Summary: GAO does not believe it would be prudent for the financial management of the Federal Employees Health Benefits Program (FEHBP) to implement the proposal once made by the Office of Personnel Management (OPM) to pool and reduce the experience-rated plan options' combined contingency and special reserves. Although the proposed changes could yield a onetime reduction in the calendar-year premiums paid by government agencies and enrollees, they could also jeopardize the ability of FEHBP's combined contingency and special reserves to (1) cover the experience-rated plan options' unexpected costs; (2) stabilize premium and health benefits; and (3) minimize the possibility of a financial loss for plan sponsors, underwriters, enrollees, and the federal government. GAO is concerned that a reserve balance equal to one-months' benefits and administrative expenses might not always be adequate to cover unexpected costs. Because past balances have often fluctuated by large amounts in relation to reserve goals and targets, OPM could find it hard to maintain the balance at or above the proposed level. Thus, if the balance continued to fluctuate as much after the combined reserve balance was reduced, FEHBP's financial soundness and stability could be endangered.
