U.S. Office of Personnel Management
Speech by Janice R. Lachance, Director

NARFE California Federation Meeting
Town and Country Resort and Hotel

San Diego, CA

Monday, May 25, 1998

Thank you, Donald [Ross, President of the California State Confederation of Chapters], for that kind introduction, and for asking me to be with you here today in San Diego.

I began the day in Washington at the White House Memorial Day observances, so I appreciate your accommodating my schedule. I am privileged to have the opportunity to meet with you and continue the special relationship OPM has with NARFE.

This special relationship between OPM and NARFE was fostered by my predecessor, Jim King, and I want to continue and strengthen our partnership through frequent exchange of ideas on ways we can serve our mutual customers.

I would like to compliment you on meeting on this holiday, which is most appropriate. It may be Memorial Day, but as we know, the federal government and its employees never rest. Not even when they are retired, obviously.

I would like to use this opportunity to update you on areas where OPM is making life better for retired federal employees, and provide a status report on some topics of importance to you.

Last year was an extremely important year, both for you and for us. Fortunately, retirement changes from the Balanced Budget Act were measured and minimal.

For CSRS and FERS employees, there will be a graduated, temporary increase in employee contributions through the year 2002. For most employing agencies, there will be a one-point-five-one percent [1.51%] increase in the CSRS contribution rate, also through 2002.

More severe proposals did not receive substantial support and were not adopted.

Some of the proposals that were NOT adopted included:

Also included in the Balanced Budget Agreement is the new formula for determining the government's contribution toward the cost of premiums under the Federal Employees Health Benefits (FEHB) Program.

The new Fair Share formula stabilizes the Government's contribution at 72 percent government-wide; and avoids a cost shift of almost $300 per enrollee per year which was scheduled to take effect in 1999.

The formula guarantees that the government contribution will precisely mirror future changes in average premium rates.

I know that NARFE worked hard in both these areas to preserve the earned benefits of your constituents.

As you may know, the House Budget Committee is considering changing the Health Benefits Formula again. Under the House Committee's plan, the Government's contribution toward the cost of health care would become a fixed dollar amount, adjusted yearly by the rate of general inflation.

Federal employees, annuitants, and their families would pay the difference.

I do not have to tell you that if medical costs are rising higher than inflation, that means that we will all be paying proportionately more for our health insurance.

This proposal does nothing to control the overall cost of health care. It simply shifts those costs in different directions depending on the inflation rate.

As I mentioned, last year the Congress adopted a new formula that NARFE supported - the Fair Share Formula. Now hardly seems the time to be developing a new proposal given that the Fair Share Formula will not even go into effect until this coming January.

At OPM, we are working hard on your behalf. Let me assure you that no one in the federal government is more aware of the importance of improving customer service than we at the Office of Personnel Management.

In speaking with you today, I am very proud of the customer service improvements we have made in recent months.

In October, we unveiled our new toll-free service that allows callers to reach us and use our automated services or talk to a Customer Service Specialist for assistance -- for free.

That number is 1-888-767-6738; or, if you prefer acronyms, dial 1-88-US OPM RET.

We opened a new Teleservice Center in Pittsburgh, Pennsylvania in December.

This facility is devoted exclusively to providing customer service by phone, and is currently staffed by 20 employees but will expand to 50.

We plan to expand our hours and be available to you until 8 p.m. in the Eastern Standard or Eastern Daylight Time Zone, allowing those of you in the West to reach us during your business hours.

[I do apologize to those retirees in Alaska, Hawaii and Guam who might have to do a little more time management than you in this fair state of California. But overall, I think this is a great improvement from prior practice.]

If you are wondering why we chose Pittsburgh it was because Pittsburgh fits in well with existing OPM operations already in place in Pennsylvania near Pittsburgh -- our Boyers Retirement Operations Center.

OPM also has added staff to our Washington operations and installed new technology to provide customers with fast and accurate service.

