Key Takeaways:
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Maximize your healthcare savings in retirement: Strategic decisions around FEHB can help you stretch your retirement budget while maintaining great coverage.
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Know your options for Medicare integration: Learning how FEHB and Medicare work together is crucial to avoid overpaying and to secure more comprehensive coverage.
Planning Your FEHB Benefits in Retirement
Retiring as a federal employee
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Understanding FEHB for Retirees
The FEHB Program offers a wide range of plans with different benefits, premiums, and out-of-pocket costs. The FEHB program differs from private sector benefits, especially because it allows you to keep your coverage well into retirement. However, to get the most out of it, you need to understand the program’s structure and options. The key difference when you retire is that you can keep your FEHB coverage, as long as you have been continuously enrolled for at least five years before your retirement.
How to Remain Eligible for FEHB Coverage
Before retiring, ensure you meet the eligibility criteria to continue FEHB coverage in retirement. The primary requirement is maintaining FEHB enrollment for five continuous years immediately before retirement. If you don’t meet this threshold, you may lose access to FEHB upon retirement, which could mean significant healthcare costs later in life. But if you’re nearing retirement without meeting this timeline, speak with your HR department to explore options that may help you stay on track.
Reviewing Your FEHB Plan Choices
As a retiree, your healthcare needs may change, and with those changes, it’s important to review your FEHB options regularly. Here’s how to approach it:
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Evaluate Coverage Needs: Consider your anticipated healthcare needs. If you’re in good health, a basic plan with lower premiums might be sufficient. But if you have chronic conditions, you might need a more comprehensive plan that covers more services.
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Understand Plan Types: FEHB offers various types of plans, including Health Maintenance Organizations (HMOs) and Fee-for-Service (FFS) plans. Each plan type comes with different rules, costs, and levels of coverage, so explore options to find the best match.
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Plan for Out-of-Pocket Costs: Look beyond just premiums when comparing plans. Out-of-pocket expenses like deductibles, copays, and coinsurance can add up. Especially in retirement, minimizing out-of-pocket costs could help you stay on budget.
Coordinating FEHB with Medicare
One of the biggest changes you’ll encounter in retirement is how FEHB interacts with Medicare. Here’s what to know:
Medicare Part A
Medicare Part A, which covers hospital care, is typically premium-free if you paid Medicare taxes while working. Most retirees choose to enroll in Part A at age 65 because it can supplement your FEHB coverage, and it doesn’t come with an additional premium.
Medicare Part B
Medicare Part B, which covers outpatient care, is optional and comes with a premium. Whether you need Part B will depend on your health needs and how comprehensive your FEHB plan is. In many cases, retirees who keep their FEHB coverage don’t need Medicare Part B, but it may reduce out-of-pocket costs if you face frequent medical expenses.
Medicare Part D
Medicare Part D covers prescription drugs. FEHB plans usually have solid drug coverage, so adding Part D may not be necessary. However, if your FEHB plan’s drug coverage is minimal, you might consider Part D to limit your prescription costs.
Balancing FEHB Premiums in Retirement
In retirement, managing your monthly expenses becomes crucial, and FEHB premiums will be a significant part of that. Here are a few tips on how to handle them:
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Budget for Premiums: Premiums can be higher in retirement if your income isn’t as flexible as it was during your working years. Make sure to account for the premiums of both FEHB and Medicare Part B if you choose both.
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Review Plans Annually: FEHB premiums can change annually, so reviewing your plan during each Open Season (which typically runs from mid-November to mid-December) is essential. By comparing plans, you might find an option that provides similar benefits at a lower premium.
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Consider Switching Plans After Major Life Events: Health needs can change after significant events like surgery, diagnosis of a chronic condition, or even the addition of Medicare. You may want to reevaluate your plan in response to these changes.
Take Advantage of Open Season
The annual FEHB Open Season is an ideal time to assess your healthcare needs. You can change plans during this period, allowing you to respond to premium changes or shifts in your healthcare needs. For retirees, Open Season generally happens in the fall. Take this opportunity to compare options, weigh any changes in plan structure, and switch if it’s in your best interest. Don’t miss this once-a-year chance to adjust your benefits for the upcoming year.
Making FEHB Work with Medicare in Later Retirement Years
After age 65, your FEHB benefits can work as secondary coverage if you also have Medicare Parts A and B, which can help cover some of your out-of-pocket costs. In many cases, Medicare will pay first, and FEHB will cover additional expenses that Medicare doesn’t, like deductibles and copayments. This coordination can be beneficial as healthcare needs increase over time.
Take Advantage of Health Reimbursement Arrangements (HRA)
For some retirees, an HRA can provide additional financial support to cover healthcare costs. HRAs are employer-funded accounts that help cover qualified medical expenses. If you qualify, these funds can be a great way to handle out-of-pocket costs that your FEHB and Medicare plans don’t cover. Although HRAs are more commonly seen in certain FEHB plans, it’s worth investigating if you have this option available.
Avoid Overlapping Coverage
Retirees sometimes end up with overlapping coverage that results in unnecessary costs. For instance, if your FEHB plan has strong drug coverage, adding Medicare Part D may not be needed and could just add to your premiums. Similarly, if your FEHB plan provides sufficient outpatient coverage, Medicare Part B might not be necessary for you. By assessing your coverage annually, you can make sure you’re not paying for benefits you don’t need.
Consider the Long Term
As you enjoy your retirement years, remember to think long-term. While your healthcare needs today may seem manageable, they can change as you get older. Maintaining comprehensive coverage through a combination of FEHB and Medicare (if applicable) can help you handle rising healthcare costs and any unexpected health needs that may arise. Your FEHB benefits are a significant part of your retirement package, so take full advantage of them to secure peace of mind and financial security.
Make the Most of Your FEHB Coverage in Retirement
Your FEHB coverage is a valuable asset in retirement, providing security and flexibility to meet your healthcare needs. By understanding your options, coordinating with Medicare wisely, and staying informed about plan changes during Open Season, you can make strategic choices that maximize your benefits. FEHB, combined with Medicare, can help you create a strong healthcare foundation that keeps you protected as you enjoy your retirement years.
