Q: I have retiree coverage through the Federal Employee Health Benefits Program (FEHB). Do I need to enroll in Medicare?
A: You don’t have to enroll in Medicare, but there are some reasons you should consider it.
What is the Federal Employee Health Benefits Program (FEHB)?
The FEHB provides comprehensive health insurance to federal employees and retirees, and their spouses. If you qualify for FEHB as a retiree, optional Medicare coverage can lower your out-of-pocket costs, but you’ll have to pay a premium for this extra coverage (Medicare Part A will likely be premium-free, but Medicare Part B will have a monthly premium).
Are Medicare rules different if I have FEHB coverage?
Most people who have retiree coverage must enroll in Medicare Part A and Part B when first eligible. If they don’t enroll, their retiree plan may pay only a small amount – or nothing at all – for their care. Medicare’s rules for you are different, however, if you’re a federal retiree. As a federal retiree, if you don’t enroll in Medicare, your FEHB plan will act as your primary insurer and won’t pay less because you qualify for Medicare.
However, if you choose to delay your enrollment in Part B (which has a monthly premium), you may find that you’re subject to a late enrollment penalty if you eventually decide later on that you’d like to enroll in Part B. If you continue working past age 65, you can safely delay Part B while you’re still enrolled in FEHB coverage as an active employee. But once you transition to retiree coverage, you have an eight-month window during which you can enroll in Part B at any time without a penalty. But after that window ends, your opportunity to enroll in Part B will be limited to the January-March General Enrollment Period, and you would be subject to a late enrollment penalty for Part B if you delay your enrollment for 12 months or longer.
Will FEHB be my primary coverage? or Medicare?
If you have FEHB and do enroll in Medicare, then Medicare will be your primary coverage and your FEHB plan will pay after Medicare does. Having Medicare could reduce your out-of-pocket costs, because many FEHB plans waive cost-sharing for enrollees who have Medicare. Even if this isn’t the case, as long as your provider takes both your FEHB plan and Medicare, the most you’d have to pay for care is the difference between what Medicare and your FEHB plan pay and Medicare’s limiting charge.
(The limiting charge is 115% of Medicare Part B’s payment rate, and is the maximum amount you can be charged after the FEHB plan and Medicare pay (assuming your doctor hasn’t opted out of Medicare altogether). Some states don’t allow excess Medicare charges. If you live in one of these states – or you see a doctor in any state that accepts Medicare’s rate as full payment – you’d only have to pay the difference between what Medicare and your FEHB plan pay and Medicare’s rate. Part B’s limits on what you can be charged don’t apply to some services, and Part A doesn’t have these limits.)
If you enroll in Part A but decline Part B, your FEHB coverage will pay after Medicare does for Part A services, but will be your primary insurer for other medical care. Medicare would no longer be your primary insurer if you return to work for the federal government, however, and in that case your FEHB plan would pay first, with Medicare paying at least some of your remaining costs (because you’d be covered as an active employee, rather than a retiree).
If I'm in the FEHB, should I enroll in Part A?
Most people don’t have to pay a premium for Part A. When combined with FEHB coverage, having Part A would limit your out-of-pocket costs for the expenses it covers (such as hospital or skilled nursing facility stays). Having Part A means you can’t contribute to a Health Savings Account (HSA), so you’d want to delay enrolling in Part A if your FEHB coverage is HSA-qualified and you want to continue making contributions to your HSA.
You can only delay Part A until you begin collecting Social Security – at which point your Part A coverage will start automatically. The Office of Personnel Management (OPM), which administers the FEHB, recommends taking Part A if you don’t have to pay a premium.
(It should be noted that many older retirees are not eligible for Social Security because they participated only in the Civil Service Retirement System and didn’t have Social Security taxes withheld. Somebody in this situation might choose not to enroll in any part of Medicare. But most people retiring today qualify for both Social Security and premium-free Part A.)
Should I enroll in Part B if I have FEHB coverage?
Deciding whether to enroll in Part B is complicated. And unlike Medicare Part A, all enrollees pay a premium for Medicare Part B ($174.70/month in 2024 for most people). While FEHB plans cover most of the same types of expenses that Medicare covers, FEHB plans’ coverage may be more limited than Medicare Part B when it comes to orthopedic and prosthetic devices, durable medical equipment, home healthcare, medical supplies, and chiropractic care.
Conversely, FEHB plans cover emergency care received outside the United States, and this isn’t covered by Original Medicare at all – and is rarely covered by Medicare Advantage. FEHB plans may also pay for vision and dental care that’s not covered by Original Medicare and is limited in Medicare Advantage.
