How Does FEHB Work With Medicare Coverage?

Federal employees and retirees often balance their Federal Employees Health Benefits (FEHB) Program coverage with Medicare eligibility. Understanding how these two comprehensive health insurance programs interact is a common concern. This article clarifies their roles and how they can work together to maximize coverage and manage costs.

Understanding FEHB and Medicare

The Federal Employees Health Benefits (FEHB) Program provides healthcare benefits to millions of federal civilian employees, retirees, and their families. It offers a wide array of health insurance plans from various carriers, including fee-for-service, health maintenance organizations (HMOs), and high-deductible plans. Participants select options based on location and needs, with the government contributing a significant portion of premiums.

Medicare is a federal health insurance program primarily for individuals aged 65 or older. Younger people with certain disabilities or End-Stage Renal Disease (ESRD) may also qualify. It consists of different parts, each covering specific services.

Medicare Part A, or Hospital Insurance, helps pay for inpatient care in hospitals, skilled nursing facilities, and hospice. It is often premium-free for those who have paid Medicare taxes for at least 10 years. Medicare Part B, Medical Insurance, covers services from doctors, outpatient care, durable medical equipment, and some preventive services, typically requiring a monthly premium.

Medicare Part C, known as Medicare Advantage, is an alternative to Original Medicare (Parts A and B) offered by private companies. These plans bundle various coverage types, often including prescription drugs and additional benefits like vision or dental. Medicare Part D provides prescription drug coverage and is also offered by private companies, helping to cover medication costs.

Coordinating Benefits Between FEHB and Medicare

When an individual has both FEHB and Medicare, the coordination of benefits determines which plan pays first. The rules depend on the beneficiary’s employment status.

For active federal employees, their FEHB plan generally acts as the primary payer, meaning it pays for services first. Medicare, if enrolled, would then be the secondary payer. Conversely, for retired federal employees who are enrolled in both Medicare Parts A and B, Medicare typically becomes the primary payer. The FEHB plan then functions as the secondary payer, covering remaining costs like deductibles, co-payments, and co-insurance.

FEHB plans supplement Medicare by covering costs Medicare does not, such as deductibles, co-payments, and co-insurance. This “wraparound” benefit significantly reduces out-of-pocket expenses for retirees. FEHB plans also cover services not typically covered by Medicare, like overseas emergency care, dental, or vision care.

Regarding prescription drug coverage, FEHB plans are generally considered “creditable coverage” for Medicare Part D. This designation means the FEHB drug coverage is at least as good as Medicare’s standard Part D benefit. This eliminates the need for most federal retirees to enroll in a separate Medicare Part D plan and can prevent late enrollment penalties if they later decide to enroll in Part D.

Federal employees and retirees typically do not enroll in a Medicare Part C (Medicare Advantage) plan in addition to their FEHB coverage. Medicare Advantage plans replace Original Medicare (Parts A and B) and often include Part D coverage. If an individual enrolls in a Medicare Advantage plan, it usually changes FEHB’s role, and in many cases, FEHB may become redundant or can be suspended.

Making Enrollment and Coverage Decisions

For federal employees working past age 65, it is generally advisable to enroll in Medicare Part A when first eligible. Delaying enrollment in Medicare Part B, which has a monthly premium, is often possible without penalty if still actively working and covered by an employer group health plan like FEHB. A Special Enrollment Period (SEP) allows enrollment in Part B without penalty once employment ends or group health coverage based on current employment ceases.

When considering Medicare Part B enrollment, federal retirees should evaluate how it affects their out-of-pocket costs, access to providers, and overall value when combined with FEHB. While FEHB provides substantial coverage, Part B can fill in gaps for outpatient medical care, preventive services, and physician services, especially when Medicare becomes the primary payer in retirement. Some FEHB plans may also waive certain deductibles, co-payments, and co-insurance for those who also have Medicare Part B.

Having Medicare can influence the choice of an FEHB plan. Some FEHB plans might offer specific benefits or have lower out-of-pocket costs for members who also have Medicare. Retirees might consider switching to an FEHB plan that “wraps around” Medicare effectively, potentially leading to lower overall expenses.

The process for applying for Medicare Parts A and B is handled by the Social Security Administration (SSA). Individuals can apply online, by phone, or in person at a local SSA office. It is important to inform your FEHB plan once you or a covered family member enrolls in Medicare to ensure proper coordination of benefits.

Analyzing the Financial Impact

While FEHB premiums continue in retirement, the addition of Medicare Part B introduces another monthly premium. For 2025, the standard Medicare Part B premium is $185 per month. Individuals with higher incomes may also be subject to an Income-Related Monthly Adjustment Amount (IRMAA) for both Medicare Part B and Part D. This means they pay a higher premium based on their modified adjusted gross income from two years prior. For instance, in 2025, if an individual’s 2023 income exceeded $106,000, they would likely pay an IRMAA.

Despite the added premium for Medicare Part B, combining FEHB and Medicare can significantly reduce overall out-of-pocket expenses. When Medicare acts as the primary payer, it covers a substantial portion of healthcare costs, such as 80% of eligible outpatient medical expenses under Part B. The FEHB plan then functions as the secondary payer, often covering the remaining 20% co-insurance, deductibles, and co-payments that Medicare does not. This coordination can lead to very limited out-of-pocket costs for covered services.

The financial advantage extends beyond just cost-sharing. For many retirees, having both coverages means they do not need to purchase a separate Medicare supplemental insurance (Medigap) policy. FEHB effectively fills similar gaps in Medicare coverage, which can result in considerable savings since Medigap plan premiums can be substantial.