Federal Employees and Retirees Face Hard Choices With Rising Premiums

Federal employees and retirees will face a series of difficult decisions over the next month as they think about funding their benefit contributions in the midst of rising costs.

Federal employees and retirees are facing a cascade of tough decisions over the next month as they think about funding their benefit contributions.

Even if employees receive the President’s proposed increase of 1.0 percent across-the-board and 0.6 percent locality pay, benefit costs are increasing faster.

For retirees, the picture is worse as the current 2017 COLA appears to be coming in at the 0.2 to 0.3 percent range depending on the CPI index number to be announced October 18. If you are lucky, that might translate to an extra $6 to $15 per month, depending on your present annuity.

September 30 Deadline for Long-Term Care and Life Insurance

For retirees and employees, September 30 is the deadline for the Federal Long-Term Care Insurance Program (FLCTIP) and, for current federal employees, the Federal Employees’ Group Life Insurance Program (FEGLI) Open Season.

With premiums rising an average of 83 percent for FLCTIP and no Congressional action to reduce costs, the choices are: pay the increased premium and hope it doesn’t continue to rise in future years, reduce coverage and hope that premiums stay affordable, or drop coverage and make alternate plans in case you need long-term care at some point down the road.

OPM isn’t making this decision any easier by requiring a decision before we know about increases in other insurance premiums, and before Congress acts on increases in employee pay and retirees’ COLA.

For FEGLI, the rare open season is an opportunity for employees to sign up for life insurance without a medical exam and with no health questions to answer. Elections made have a one-year delayed effective date, and coverage you elect in the September 2016 FEGLI Open Season will be effective on the first day of the first full pay period on or after October 1, 2017, as long as you meet pay and duty status requirements.

If you to sign up for FEGLI during this year’s open season, you are committing to working for the federal government until October 2022 or forfeiting your life insurance benefits.

Health Insurance

Soon it will be open season for the 2017 Federal Employee Health Benefits Program (FEHBP).

Expect higher average premiums from most health plans. In 2016, FEHBP premiums jumped an average of 6.5 percent, more than twice the cost for private sector employer-sponsored plans.

With the inflation rate for Medical Care Services up 5.5 percent over this past year, it is likely that insurance premiums will continue to outpace pay raises and COLAs.

Last year’s introduction of Self Plus One was supposed to help by lowering rates for couples who did not have to insure children. Instead, the Self Plus One rates disappointed many who saw insignificant savings compared to Family rates.

OPM is encouraging folks to consider High Deductible plans that offer catastrophic risk protection with higher deductibles, health savings/reimbursable accounts and lower premiums, and HMOs over traditional Fee-For-Service plans; but each of these involve trade-offs that might cost families more money depending on their future health status.

Medicare Part B

For federal retirees covered by CSRS, higher Medicare Part B premiums are a distinct possibility. The Medicare Trustees’ earlier estimate of Part B premiums rising to $149 per month in 2017 looks increasingly realistic for most CSRS recipients, and others not protected by the hold-harmless clause.

A 22 percent increase over the current $121.80 rate will gobble up any COLA increase next year. Of course, for those in the higher income brackets, the increases will be even greater.

Little chance for help from Congress

Except for rhetoric, Congress and the administration appear to be unsympathetic to both federal employees and retirees. A few senators, such as Cardin and Mikulski, have expressed concern, but whether this will translate into measurable action before these premiums go into effect remains to be seen.

Even in a presidential election year, it will take strong and persistent lobbying to see any changes enacted that would benefit the federal sector.

Increases in any one of these benefit plans would put strains on family budgets. Rising premiums in all the federally-sponsored insurance programs will force some families to make some hard choices from a range of bad choices.

About the Author

Michael Wald is a public affairs consultant and writer based in the Atlanta area. He specializes in topics related to government and labor issues. Prior to his retirement from the U.S. Department of Labor, he served as the agency’s Southeast Regional Director of Public Affairs and Southeast Regional Economist.