Navigating the world of health insurance can be confusing, especially when it comes to understanding how different programs work together. For federal employees and retirees, this confusion is often amplified when trying to combine Medicare coverage with Federal Employee Health Benefits (FEHB). Don’t worry! This blog post will guide you through the intricacies of “how Medicare works with federal employee health insurance”, providing you with the knowledge and confidence to make informed decisions about your health coverage needs.
Key Takeaways
FEHB is not creditable coverage for Medicare Part B, outpatient care. Declining Medicare Part B coverage, once retired from the Federal Government, can lead to substantial late enrollment penalties later on.
FEHB is creditable coverage for Medicare Part D prescription drug coverage.
FEHB is Primary coverage while you are actively working for the federal government.
If you enroll in Medicare Part A but decline Part B coverage, your FEHB will be the Primary insurer.
If you enroll in Medicare Part A and Part B, and keep your FEHB after you retire. Your FEHB will act as a secondary supplement. In this case, FEHB plans should be compared to Medicare supplement Plan benefits and premiums.
When you enroll in Part B, you have a 180-day window (six-months) to get a Medicare supplement without any medical questions asked. After that 180-day period, you must qualify medically for a supplement and can be denied coverage.
Medicare supplement plan benefits never change. Once you have your plan, no can take it away from you, or change your benefits. Premiums can increase over time.
FEHB benefits can change annually. Premiums can increase over time.
Understanding Medicare and Federal Employee Health Benefits (FEHB)
Medicare and FEHB are two unrelated health insurance programs, each with its own unique eligibility requirements, coverage types, and enrollment periods.
Medicare is a federal health insurance program that provides coverage for basic hospitalization and medical expenses, while FEHB offers comprehensive health insurance to federal employees, retirees, and their families.
Medicare Basics
Medicare is a health insurance program that covers hospitalization (Part A) plus medical expenses and durable medical equipment (Part B) for individuals aged 65 or older, certain younger individuals with disabilities, and individuals with End-Stage Renal Disease (ESRD).
Medicare Part A and part B combined is called Original Medicare.
The intent of Medicare is to cover everything medically necessary to diagnose and treat any medical condition or disease.
Medicare Part B has a monthly premium, but most people have no premium for Part A.
To be eligible for premium-free Medicare Part A, you must have worked and paid Medicare taxes for at least 10 years, or 40 working quarters. Since 1983, federal employees have been required to pay the Medicare Part A FICA tax, which contributes to the program’s financing.
Federal Employee Health Benefits Overview
The Federal Employees Health Benefits Program (FEHB) provides comprehensive health insurance plans to federal employees, retirees, and their families. This program is administered by the Office of Personnel Management (OPM) and offers a wide range of coverage options.
Federal employees who are eligible for FEHB can also enroll in Medicare. However, it’s crucial to understand the pros and cons of your decision to keep Federal Employees Health Benefits or choose Medicare coverage.
Changes to your FEHB coverage can be made 30 days before qualifying for Medicare coverage or during the FEHB Open Season.
How Medicare and FEHB Interact
When used together, Medicare and FEHB can coordinate benefits to provide you with comprehensive health coverage. Once you retire, Medicare will act as the primary payer, while FEHB will serve as secondary coverage if you have both Medicare Part a and Part B.
Put simply, Medicare would be primary coverage and your FEHB coverage would act as a supplement. This means that when weighing the Pros and Cons of using your FEHB plan with Medicare, you would compare the FEHB premiums and benefits to a Medicare supplement.
If you are considering using FEHB as secondary insurance to Medicare, you would compare the FEHB premiums and benefits to that of a standardized Medicare supplement.
Coordination of Benefits
If you have both Medicare and FEHB, they will automatically coordinate benefits between the two organizations. The coordination of benefits between Medicare and FEHB plans ensures that you receive the maximum coverage possible when utilizing both programs. This coordination process involves determining which program will pay for your healthcare services first (primary payer) and which will pay the remaining balance (secondary payer).
Primary and Secondary Coverage
When determining which payer is primary and which is secondary, several factors come into play. If you enroll in Medicare Part A but declining Part B, FEHB will pay for medical care and serve as the primary insurer with Part A being secondary.
