It’s that time of year again. Every year, during the benefits “Open Season”, federal employees must make decisions about which their various healthcare benefits coverage. Even if you’ve been enrolled for many years, it’s important that you review your coverage based on your specific needs. 2022 Open Season is from November 14 – December 12, 2022, to select your FEHB benefits for the 2023 plan year.
Health insurance programs change over time, as does your health and financial life, and Open Season gives you an opportunity to make decisions about your various insurance benefits so that they are aligned to best support your family’s needs.
The Office of Personnel Management (OPM) offers resources for you utilize in your research but expects that it is your own responsibility to understand the information you gather. This article will equip you with key considerations and resources, as well as how each plan type may or may not meet your needs, allowing you to feel better prepared for Open Season.
Key Considerations and Terminology
When selecting your health insurance, there are numerous FEHB programs available and sorting through the list can seem overwhelming. Let’s start by defining some of the terminology that you’ll encounter.
Premium: this is the cost of the insurance policy. This figure is influenced by the type of plan and coverage levels. Higher costing premiums do not always mean better coverage. In many cases it may mean higher coverage, but it’s important to not pay more for insurance than what you need.
Copayment: this is generally a fixed dollar amount that you would pay for health care service after you’ve paid your deductible. In general, plans with lower monthly premiums have higher copayments, and vice versa.
Coinsurance: this is the percentage of covered health care services that you pay after you’ve paid your deductible. As with copayments, there is an inverse relationship to premium costs.
Deductible: this is the out-of-pocket amount owed by you before your insurance begins to pay. This concept is similar to a deductible on your car or home insurance.
Health Savings Account (HSA): this is a type of account that allows you to put in pre-tax dollars to be used for medical expenses. Your contributions lower your tax bill and using the money for qualified medical expenses makes the withdrawals tax-free. This balance can accrue from year to year, unlike an FSA that typically features use-it-or-lose-it.
Out-of-Pocket Maximum: this is the highest amount you’ll pay each year towards costs including deductibles, copay, and coinsurance. Premiums are not included, neither are extra services. In-Network vs Out-of-Network providers may impact this too.
Network: this is a list of health care providers that are within a group that accepts that insurance. In-Network usually means negotiated rates that lead to discounted services for you as a consumer. Out-of-Network providers generally cost more.
Changes in these categories impact the cost of the health insurance plan. The overall average increase in rates for the FEHB Program for 2023 is 7.2%.
For someone that is relatively healthy, rarely injures themselves or gets sick, and visits doctors mainly only for regular check-ups, perhaps opting for a lower-priced premium may provide you with enough coverage for your needs.
Just make sure to keep an emergency fund liquid in the event that you have a greater health expense than your insurance covers, including deductibles.
For someone with greater health challenges, it may be more advantageous to opt for a plan that has better coverage, especially if you expect to be needing health care more frequently.
You should consider the type of health care you expect to receive, especially if you have regular therapy that you attend, or on-going medication needs. These are coverages that you’ll want to ensure your plan covers before electing that insurance plan. Be sure to check every year you renew – health insurance carriers often change their coverage each year. This will help you prevent a surprise bill from a medication or care that is no longer covered.
Remember that you can have one year of more comprehensive coverage, followed by another year of reduced coverage (and likely reduced expense). Open season allows for flexibility of changing your plan as your needs change. You may even get the option to change more frequently if you meet a qualifying event, such as getting married or having children. You’ll want to consider your coverage needs for your family as well.
Finally, make sure you understand how becoming eligible for Medicare impacts the decision matrix. Often, Medicare can pair well with certain FEHB plans and help reduce out of pocket expenses. There are additional costs for Medicare that need to be weighed carefully. Your taxable income determines how expensive your Medicare Part B premiums are, so careful planning is required. More info in our guide found at the end.
Types of Health Insurance Plans
HMO Plans: Health Maintenance Organizations
HMOs have historically been known for being focused on wellness and prevention. They typically require that you go see your primary care physician for the majority of your care. Since this primary physician sees you frequently, they have a good sense of your overall health and will work with you to keep you healthy. This also means that most, if not all your care will be through in-network providers.
This is an important consideration because if there is a specific doctor that you see regularly, you’ll want to make sure that they fall within your network if you are opting to go with an HMO. HMOs also usually have a co-pay instead of deductibles.
With an HMO, if you require medical care from a medical professional that is considered a specialist, you usually have to first contact your primary care physician and get a referral. While this isn’t necessarily a game changer, it’s an important factor to know about. You risk not having coverage if you visit a specialist without first having a referral from your primary care physician. Another factor to note is that you’ll also likely be seeing a specialist that falls within your network. Again, something to considering if there is a specific doctor that you’d like to use.
There are a few different types of sub-HMO categories that apply to how the doctors work. We won’t go into that in this article, but if you have questions, it’s important that you contact the insurance carrier first before you select it as your insurance.
FFS Plan: Fee-for-Service
A Fee for Service plan is a more flexible type of insurance. With these plans, they will typically pay the medical provider directly or they might reimburse you after you filed an insurance claim for medical treatment. This means that you have more flexibility in choosing your medical care providers, so you can change doctors frequently if you’d like, without having to talk to your primary doctor.
If your fee for service plan is an indemnity plan, then you have what’s called a deductible. The plan will only pay for a portion of the medical costs and pass the rest on to you as the insured. It’s not until you reach your deductible limit or max out of pocket that the insurance company will begin covering the remainder of the cost for your medical care. Out of pocket maximums reset each year, so just know that you may be putting yourself at risk for more expenses if you see many doctors with this plan.
