Which FEHB Plan Works Best With Medicare?

Healthcare planning for federal retirees involves understanding how the Federal Employees Health Benefits (FEHB) program interacts with Medicare. Both programs offer significant advantages, and informed decisions are important for continuous, cost-effective medical coverage during retirement. This article clarifies the interplay between FEHB and Medicare, assisting federal retirees in making choices that align with their healthcare needs.

Understanding FEHB and Medicare Coordination

The Federal Employees Health Benefits (FEHB) Program provides health insurance to federal employees, retirees, and their eligible family members. It offers a wide selection of plans from various carriers, providing comprehensive medical and prescription drug benefits.

Medicare is the federal health insurance program for people aged 65 or older, certain younger people with disabilities, and those with End-Stage Renal Disease. It has several parts:
Part A (Hospital Insurance) covers inpatient hospital stays, skilled nursing facility care, hospice care, and some home health care.
Part B (Medical Insurance) covers doctor’s services, outpatient care, medical supplies, and preventive services.
Part D provides prescription drug coverage through private plans.
Part C (Medicare Advantage) is an alternative to Original Medicare (Parts A and B), offered by private companies. These plans often include Part A, Part B, and Part D coverage, plus additional benefits.

When an individual has both FEHB and Medicare, coordination of benefits determines which plan pays first. For federal retirees with Medicare, Medicare generally pays first as the primary payer, and your FEHB plan pays second as the secondary payer. Medicare processes the claim, then the remaining balance is sent to your FEHB plan. Your FEHB plan may then cover services Medicare does not, or a portion of remaining costs like deductibles, copayments, or coinsurance. This coordination can significantly reduce out-of-pocket expenses for services covered by both programs.

If you are actively employed by the federal government and enrolled in FEHB, your FEHB plan is typically the primary payer, and Medicare is secondary. This rule applies unless the employer has fewer than 20 employees or other specific circumstances dictate otherwise. Upon retirement, or if you become eligible for Medicare due to disability and are not actively working, Medicare generally becomes primary.

Key Considerations for Plan Selection

When selecting an FEHB plan to complement Medicare, federal retirees should evaluate several factors. Understanding potential out-of-pocket costs is a primary consideration, encompassing premiums, deductibles, copayments, and coinsurance. While Medicare typically becomes the primary payer, the FEHB plan’s benefit structure determines its coverage of remaining expenses, impacting your financial burden.

Prescription drug coverage is another significant factor. Many FEHB plans offer “creditable coverage,” meaning their drug benefits are at least as good as standard Medicare Part D. If your FEHB plan’s drug coverage is creditable, you generally do not need a separate Medicare Part D plan, avoiding potential late enrollment penalties. However, comparing drug formularies and costs with standalone Part D plans can reveal savings, especially for high-cost medications.

Physician and hospital choice, along with network restrictions, also influence your decision. Some FEHB plans, like Health Maintenance Organizations (HMOs), may require using in-network providers. Fee-for-Service (FFS) plans offer more flexibility. While Medicare allows you to see any doctor or hospital that accepts it, your FEHB plan’s secondary benefits might be limited if you go out-of-network with that specific FEHB plan.

Travel coverage is important for retirees who travel internationally. Medicare generally provides limited coverage outside the U.S., but many FEHB plans offer worldwide coverage for emergency and urgent care. Evaluating international coverage can prevent unexpected medical costs while traveling.

Consider your specific healthcare needs. Retirees with chronic conditions or anticipated surgeries should review how different FEHB plans cover these services after Medicare pays its share. Comparing out-of-pocket maximums and benefit limitations for frequently needed services helps determine the best financial protection and access to care.

Navigating FEHB Plan Types with Medicare

Federal retirees have various FEHB plan types, each interacting uniquely with Medicare. Understanding these interactions helps optimize coverage and manage costs. Primary FEHB plan types include Fee-for-Service (FFS) plans, Health Maintenance Organizations (HMOs), and High Deductible Health Plans (HDHPs) with Health Savings Accounts (HSAs).

