Retirement & Financial Planning Report

If you are covered by the Federal Employees Health Benefits program, do you still need to be covered by Medicare? Or put another way, if you have Medicare, do you still need to be covered by the FEHB program? After all, Medicare Part A is free – you paid for that coverage while you were employed – and the premiums for plans in the FEHB program keep going up every year. Let’s see.

Medicare Part A only covers hospital costs. In order to get coverage for physicians’ services, you’d have to enroll in Medicare Part B. And every year the premiums for Part B keep going up. For 2021, the monthly premium for an individual with income of $85,000 or less ($170,000 if filing jointly) is nearly $150 a month. The premiums rise for those with higher income.

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So, the question becomes, is the combination of Medicare Part A and B enough? Or, looked at another way, is FEHB coverage coupled with Medicare Part A enough?

FEHB plans and Medicare don’t cover the same things or at the same levels. Each has deductibles or copayments. And neither Medicare Parts A or B provide prescription drug coverage. You can only get that if you enroll in Medicare Part D, which is an additional expense that will grow over time.

So, what are you to do? The consensus of opinion among the experts is that most Medicare-eligible federal retirees only need their FEHB enrollment and premium-free Part A. That’s because this combination of coverage will give them the greatest protection for the least amount of money. Only those with specific needs covered by Part B need to enroll in that. And even fewer need Part D.

Note: Medicare-covered retirees often think their FEHB premiums should be lower because Medicare pays a lot of their bills. However, group health insurance doesn’t work that way. Premiums are based on an average of the costs incurred by all enrollees. Putting employees and retirees in one risk pool carries out the principle that the healthy should underwrite the less healthy. Fragmenting the enrollment pool would result in much lower premiums for some enrollees but skyrocketing ones for others.

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FERS Retirement Guide 2021