Federal Annuitants over Age 65

FEHB Open Season ends December 12th and Open Enrollment for Medicare ends on the 7th

FEDZONE Ed Zurndorfer

Edward A. Zurndorfer

The 2022 benefits “open season” started on November 14, 2022 and will conclude December 12, 2022. During the federal benefits “open season” federal employees and retirees decide about their health, dental and vision insurance for the next plan year. The next plan year starts January 1, 2023. If employees and annuitants are satisfied with their current insurance plans, they need not take any action. But if they want to make any changes including enrollment, disenrollment and changing health, dental and vision insurance plans, they must act between now and December 12, 2022.

There is another “open season” that started October 15, 2022 and will conclude December 7, 2022. That “open season” is the Medicare Open Enrollment Period (OEP) in which Medicare beneficiaries can make certain changes to their Medicare coverage. Most federal annuitants over age 65 are enrolled in Medicare. Together with enrollment in the Federal Employees Health Benefits (FEHB) program (which is considered as Medicare supplemental insurance), most federal annuitants are fully insured with respect to their medical care needs. If they have significant dental and/or vision expenses, they can enroll in the Federal Employees Dental and Vision Insurance Program (FEDVIP) also during the current “open season”.

Federal annuitants enrolled in the “Original Medicare” (Medicare Parts A and B) have another choice with respect to their medical, dental and vision care needs during retirement. They are eligible to join a Medicare Advantage (MA) plan. MA plans have become attractive in recent year, offering medical, dental, and vision benefits to Medicare beneficiaries in an HMO arrangement. The attraction for federal annuitants is that rather than being enrolled in Original Medicare and a FEHB program health plan (and purchasing if needed separate dental and vision insurance) a federal retiree can be enrolled in one MA plan and potentially save much in their overall health care costs.

This column discusses what the specific choices are for federal annuitants enrolled in Original Medicare who may be considering enrolling in a MA plan.

Review of the Medicare “Basics”

It is important to first review Medicare basics and what parts of Medicare are available to federal government retirees over age 65. There are four parts to Medicare – Medicare Part A (Hospital Insurance) covering inpatient hospital care, hospice and skilled nursing service; Medicare Part B (Medical Insurance) which covers outpatient services including physician services, laboratory tests, and home healthcare services; Part C is Medicare Advantage and Part D is the Medicare prescription drug coverage.

Federal annuitants over age 65 who enroll in Medicare Parts A and B (Original Medicare) and are eligible and keep their FEHB program health insurance in retirement should be adequately covered for their health care needs throughout their retirement. Medicare Parts A and B are considered “primary” insurance – paying on average 60 to 80 percent of their hospital and doctor expenses – while the FEHB program insurance is their Medicare supplemental insurance paying the other 20-40 percent of their medical expenses. With this arrangement, a federal retiree will likely pay nothing out-of-pocket. That means they will likely not have to pay any deductibles, copayments or coinsurance. Most importantly, a federal retiree need not shop around for Medicare supplement insurance or Medigap insurance in the private market. The FEHB program health insurance, in which the federal government pays on average 72 to 75 percent of FEHB program premiums is a tremendous benefit for federal annuitants who qualify to keep their FEHB program health insurance throughout retirement.

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There are some federal annuitants who incur significant dental and vision care expenses in which their FEHB program plans and Medicare Parts A and B offer limited coverage. These annuitants must purchase separate dental and vision insurance to help pay these expenses. They could purchase dental and/or vision insurances from the FEDVIP. There is no federal government contribution to the cost of FEDVIP premiums for both employees and retirees. In so doing, these annuitants are paying a monthly premium for Medicare Part B, FEHB program health plan enrollment, and for separate dental and/or vision insurance enrollment.

Origin of Medicare Advantage Plans

Medicare Advantage plans started in 1997. At that time, they were called Medicare Choice plans (Medicare Part C). Medicare Part C was designed to be enhanced HMOs for those Medicare beneficiaries enrolled in Medicare Parts A and B.

In 2004, The George W. Bush Administration and Congress changed the nature of Medicare Part C and renamed it Medicare Advantage. Two major changes were made, namely: (1) The “HMO nature” of Part C, offering medical services only, was extended to offer dental and vision services; and (2) The federal government would pay private insurance companies to administer and offer private Medicare Advantage plans. Anyone enrolled in Medicare Parts A and B had the option of joining a private Medicare Advantage plan. Most Medicare Advantage plans offer some prescription drug coverage, and for individuals incurring catastrophic prescription drug expenses, they could enroll in Medicare Part D (prescription drug coverage). Medicare Part D started in 2007.

