Key Takeaways
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FEHB premiums are not fixed and often rise annually, sometimes outpacing cost-of-living adjustments (COLAs) in retirement.
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Planning for long-term affordability requires understanding the trends, timing, and potential strategies to soften the financial impact over decades.
The Nature of FEHB Premium Increases
When you retire under the Federal Employees Health Benefits (FEHB) Program, your coverage doesn’t end—but its cost doesn’t stay still either. Each year, the Office of Personnel Management (OPM) announces updated premium rates that typically take effect on January 1. As of 2025, the average increase for FEHB enrollees stands at 13.5%, with some plans seeing even steeper hikes.
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Rising healthcare delivery costs
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Expanded coverage for new treatments
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Shifting demographics within the insured population
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Broader economic factors like inflation
In other words, the FEHB program remains generous, but it’s not immune to the rising cost of healthcare nationally.
Why It Matters in Retirement
As a retiree, your premium contributions no longer benefit from the pre-tax advantage active federal employees enjoy. That means you pay your FEHB premiums with after-tax dollars, and that alone can make these increases sting more.
Additionally, you’re no longer drawing a regular paycheck. Instead, your budget is anchored in fixed income sources:
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Your FERS or CSRS annuity
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Social Security benefits (if eligible)
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Distributions from the Thrift Savings Plan (TSP) or other savings
When premiums rise faster than your income sources—especially during years with low or no COLAs—it gradually chips away at your purchasing power.
Understanding the Timing of Increases
FEHB premium adjustments are typically announced in the fall (September or October) and implemented at the beginning of the calendar year (January 1). These are synchronized with Open Season, which usually takes place from mid-November to mid-December.
This timing gives you:
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A chance to review your plan’s changes (including premiums, deductibles, coinsurance, and provider networks)
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An opportunity to switch plans or coverage types
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A narrow window to adjust your retirement budget for the following year
It’s essential to use this window proactively. Don’t just glance at the premium line—review the full plan brochure and look at total cost implications.
Budgeting Beyond the Current Year
If you’re only planning for one year at a time, you’re vulnerable to being blindsided. FEHB premiums have historically trended upward, and there’s no indication that will change in the coming decades.
Consider this when budgeting:
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Historic Trends: Over the past 10 years, average annual FEHB premium increases have ranged from 5% to 13%, with occasional spikes above that.
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Compounding Effect: Even modest increases add up quickly when compounded over 10, 20, or 30 years.
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Fixed vs. Variable Income: Your annuity may grow slowly with COLAs, but FEHB premiums can grow faster.
A conservative rule of thumb is to assume a 6–7% annual increase in healthcare costs when projecting your future budget.
Cost-Sharing Shifts That Hit Your Wallet
FEHB increases don’t always come in the form of premiums alone. Many plans also revise their cost-sharing terms:
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Deductibles: These may rise annually and can vary based on plan type and enrollment tier.
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Coinsurance: Some plans increase the percentage you pay for outpatient services, specialty care, or prescription drugs.
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Copayments: Amounts for primary care, urgent care, and emergency visits may change each year.
The impact of these changes can be significant, particularly if you have recurring or chronic medical needs. Be sure to evaluate total out-of-pocket exposure—not just premiums—each year.
How Medicare Enrollment Alters the Equation
Once you become eligible for Medicare—typically at age 65—you’ll face new decisions about how FEHB and Medicare interact. Many retirees choose to enroll in both FEHB and Medicare Part B.
Doing so can:
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Reduce your FEHB plan’s out-of-pocket costs (some plans waive deductibles and reduce coinsurance if you have Part B)
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Provide access to broader provider networks
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Increase your total monthly premium burden when you add the cost of Medicare Part B (which is $185/month in 2025)
However, the long-term cost benefit depends on your health status and the coordination of benefits between FEHB and Medicare. It’s not a one-size-fits-all decision, and your strategy may need to shift over time.
Strategies to Stay Ahead of FEHB Inflation
You can’t stop premium increases, but you can plan for them. Here are several techniques to help you stay ahead:
1. Use Open Season Strategically
Each fall, you should actively compare FEHB plans. Even if you like your current plan, another option may offer similar coverage at a lower cost. Focus on:
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Total yearly costs (premium + deductible + copays)
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Medicare coordination features (if eligible)
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Out-of-pocket maximums
2. Reassess Your Enrollment Tier
Are you on a Self Plus One plan but only covering a spouse who’s now eligible for Medicare? Or on a Self and Family plan when your children have aged out of eligibility? Adjusting your enrollment type could yield substantial savings.
3. Build a Healthcare Reserve Fund
Set aside a portion of your TSP withdrawals or annuity income in a dedicated reserve fund specifically for future premium increases. Target 10–15% of annual healthcare expenses if possible.
4. Consider a High-Deductible Health Plan (HDHP) with HSA (Pre-Retirement Only)
Before retirement, an HDHP paired with a Health Savings Account (HSA) can allow you to save tax-advantaged dollars for use in retirement. Funds roll over year to year and can be used tax-free for qualified medical expenses—including FEHB premiums in retirement.
5. Watch for Annual COLA and Adjust Accordingly
Each December, Social Security and FERS/CSRS annuitants receive notification of the next year’s COLA. Don’t assume it will cover healthcare inflation—review your premium notice and adjust your budget before the new rates go into effect.
How FEHB Interacts with Other Retirement Costs
FEHB is just one of several budget categories you must account for in retirement. Others include:
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Long-term care needs
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Dental and vision (covered separately through FEDVIP)
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Life insurance (FEGLI premiums also rise over time)
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Housing, utilities, and inflation-driven living expenses
An effective retirement income strategy takes a holistic view. That means projecting all of these costs—not just the headline premium—and ensuring your savings and income sources are sufficient over a 20–30 year horizon.
Special Considerations for Survivors and Former Spouses
Don’t overlook the impact of FEHB costs on survivor planning. If you pass away, your spouse’s ability to keep FEHB depends on whether you elected a survivor annuity. If they are eligible to continue coverage, they will take on the full premium cost themselves, which may strain their finances.
Similarly, divorce orders can assign FEHB continuation rights to a former spouse, and the court order will determine who pays premiums. These details matter for long-term affordability—especially when planning your estate or making decisions about annuity reductions.
A Long-Term Plan Pays Off
Planning ahead for FEHB cost increases may seem tedious—but it can make the difference between enjoying a secure retirement and feeling squeezed year after year. Even small adjustments each year—whether it’s switching plans, modifying your budget, or setting aside reserves—can compound into major savings and better peace of mind.
The most important step? Don’t treat your FEHB plan as static. It’s a living part of your financial picture, and it deserves yearly attention.
Protecting Your Retirement Income from Erosion
Rising FEHB premiums aren’t going away, but your ability to handle them doesn’t have to erode with time. By reviewing your plan each year, accounting for likely future increases, and adjusting your retirement income strategy accordingly, you put yourself in a stronger position to weather the ups and downs of healthcare inflation.
If you need help estimating future costs or adjusting your plan, consider getting in touch with a licensed agent on this website for professional advice tailored to your specific retirement goals.
