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Could Tricare Program Premium Increases Devastate Military Family Budgets?

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Posted in Savings Account

In late Feb. 2010, the Defense Department, in an effort to cut high military health care costs, began looking at adjustments it could make to various programs, including the popular Tricare program that offers low-cost coverage options to military families.

With millions of military officials counting on the program for inexpensive health insurance coverage, some are worried that increased costs could make obtaining health care more financially challenging.

What is the Tricare Program?

Tricare, formerly known as the Civilian Health and Medical Program of the Uniformed Services (CHAMPUS), is a health care program provided by the United States Department of Defense and Military Health System.

The program provides civilian health benefits for 9.6 million service members, including military personnel, military retirees and their dependents. It also includes health care delivered in military medical treatment facilities.

There are a number of individual programs associated with Tricare, including the Tricare Dental Program and Tricare Pharmacy Program. Each program is noted for being less expensive than many private insurance options.

For instance, the Tricare Prime program offers coverage for $38 a month, or $460 a year for an entire family. Individual retirees catch an even better break with their Tricare insurance, paying as low as $230 a year.

Pentagon’s Budget (and Possibly Tricare) Affected by High Health Care Costs

While the Tricare program has offered consistent rates since 1995, some changes to the extremely low premiums could be on the horizon as a result of higher military health care costs.

According to a recent report from CNN Money, the cost of health care has increased 300 percent in the past decade, which is said to be eating a giant hold in the Pentagon’s budget. Even more problematic is the fact that, in 2012, the Defense Department expects to spend $52.5 billion on health care, which is considered a huge increase over previous years.

The cost of health care as a whole has increased considerably over the past decade, leaving many medical facilities to raise the amount they bill insurance companies. In many cases, insurance companies request increases, arguably to cover the costs, but in the case of the Defense Department, the premiums have not increased.

Changes to Tricare Have Been Proposed to Aid the Budget

A couple of adjustments have been proposed to aid in the Pentagon’s budget. One comes from the a report released by the Center for American Progress and the other from Defense Secretary Robert M. Gates.

In the Center’s report, released in February, the following changes were proposed:

  • Annual enrollment: Enrollees would be asked to pay a $120 annual enrollment fee.
  • Initial expenses: The program would no longer cover the first $500 in expenses, if the proposed changes are approved.
  • Medicare cost-sharing: Cost-sharing with Medicare would increase.
  • Coverage limits: The proposal would limit coverage for high-income working-age retirees, many of whom are able to secure health insurance through their current employers, but instead choose Tricare for its low premiums.

In addition, the Center’s report asked for the Defense Department to consider raising costs on retirees who use a program called Tricare for Life, which is a supplemental policy issued to veterans who are enrolled in Medicare.

Gates, on the other hand, asked to increase the fee retired working-age military personnel paid for family health-care coverage by $5 a month, while the cost for individual care would increase by $2.50 a month. In this case, the overall fee would increase to $520 for a family and $260 for an individual.

The Increased Fees Aren’t Too Devastating

While proposed fee increases could have an impact on the price military families have to pay for their health insurance through Tricare, they don’t appear to come close to the cost the average policyholder pays for coverage.

Either program would still be much cheaper than what federal workers average for health insurance, which is $5,000 annually. In turn, it could reduce the Pentagon’s annual health care costs, which are currently estimated at $3,584 per beneficiary.

But as a military worker, if you are concerned that you could be blind sighted by increasing rates, you could consider setting some money aside in an interest-bearing account like the one offered in the Military’s Savings Deposit Program to save for health care. The interest for the program’s account accrues quarterly at very high annual rate of 10 percent.

Also, keep in mind that the fee increases are currently just proposals. As told by Defense Secretary Robert Gates in a statement, the department has attempted to make modest increases in premiums and co-pays in the past, “but has been met with a furious response from the Congress and veterans groups.” So if previous experience dictates the future, it’s possible that the program will make no changes at all.