Additionally, if you’re still an active federal employee and have Medicare before turning 65, FEHB will be the primary payer.
If you are enrolled in both Medicare Parts A and B, Medicare will be your Federal retirees primary coverage. FEHB will take on the role of a Medicare supplement, without having all the benefits of a standardized supplement plan designed to work with Medicare.
Enrolling in Medicare with FEHB
To avoid late enrollment penalties, it’s essential to enroll in Medicare during your Initial Enrollment Period (IEP). Deciding whether to enroll in Medicare Part B alongside your FEHB coverage is an important decision.
Unfortunately, none of us know what the future will bring us regarding our health needs. That is why we often recommend you consider the stability of the benefits of a Medicare supplement. With a standardized Medicare supplement as retiree health insurance, the future of your personal health benefits program becomes much more predictable. Your maximum out of pocket costs are also lower, and again, predictable.
Enrollment Periods
Medicare’s Initial enrollment Period (IEP) begins three months before your 65th birthday month and ends three months after your birthday month. If you miss this initial period, you can still enroll during the General Enrollment Period, which occurs annually from January 1 to March 31.
You have 8 months to enroll in Part B upon transitioning to retiree coverage (retire from the Federal Government) .
It’s also worth noting that you can delay enrollment in Part B if you’re still covered by FEHB as an active employee and continue working beyond the age of 65.
Late Enrollment Penalties
Failing to enroll in Medicare Part B during your initial eligibility period can result in late enrollment penalties. These penalties can be quite significant, so it’s essential to enroll on time to avoid unnecessary costs. The penalty is 10% of the monthly premium for Part B for every 12-month period you failed to enroll. This penalty is paid each month for the rest of your life, and increases as the Part B premium increases.
If you decide to postpone your enrollment in Part B for 12 months or more, your opportunity to enroll is limited to the January-March, the General Enrollment Period.
To avoid penalties, be sure to enroll in Medicare during your IEP or within eight months of transitioning to retiree coverage.
Assessing the Need for Medicare Part B with FEHB
If you choose to enroll in Medicare Part B while keeping your FEHB coverage, your FEHB coverage will be secondary, the same role as a standardized Medicare supplement. However, the benefits and costs of FEHB coverage are not tailored for Medicare.
In many cases, the FEHB premiums are higher than those of Medicare supplement, with the benefits not as comparable.
I have seen cases where a person on an FEHB plan was paying three times more for her FHB plan that what she would be paying if she had a supplement. In addition, the changes in benefits over the years left her confused and stressed.
If she were to enroll in Part B after a decade among the federal retirees, her late enrollment penalty would double the cost of her Part B if she were to enroll in Part B with years of late enrollment penalty.
Pros and Cons of Part B Enrollment
People who choose to stay with FEHB coverage and enroll in Medicare Part B tend to do so because they are comfortable with their FEHB health insurance plan. In addition, they read that if they quite FEHB they can’t get it back.
From my experience, such a fear tactic is often used when the facts do not support staying with the plan.
Most federal employees have good experiences with FEHB during their working years. Thus as retired federal employees they are comfortable continuing that relationship. Sadly, that comfort can prevent some from exploring the benefits of Medicare coverage combined with a supplement. As such, they miss out on obtaining the best health program available in the US.
Enrolling in Original Medicare plus a supplement allows you to see any doctor or visit any medical facility in the US or US territory as long as they accept Medicare. Nearly all non-pediatric physicians accept Original Medicare. In addition, no insurance company can delay or deny your benefits. Your healthcare is between you and your doctor.
With FEHB coverage as primary, your doctor must obtain pre-authorization (permission) from the insurance company before performing any non-urgent procedure. In addition, you are limited to an ever changing network of physicians. Your limited to a network.
With FEHB as secondary, you are often overpaying for a supplement that not standardized.
Comparing FEHB and Medicare Advantage Plans
Medicare Advantage plans offer similar coverage to FEHB plans, but it’s important to explore your options since benefits can vary between plans.
