illinois counties will be offered a "faith-based" health savings plan, administered by the Order of Saint Francis, a hospital group in Peoria, Ill. That plan will not cover abortions or contraception.

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