Federal employees have access to robust insurance options, but getting the most out of these benefits requires informed decision-making. Image: JohnKwan/Shutterstock.com
By: Dallen HawsFederal employees enjoy access to a variety of insurance options designed to meet their unique needs. These include the Federal Employees Health Benefits (FEHB) Program, the Federal Employees’ Group Life Insurance (FEGLI) Program, and coverage for dental and vision through FEDVIP (Federal Employees Dental and Vision Insurance Program). Navigating these programs and selecting the best coverage can feel overwhelming, but understanding the basics can help federal employees make informed decisions that suit their personal circumstances.
Federal Employees Health Benefits (FEHB) Program
The FEHB Program offers one of the most comprehensive health insurance systems available. With a wide array of plans, employees can choose the option that best meets their medical and financial needs. However, making the right choice requires careful consideration of costs, benefits, and potential health needs.
Key Considerations When Choosing an FEHB Plan
1. Total Costs: Most federal employees prioritize total costs, including premiums, deductibles, copays, and coinsurance. It’s important to look beyond the monthly premium and consider the yearly out-of-pocket maximums. This ensures coverage for both routine and unexpected medical expenses.
2. Provider Networks: Verify whether your preferred doctors, hospitals, and specialists are part of the plan’s network.
3. Catastrophic Coverage: Review each plan’s “Most You Could Pay in a Year” figure. This reflects the worst-case scenario for out-of-pocket expenses and helps gauge the financial protection a plan offers.
4. Plan Changes: FEHB plans adjust their benefits annually. For instance, a plan may add or remove coverage for treatments such as acupuncture or alter prescription drug formularies. Reviewing these changes during Open Season ensures your plan still meets your needs.
5. High Deductible Health Plans (HDHPs) with Health Savings Accounts (HSAs): These plans can be cost-effective for active employees. HSAs allow participants to set aside tax-advantaged funds for medical expenses, which can grow over time if unused.
6. Merging Well With Medicare: When you start applying for Medicare (usually around age 65) some FEHB plans will reimburse you to sign up for Medicare part B. This can save federal employees thousands of dollars over time.
Importance of Shopping Around
Federal employees often remain with the same plan year after year, but this can result in missed opportunities to save money or gain better benefits. By comparing plans annually, you may find options that better suit your evolving needs. Fortunately, both the Checkbook and OPM plan comparison tools are available to help make the task easier. Check with your employer to see if they pay for a Checkbook account (some agencies do).
Federal Employees’ Group Life Insurance (FEGLI)
FEGLI is the largest group life insurance program in the world, offering basic and optional coverage for federal employees and their families. While it provides valuable protection, understanding its structure and costs is key to maximizing its benefits.
Understanding FEGLI Coverage
1. Basic Coverage: Automatically provided unless waived, this covers an employee’s annual basic salary rounded up to the nearest $1,000, plus an additional $2,000. The government subsidizes a portion of this cost, making it affordable.
2. Optional Coverage:
○ Option A: Provides a flat $10,000 of additional coverage.
○ Option B: Allows employees to purchase coverage equal to 1-5 times their annual salary (rounded to the nearest $1,000).
○ Option C: Offers coverage for a spouse and eligible dependent children, with multiples of $5,000 for the spouse and $2,500 per child.
Adjusting Coverage
Employees can elect or modify FEGLI coverage during certain life events, such as marriage, the birth of a child, or divorce, or during rare FEGLI open seasons. However, increasing coverage outside these opportunities requires medical underwriting.
FEGLI in Retirement
To retain FEGLI in retirement, employees must meet certain criteria, including being enrolled for the five years prior to retirement. Retirees can choose different reduction options (75%, 50%, or no reduction) for basic coverage, which impacts the premiums they pay in retirement.
Federal Employees Dental and Vision Insurance Program (FEDVIP)
FEDVIP offers additional coverage for dental and vision care, which are not included in FEHB plans. These optional benefits can be invaluable for maintaining oral and visual health. However, this insurance is not perfect for everyone.
While FEHB benefits are largely subsidized by the government, FEDVIP requires employees to pay the full cost of their dental and vision insurance. This makes FEDVIP less competitive compared to FEHB, offering fewer advantages in terms of cost savings.
FEDVIP covers most dental and vision needs, though high-cost procedures like crowns may not always be fully covered. For individuals with limited dental or vision needs, exploring alternatives like Health Savings Accounts (HSA) or Flexible Spending Accounts (FSA) may be more cost-effective. These accounts are tax-efficient for covering health expenses.
FEDVIP provides flexibility in retirement, as it does not require a 5-year holding period like FEHB. However, FEDVIP can only be retained in retirement if the employee opts for an immediate retirement, where they receive their Federal Employees Retirement System (FERS) pension immediately. Deferred retirement does not offer this option, as FEDVIP is only available once pension payments commence.
Employees should check their Leave and Earning Statement (LES) to confirm their FEDVIP coverage and evaluate whether it aligns with their specific dental and vision needs.
Maximizing Your Insurance Benefits
Review Regularly
Federal employees should take advantage of Open Season each year to review their FEHB, FEGLI, and FEDVIP plans. Changes in personal circumstances, health needs, or plan offerings may necessitate updates to your coverage.
Consider Alternatives
For life insurance, alternatives like private term or whole life policies may provide better rates or tailored benefits as you age. Similarly, private dental and vision insurance may sometimes offer more comprehensive coverage at competitive prices.
Keep Beneficiaries Updated
Ensuring that beneficiary designations are current is crucial for FEGLI and other benefits. Outdated information can lead to unintended outcomes, such as proceeds going to an ex-spouse.
Federal employees have access to robust insurance options, but getting the most out of these benefits requires informed decision-making. By understanding the nuances of FEHB, FEGLI, and FEDVIP, and regularly reviewing and updating your coverage, you can ensure your insurance aligns with your needs and provides the financial protection you and your family deserve.
Dallen Haws is a Financial Advisor who is dedicated to helping federal employees live their best life and plan an incredible retirement. He hosts a podcast and YouTube channel all about federal benefits and retirement. You can learn more about him at Haws Federal Advisors.
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