As more and more federal employees are approaching age 65, it’s important to understand what benefits you have available under Medicare and how they work with the Federal Employees Health Benefits (FEHB) program.
Medicare ABC’s
Let’s start by going through the Medicare ABC’s.
There are four parts to Medicare: Part A is hospital coverage and is free of charge for those that qualify for coverage, Part B provides physician and outpatient services, Part C is Medicare Advantage Plans (insurance provided by private companies), and Part D provides prescription drug coverage. Part B, C and D all require premiums.
Medicare Part B
The most common questions have to do with Part B, physician and outpatient coverage. Part D is prescription drug coverage which is included in FEHB plans, and Part C Medicare Advantage program would mean getting your hospital and medical insurance from the Medicare Advantage Plan and not the Original Medicare. (You would have to pay Part B premiums and the Medicare Advantage premium).
Most federal employees do not elect Medicare Part B if they are older than age 65 and are still employed, however, if you did, FEHB would still be the primary payor, and Medicare secondary. This reverses as an annuitant with Medicare primary, and FEHB plan secondary. Where this can pose a problem is if you are getting the services from a provider that does not accept Medicare, and Medicare is the primary provider, you will not be eligible to receive any benefits from Medicare or your FEHB plan. The only option to get services from a non-Medicare provider is to self pay.
One question that I hear over and over again is, “If I have been with an FEHB plan and am satisfied with this plan all the years pre-65, then why do I need to add Medicare and pay additional premiums?”
The concern falls within the text below provided in FEHB plan documents:
When you are age 65 or over and do not have Medicare, under the FEHB law, we must limit our payments for inpatient hospital care and physician care to those payments you would be entitled to if you had Medicare. Your physician and hospital must follow Medicare rules and cannot bill you for more than they could bill you if you had Medicare. You and the FEHB benefit from these payment limits. Outpatient hospital care and non-physician based care are not covered by this law; regular plan benefits apply.
The initial 7-month enrollment period for applying for Medicare (If retired) is three months before the month you turn 65, the month you turn 65, and three months after the month you turn 65. If you do not enroll during this time you can later enroll during open enrollment: January 1 – March 31, but would have to pay a penalty of 10% for each full 12-month period that you could have Part B, but did not sign up for it.
Example
Jay’s initial enrollment period ended September 30, 2013. He waited to sign up for Part B until the General Enrollment period in March 2016. His Part B premium penalty is 20%. (While he waited a total of 30 months to sign up, this included only 2 full 12-month periods.)
If you are still employed and are enrolled in FEHB past age 65, you can wait to enroll in Part B up to eight months after your retirement date, and not have a penalty.
Premiums for Part B are based on your modified adjusted gross income as reported on your tax return from the previous 2 years. The fear of the unknown leads most people to enroll in Medicare but it can be costly.
| If your yearly income in 2014 (for what you pay in 2016) was | If your yearly income in 2014 (for what you pay in 2016) was | If your yearly income in 2014 (for what you pay in 2016) was | You pay each month (in 2016) |
|---|---|---|---|
| File individual tax return | File joint tax return | File married and separate tax return | |
| $85,000 or less | $170,000 or less | $85,000 or less | $121.80 |
| Above $85,000 up to $107,000 | Above $170,000 up to $214,000 | N/A | $170.50 |
| Above $107,000 up to $160,000 | Above $214,000 up to $320,000 | N/A | $243.60 |
| Above $160,000 up to $214,000 | Above $320,000 up to $428,000 | Above $85,000 and up to $129,000 | $316.70 |
| Above $214,000 | Above $428,000 | Above $129,000 | $389.90 |
Part A hospital is free (not really because you have been paying 1.45% of your pay while you were working). The deductible for 2016 is $1,288 for each benefit period. Days 1 – 60: zero coinsurance. Days 61 – 90: $322 coinsurance for each day of benefit period. Days 91 plus: $644 coinsurance for each day of benefit period.
Part B deductible for 2016 is $166 per year. After the deductible is met, you typically pay 20% of the Medicare Approved amount for most doctors’ services.
Most of the FEHB plans give you incentives to enroll in Medicare by paying copays and deductibles. Read your plan brochure to see exactly what they pay.
Suspending FEHB
An annuitant, survivor annuitant, or former spouse covered under the Spouse Equity provision of FEHB law may suspend their FEHB enrollment in order to enroll in a Medicare Advantage plan (Medicare Part C), TRICARE, CHAMPVA, Medicaid or a similar state-sponsored program of medical assistance for the needy, or use Peace Corps health insurance coverage, but still retain the right to reenroll in FEHB. Please visit www.medicare.gov for more information.
As you can see, understanding all the rules with Medicare and FEHB are very important to your retirement.
