Monday, September 26, 2022

Should Retired Federal Employees Take Medicare Part B

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Which Is Primary Coverage Medicare Or Fehb

Does Medicare Part B And FEHB Work Well Together?

A FEHB plan must pay first when an individual is an active federal employee or rehired annuitant. When an individual is an annuitant and is enrolled in Medicare Parts A and B and in a FEHB plan, then Medicare is primary coverage and the FEHB is secondary coverage or Medicare supplement.

FEHB premiums will not be reduced when an employee or annuitant enrolls in Medicare. Annuitants pay the same FEHB premium for the same FEHB plan as active employees. However, once Medicare becomes the primary payer of an individuals healthcare related expense, the individual may find that a lower cost FEHB plan is adequate for their needs, especially if the individual is currently enrolled in a FEHB plans high option coverage. Also, some FEHB plans waive deductibles, coinsurance, and copayments when Medicare is primary.

Since enrolling in Medicare is considered a life event, an annuitant or employee can change his or her FEHB plan to any available plan or option at any time beginning 30 days before becoming eligible for Medicare and ending 30 days after the day the individual becomes eligible for Medicare. Changes to ones FEHB plan can also be made during the annual FEHB open season.

Can Federal Employees Keep Their Health Insurance After Retirement

Although unnecessary, retirees may choose to have benefits from both programs. Retiring and Medicare eligibility begin at age 65.

Once benefits begin, Medicare takes over as the primary insurance.

Primary insurance pays for services first, then secondary coverage wraps up the remainder. Working federal employees that dont retire at 65 are still eligible for Medicare.

Certain retiring federal employees may want to consider joining Part B of Medicare.

For example, individuals with a fee-for-service plan, mail handlers or those with Government Employee Health Association plans may strongly consider Part B coverage.

Part B has a fee-for-service plan offering the most complete overall coverage for all medical expenses. Beneficiaries with both FEHB and Part B plans can expect very little out-of-pocket fees.

FEHB and Fee-for-Service Plans

One popular fee-for-service plan among adult Americans is Blue Cross Blue Shield . In 2019, the company offers lower premiums for dental and vision plans than in the past.

BCBS has a governmentwide Service Benefit Plan known as the Federal Employee Program .

The program recently implemented a new coverage option for federal employees and retirees in the FEHB Program known as the FEP Blue Focus.

When Is My Fehb Plan The Primary Payer

There are some cases when your FEHB plan would be the primary payer, meaning it pays for the cost of services first and Medicare covers the rest. If you or your covered spouse are age 65 and have Medicare, your FEHB plan is the primary payer when you:

  • Have FEHB coverage on your own as an active employee, or through your spouse who is an active employee
  • Are a reemployed annuitant with the Federal government and your position is not excluded from the FEHB
  • Are enrolled in Part B only, regardless of employment status
  • Have Medicare because of ESRD and it’s within the first 30 months of eligibility for or entitlement to Medicare. If you’re eligible for Medicare due to ESRD and the FEHB plan was already the primary payer, it will continue to be for the 30-month coordination period
  • Are eligible for Medicare due to a disability and have FEHB coverage on your own as an active employee, or through a family member who is an active employee

Most of the time, the primary payer depends on your employment status, as well as other factors. You should share with OPM if you or a covered family member has Medicare so they can ensure requirements are administered correctly.

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Suspending Fehb For Medicare Plus Supplemental Coverage

If you have Original Medicare and FEHB but want coverage through an Advantage or Medigap plan, youll need to suspend your FEHB coverage. Suspending FEHB is not the same as canceling.

Advantage plans, also known as Medicare Part C, replace Parts A and B, as Medicare pays the private insurance company offering the policy to take on the beneficiarys risk. Most of these plans include dental, vision, hearing, and prescription drug coverage.

For as long as you suspend your FEHB, you wont have the prescription drug coverage you used to receive. If you choose a Medigap plan to go with your Part A and B coverage, you should also look for a Part D plan.

If you choose to return to your FEHB plan, you can re-enroll during Open Season.

Is Medicare Or Fehb The Primary Payer

What should federal retirees do about Medicare Part B ...

The FEHB provides health insurance to federal retirees and their spouses. You have the option to choose from a few different types of plans, each covering medical services and supplies you may need.

If you choose not to enroll in Medicare, your FEHB plan acts as your primary insurer and will cover the medical services you need. If you do, Medicare will likely act as the primary insurer in most cases.

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What Happens If I Decline Fehb Coverage

If you decline FEHB coverage, you would give up the subsidy the government pays toward it, which ranges from a low of about $350 for self-only coverage to $1,000 or more if youre also covering family members. If your family members are covered under FEHB, their coverage would end if you terminate yours.

Should Federal Annuitants Enroll In Medicare Part B After Age 65

There are advantages to enrolling in Part B as a complement to FEHBcoverage . Almost all ofthe national plans waive their hospital and medical deductibles, copays,and coinsurance for members enrolled in both Medicare Part A andPart B . In effect, they “wrap around” Medicare. HMOs generallyhave only nominal deductibles or copayments and most of them do not providesuch waivers. However, an increasing number do. For example, in theWashington, DC area CareFirst and M.D. IPA provide wrap around benefits toretirees with both parts of Medicare. In other parts of the nation, theHumana plans offer similar savings. With Medicare Parts A and B and mostnational Federal plans, you will have close to 100 percent coverage ofalmost all medical expenses . Coverage for dental andprescription drug expenses will still differ depending on which plan youchoose.