According to our surveys, retirees are pleased with the automated services we have been providing for several years. The following services are available automatically, or callers can elect to speak with a Customer Service Specialist at any time:

Customers can now automatically make Federal and State Tax withholding elections;

Enroll in the savings bond program;
Request duplicate 1099R forms for their tax returns;
Request verification of income when applying for loans and other purposes;
Obtain information on their life insurance coverage as it changes in value;
Verify amount of survivor benefits payable in the event of death; and
Request OPM retirement forms and brochures.

New services under development include:

Additional discretionary allotments for any purpose, and contributions to the Combined Federal Campaign organizations. More information on those services will be available later this summer.

The Federal Employees Health Benefits Program is a very important benefit to federal employees, both active and retired. We are working hard to preserve and expand this program for the benefit of our customers.

After several years of holding premium increases to below the cost of inflation, FEHB experienced an average premium increase of eight-point six percent [8.6%] for 1998.

Yet the most recent data available (1996) indicates that the FEHB Program continues to be ahead of private sector health care programs. FEHB enjoys an average premium of $3,700 compared to $3,900 in the private sector.

We also negotiated some important health benefit improvements for this year.

These include:

Guaranteed inpatient hospital stays of 48 hours for mastectomies and natural childbirth's and 96 hours for caesarian deliveries:

And, consistent with the Mental Health Parity Act, improvements were also made in mental health benefits.

Looking forward to 1999, we will take a leadership role in assuring that FEHB plans fully adopt the Patient Bill of Rights as outlined by the President in his State of the Union address; and that FEHB enrollees are fully informed about their rights under this important initiative. We also expect further improvements in the mental health coverage.

Even though we continue to see medical costs running higher than regular inflation, OPM is committed to keeping health care premiums affordable. However, just like other employers, we have to face the reality of increasing medical costs.

Last Fall's FEHB Open Season for retirees was a great success. For the first time, virtually all activities -- brochure requests, plan information and enrollment changes, for example -- were conducted by our toll-free telephone service called: "Open Season Express".

More than 57,000 enrollment changes and 40,000 brochure requests were made using the new, free system.

Survey results show that 97 percent [97%] found the Open Season Express system easy to use; and seven out of eight users preferred to use this automated telephone system.

You should know that the changes we made were based on NARFE focus groups from all across the country. NARFE input played an important role in this success. To build on this success we have already convened several NARFE focus groups to discuss next year's open season.

Since we at OPM are charged with providing a strong benefits system for the federal workforce, we are perhaps somewhat prone to err on the side of employee and annuitant security.

This is our feeling in regard to the issue of allowing Medical Savings Accounts under the Federal Employees Health Benefits Program.

In February, the Archer-Burton Bill was introduced. H.R. 3166 would allow the use of Medical Savings Accounts -- or MSAs -- under the FEHB Program

Here=s our position on that issue: OPM wants to know more about the potential consequences before endorsing MSAs for the FEHB Program.

We want the FEHB Program to continue to offer choice, affordable health care, and access to quality medical services.

However, we are concerned that MSAs could significantly alter the way that the FEHB Program delivers its benefits and we want to be reasonably certain that any change will do no harm to the FEHB Program or its enrollees. There is relatively little actual experience with the MSA concept.

As reflected in testimony at a Subcommittee hearing on December 13, 1995, such experience involves relatively small groups who typically have a very limited range of plan choices. The MSA proponents who testified conceded that their health plans provided very limited options, with MSAs being the only option in some cases, and that given a wide choice of health plans, adverse selection could be a problem.

One of the main arguments against medical savings accounts is that they primarily attract young and healthy individuals who expect to use few medical services and want to save money for future health expenses.

This would cause adverse selection, whereby healthy individuals choose high-deductible, relatively low premium health plans, leaving the sick in the low-deductible, high premium plans.

The net effect would be higher premiums for low deductible health plans, leading to a two-tiered system -- an inexpensive one for the healthy and an expensive one for the chronically ill.