In some plans, you might have access to what’s called a PPO, or Preferred Provider Organization. As the name indicates, this is a group of medical providers that agreed to being part of this group and as such, reduce their charges for service. An employee seeking medical care from a PPO would likely pay less out of pocket, but as with everything, there are exceptions, so be sure to look carefully before enrolling.
POS Plans: Point of Service
A point of service is a combination plan. If you took some of the benefits of HMO plans and put it together with a PPO, you’d get this plan.
Enrollees are typically less restricted than in an HMO since their range of doctors is bigger. Enrollees also tend to have lower costs and out of pocket expenses than compared to a PPO.
You’ll still select a primary care physician from the list that they let you pick from, and you’ll still need to have a referral if you’re going to see a specialist. In these manners, it seems like a regular HMO, except you’ll find that the cost to you tends to be less than the traditional HMO.
Our clients have indicated that point of service plans have required them to use generic brands of prescription, so if you are on continued medication, make sure your specific brand is covered. Any cost savings can easily be destroyed by extra expenses from prescriptions, especially if you take a medication that does not have a generic equivalent, or if the generic doesn’t work as well for you.
HDHP: High Deductible Health Plans
A high deductible plan is one in which an enrollee typically has higher annual out of pocket expenses. The deductible is a much higher amount than in other types of plans. So why would an employee choose this plan?
First, the monthly premium tends to be lower with high deductibles. If you are someone that does not frequently require doctor visits and are in good health, perhaps this might be a good plan for you. Yearly checkups (wellness visit) are often included in this.
Another incredible benefit of a high deductible plan is that you have access to an HSA (health savings account). This type of account allows you to deposit money into it on a pre-tax basis, grow it with investments, and then use the grown money in a tax-free status if you’re using it for qualified expenses.
It’s like an FSA, but better because any unused balance will rollover into the next year for you. If you use it for non-qualified expenses, you’ll be penalized, so be careful.
There are many expenses that insurance may not cover (including Medicare); HSAs may be a source of funds to cover these expenses in a tax-free status if they’re qualified expenses. This is an underutilized planning vehicle, especially by young people.
CDHP: Consumer Driven Health Plans
This one is the odd one out. These are still high deductible plans, but as the name indicates, these tend to be more customized plans, and it isn’t just one particular type of plan.
You still have the ability to set aside money on a pre-tax basis to help pay for your health care, but the cost of health care will be higher than some other traditional types of health insurance. These plans tend to have lower premiums and as such, are most popular by employees that tend to be healthy and conscientious about their health and the care they need.
In short, it allows enrollees to look around and select competitive care in an effort to reduce costs. The philosophy is to put the power in the hands of the enrollee. It hasn’t been too popular of a plan since most people just don’t have the knowledge or time to research the world of medical care. You have more choices of medical care providers than traditional health care programs but that also means more research on your part.
Other Benefits
Federal employees also have access to dental and vision (FEDVIP), long term care (FLTCIP), and life insurance (FEGLI). We’ll cover each briefly, and you can find more comprehensive information with the guide.
Federal Employees Dental and Vision Insurance Program (FEDVIP)
Dental and Vision coverages are offered through FEDVIP as a separate cost. There are significantly less choices than FEHB, making it easier to navigate.
Your dental and vision needs should be addressed through FEDVIP, not FEHB. Some FEHB plans have coverage, but avoid picking them based on dental and vision coverage. You should make your FEDVIP choices based on the kind of care you believe you will need for the year. If it is a year where you will need higher levels of dental care, you may choose to opt for the higher coverage for one year.
Federal Long Term Care Insurance Program (FLTCIP)
Long term care insurance is offered through FLTCIP and is a great benefit available when working. This helps cover expenses for helping you with activities of daily living if you are unable to do them yourself. Its costs become prohibitive as you age, and this program may become less favorable for retirees.
The private market has developed better programs for long term coverage, in our opinion. Just beware of the many complex policies in the private sector, and ensure you find independent advice regarding your insurance coverage.
FLTCIP fits a specific need, and it’s important that you explore all of your options available. We like FLTCIP for many working feds to help cover the risk of this need.
Federal Employees Group Life Insurance (FEGLI)
Life insurance is offered through FEGLI with a series of coverage levels. Like FLTCIP, it too becomes very expensive over time, so retirees may opt for different coverage. The primary purpose of life insurance is income replacement, so retirees may no longer have a need for this.
Any fed with a family should consider getting as much FEGLI coverage as they are able to, especially if they are still building their wealth. For those late in their careers, the case for FEGLI becomes less strong, but just understand that the death of a federal employee means the reduction or loss of a FERS pension as well as one Social Security benefit. It’s important to understand if there is an insurance gap for the surviving spouse. More details on specifics for all of these in the guide.
Guide to 2022 Federal Benefits Open Season
Choosing your coverage is a personal process and involves careful planning. There’s plenty to think about as each plan type serves a specific group of people and their needs. RMG Advisors has put together a free guide that covers the main considerations for each of your open season benefits.
OPM offers resources but expects that you do your own research to understand your benefits. They do not offer planning considerations, nor is there context on how federal employees should be thinking about their benefits as it relates to their overall financial well-being. Their website is dense with valuable information but is primarily focused on providing facts, policies, and rules.
If you’re interested in receiving it, please send an email with the subject line “Annual Guide” to info@rmgadvisors.com and someone from our team will send it to you.
