The increase in healthcare costs has made finding the ideal healthcare plan and insurance coverage for retirement a necessity. Typically, federal employees have Medicare as an integral part of their retirement healthcare plan.
Medicare enrollment starts three months before your 65th birthday, and for most, it’s more of choice than a requirement. The only people required to enroll for Medicare at 65 are those under the military healthcare program called TRICARE. They are required to register for Medicare Parts A and B or lose their TRICARE insurance.
Medicare has four parts; A, B, C, and D. Most federal employees choose parts A and B. Part C and D are less popular because C restricts which healthcare an individual can choose, and D is for prescription drugs already covered in FEHB.
Medicare Part A
Medicare part A is premium-free for anyone who has been contributing to Medicare for the past ten years. Which will be almost everyone since Medicare is removed from paychecks at the source.
Part ‘A’ covers inpatient hospital care, surgeries, hospice care, lab tests, and skilled nursing care. It’s recommended that everyone enrolls for Medicare part A. If you are already withdrawing Social Security, you don’t have to apply, as you’ll automatically be enrolled in the scheme. Otherwise, you have to enroll to enjoy the benefits.
Medicare Part B
Unlike Part A, Medicare Part B isn’t free. For most people, it costs a premium of $144 as of 2020 and can be potentially higher for those with a more substantial income.
This part of Medicare covers retirement healthcare providers, medical equipment, outpatient care, home healthcare, and other preventive services.
For those already withdrawing social security, the premium is deducted directly from their social security check, while those who haven’t started withdrawing have to make direct payments to Medicare.
It’s important to note that enrolling for Medicare will not lower your FEHB premium. However, for those enrolled in FEHB who are above 65 have retired, there will be a 10% increase in FEHB premium every year they wait to enroll for Medicare. This means that if you retire at 65 and refuse to enroll for Medicare at 68, your FEHB premium will increase by 30 percent.
Individuals who are still working at 65 won’t face any penalty for not enrolling in Medicare.
Combining Medicare Part B and FEHB
Since there almost no downsides to enrolling in Medicare Part A. The real issue for most federal workers is how they can best coordinate FEHB and Medicare Part B.
Here are three combinations that can help.
1. Keep FEHB, But Don’t register For Medicare Part B
It’s very straight forward. If you aren’t already withdrawing from your social security, then don’t register for Medicare. If you are already withdrawing from your social security, write to Medicare to cancel your subscription and continue paying your FEHB premiums.
2. Enroll in Medicare Part B, but drop FEHB
This may be the right solution for most people; however, it has several downsides. Firstly, you can’t come back to FEHB after you leave the program, even if you are in perfect health condition. Also, most providers are less likely to accept Medicare-only patients. Medicare pays providers lower rates, and providers want to collect their full prices.
Additionally, Medicare Part B only covers 80% of medical expenses. While 20% may look small, it can be a lot for high medical costs.
3. Enroll in Medicare Part B and Keep FEHB
This combination is quite expensive, as you’ll have to pay a premium for FEHB and Medicare Part B. But, it comes with a lot of advantages, so it’s essential to weigh the costs and benefits when making a decision.
Since Medicare only cover 80% of healthcare expenses, FEHB would act as secondary insurance coverage and cover the rest. Another advantage is that when you have any health issue that’s not covered by Medicare Part B, FEHB will act as the primary insurance and cover it.
Conclusion
Although healthcare costs have increased drastically, the insurance you choose will always have to do with the level of risk you can take. If you can take more risk, you don’t need to pay more for health insurance coverage.
However, if it makes more sense to transfer the risk to insurance companies, you should pay what’s required to ensure you will get sufficient cover.
