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Federal Employee Retirement Health Benefits (FEHB) and Medicare


Before you retire, it’s important to explore all your health care coverage options. For those in the Federal Employee Health Benefits (FEHB) Program who are also Medicare-eligible, this can be a bit tricky. That’s why we’re here to help you understand how to coordinate your coverage when you’re eligible for FEHB and Medicare!

Medicare vs. FEHB Coverage

FEHB is the world’s largest employer-sponsored group health insurance program. This coverage is for federal workers and retirees, as well as their families and spouses. Like Medicare, FEHB includes coverage for inpatient and outpatient services. So retired, former, and active federal employees who are eligible for both programs – as well as those who are eligible for FEHB through their current or former spouse – often wonder if they can have both forms of coverage at the same time.

The short answer is yes; you can have Medicare and FEHB coverage simultaneously. But do you need both? Well, it can be beneficial. We’ll discuss how and why.

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Do You Need Both Medicare and Federal Employee Health Benefits?

Although most people who are eligible for Medicare and FEHB won’t need a Medicare Supplement or Part D plan, the truth is that FEHB can be expensive. Thus, these beneficiaries often ask if there’s a way to coordinate their coverage that will also minimize their out-of-pocket costs. With Medicare, there are a few ways to do this.

How Does FEHB Work With Medicare Part A?

Those who pay into Medicare taxes for the sufficient number of quarters – or have a spouse who meets this requirement – are eligible for premium-free Medicare Part A inpatient insurance. When you reach Medicare eligibility at age 65, you can enroll in Part A even if you’re still working. It will be secondary to your FEHB, acting as additional coverage for inpatient medical expenses.

For Medicare’s Part B outpatient coverage, you’ll need to pay a monthly premium – no matter how many quarters you pay Medicare taxes. So, if you have FEHB, you can delay Part B for as long as you’re working and may save money by doing so.

When deciding whether to pick up both Parts or just stick with Part A, calculate what you’d pay in Part B premiums for the year (higher-income earners are responsible for larger premiums). Then, calculate your best estimate for the dollar amount you’d need to pay in copayments for outpatient services on FEHB.

If you find that you would pay more in premiums, you’ll indeed save money by delaying Part B. Yet, those whose copays on FEHB in an average year outweigh their would-be Part B premiums should consider picking up both Parts.

FEHB with Medicare Parts A and B

Those who choose to take both Parts A and B of Medicare will also pay for both FEHB and Medicare (Part B). When you have both Parts A and B in addition to FEHB, Medicare becomes primary.

As secondary coverage, FEHB acts as a supplement plan. It covers deductibles, copays, and coinsurance for which Medicare beneficiaries are otherwise responsible.

With this combination of coverage, you can see any practitioner who accepts Medicare and receive benefits through Part B that FEHB doesn’t provide. Additionally, when you have both parts of Original Medicare with FEHB, you won’t need a prescription drug plan through Part D because FEHB includes prescription drug coverage.

Suspending FEHB for Medicare Plus Supplemental Coverage

If you have Original Medicare and FEHB but want coverage through an Advantage or Medigap plan, you’ll 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 beneficiary’s risk. Most of these plans include dental, vision, hearing, and prescription drug coverage.

For as long as you suspend your FEHB, you won’t 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.

FEHB Coverage After Retirement

It’s never mandatory to take Medicare – yet, there can be consequences to delaying enrollment. When you have FEHB, you’re safe from the Part B late enrollment penalty for as long as you or your spouse is actively working.

When you or your spouse retires, however, things get more complicated. FEHB is not creditable coverage for Medicare, so you should take advantage of the Special Enrollment Period you’ll have when you or your spouse retires. Otherwise, you’ll be subject to the late enrollment penalty whenever you enroll in Part B.

As long as you keep FEHB, whether or not you’re working, your prescription drug coverage is sufficient and you’ll avoid the late enrollment penalty for Part D.

Mail Handlers Insurance and Medicare

The Mail Handlers Benefit Plan (MHBP) has been serving federal and postal employees for over 50 years. Aetna administers the MHBP, whose plan options include Self Only, Self Plus One, and Self and Family – similar to FEHB.

It’s best to have MHBP and Medicare when you become Medicare-eligible. Medicare will be the primary insurance, and MHBP will give you access to things Medicare doesn’t cover like additional options for chiropractic care.

FAQs

Are FEHB premiums tax-deductible for retirees?
Retirees can’t participate in premium conversion when they pay FEHB premiums with pre-tax dollars. But, retired law enforcement can deduct up to $3,000 of health insurance premiums from federal income tax. Although, for the most part, you can’t deduct health insurance premiums as an itemized deduction on an income tax return.
Do retired federal employees lose FEHB plans when they become eligible for Medicare?
No, federal employees may keep their FEHB after they become eligible for Medicare.
How do I suspend FEHB for Medicare Advantage?
Contact your retirement office to find out how to suspend your FEHB enrollment. Unless you move outside of your Advantage plan’s service area, you can only re-enroll in FEHB during Open Season.
When Medicare becomes primary, do my FEHB premiums change?
No. Your FEHB premiums will remain the same, regardless of whether you also enroll in Medicare.
Do I need Part D if I have FEHB
No, FEHB includes prescription drug coverage as good as Part D.

