Last week I wrote about life insurance in retirement. This week I want to finish this series with an article about the Federal Employees Health Benefits program. My focus will be on the things you need to consider both before and after you retire.
The Five-Year Rule
As a rule, you can only carry your FEHB coverage into retirement if you are currently enrolled in the program and have been enrolled for at least 5 consecutive years. However, there are two exceptions:
• Waiver of the 5-year rule—You can receive a waiver of the 5-year rule if you enrolled in the program at your first opportunity to do so and retire before you have 5 years of coverage. You can also receive a pre-approved waiver if you have fewer than 5 years of coverage and accept an offer of early retirement under the Voluntary Separation Incentive program (VSIP), the Voluntary Early Retirement Authority (VERA) or both. If you retire under one of these authorities, your agency will attach a memorandum to your retirement application stating that you have met the requirements to carry your coverage into retirement.
• Individual Waivers—If you aren’t eligible for the two waivers mentioned above, you may request a waiver from OPM. Requests will be judged on a case-by-case basis and decided on their merits. However, because it has little leeway, OPM rarely grants such waivers. OPM may only grant a waiver when it would be against equity and good conscience not to do so.
Temporary Continuation of Coverage
If you aren’t eligible to keep your FEHB coverage when you retire, you’ll receive a premium-free 31-day extension of coverage. After that you can drop your coverage, convert to an individual contract with your current plan at your own expense or elect to be covered under the Temporary Continuation of Coverage provision. Under TCC you can keep your FEHB coverage for up to 18 months if you are willing to pay the full premiums plus 2 percent to cover administrative costs.
FEHB and Medicare
Your FEHB coverage will continue to be primary unless you are eligible for Medicare. Then it will become secondary. Because contributions for Medicare Part A (hospital insurance) were deducted from your pay while you were an employee, at age 65 you’ll automatically be enrolled in it. However, enrolment in Medicare Part B (medical insurance) is optional. If you decide to enroll in it, you’ll have to pay the full premiums for that coverage. Whether that additional coverage is worth the cost is something you’ll have to decide.
FEHB, Tricare and CHAMPVA
If you are a Medicare-eligible uniformed service retiree and are eligible to enroll in Tricare for Life or a Medicare-eligible retiree of the Department of Veterans Affairs who is eligible for CHAMPVA coverage, you may decide to enroll in one of those programs and suspend your FEHB coverage. You can always reenroll in the FEHB at the next Open Season. You can immediately reenroll if you are involuntarily dropped from your Tricare or CHAMPVA coverage.
Suspending FEHB coverage
If you are a Medicare-eligible retiree, you can suspend your FEHB enrollment and enroll in a Medicare-sponsored prepaid health plan. If you do that and your plan stops participating, you can reenroll in the FEHB program. By doing that, you won’t lose a day of health benefits coverage. However, if you voluntarily drop your Medicare-sponsored prepaid plan, you won’t be able to reenroll in the FEHB program until the next Open Season.
With the exception of Postal Service retirees, you’ll pay the same premiums in retirement that you did as an employee. Postal Service retirees will pay more. That’s because union agreements have resulted in the Postal Service paying a higher percentage of the premiums for its employees. When Postal Service employees retire, they pay the same premiums as all other federal employees and retirees.
Note: While most employees are eligible for premium conversion, which allows for the pre-tax payment of premiums, retirees aren’t, effectively making the insurance more expensive. The law would have to be changed to allow that.
A closing word
Over the last nine weeks, I’ve explored the retirement system you are in – and if you’re in the right one – what service is creditable and how to calculate your annuity. I finished with a post-retirement series on cost-of-living adjustments, survivor benefits, and life and health insurance.
While I’ve expended hundreds of words on each topic, there are many fine points that were left unexplored. As a wise personnel specialist once said, “In retirement and insurance, there are rules, exceptions to the rules, and variations to the exceptions.” As time goes by, I’ll explore some of these exceptions.