Existing programs that offer MSA plans are not representative of the FEHB Program, which covers more than 9 million people, offers a broad range of options, and has been highly successful in recent years at achieving savings through promotion of prepaid medical plans and a variety of other managed care mechanisms.

The Administration also has expressed concern that proposals to offer Medicare beneficiaries the MSA option could lead to fragmentation of the risk pool and increased costs.

In short, we believe any movement to add MSAs into the FEHB Program at this point would be premature. FEHB isn't broke, and we don't think it needs this fix.

I would like to briefly touch on another area of interest -- legislation regarding the Federal Employees Group Life Insurance program.

In November, H.R. 2675 -- titled the Federal Employees Life Insurance Improvement Act -- was passed by the House.

Another bill -- one that we support and helped write -- was to have been marked-up in the Senate recently, but the markup was postponed.

Both bills address concerns that we believe should be acted on, namely increasing the level of optional insurance available to retiring employees and increasing the level of family insurance available.

In addition, the House bill would make two new types of insurance available while the Senate bill contemplates that new types of insurance would be studied before they are introduced. We believe that the Senate bill is a more prudent approach.

Therefore, OPM has included questions about interest in other types of life insurance in the 1998 employee FEGLI feedback survey now underway.

We'll decide on expanding the types of insurance AFTER we hear from our customers, not before.

Once again, we're taking the careful approach -- and want to hear from our clients before we start trying to sell them something in which they might not be interested.

Until a Senate bill is passed, a final version cannot be worked out in conference committee. So the outlook for change in the program is uncertain at this point.

The second session of the 105th Congress convened in late January, and planned only a total of about 75 actual days in session this election year. So it has been, and should continue to be, -- shall we say -- an INTERESTING year for legislation.

OPM provides Human Resources Management leadership on legislation to both the Administration and to Congress. We are frequently asked to draft legislation, or analyze proposed legislation.

In the first instance, we hope to accomplish some meaningful human resources management initiatives to balance flexibility and consistency across government.

OPM continues to respond to the changing HRM environment by equipping agencies with the flexible systems they need to manage their human resources strategically while serving the interests of the government as an employer.

We will ensure that benefits evolve appropriately as employment practices evolve, such as the appropriate extensions of benefit coverage to non-permanent employees.

Most of you here already realize that when legislation is passed, sometimes it contains little surprises.

Last year, one of those little surprises was an open season giving eligible employees an opportunity to switch from the Civil Service Retirement System -- CSRS -- to the Federal Employees Retirement System -- FERS.

It set an open season from July 1 to December 31 of this year for eligible employees to elect to make the change, or stay where they are.

Frankly, we would have preferred an open discussion of whether this open season is a good idea.

That did not happen.

So, our job at OPM is to be prepared for an open season--which means arming people with the facts and helping them make the change, if that is their choice.

Of course, this will not affect those of you who have already retired. But for your future members, it is now an individual decision that will have to be calculated, weighed and decided by as many as a million currently employed individuals.

OPM has worked hard to put everything in place that will be necessary for people to make this important choice. We have put all necessary information, including a means to make individual calculations, on our Web page.

We are training and providing information for agency personnel who will help employees with their changes. We will provide three live interactive satellite broadcasts -- the first this week -- both to train agency personnel and to directly address and involve the affected employees.

In short, we are confident that everything and everybody will be more than ready when July 1 arrives. Of course, this will not affect those of you who have already retired.

Another retirement issue that is very important to me and to OPM is to help those employees who were erroneously enrolled in the wrong retirement system over the past decade. We developed legislation to fix these situations last fall.

There are four principles behind the Administration's proposal to equitably correct retirement coverage errors.

First: the government is a responsible employer.

The second principle guiding our proposed solution is:

Choice.

The third principle guiding our proposed solution is:

Clarity.

The final principle is:

Ease of administration

As you know, the House Civil Service Subcommittee crafted its own bill to resolve this situation.

