The previous two articles in this series have focused on choosing the best plan for you and your family based on the type of plan you want and how healthy you are. But, of course, cost also plays a significant role in choosing your plan. Everyone wants to pay as little as possible for health insurance, but is it your most important factor? (See Which Health Plan is the Best One for You? and Practical Advice in Choosing the Right Health Plan.)
While you are working, your share of the insurance premium is paid with pre-tax dollars – called premium conversion. Once you retire, you no longer receive this benefit and must pay your premiums with after-tax dollars. The federal government continues to pay their proportionate share – approximately 72% – for both you and your spouse even after retirement.
This is one of the best benefits you get for your years of public service (other than your annuity). Your spouse can continue on your coverage as long as you live, but if you want to ensure that their coverage continues even if you pass away first, you’ll want to be sure and take a survivorship benefit on your federal annuity for them. This election at retirement allows you and your spouse to be covered by federal health benefits as long as you both live with the federal government paying 72% of your premium and you paying 28%!
Often two federal employees will be married to each other and each takes self-only health coverage. The premiums for two self-only policies are less than family coverage. This seems like a cost-effective plan. However, keep in mind that each employee has to meet the plan’s maximum out-of-pocket limit if they’re under two separate plans. This is particularly of interest as employees/retirees age and tend to have higher overall health care expenses.
You are eligible to continue your health benefits in retirement as long as you retire on an immediate annuity and have been enrolled in the FEHB for at least five years either as an employee or family member. You do not have to be enrolled in the same health plan the entire five years, but continuously enrolled in any FEHB plan.
A common misconception is that your spouse has to be enrolled for five years prior to your retirement. This is NOT true! As long as your spouse has other coverage, they can enroll in your plan either after a life-changing event (such as retirement) or during any open season. A pitfall to avoid here is that if your spouse continues to work after you retire and keeps their own health coverage, thinking they’ll get on your plan when they retire, if the federal retiree passes away before the spouse has a chance to retire – the spouse loses the access to those health benefits (because they were not covered by the FEHB at the time of the retiree’s passing). Even if you take the survivor benefit to enable your spouse to continue health benefits if you pass away first, if the spouse is not covered by FEHB on the day you die, they are unable to get FEHB coverage.
Your overall health care expenses include more than just your share of the premium. You also have to take into consideration what your maximum deductibles could be, as well as any co-pays for doctors, hospitalization, and prescriptions. In the case of the high-deductible health plan, remember you also get a rebate from the insurance company into your health savings account, so you get to deduct that amount from your overall expenses.