However, Medicare Part B will rarely save you nearly as much money as youspend on the Part B premium. This is because the cost sharing for physicianvisits and tests in almost all FEHB plans is already so low. And as wediscuss below, for those who pay more for Part B than the normal premium,it is almost always a bad buy in purely financial terms.

Part B does have some important advantages. Perhaps most importantly, inalmost all the plans that wrap around Part B,enrollment in Part B gives you the freedom to go outside the plan’snetworkat no cost.

There are some circumstances to which the conclusions above do not apply:

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What About A Roth Conversion

If you are over age 65 and paying for Part B, you could increase your IRMAA by performing Roth conversions. A Roth conversion may still be beneficial but be careful. It may end up costing you more than just income taxes to perform the conversion.

Plus, there are other tax planning strategies that you can use to help reduce AGI as well.

Determine Your Annual Part B Premium Cost

FEHB and Medicare for Retirees | Should You Sign up for Part B?

The Part B monthly premium is $144.60 .

If your adjusted gross income exceeds $174,000 then you will have to pay a Part B premium surcharge. Medicare assesses the surcharge based on your income from two years earlier . The bullets below show the premium for various adjusted gross income levels.

  • Below $174,000 = $144.60

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Fehb And Medicare Parts C & D

Federal employees should definitely enroll in Medicare Parts A & B according to Brian. However, when it comes to Medicare Advantage, Brian recommends declining that coverage and sticking with your FEHB instead. Typically the FEHB has more benefits and greater coverage than Medicare part C. Finally, most FEHB plans also cover prescription drugs, so you should not need to enroll in Medicare Part D. However, you may want to double check that your FEHB plan does cover the prescription drugs you need before declining Medicare Part D. If you decide you want Medicare Part D, you can add Medicare Part D during a future open enrollment period but may face a penalty in the form of an increased premium. Furthermore, you can only add Part D during the open season.

So, in summary, most federal employees should:

  • Keep FEHB coverage
  • Enroll in Medicare Parts A & B when they are eligible

If you want to go deep into the weeds on this topic, OPM published a 20 page book that walks you through the decision making process. Be warned that it is extremely dry reading.

Premium Rates Are Increasing By 145% In 2022

It was only a matter of time. Medicare is in worse financial shape than Social Security, so it wasnt a complete surprise to see the new standard Medicare Part B premium increase substantially for 2022.

The standard rate is going up 14.5%, from $148.50 per month for one person to $170.10 per month. The standard premium rate is what you pay if your modified adjusted gross income is $91,000 or less if you file an individual return, or $182,000 or less when filing a joint return. The amounts assessed for higher-income Medicare enrollees also went up, of course, to as much as $578.30 per person per month.

If you don’t sign up for Part B, which covers medically necessary care and preventive services, when you’re first eligible at age 65 during your initial enrollment period, your monthly premium may permanently increase by 10% for each 12-month period you didn’t sign up. There are exceptions to this penalty and allowances for a special enrollment period if youre covered by health insurance through current employment.

AARP provides excellent Medicare resources, one of which provides a list of situations where you would not pay the Part B late enrollment penalty.

Most cost-sharing will be waived when Medicare is the primary payer, which makes it less likely that you would incur much in the way of out-of-pocket expenses other than premiums and copayments for outpatient prescriptions.

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Why Should I Consider Enrolling In Medicare

When you turn 65 and are retired, many health insurance carriers assume that youll be on Medicare Part B. In turn, many people experience slight changes in their health insurance coverage as time goes on, even with FEHB. Does it impact everyone? Sometimes not someones health needs may be more simplistic and their FEHB in retirement sufficiently covers their needs. For others, it might be different.

Remember, health insurance carriers are for-profit organizations, even those through FEHB. As such, they will make business decisions about certain health coverages in a manner that works best for them. Carriers frequently change their health care coverage, and some day that coverage change could impact you in a way that can be devastating. This is why we always encourage the families we serve to review their health coverages again in open season, even if theyre not making changes.

I have a client who personally experienced receiving health services that were no longer covered by FEHB as they progressed through retirement, because the insurance carrier passed on that coverage responsibility to Medicare as the primary insurer. They didnt have Medicare Part B, which in turn required them to pay out of pocket for those expenses.

Researching Ma Plans And Making The Change

" Should I Sign Up for Medicare Part B?"

To see the Kaiser website regarding its special MA plans, go to www.kp.org/feds and follow the links to that information. To see the UnitedHealthcare and Aetna information, start at www.uhcfeds.com or www.aetnafeds.com and do the same. In these cases, you will need to talk to plan representatives to arrange for enrollment in the special MA plan and to have some of the details of these options explained.

