- December 12, 2023
Today's topic is the four Medicare options for retired federal employees. If you retired from the federal government, you have benefits that are called federal employee health benefits. Be all right. And so you have some very unique options that you have to consider as you are retired and Medicare eligible. So let's go through those four different options.
Enroll in Medicare Part A Only (Hospital)
The first option you have is to enroll in Medicare Part A only. Medicare Part A is called hospital coverage and is for anything inpatient related. Keep in mind, if you or your spouse are not retired from the federal government, you do not have the option of only enrolling in Part A. If you are retiring or already retired from a non-government job, you have to enroll in Medicare A and B.
You have three different opportunities to enroll in Medicare B, the initial enrollment period, the special enrollment period, and the general enrollment period. The initial enrollment period begins three months before your 65th birth month and lasts a total of seven months. This is for people who are already retired or are retiring at 65. If you are a federal employee, you do not have to enroll in Medicare Part B during the initial enrollment period. Instead, you can choose to enroll in Medicare Part A only.
The other time you can enroll in Medicare Part B is the special enrollment period. This is for those of you who did not enroll at 65 because you were still working. When you decide to retire, Medicare gives you an 8-month window of time (beginning when your employment ends) to enroll in Medicare Part B.
If you fail to enroll during the special enrollment period, you will have to use the general enrollment period (GEP). The GEP only allows you to enroll in Part B during the first quarter of the year (January, February, and March), and the coverage doesn’t begin until the third quarter (July). Further, for every year you should have enrolled in Medicare Part B but didn’t, you will have a 10 percent penalty added to your premium. Let’s say you waited three years after retirement to enroll in Part B. In this scenario, you will have a 30 percent lifetime penalty added to your Part B monthly premium.
We have worked with several federal employees who chose to hold off enrolling in Part B, but then failed to abide by the special enrollment period and general enrollment period timelines and they had to live with the penalties. So if you decide to not enroll in Part A only, be aware of time timelines and penalties you have to follow.
Enroll in Medicare Part A & B - Keep FEHB
The second option you have is to enroll in Medicare Parts A and B and keep your FEHB benefits. If you decide to enroll in both Parts A and B, remember Part B has a monthly premium. This year, most people’s Part B premium is $170.10. If you are in a higher income bracket, you will have to pay more for your premiums, but again, most people pay the standard amount of $170.10. So when you enroll in Part B, keep in mind you will have to start paying the Part B premium. If you're on Social Security, they take the Part B premium out of your check. If you're not on SS, Medicare will bill you every quarter, meaning you’ll owe Medicare around $450 every three months.
When you enroll in Medicare A and B with FEHB benefits, Medicare will pay first and your FEHB plan will pay second. Though Medicare pays very well, there are gaps left in your coverage. Your FEHB plan will typically cover 100 percent of the coverage gaps left by Medicare. So again, if you decide to enroll in Medicare A and B, you do take on a monthly premium of $170.10 (depending on your income bracket), but for that relatively small amount, you are picking up a lot of insurance and placing Medicare in the first payor position. So for many, enrolling in Medicare A and B with an FEHB is a great option. But of course, it comes down to your personal financial situation.
Enroll in Medicare A & B with Supplemental Plan
The third option you have is to enroll in Medicare A and B and purchase a Supplemental plan. Supplemental plans are standardized and regulated by Medicare, and their purpose is to help cover the gaps left in original Medicare. Here’s how they work: When you have a medical bill, Medicare will pay the bills first, and the Supplemental plan will cover the rest of the balance (depending on which plan you chose). Some Supplemental plans cover all the gaps left in Medicare while others only cover some of them, so make sure you choose one that works well for you.
Keep in mind, if you choose to enroll in Medicare A and B and purchase a Supplemental plan, your FEHB benefits will be permanently terminated. In fact, you will have to sign a document from OPM that states you are willingly terminating your FEHB benefits and you cannot go back to them ever again.
Many people we work with decide to terminate their FEHB benefits and get a Supplemental plan because they like the coverage options in the Medicare market better than their FEHB benefits. So this option may be good for you, but be aware that you have to terminate your FEHB benefits for good.
Enroll in Medicare A & B with Advantage Plan
The fourth and final option you have is to enroll in original Medicare A and B and purchase an Advantage plan. Advantage plans are called replacement plans or Part C plans. Here’s how they work: When you have a medical bill, you are responsible to first pay a copay for it. Your copay may be as little as $10 or $25 to see your doctor or as high as $300 per day for a hospital stay. Once you’ve paid your copay, the bill will be sent directly to the Advantage insurance company, and they’ll cover the rest of the balance.
Many people like the Advantage plan option because they are typically zero or very low premium plans. Remember, you already have to pay your Part B monthly premium of $170.10 (or higher depending on your income bracket). Some people don’t want the extra premiums that come with a Supplemental plan so they choose to go with an Advantage plan.
Further, if you go with an Advantage plan, your FEHB benefits will only be suspended, instead of permanently terminated. This means every year during the open enrollment period, you have the option of getting off the Advantage plan and switching back to your FEHB plan. After one year of having an Advantage plan, most people will have to medically qualify to switch to a different type of plan, but as a federal employee, you are free to make that switch during open enrollment without going through medical underwriting.
We understand how difficult making the right Medicare decisions can be. To take the next step, watch our full course here, or schedule a free one-on-one call with a certified Medicare School Guide who can answer your questions, compare plans options, and even help you enroll. Click here to get started.
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