Last week I went over the basic rules governing the FEHB program for federal employees. This week I want to focus on how things change when you retire.
First, can I carry my FEHB coverage into retirement?
As a rule you can carry your coverage into retirement if you have been continuously enrolled in the program for the five consecutive years before you retire. However, there are exceptions to that rule. For example, you can still qualify with fewer than five years if you transferred from a position that didn’t provide FEHB coverage to one that does and you retire before completing five years of coverage.
The five-year rule can also be waived in other situations, including the following:
• if you are covered by Tricare or CHAMPVA, that time will count toward the five-year requirement if you are enrolled in an FEHB plan when you retire.
• if you take early optional or discontinued service retirement with or without a buyout.
• when it would be against equity and good conscience not to do so. However, such waivers are exceptionally rare.
What happens with premiums at retirement?
With one notable exception, premium rates stay the same as they while you were working. Here’s the exception. If you are a Postal Service retiree, you’ll pay more for your FEHB coverage than you did while employed. That’s because the lower union negotiated premiums you enjoyed while an employee end when you retire.
Also, for both postal and non-postal retirees, the eligibility to pay premiums with pre-tax money (“premium conversion”) ends at retirement. That effectively makes the premiums more expensive for retirees—how much more expensive will depend on your personal tax situation.
Don’t count on this changing. There have been proposals in past years to make retirees eligible for the tax break but they have never come close to enactment and they haven’t even been actively considered in recent years.
How do FEHB and Medicare Part A relate?
Every federal employee has Medicare Part A (Hospital) deductions taken from his or her pay. If you are retired and eligible for Medicare, usually at age 65, your FEHB benefits won’t be reduced.
If you are covered by Medicare, it will become the primary payer of your medical bills and your FEHB plan will become the secondary payer. However, that’s only true when both provide the same benefit. If Medicare provides a benefit that your plan doesn’t cover, it will be the sole payer. Conversely, if your plan provides a benefit that Medicare doesn’t, it will be the sole payer.
What about Medicare Parts B, C and D?
You paid for Medicare Part A coverage through payroll deductions while you were working. If you want to enroll in Medicare Part B (Medical) and/or Part D (Prescription Drugs), you’ll have to pay for that out of your own pocket.
Medicare Part C (Medicare Advantage Managed Care) is offered through private insurers and is only available to retirees who are enrolled in both Medicare Part A and B. If you do enroll in Medicare Part C, you can suspend your FEHB enrollment. Suspending that coverage rather than cancelling it means that you can reenroll in the FEHB program during any Open Season or at any time if your Part C provider stops offering coverage.