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Fehb And Medicare Advantage Plans

A Medicare Advantage plan, which covers everything in Original Medicare plus additional benefits, typically offers a similar level of coverage to FEHB plans. This means that it may not always make sense to have both. Its best to explore both options since each Medicare Advantage plan offers different benefits.

Remember that in order to be eligible for Medicare Advantage, you must have both Part A and B. If you arent eligible for premium-free Part A, then you would have to pay for it to get Medicare Advantage.

If you do opt for a Medicare Advantage plan, you can cancel or suspend your FEHB coverage. But if you later decide to get off of your Medicare Advantage plan due to a change in coverage, location or some other factor, you can typically get back on your suspended FEHB plan.

What Can You Do Prior To Age 65

One big takeaway for those that arent yet Medicare age is the benefit of a lower income. This is something that can be achieved through contributions to Roth TSP, Roth IRAs, and Roth conversions. Distributions from these accounts are not considered taxable income nor are they added to your AGI or used in calculations for IRMAA. If you look at law enforcement Joe above, he would pay lower premiums for Part B if his 31k distribution was from a Roth IRA vs traditional or TSP.

The decision on whether or not to take Medicare Part B is an important one, and your income range should play a role in that decision. IRMAA is just one way that retirees can incur extra, unnecessary costs in retirement. Addressing seemingly little things like IRMAA can help you enjoy a fruitful retirement.

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Medicare Part B If You Have Fehb Coverage

You do not have to enroll in Part B if you don’t want to, and you’re not required by your FEHB plan to take it. However, some people choose to have both Part B and FEHB coverage.

When deciding if you should enroll in Part B, first take into consideration the differences in Medicare and FEHB plan coverage. For example, FEHB plans are more limited than Medicare when it comes to coverage for:

  • Orthopedic and prosthetic devices

On the other hand, FEHB plans generally have more coverage for services such as:

  • Emergency care outside of the U.S.
  • Vision
  • Dental

Another differentiator is the network. If you are covered by an FEHB HMO plan, you’re typically limited to only seeing providers who are part of that plan. However, with Medicare, you have access to any doctor who accepts Medicare patients, which accounts for an estimated 93% of providers.

If you enroll in Part B, you’ll also have to pay the monthly premium , and FEHB premiums are not reduced. But, by having Part A and Part B, you can switch to a less expensive version of your FEHB plan due to waiving of cost-sharing that happens when you have Original Medicare. This includes co-payments, co-insurance, and deductibles for covered services.

Finally, the decision to enroll often depends on how much you’ll pay for Part B due to your income. While the standard is $170.10, you may pay more depending on your modified adjusted gross income as reported on your IRS tax return from two years ago.

If I Have Fehb Do I Really Need Medicare Part B

If I Am a Retired Federal Employee with FEHBP, Do I Have To Take Part B Coverage If I Don’t Want It?

Yes. If you enroll in Medicare Part A you should probably enroll in Medicare Part B as well, even if you have FEHB.

Health insurance can change from policy year to policy year. What was once covered under FEHB may change down the line, and that just is not something that you can easily predict.

Choosing not to enroll in Medicare Part B when you are first eligible will result in penalties when you apply during an open enrollment period, later.

For every 12 months that you were eligible to enroll in Medicare Part B but chose not to, there is a 10% penalty.

Year 1 Penalty:

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If I’m In The Fehb Should I Enroll In Part A

Most people dont have to pay a premium for Part A. When combined with FEHB coverage, having Part A would limit your out-of-pocket costs for the expenses it covers . Having Part A means you cant contribute to a Health Savings Account , so youd want to delay enrolling in Part A if your FEHB coverage is HSA-qualified and you want to continue making contributions to your HSA.

You can only delay Part A until you begin collecting Social Security at which point your Part A coverage will start automatically. The Office of Personnel Management , which administers the FEHB, recommends taking Part A if you dont have to pay a premium.

Fehb And Medicare Part C Enrollment

To enroll in Medicare Part C, you must enroll in Part A and B coverage. FEHB benefits are likely to continue.

Because Medicare Advantage Plans offer similar benefits to the FEHB program, for many, theres no need to enroll in a Part C plan.

However, individuals may suspend their FEHB benefits if they choose to enroll in a Medicare Part C plan. Before the suspension of benefits, the retirement system requires beneficiaries to show their coverage documentation at the time of enrollment.

Life happens and some circumstances require the change or adjustment of benefits. Say a beneficiary loses or cancels their Part C policy they may re-enroll in the FEHB program.

The reason why a person no longer has an Advantage Plan determines when they can re-enroll. Beneficiaries may re-apply for FEHB benefits for up to 60 days after the loss of an Advantage Plan.

This example is only for beneficiaries that lost a policy due to the plan leaving an area or if a person moves out of their plans service area.

FEHB Re-Enrollment Period

On the other hand, simply canceling a plan for personal reasons may delay the re-enrollment process until the next Open Season.

The FEHB Open Season typically runs from Nov. 12 through Dec. 10 annually benefits start Jan. 1 the following year. This is the re-enrollment period for otherwise ineligible beneficiaries.

Current federal employees have two new nationwide FEHB plans to consider this fall during the FEHB Open Season.

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