May 20, 2002
Magda Lynn Seymour
Diane S. Witiak
(202) 639-6419

AFGE To Oppose Cafeteria Plans

(Washington, D.C.)—Stating his strong opposition to the establishment of cafeteria plans, Derrick Thomas, National Vice President of the American Federation of Government Employees’ (AFGE) 2nd District, will outline the union’s objections in testimony before the House Government Reform Subcommittee on Civil Service, Census and Agency Organization. The hearing will take place on:

Tuesday, May 21, 2002 at 1 p.m.
Rayburn House Office Building, Room 2247

“AFGE believes that the federal government as an employer has a duty to provide health insurance benefits to all of its employees, and a cafeteria plan approach would take us even farther away from that goal than we are today,” Thomas will add.

Thomas will emphasize that under cafeteria/voucher plans the government would no longer be required to pay an average of 72 percent of whatever premium is charged. “Instead, the government would become master of its own destiny, choosing when, whether, and by how much it will raise or lower the voucher amount,” Thomas will state.

If such a plan had been in effect over the past four years, using the Consumer Price Index for annual adjustments as suggested in legislative proposals, the cafeteria plan voucher for FEHBP’s most popular plan—The Blue Cross/Blue Shield Standard Option—would have only been increased by 9.5 percent, while premiums have actually risen by 49 percent.

“Cafeteria plans, along with Medical Savings Accounts and voucher programs, defy the basic principle of group health insurance by worsening the FEHBP’s risk segmentation problems,” Thomas will point out. “Such plans are a surefire recipe for making a bad system worse.”

“Cafeteria plans are inequitable, effectively giving larger subsidies to higher income federal employees,” Thomas will conclude. “When combined with Flexible Spending Accounts, cafeteria plans encourage employees to voluntarily lower their salaries in order to make their own financial contributions for various benefits more affordable, only to receive lower pensions, Social Security benefits and insurance coverage as a result.”

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