The following is from a 2007 paper by John Cawely and Andrew Whitford that appeared in the Journal of Health Politics, Policy and Law.
The Federal Employees Health Benefit Plan is administered by the OPM and offers health insurance coverage to federal employees and their dependents; about 9 million people are enrolled in 350 different plans. A broad difference between FEHB and Medicare is that the former considers applications only from comprehensive, prepaid medical plans (HMOs, PPOs, and point-of-service plans). These health benefits carriers must offer a complete line of medical services, including doctor’s office visits, hospitalization, emergency care, prescription drug coverage, and treatment of mental conditions and substance abuse. The FEHB does not contract with companies offering only services such as dental/vision plans, prescription drug plans, supplemental insurance, and disability insurance. It also does not write contracts with FFS carriers.
A second important difference is that the FEHB lists broad types of benefits that contracting plans may cover — not the mandatory set of benefits and services required in MA. Beneficiaries may reduce the package of services they receive and thereby reduce their exposure to premiums and cost sharing. OPM exercises discretion in negotiating with plans over benefits packages; these negotiations also impact beneficiaries, because they can potentially reallocate costs between the program and subscribers over time. There are two broad types of plans, nationally rated and locally rated, which differ in how premiums are set to vary across local markets. Plans that participate are selected by fairly basic criteria: meeting a set of qualifications and offering at least a minimum benefit package. OPM negotiates benefits and rates annually, but it does not solicit competitive bids. However, competition by multiple plans in the same area may reduce costs to beneficiaries (Feldman, Thorpe, and Gray 2002). In FEHB, the federal government pays 75 percent of the costs of the plan up to a prespecified national ceiling.
The following citations from the paper may be of use.
Caplan, Craig F., and Lisa A. Foley. 2000. Structuring Health Care Benefits: A Comparison of Medicare and the FEHBP. American Association of Retired Persons (AARP) Policy Institute Research Report No. 2000-05, May.
Feldman, Roger, Kenneth E. Thorpe, and Bradley Gray. 2002. Policy Watch: The Federal Employees Health Benefits Plan. Journal of Economic Perspectives 16 (2): 207 – 217.