Larry Humphreys, a retired FEMA worker in Moultrie, Georgia, is feeling the pinch. Next year, his monthly health insurance premium will rise over 40%, hitting $938. At 68, he feels let down by the Federal Employees Health Benefits Program (FEHB). “We chose federal jobs for better benefits, expecting them to last into retirement,” he said.
The FEHB, which covers over 8.2 million federal employees and retirees, was once praised for controlling costs while offering many plan options. However, average premiums are set to increase by more than 12% next year, following a 13.5% hike in 2025. These increases are higher than what many private employers are seeing.
The rise in FEHB premiums mirrors trends in the Affordable Care Act (ACA) marketplace, where average premiums are slated to jump by 26% in 2026 after a 4% increase this year. Many employees feel especially frustrated given that the rate hike was announced during a 43-day government shutdown when many were on unpaid furlough.
The FEHB Program allows many health plan options, enabling some individuals to lower their premiums by switching to plans with higher deductibles. Yet, only about 5% of enrollees switch plans each year, according to the Office of Personnel Management (OPM).
Humphreys remains with his long-term plan despite rising costs. He has glaucoma and diabetes, and his wife faces heart issues. “It’s difficult to find what’s best for our health needs,” he said. Their FEHB plan fills in costs that Medicare doesn’t cover.
The reasons behind increasing premiums are multifaceted. An aging workforce with more chronic conditions plays a role. OPM states that about 42% of federal employees are over 50, compared to 33% in the general workforce. Prescription drug use, especially costly medications like GLP-1 for weight loss, is also a factor.
In a recent statement, Shane Stevens, an associate director at OPM, mentioned ongoing efforts aimed at cost control, but admitted it takes time to shift such a large program.
John Holahan, a health policy fellow at the Urban Institute, points to hospital consolidation as a significant reason for rising costs. As hospitals merge, they gain more negotiating power over insurers, which can drive prices up. “People find health insurance complicated. Many stick to what they know, even if it might not be the best financial decision,” he explained.
Federal employee Mike Lindquist, from Maryland, is frustrated by his increased premiums but continues to assess his options each year. “You worry about whether a new plan will cover your doctors,” he said.
Experts like Jonathan Foley, a former senior adviser at OPM, note that lack of competition among plans, particularly Blue Cross and Blue Shield, is a key issue. He also highlights the rising use of behavioral health services since the pandemic, increasing costs for health plans.
The pandemic has brought another challenge: more federal employees are utilizing mental health benefits. This uptick adds to the financial strain on the FEHB Program.
Former OPM staff have noted significant staffing losses in recent years, which complicates negotiations with insurers. A Government Accountability Office report recently highlighted how these vacancies have affected fraud assessments in the program, further intensifying concerns about rising premiums.
Advocates like John Hatton emphasize the need for members to shop around during open enrollment. “Many don’t switch because they feel overwhelmed,” he noted. A slight change in deductible could lead to significant savings.
For Humphreys, however, the reassurance of low out-of-pocket costs with his current plan outweighs the risk of gambling on a new one. “After my wife’s hospital stay, I can’t take that risk,” he said.
With rising premiums set to consume more than half of Humphreys’ pension, retirees and federal employees alike are left to navigate a complex health insurance landscape, hoping for a solution in the near future.
For more insights on healthcare policy changes, you can visit resources at the Urban Institute and the Kaiser Family Foundation.
