Key Takeaways

• Upon retirement, your health insurance options shift, but federal employees retain important benefits through the Federal Employees Health Benefits (FEHB) program.
• Understanding changes to your premiums, Medicare integration, and coverage options helps you prepare for a seamless transition in retirement.

What’s Changing with Your Health Insurance When You Retire? The FEHB Breakdown

For federal employees and retirees, health insurance is a critical component of retirement planning. The Federal Employees Health Benefits (FEHB) program provides comprehensive coverage for over 8 million federal employees, retirees, and their families. As you transition from active employment to retirement, the structure of your health insurance changes, but you’ll be pleased to know that many benefits remain intact. However, there are important adjustments you need to be aware of, especially when it comes to premiums, coordination with Medicare, and continuing coverage.

What Happens to FEHB When You Retire?

One of the greatest perks of federal employment is the ability to carry your FEHB health insurance into retirement. If you meet eligibility requirements—enrolled for the five years before retirement and retired on an immediate annuity—you can continue your FEHB coverage for life. Unlike many private-sector employees who may lose their employer-sponsored coverage upon retirement, federal retirees can enjoy a smooth transition without searching for a new health plan.

Premiums and Payment Adjustments

As a federal retiree, you will continue paying health insurance premiums, but with one key change: instead of payroll deductions, your premiums will be automatically deducted from your retirement annuity. The premium structure remains the same—there are no increases specifically because of retirement—but you may notice that your share of the premium can change depending on the plan you choose during the annual Open Season.

Additionally, the government continues to contribute approximately 70-75% toward your FEHB premium, just as it did while you were actively employed. This helps keep the cost of health insurance manageable, especially when compared to those purchasing individual coverage in the open market.

How Does Medicare Work with FEHB in Retirement?

When federal retirees become eligible for Medicare at age 65, one of the most common questions is how Medicare and FEHB work together. Unlike private-sector health plans that may require retirees to transition solely to Medicare, the FEHB program allows you to maintain your FEHB coverage, even after enrolling in Medicare. But it’s important to understand the coordination of benefits between the two programs.

Should You Enroll in Medicare Part B?

One of the biggest decisions federal retirees face is whether to enroll in Medicare Part B (which covers outpatient services). Medicare Part A, which covers hospital stays, is typically premium-free for most retirees, but Medicare Part B comes with a monthly premium. Here’s where the coordination comes into play.

• Medicare as Primary: If you enroll in Medicare Part B, Medicare becomes your primary insurer, and FEHB functions as secondary coverage. This means that Medicare pays first for your outpatient care, and FEHB covers any remaining costs.

• FEHB Alone: If you choose not to enroll in Medicare Part B, your FEHB plan remains your primary insurer. While this saves on the cost of Medicare Part B premiums, you may face higher out-of-pocket costs in the long run, depending on your healthcare needs.

Many federal retirees opt to enroll in both Medicare and keep their FEHB, providing a robust safety net that covers a wide range of services.

Coordination of Benefits

When both Medicare and FEHB are in effect, the coordination of benefits helps minimize your out-of-pocket expenses. Medicare typically covers the majority of approved medical costs, and FEHB picks up the rest, which can include deductibles, copayments, and other expenses not covered by Medicare.

It’s essential to review how your specific FEHB plan coordinates with Medicare to determine the best coverage strategy. Some FEHB plans may waive certain costs, like deductibles and copays, if you are enrolled in both Medicare Parts A and B, making it a cost-effective choice for many retirees.

Can You Change Your FEHB Plan in Retirement?

Yes, retirees have the same flexibility as active employees when it comes to changing their FEHB plan during the annual Open Season. This occurs each year in November and December, allowing retirees to review and adjust their health coverage to better suit their needs in retirement.

It’s important to evaluate whether your current plan still meets your health needs and budget. Some retirees opt to switch to lower-cost plans, particularly if they have robust Medicare coverage. Others may want to shift to a plan with lower out-of-pocket costs if they anticipate more medical care in the upcoming year.

Outside of Open Season, changes can be made under specific circumstances known as qualifying life events (QLEs), such as moving to a different coverage area or experiencing a significant life change like the death of a spouse.

What About Your Spouse’s Coverage?

FEHB plans also provide options for covering your spouse in retirement. If your spouse was covered under your FEHB plan while you were actively employed, they can continue their coverage into your retirement. This can be especially important if your spouse does not have access to their own employer-sponsored retiree health benefits.

It’s crucial to note that if your spouse is also a federal employee, they will need to decide whether to carry their own FEHB coverage or remain on your plan after retirement. You can switch between individual and family plans during Open Season to adapt to changing needs, such as if your spouse gains or loses eligibility for other coverage.

Dental and Vision Coverage After Retirement

In addition to health coverage, many federal employees also participate in the Federal Employees Dental and Vision Insurance Program (FEDVIP). Like FEHB, retirees can continue their FEDVIP coverage, though it operates as a separate enrollment and is not automatically carried over into retirement.

FEDVIP Considerations

FEDVIP provides dental and vision benefits that can be important in retirement, especially if Medicare does not cover these services. For example, while Medicare typically excludes dental care, you can rely on your FEDVIP plan to cover routine dental visits, cleanings, and other necessary treatments.

Enrollment in FEDVIP during Open Season or due to a qualifying life event allows retirees to continue receiving vision exams, corrective eyewear, and dental treatments—services that become more essential as we age.

Additional Benefits and Considerations

While health coverage is the most significant component of your retirement benefits, there are additional factors to consider when managing your healthcare costs and overall well-being.

Health Savings Accounts (HSA) and Retirement

For those who participated in a High Deductible Health Plan (HDHP) with a Health Savings Account (HSA) while employed, understanding the role of these accounts in retirement is crucial. Once you enroll in Medicare, you can no longer contribute to an HSA, but you can continue to use the funds accumulated for qualified medical expenses. These accounts offer a tax-advantaged way to pay for out-of-pocket medical costs in retirement, so it’s a good idea to manage these funds wisely.

Long-Term Care Insurance

As healthcare needs evolve, long-term care may become an important consideration for retirees. While FEHB does not cover long-term care services, the Federal Long Term Care Insurance Program (FLTCIP) is available to federal employees and retirees. This program helps cover the cost of extended care services like nursing homes, assisted living, and in-home care, which Medicare and FEHB typically do not cover.

Retirees should evaluate their potential need for long-term care insurance early in retirement, as premiums for these policies increase with age.

Plan Ahead for a Healthier Retirement

Navigating health insurance in retirement can seem overwhelming, but understanding the nuances of FEHB, Medicare, and other benefits helps ensure that you have the right coverage in place. Planning ahead, particularly around Medicare enrollment and Open Season options, will save you from unexpected expenses and provide you with the security needed to enjoy a comfortable retirement.

Maintaining both FEHB and Medicare can provide federal retirees with comprehensive coverage that protects their financial well-being while allowing them to access high-quality care. It’s important to review your options regularly to ensure your health coverage is aligned with your evolving healthcare needs.

Secure Your Future Health Coverage

The transition to retirement is a significant life change, but it doesn’t mean leaving your valuable health benefits behind. With careful planning and by staying informed about your FEHB, Medicare, and other related programs, you can continue to enjoy the benefits of federal employee health insurance well into retirement. Make the most of annual Open Season periods and don’t hesitate to reach out to a licensed insurance agent for personalized advice tailored to your situation.