We do not feel that bill, in its present form, meets these four principles, and are quite certain that as written it will result in unintended and unfortunate complications.

You know how important income security is, and we want to rapidly, fairly and finally resolve this problem for those affected by erroneous enrollment.

OPM therefore wants to develop consensus using the Administration proposal as a framework, but with the understanding that appropriate modifications and fine tuning may be necessary.

On another topic of importance to you, I am aware of NARFE's efforts to have the Government Pension Offset and Windfall Elimination Provisions repealed.

However, since they are current law; since they affect the Social Security System and involve outlays from that system -- you know all too well how difficult it will be to repeal these provisions.

Furthermore, the President is asking for a comprehensive, top-to-bottom review of the Social Security System as a way of assuring its solvency into the future. In fact, he made that a key ingredient in both his State of the Union and Budget messages.

He pledged to apply budgetary surpluses to the Social Security System until fundamental reforms have been made.

The President spoke at Georgetown University in February about Social Security reforms, and he plans a lot of legislative action to preserve and protect Social Security for all Americans.

So the outlook for action on Offset and Windfall Elimination provisions probably is not bright in the short term. at is bright, I believe, is the economic future and possibilities for All Americans under this President -- and this certainly includes our federal retirees.

Also continuing bright, I believe and trust, will be the relationship between OPM and NARFE.

I believe Federal retirees and their families deserve the highest possible level of service.

I look forward to continued cooperation and partnership between OPM and NARFE to support that goal.

We will continue to hold quarterly meetings to share information, discuss issues, and address concerns that are of interest to the Federal retiree community.

And we will work cooperatively on semi-annual mailings to federal retirees. The first of these goes out shortly after retirement and, I believe, has made a significant contribution to NARFE's membership program.

Not only are we aware of NARFE efforts to increase communication and improve the recruitment and retention of membership -- but, If there is support we are able to provide, we want to assist your efforts.

In short, we want not only to continue but to improve our services to retirees, and are working hard to achieve that goal.

Finally, there is one more point that I want to make and which I hope you will share with retired federal employees everywhere.

You may have heard some rumblings about what is either an expensive nuisance or the greatest technological disaster in the short history of computers -- the so-called Year 2000 problem -- or Year 2000 crisis, depending on whom and what you want to believe.

Ladies and gentlemen, I am the director of OPM. My responsibility is making sure that OPM fulfills its responsibilities.

Outside of OPM, I do NOT know, with personal certainty, what is going to happen at and after the stroke of midnight on December 31, 1999.

It may be true that telephone systems will cease to function, and we will be able to employ all the unemployed of the world as telephone operators - - which, let us face it, certainly would beat listening to another lengthy listing of automated voice mail options.

It may be true that you gentlemen will be wearing heavily starched detachable collars on your dress shirts as of January 1, 2000, and we ladies will be back in whale-bone corsets.

But, somehow I doubt there will be such catastrophes in this nation.

The Clinton/Gore Administration is focusing attention and resources on the situation. I know how hard government and most vital industries are working to avoid real disasters. There may be some glitches, and in areas where insufficient attention was paid to the potential for problems, there may be some real hardships.

But, I do have personal knowledge of one thing that WILL happen, with certainty. In January, 2000, our federal retirees will receive their annuity payments from OPM.

Our technological fixes will be made by the end of this November.

And if all else fails, our Associate Director of Retirement and Insurance Services -- Ed Flynn -- is an ardent bicyclist. If nothing else works, you can watch for Ed to come pedaling up your driveway.

No kidding. We're ready for the year 2000, and we're getting ready for the 21st Century.

While I don't want to downplay the seriousness, complexity or expense of fixing the year 2000 computer problem, I do want you to know that you can rely on OPM to deliver. If local systems fail -- systems that OPM does not have any control over -- we'll find an alternative way to deliver.

And by the way -- Ed, having seen an earlier draft of this speech, is in training right now.

I thank you for the opportunity to be here today. Are there any questions?

--end--

Page created 29 May 1998