If you are covered by an FEHB HMO plan, you’re normally limited to seeing providers who are part of your plan. Having Part B means you can go outside the HMO’s network and see other providers, as long as they accept Medicare.
Will I pay less for FEHB premiums if I enroll in Medicare?
FEHB premiums are not reduced if you enroll in Medicare, but having Medicare Part A and B can allow you to switch to a less expensive version of your current FEHB plan, because some FEHB insurers waive cost-sharing (like deductibles, co-pays and coinsurance) when you have Medicare Parts A and B. Contact your FEHB insurer if you’re wondering whether your plan waives cost-sharing for people enrolled in Medicare.
The decision of whether to enroll in Part B often hinges on whether you have to pay more for it because of your income. You pay more for Part B in 2024 if you earn over $103,000 (or $206,000 for a couple), according to your tax return from two years ago (2022 tax return was used to determine high-income surcharges for 2024). These higher premiums can range from $244.60/month to $594/month in 2024. You’ll have to gauge how much you are willing to pay in Part B premiums in exchange for lower cost-sharing when you visit the doctor.
When should I change my FEHB coverage?
You may want to make changes to your FEHB coverage when you are nearing Medicare eligibility, and will have the option to do this starting 30 days before you qualify for Medicare. Changes can only be made once during this window. You can also wait until FEHB Open Season to change your coverage.
Should I suspend my FEHB cover to enroll in other coverage?
You can suspend your enrollment in FEHB to enroll in Medicare Advantage or other eligible coverage by contacting your agency’s retirement system, and providing them documentation that you enrolled. If you do this, you’ll be allowed to leave your Medicare Advantage plan and return to FEHB. You usually have to wait until Medicare’s fall open enrollment and FEHB’s Open Season to re-enroll in FEHB. (These periods coincide.) You won’t have to wait until an enrollment period if your Medicare Advantage plan ends through no fault of your own, or if you move out of the Advantage plan’s service area. In that case, you could re-enroll between 31 days before and 60 days after your Medicare Advantage plan ends. The FEHB coverage would begin the day after the Advantage plan terminates.
FEHB also allows you to suspend your enrollment if you want to use health coverage through Medicaid, Peace Corps, CHAMPVA, TRICARE, or TRICARE-for-Life. You can re-enroll in FEHB if this other coverage ends through no fault of your own. But if you cancel your FEHB coverage instead of suspending it, you’ll never be able to re-enroll.
Although FEHB coverage can be more generous overall than Medicare Advantage or Original Medicare, having additional coverage may not be helpful if you can’t afford its premiums. If you qualify for the Medicare Savings Program (MSP) or Medicaid, you may find your healthcare costs are lower overall if you don’t use FEHB.
Should I enroll in Medicare Part D if I have FEHB coverage?
You generally don’t have to sign up for a Part D plan if you are covered through FEHB. The prescription coverage through your FEHB plan may have fewer restrictions (like quantity limits or drugs requiring prior-authorization) than the Part D plans in your area. If you do sign up for Part D, it will usually be your primary insurer.
Starting in 2024, some FEHB plans shifted to employer group waiver plan (EGWP) Part D coverage. Enrollees were notified of this and had the option to opt out the transition to Part D drug coverage.
Because FEHB is considered creditable coverage, you won’t have to pay a late enrollment penalty if you don’t take Part D now and decide to enroll in the future.
If you’re eligible for Extra Help, you probably do want to use Medicare Part D, because the co-pays for people with Extra Help pay are typically lower than the costs in FEHB plans. People with the most generous level of Extra Help pay only $4.50 for generics and $11.20 for brand medications in 2024. (People who have Extra Help but don’t enroll in Part D are automatically assigned to a plan.)
What do I need to know about Medicare coverage if I'm a postal retiree?
Starting in 2025, there’s a new Postal Service Health Benefits (PSHB) Program; it’s part of the FEHBP but operates as a separate program.
The PSHB program will provide the same sort of comprehensive benefits as the FEHBP coverage that postal retirees previously used. But there are a couple of important points to understand:
- Some Medicare-eligible Postal Service annuitants and their Medicare-eligible family members have to enroll in Medicare Part B. There was a Part B special enrollment period from April – September 2024, allowing these people to sign up for Part B without a late enrollment penalty.
- For Medicare-eligible enrollees, all PSHP plans will provide pharmacy benefits via Medicare Part D. Medicare-eligible PSHB enrollees have the option of opting out of Part D, but they will not have prescription coverage if they do that. So it’s recommended that Medicare-eligible PSHB enrollees DO NOT opt out of Part D.
Footnotes
Tags: FEHB, Medicare Advantage, Medicare Part A, Medicare Part B, Medicare Part D, Medicare premiums