With skyrocketing health insurance premiums during the period 2007-2017, Medicare Advantage plans became more popular. Private insurance companies were anxious to attract Medicare enrollees to join their Medicare Advantage plans. In recent years, Medicare Advantage plans have become even more popular with insurance companies offering many “incentives” to join their plans. These incentives include $0 premiums, free gym membership, transportation to health care providers, hearing aids and eyewear.

About five years ago, the FEHB program started offering Medicare Advantage to federal retirees over age 65 enrolled in Medicare Parts A and B and interested in joining a Medicare Advantage plan. Federal annuitants therefore have two choices for enrolling in a Medicare Advantage plan. One way is through the FEHB program, and the other way is through private Medicare Advantage offered to anyone over 65 who is enrolled in Medicare Parts A and B.

The Center for Medicare and Medicaid Services (CMS) conducts the OEP annually from October 15 through December 7. During the OEP. Individuals over age 65 enrolled in Medicare Parts A and B can make certain changes to their health coverage including:

  • Joining a new Medicare Advantage plan or a Part D prescription drug plan
  • Switching enrollment from Original Medicare to a Medicare Advantage plan, or
  • Dropping a Medicare Advantage plan and switching to Original Medicare, with or without a Medicare Part D plan.

The question is: Can a federal annuitant, enrolled in an FEHB program health plan and in Medicare Parts A and B, enroll in a private Medicare Advantage plan during this current OEP? The annuitant is considering this enrollment because he or she has determined that their current medical, dental and vision care needs can be best met by enrolling in a Medicare Advantage plan. The answer is that he or she is eligible to enroll either in a private Medicare Advantage plan or to enroll in a Medicare Advantage plan offered through the FEHB program..

A federal annuitant enrolled in a FEHB program health plan can “suspend” their FEHB enrollment for two reasons: (1) To enroll or to reenroll in TriCare; or (2) To enroll in a private Medicare Advantage plan. By “suspending” their FEHB program enrollment, an annuitant can reenroll in the program, usually during an “open season, if they so choose. Suspension is different than dropping out of the FEHB program. A federal annuitant who drops out of the FEHB program cannot reenroll in the program.

If a federal annuitant suspends their FEHB program enrollment to join a private Medicare Advantage plan, the election will have to be done during the current FEHB program “open season” ending December 12, 2022, and the retiree would then have to enroll in a private Medicare Advantage plan during the OEP ending December 7, 2022.

However, there are two reasons a federal retiree is advised not to enroll in a private Medicare Advantage plan. First, the retiree would have to choose a plan that meets his or her needs. This could be a challenge. Second, unlike the FEHB program in which the federal government pays on average 72 to 75 percent of a retiree’s FEHB program health plan premium, the federal government will contribute nothing to the premium costs of a private Medicare Advantage plan.

 A federal retiree enrolled in Original Medicare who is interested in enrolling in a Medicare Advantage plan is therefore advised to choose from the Medicare Advantage plans offered through the FEHB program. In so doing and choosing the Medicare Advantage plan that best meets their medical, dental and vision care needs, the federal government will pay on average 72 to 75 percent of the plan premiums. The retire will likely not have to enroll in separate dental and/or vision insurance, paying the full premium cost of the Medicare Advantage plan.

There are also some important considerations that federal annuitants need to keep in mind when enrolling in any Medicare Advantage plan including:

  • If they have preferred doctors, dentists, ophthalmologists, pharmacies, or optometrists, then some or all of them may not be in the Medicare Advantage network
  • An annuitant has to be enrolled in both Medicare Part A and Medicare Part B (in which there is a monthly premium). The amount of the Medicare Part B monthly premium depends on the retiree’s adjusted gross income. The higher the adjusted gross income, the higher the monthly premium
  • If a retiree travels overseas and requires international emergency coverage, then a Medicare Advantage plan may not be a wise choice, and
  • Beware that some FEHB program Medicare Advantage plans only offer coverage in certain geographic regions of the U.S. Federal retirees are encouraged to check out Consumers Checkbook Guide for more information.

Edward A. Zurndorfer is a Certified Financial Planner, Chartered Life Underwriter, Chartered Financial Consultant, Chartered Federal Employee Benefits Consultant, Certified Employees Benefits Specialist and IRS Enrolled Agent in Silver Spring, MD. Tax planning, Federal employee benefits, retirement and insurance consulting services offered through EZ Accounting and Financial Services, and EZ Federal Benefits Seminars, located at 833 Bromley Street – Suite A, Silver Spring, MD 20902-3019 and telephone number 301-681-1652. Raymond James is not affiliated with and does not endorse the opinions or services of Edward A. Zurndorfer or EZ Accounting and Financial Services. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. While the employees of Serving Those Who Serve 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.

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