Most federal employees and retirees are beginning to think about the annual Federal Employee Health Benefits (FEHB) open season and the choices that they will have the opportunity to make.
FEHB is one of the best benefits that we have as federal employees or federal retirees, and federal retirees (unlike most private sector retirees) are able to continue their FEHB enrollment after leaving federal service, and even after becoming eligible for Medicare.
There are some, but not many, changes in FEHB after retirement, and this article will take a look at them.
First off, there are requirements that must be met in order to carry your Federal Employee Health Benefits into your retirement. Those requirements are:
- You must be covered under FEHB at the time of retirement; and
- You retire on an immediate annuity; and
- You have been enrolled, or covered as a family member (on your federal spouse’s FEHB plan) for the last five years;
- If, due to a break in service, your last opportunity to enroll was less than five years ago, and you have five consecutive (though not continuous) years of coverage, the five year requirement is considered met.
- OPM will waive the five year requirement in the case of Reductions in Force.
- OPM might waive the five year requirement if it would be “against equity and good conscience” not to. OPM considers these waivers on a case by case basis.
- TRICARE counts towards the five year period, but the retiring employee must be enrolled in FEHB on the date of their retirement.
When you are retired the government will continue to contribute its share of the FEHB premium (roughly 72%) but:
- You will pay out of after tax dollars (retired public safety officers can exclude up to $3,000 of health insurance premiums from income on their federal income tax return); and
- Any additional agency contribution that is the result of a collective bargaining agreement will end (e.g., United States Postal Service, Securities and Exchange Commission, etc.).
You will still be eligible to participate in the annual FEHB open season after you retire, though if you drop your FEHB coverage after retirement, it cannot be reinstated.
Coverage can be suspended (and subsequently reinstated) in the following situations:
- To enroll in TRICARE or TRICARE for Life (Medicare eligible military retirees); and
- CHAMPVA; and
- To enroll in a Medicare Advantage plan; and
- To enroll in the Peace Corps health benefit program.
At age 65 you will become eligible for Medicare. In fact, if you are collecting Social Security at that time, you will be automatically enrolled in Medicare (though you are allowed to opt out of Medicare Part B). Whether or not Medicare will be your primary coverage depends on many things.
- If you are still working at age 65 (either at your federal job, or at another job that provides you with health insurance), Medicare will be considered secondary to your employer provided health insurance.
- If you are covered by the employer provided health insurance of your still employed spouse, Medicare will be considered secondary.
- In all other cases, Medicare will be considered primary.
There is an exception to the above for military retirees who are receiving their health insurance from TRICARE; once they hit age 65, they must enroll in both Medicare Part A and Part B, even if they are still employed and receiving employer provided health insurance.
Reaching age 65 is considered a qualifying life event for FEHB purposes and gives you an opportunity to change your FEHB enrollment outside of open season.
Here’s a brief overview of Medicare. Members of NARFE have access to much more detailed information on FEHB and Medicare, including discussions of what to consider in making the decision as to whether or not to choose Medicare Part B. The NARFE website is http://www.narfe.org.
Medicare Part A is hospital insurance and has no cost associated with it. Medicare Part B is medical insurance and does have a premium. The government pays 75% of the Part B premium, leaving a cost of $121.80 per month for new enrollees in 2016. The premium is adjusted annually. Higher income retirees pay more. Though federal retirees are not required to elect Medicare Part B, if they fail to elect it at their first opportunity and subsequently choose it, there is a 10% penalty for each year that they had not elected it. How individual FEHB plans coordinate with Medicare can and do vary; you should consult the coordination of benefits section of your FEHB plan’s brochure for detailed information. Generally, most FEHB PPOs and fee for service plans will waive their deductibles and co-pays for those who choose to enroll in Part B.
Medicare Advantage plans (Part C) are private plans that can be elected by those who choose Parts A and B. These plans vary extensively in what they cover, and are primarily regional or local plans. Those who enroll in a Medicare Advantage plan are allowed to suspend their FEHB.
Most federal retirees do not elect either Medicare supplements (often called Medigap) or Medicare Part D (drugs), as FEHB coverage is almost always better and less expensive.
The 2016 report of the Medicare trustees states that, unless there are changes made, Medicare would be insolvent in 2030. This leads one to believe that changes will be forthcoming sooner, rather than later. You should be sure to check the “coordination of benefits” section of your FEHB plan’s brochure, as well as Medicare’s publication, Medicare and You, as you approach the age of Medicare eligibility.
John Grobe’s latest book, The Answer Book on Your Federal Employee Benefits, has just been released by LRP Publications. Order your copy at shoplrp.com. Ask your human resources office to contact Federal Career Experts about pre-retirement training.