Healthcare costs can be unpredictable and typically rise later in age, making health insurance coverage a critical part of a strong retirement plan. Federal employee health insurance options in retirement are unique, thanks to the Federal Employees Health Benefits Program (FEHBP). Unlike many private-sector plans, FEHBP coverage can continue into retirement, provided employees meet eligibility requirements.
However, Feds are often confused by the range of plan options and the logistics of transitioning from active employee plans to retirement plans. Making well-informed choices can help Feds ensure reliable access to quality healthcare coverage, allowing them to manage medical expenses in retirement without significantly depleting their savings. Taking the time to review Federal employee health insurance retirement options early can help you get coverage that aligns with your needs.
Understanding Federal Employee Health Insurance (FEHBP)
FEHBP is a federally managed health insurance program created specifically for federal employees, retirees, and their families. It’s designed to provide affordable, comprehensive coverage for routine care, emergency services, prescription medications, and preventive services. By maintaining FEHBP coverage into retirement, Feds can receive consistent health benefits and minimize unexpected out-of-pocket expenses.
FEHBP enrollment for retirees requires Feds to have at least five consecutive years of coverage before their retirement date. Once enrolled as a retiree, you can choose from three types of coverage:
- Self Only: Covers only the retiree.
- Self Plus One: Covers the retiree and one eligible family member, such as a spouse or dependent.
- Self and Family: Covers the retiree and multiple eligible family members.
You can review and adjust coverage during Open Season, which typically runs from mid-November to mid-December each year. Options include choosing a new plan or changing the existing one based on current health needs or financial goals. Retirees who are eligible for Medicare can also use Open Season to adjust their FEHBP plan in a way that best complements their Medicare coverage. For example, many retirees choose plans that reduce out-of-pocket costs when paired with Medicare Parts A and B.
Outside of Open Season, you can only change your plan if you experience a qualifying life event, such as marriage or the birth of a child. Compared to active employees, retirees have fewer options to adjust coverage outside of Open Season.
Key Considerations When Choosing a Plan
The variety of choices within the FEHBP can be overwhelming, especially when transitioning to retirement. However, focusing on a few key steps can make it easier to find a plan that fits your healthcare needs and financial goals.
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- Assess Your Healthcare Needs
Begin by considering your health and any existing conditions. For example, if you expect frequent doctor visits, ongoing treatments, or specialized care, plans with lower copayments and comprehensive provider networks may help keep expenses in check. Also, consider how often you may need routine care versus emergency services, as some plans may have higher costs for out-of-network emergency visits.
- Understand Out-of-Pocket Costs
Choosing the plan with the lowest premium doesn't always mean you're getting the best deal. As you evaluate plans, check each of these variables:
- Premiums: Monthly payments for coverage. Plans with lower premiums often have higher deductibles, so it's important to balance premium costs with how often you expect to use healthcare services.
- Deductibles and copays: Deductibles are the out-of-pocket expenses before insurance kicks in. After meeting the deductible, you may still have copays (fixed fees for services).
- Out-of-pocket maximums: The maximum amount you’ll pay annually before the plan covers 100% of your costs. Plans with higher out-of-pocket maximums could lead to unexpected expenses if you experience significant medical needs.
- Evaluate Coverage Options
Choosing a healthcare plan typically requires finding a balance between costs and benefits. As you evaluate your options, consider:
- Plan levels: FEHBP offers different coverage levels, such as high, standard, and premium options. High options may offer more extensive networks and lower out-of-pocket costs but often come with higher premiums.
- Provider networks: If you prefer specific doctors or specialists, check that they’re included in your plan’s network. Going out of network can result in higher costs or reduced coverage.
- Prescription drug coverage: Review the prescription drug benefits for each plan, especially if you or family members take regular medications. Some plans may cover more medications or offer lower copayments on brand-name drugs.
If you’re planning to cover a spouse or dependents, don’t forget to consider their medical needs when selecting a plan.
Retirement and the Transition Period
Ideally, Feds should start planning for retirement a few years before the anticipated retirement date. When you retire, your health coverage through FEHB will automatically transition from an active employee plan to a retiree plan.
FEHBP enrollment for retirees does not require a new application, and coverage remains the same. However, there’s a key change in how premiums are deducted. Instead of coming out of bi-weekly paychecks, premiums will now be taken from your monthly annuity. The change in frequency makes the deduction appear larger, however, the total annual cost remains similar.
To avoid unexpected surprises, check with HR as you near retirement to confirm that your FEHB coverage will carry over seamlessly. After retiring, you’ll still have access to Open Season each year to make changes to your plan or update covered family members as needed.
Additional Resources and Support
The Office of Personnel Management (OPM) offers a wealth of information for Feds, including guidance on FEHB options, eligibility requirements, and updates to health coverage policies. The OPM also hosts annual retirement seminars and workshops, which can help you stay up to date on any changes and learn more about making a smooth transition into retirement.
For a detailed comparison of FEHB plans, consider using Consumer’s Checkbook, a software tool that’s excellent for creating side-by-side comparisons of FEHB healthcare plans. With the code stwserve, you can get 20% off the already affordable service at checkbook.org.
Finally, consider consulting with a financial planner or health insurance advisor for advice that’s tailored to your specific circumstances. The team at Serving Those Who Serve is here to provide you with personalized guidance. Reach out to [email protected] to learn more.
The information has been obtained from sources considered reliable but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of Serving Those Who Serve writers and not necessarily those of RJFS or Raymond James. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Investing involves risk and you may incur a profit or loss regardless of strategy suggested. Every investor’s situation is unique and you should consider your investment goals, risk tolerance, and time horizon before making any investment or financial decision. Prior to making an investment decision, please consult with your financial advisor about your individual situation. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of RJFS, we are not qualified to render advice on tax or legal matters. You should discuss tax or legal matters with the appropriate professional. **