Coverage Comparison
FEHB plans generally provide more extensive coverage than Medicare Advantage plans, but the latter may have lower premiums and out-of-pocket costs. Both types of plans offer comprehensive health coverage.
Making the Right Choice
When choosing between FEHB and a Medicare Advantage plan, consider factors such as premium, coverage gaps and your maximum annual out-of-pocket limits. You may also want to consider the size of the provider network. A Medicare Advantage plan PPO may offer access to a larger network of medical professionals.
A Medicare Advantage plan and the FEHB plans have very similar strengths and weaknesses.
They both are limited to networks, with their benefits and costs changing annually.
If you have a chronic health condition, a Medicare Advantage Plan designed for your condition may be the better choice.
Navigating Prescription Drug Coverage (Part D) with FEHB
Most FEHBP enrollees don’t need to enroll in Medicare Part D, as their prescription drug benefits are adequately covered by their FEHB plan.
However, if you’re a low-income retiree, it’s essential to compare your FEHB drug plan with Medicare Part D options to determine which plan provides better coverage for your needs. Keep in mind that you can enroll in both FEHB and Part D, but be sure to contact your benefits administrator before enrolling in Part D to avoid losing your FEHBP coverage.
FEHB and Part D Coverage
FEHB prescription drug coverage is considered creditable for Medicare-eligible retirees, meaning it provides benefits that are as good as or better than those offered by Part D plans. If you choose to enroll in Part D, Medicare benefits for drugs will generally be primary in most cases for FEHB enrollees, with FEHB serving as secondary coverage.
Deciding on Part D Enrollment
When deciding whether to enroll in Medicare Part D, consider factors such as cost, coverage gaps, and any penalties for late enrollment. You should also evaluate your current medications and ensure that any potential Part D plan covers those prescriptions.
If you decide to enroll in Part D, you can do so online using Medicare’s plan finder tool or our part D website https://partdshopper.com/.
Summary
Navigating the world of health insurance can be complex, but understanding the interaction between Medicare and FEHB can help you make informed decisions about your health coverage.
Even more, let our Medicare experts help you make the right decision for your needs and your budget. Our services are free to you, the consumer.
Frequently Asked Questions
How FEHB and Medicare work together?
FEHB and Medicare can work together, but not as optimally as Medicare plus a supplement. No other health insurance program offers the strength of benefits and freedom to choose your provider like Medicare plus a supplement.
Do federal employees go on Medicare?
Yes, federal employees can go on Medicare when they reach the age of 65. They are usually eligible to enroll in Medicare Part A without having to pay a premium. This can help reduce their out-of-pocket expenses and costs associated with the FEHB program.
How does Medicare Part B work with FEHB?
Medicare Part B and Federal Employees Health Benefits (FEHB) can work together to provide comprehensive health coverage. Medicare becomes the primary insurance, paying for services first, with FEHB being the secondary insurer.
In this case, compare the benefits and cost of FEHB to that of a Medicare supplement plan.
Can you have Medicare and FEHB at the same time?
Yes, you can have Medicare and FEHB at the same time. However, if you are an active federal employee or a reemployed annuitant, your FEHB plan will be the primary insurer and Medicare will act as a secondary insurance, with the FEHB plan paying benefits before Medicare does.
Sources:
https://www.opm.gov/healthcare-insurance/healthcare/medicare/medicare-vs-fehb-enrollment/
Matthew Claassen
Matthew Claassen, CMT and CEO of Medigap Seminars Insurance Agency. Medigap Seminars is an award winning premier national Medicare Insurance Brokerage, ranked among the top in the U.S.A. Matthew is considered a leading national expert on Medicare and Social Security. Mr. Claassen is a distinguished member of the Forbes Business council, an invitation only organization of business leaders and entrepreneurs. He and his team have received awards from many of the countries largest insurance companies including Mutual of Omaha, Aetna, Humana, Cigna, United American, United Healthcare and others. His videos have become the most popular Medicare educational videos on YouTube with millions of views. As a financial analyst Matthew lead a team of researchers to win the 2009 Best Equity Research & Strategy Award from The Technical analysis magazine.
