An Alphabetical Health Insurance Option

The Federal Employees Health Benefits Program provides benefits not just for 2.2 million employees but also 1.9 million annuitants (along with family members of both groups). The people in the annuitants group face a major turning point, if they haven’t crossed it already, after they turn 65 and have several options for enrolling in Medicare. 

Medicare becomes the primary payer for health care for those who enroll in it. It has four parts: Part A (hospital insurance), Part B (medical insurance), Part C (known as Medicare Advantage) and Part D (prescription drug coverage). Federal retirees generally maintain lifetime coverage under FEHB and can continue that coverage whether or not they are enrolled in any of the four parts of Medicare. (Those covered by the military’s TRICARE for Life insurance are required to enroll in Parts A and B.)

People receiving Social Security benefits are automatically enrolled in Medicare, and coverage begins the first day of the month they turn 65. Those who are not automatically enrolled must file an application with the Social Security Administration for Medicare benefits.

About 75% of federal retirees enroll in Parts A and B while continuing their FEHB coverage, because it reduces their out of pocket costs for health care. Many FEHB plans will waive their deductibles, copayments and coinsurance when Medicare is the primary payer. Some plans will provide a health fund or reimbursement to offset some of the costs of adding Part B. FEHB coverage provides adequate prescription drug benefits, so there isn’t much advantage to enrolling in a Part D plan. 

A Medicare Advantage enrollment is another way to get Medicare Part A and Part B coverage. Medicare Advantage Plans, sometimes called "Part C" or "MA Plans," are offered by Medicare-approved private companies.

According to the Kaiser Family Foundation, in 2020, nearly 40% of Medicare beneficiaries were enrolled in Medicare Advantage plans. This rate has steadily increased since the early 2000s. More recently, FEHB plans started offering a separate, additional enrollment in a Medicare Advantage plan to enhance the benefits of the FEHB coverage.

The following plans will offer this option for the 2022 plan year for the first time:

• Humana Value Plan
• MHBP Standard Option
• Compass Rose
• Rural Carrier Benefit

This is in addition to existing plans that offer some form of Part B

reimbursement depending on the FEHB enrollees’ enrollment in Part B or Medicare Advantage:

• Aetna Advantage (Advantage)
• Aetna Direct (CDHP)
• APWU (High)
• Blue Cross Blue Shield Service Benefit Plan (Basic)
• GEHA (High)
• Health Alliance Plan (High and Standard)
• Kaiser Permanente (several regions, High and Standard)
• Medical Mutual of Ohio Southwest and Northeast (Standard)
• MD I.P.A. (High)
• United Healthcare Choice (several regions and types of plans)
• UPMC Health Plan (Standard)

Enrollment in Medicare Advantage plans is growing among feds, but remember, these are not the same as commercially available Medicare Advantage plans. Typically, enrollment in a Medicare Advantage plan would cause a suspension or termination of FEHB coverage. However, the Medicare Advantage for FEHB plans are designed to allow retirees to retain their status in FEHB.

Federal retirees need to at least consider enrolling in Medicare Parts A and B while maintaining their FEHB coverage this open season. It’s a big change, and one that might involve switching FEHB plans to find one that offers financial incentives to make the switch. But it just might pay off in the form of reduced costs of care.