Fee-for-Service (FFS) Plans

FFS plans offer broad flexibility in choosing doctors and hospitals. With an FFS plan and Medicare, Medicare usually pays first for covered services. The FFS plan then acts as the secondary payer, often covering Medicare deductibles, copayments, and coinsurance. This can result in very low or no out-of-pocket costs for Medicare-covered services. For example, if Medicare pays 80% of an approved charge, your FFS FEHB plan might cover the remaining 20% coinsurance and the Medicare deductible.

Health Maintenance Organizations (HMOs)

HMOs typically require choosing a primary care physician (PCP) within their network and obtaining referrals for specialists. When an HMO is combined with Medicare, Medicare remains the primary payer for Medicare-covered services. The HMO then acts as the secondary payer, usually covering remaining costs for in-network services. If you receive care outside the HMO’s network, the HMO may not cover those services, even if Medicare pays first, unless it’s an emergency.

High Deductible Health Plans (HDHPs)

HDHPs feature lower premiums but require a higher deductible before the plan pays for covered services. These plans are often paired with a Health Savings Account (HSA), allowing tax-free savings for healthcare expenses. With an HDHP and Medicare, Medicare pays first, and the HDHP pays second. The HDHP’s deductible must still be met for services not covered by Medicare, or where the HDHP is paying secondary.

However, once enrolled in any part of Medicare (A, B, or C), you are no longer eligible to contribute to an HSA. You can still use existing HSA funds for qualified medical expenses, including Medicare premiums (excluding Medicare Advantage premiums), deductibles, copayments, and coinsurance. Existing HSA funds remain a valuable resource.

Enrolling in Medicare

Enrolling in Medicare involves specific eligibility requirements and enrollment periods. Most individuals become eligible for Medicare Part A and Part B at age 65 if they are U.S. citizens or legal residents living in the U.S. for at least five years. Premium-free Part A eligibility is generally met if you or your spouse paid Medicare taxes through employment for at least 10 years.

The Initial Enrollment Period (IEP) for Medicare is a seven-month window: three months before, the month of, and three months after your 65th birthday. During this time, you can sign up for Part A and/or Part B. Not signing up for Part B during your IEP, if not covered by an employer group health plan, may result in a late enrollment penalty.

If working past age 65 and covered by an employer group health plan, you may qualify for a Special Enrollment Period (SEP) to sign up for Part B without penalty. This SEP lasts eight months after employment or group health coverage ends. For those who miss their IEP and do not qualify for an SEP, the General Enrollment Period (GEP) runs from January 1 to March 31 annually, with coverage starting July 1.

To enroll in Medicare Part A and Part B, apply online via the Social Security Administration (SSA) website, visit a local SSA office, or call the SSA. You will typically need to provide your Social Security number, birth certificate, and potentially proof of U.S. citizenship or legal residency. If you are applying based on your spouse’s work record, you may need their information as well.

Enrollment in Medicare Part D (prescription drug coverage) is handled through private insurance companies. You can enroll during your IEP, the annual Medicare Open Enrollment Period (October 15 to December 7), or certain SEPs. Failure to enroll in Part D or have creditable drug coverage for 63 days or more after your IEP can result in a late enrollment penalty.

Making Changes to FEHB Enrollment

Federal retirees may need to adjust their FEHB coverage after Medicare enrollment decisions. The primary opportunity for changes is during the annual Open Season, typically mid-November to mid-December. During this period, you can change your FEHB plan, option (e.g., Self Only, Self Plus One, Self and Family), or cancel enrollment. Changes made during Open Season become effective the following January.

Beyond Open Season, Qualifying Life Events (QLEs) allow changes outside the regular enrollment period. These include changes in family status (marriage, divorce, birth/adoption, death of a family member) or employment status (returning to duty, gaining/losing other health insurance).

To change your FEHB plan during Open Season or due to a QLE, access the enrollment system via the Office of Personnel Management (OPM) website or submit a required form to your employing agency’s human resources office or OPM if you are a retiree. The form requires personal details, current enrollment information, and desired changes.

Review the plan’s brochure for the upcoming year to ensure it aligns with your Medicare coverage and healthcare needs. After submitting your election, you should receive a confirmation of your changes. It is advisable to retain copies of all submitted forms and confirmations for your records.