For federal employees, few benefits are as valuable—or as misunderstood—as the Federal Employees Health Benefits (FEHB) program. The government not only provides a wide selection of plans but also pays a substantial portion of the premium—typically around 72% of the total cost. That means if you’re paying roughly $400 per month for your FEHB plan, your agency is likely paying another $1,000 per month on your behalf.
Even more impressive, you can keep FEHB coverage in retirement with the same government contribution, provided you retire with an immediate annuity and have been enrolled in FEHB for the five years before retirement.
But despite this incredible benefit, most federal employees are leaving money on the table—sometimes thousands of dollars every year—by sticking with the wrong plan.
According to OPM, fewer than 5% of federal employees change FEHB plans each year, even though plan costs, coverage, and networks change constantly. The result? Many feds end up overpaying for coverage that doesn’t fit their needs.
Let’s break down why picking the wrong plan can cost you—and how to make sure you’re getting the best value for your money.
Understanding the Basics
Before diving into how to compare plans, it’s helpful to define a few key terms:
- Premium: The amount you pay every pay period or month for your insurance.
- Deductible: The amount you must pay before your insurance begins covering most services.
- Co-Pay: A fixed amount you pay for specific services (e.g., $20 for a doctor visit).
- Co-Insurance: The percentage of costs you pay after meeting your deductible.
- Out-of-Pocket Maximum: The most you’ll have to pay in a year before your insurance covers 100% of eligible expenses.
Each of these elements plays a role in your total annual health cost—not just your premium.
The True Cost of a Health Plan
Here’s where many feds go wrong: they choose their FEHB plan based solely on the monthly premium. But the cheapest plan on paper may actually cost far more in real life once you factor in deductibles, co-pays, and coinsurance.
A better way to compare plans is by looking at total estimated yearly cost, which includes:
Premiums + Out-of-Pocket Expenses = Total Health Care Cost
For example, Checkbook’s Guide to Health Plans for Federal Employees shows that a 45-year-old GS employee with a family of four in the Washington, D.C. area could see a $10,710 difference between the lowest and highest cost FEHB plans in a single year—just by switching plans.
Even for smaller households, differences of $2,000–$5,000 per year are common.
Checkbook is a valuable tool (available for free to many agencies) that compares all the different FEHB plans available to Federal Employees. It estimates your total costs in a good, average, and bad health year so you can see which plans perform best across various scenarios.
Step 1: Weed Out the Wrong Plans
Start by eliminating plans that clearly don’t fit your situation:
- Check availability: Not every plan is offered in every location.
- Decide plan type: Choose between HMO, PPO, HDHP, or CDHP based on your flexibility and financial comfort.
- Filter by cost: Focus on overall value, not just premium.
If you’re young, healthy, and rarely visit the doctor, an HDHP (High Deductible Health Plan) with an HSA (Health Savings Account) might be the best option. You’ll enjoy low premiums, significant tax savings, and the ability to grow your HSA tax-free for future expenses—even in retirement.
On the other hand, if you have regular medical needs, multiple prescriptions, or upcoming surgeries, a traditional PPO or HMO with lower deductibles may be worth the higher premium.
Step 2: Verify Your Doctors and Prescriptions
Switching plans can quickly backfire if your favorite doctor or specialist isn’t covered. Before enrolling, check each plan’s provider directory to make sure your doctors are in-network.
Similarly, review each plan’s prescription drug formulary to confirm your medications are covered—and at what tier. The difference between a generic vs. brand-name tier can add up fast.
Step 3: Plan Ahead for Known Costs
If you know you have a big medical expense coming (like a baby, surgery, or ongoing treatment), factor that in now. Some FEHB plans offer $0 maternity care when using in-network providers, while others charge thousands.
Hearing aid coverage, chiropractic care, and physical therapy benefits also vary widely. A plan that provides a $3,000 hearing aid allowance every four years might save you far more than a slightly lower premium elsewhere.
Step 4: Consider Out-of-Area Coverage
If you travel often or have a child attending college out of state, pay attention to how each plan handles out-of-area care. HMOs, for example, typically don’t cover routine care outside their service area.
For frequent travelers or those spending time overseas, a national PPO plan such as Blue Cross Blue Shield may make more sense since it covers both emergency and routine care internationally.
Step 5: Look at Plan Quality
Every year, OPM rates FEHB plans on several factors, including:
- Getting needed care
- Speed of service
- Communication with doctors
- Customer service
- Claims processing
These ratings can be found on OPM’s website or in the Checkbook comparison tool. A low-quality score might be a red flag even if the cost looks appealing.
Step 6: Don’t Forget the Tax Savings
If you’re enrolled in an HDHP, your Health Savings Account (HSA) is one of the few truly triple tax-advantaged tools available:
- Contributions are tax-free.
- Growth is tax-free.
- Withdrawals for qualified expenses are tax-free.
For 2025, contribution limits are $4,300 for self-only and $8,550 for family coverage (including both your and your agency’s contributions).
If you aren’t in an HDHP, you can still use a Flexible Spending Account (FSA) to pay for qualified expenses with pre-tax dollars—saving roughly 30% on those costs.
Step 7: Revisit Your Plan Every Year
What could be the biggest mistake federal employees make? Staying in the same plan year after year.
Plans change. Premiums increase. Networks shift. Medications move off formularies. And new plan options enter the program every year.
Even if you love your current plan, it’s smart to shop around each Open Season. There’s virtually no downside—you can always switch back next year if you prefer your old plan.
For retirees, reviewing plans becomes even more important once Medicare enters the picture. Some FEHB plans coordinate beautifully with Medicare Parts A and B—waiving copays and deductibles—while others do not. Choosing the right combination can save you thousands in premiums and out-of-pocket expenses.
The Bottom Line
Choosing your FEHB plan isn’t just a once-a-year chore—it’s a major financial decision. With potential savings of $3,000–$10,000 or more per year, it’s worth investing a few hours to compare your options.
Don’t assume your current plan is the best fit simply because it worked last year. The “right” plan depends on your health needs, location, and financial goals—and those can change every year.
The FEHB program is one of the best benefits available to federal employees. But like any powerful tool, it only works in your favor if you use it wisely.
So this Open Season, take the time to compare, calculate, and choose carefully. The wrong plan can cost you thousands—but the right one can keep more of that money where it belongs: in your pocket.