How to Get Help Understanding Your Options with FEHB and Medicare

Our agents are Medicare experts and can walk you through the process of identifying your options. Then, you can make the best choice for your needs.

Give us a call at the number above to learn more today. Or, if you prefer, fill out an online rate form to see plan options in your area now!

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Lindsay Malzone

Lindsay Malzone is the Medicare expert for MedicareFAQ. She has been working in the Medicare industry since 2017. She is featured in many publications as well as writes regularly for other expert columns regarding Medicare. You can also find her over on our Medicare Channel on YouTube as well as contributing to our Medicare Community on Facebook.

26 thoughts on “Federal Employee Retirement Health Benefits (FEHB) and Medicare

  1. I am currently enrolled in Medi care A and B plus FEHB retired in 2010 . I keep getting letters from Medicare advantage stating that it is better then FEHB , I currently pay no out of pocket for any medical bills I incur. Is Medicare advantage a better deal?

    1. Hi Lucille! I would not say Medicare Advantage is better than FEHB. It would really depend on your location since Advantage plans vary from county to county. If you’re happy with your current FEHB, I would stick with them.

  2. Iam a retired federal employee with FEHB BCBS coverage. Iam paying a late penalty on my part B. Why is my insurance not creditable under medicare, and have there been efforts in Congress to address t his rule .

    1. Hi Don. You’re paying a penalty because FEHB is not considered creditable coverage. The coverage is not considered as good as Medicare coverage. At this time, there is no action in place from Congress to change this rule.

  3. Can a retired military / federal employee keep all 3 insurances: FEHB, Tricare for life, and Medicare (part A & B) simultaneously?

    1. Hi Tabatha! No, you cannot keep all three. You either have FEHB + Medicare OR TRICARE for Life + Medicare.

  4. Just turned 65 on Saturday, my wife is 9-years younger. I am two years in with the government, and plan to get my five years, for FEHB in retirement. You think this is a good plan. My wife can retire early and be covered by FEHB. I have friends say it not worth it. Looking for your input.

    1. Hi John! FEHB + Medicare has a coordination of benefits that work really well with another. It pretty much leaves you with no out-of-pocket costs.

  5. I am retired from the Postal Service with FEHB! I am turning 65 soon and have received material for medicare A and B. Am I automatically required to take medicare? Is it better and would I continue to have both! Is it beneficial to pay another 200 hundred a month for part B? Will I eventually be forced to take part B even though my FEHB are supposed to be for the rest of my life??

    1. Hi Michael! You are not required to enroll in Medicare, but it’s recommended. FEHB is not considered creditable coverage under Part B if you’re not working, thus resulting in late enrollment penalties when you do enroll later. In addition, FEHB & Medicare have a coordination of benefits. The combination gives you great coverage.

      1. So if my husband is a retired letter carrier age 70 and has FEHB but no Medicare B if he would now decide to suspend FEHB and take Medicare B he would pay a 50% penalty per month for the rest of his life?

      2. Hi Marianne. Yes, that is the case since FEHB is not considered creditable coverage. The only way he could have the penalty removed is if he qualified for Medicaid due to being considered low-income.

  6. My son has been on federal disability retirement and social security disability retirement and has been and still is covered through the NALC insurance under the FEHB. After two years he became eligible for Medicare A and B which he took as FEHB is not considered credible coverage. He is now losing his SSDI because he got a job and is making over $1300 per month; however, he will keep his federal disability as he will not make over 80% of the pay of the job he used to have. Medicare allows those previously on SSDI to keep Medicare A and B for 93 months, paying only for Part B; after that he would have to pay for A and B. Now that he will be off SSDI my question is: Is he required to keep paying for Part B for the rest of his life in order to avoid the Part B penalty when he takes Medicare at 65 or if he goes back on social security,

    1. Hi Lynda, great question! Any penalties your son acquires between now and when he turns 65 will reset. When he ages into Medicare at 65, he will have no penalties. They will start to incur again if he delays enrolling after he turns 65.

  7. I am getting mixed and confusing answers from Medicare customer service. I am retired and continue to have my FEHB Blue Cross Blue Shield coverage through OPM. My wife has always been and will continue to be covered by my FEHB BCBS insurance. She is now retiring. She will enroll for Medicare A, but it is my understanding that since she will continue to be covered by my FEHB BCBS, she will not need to apply for Medicare Part B. Is this correct?

    1. Your wife is not required to enroll in Part B, however, FEHB is NOT considered creditable coverage under Medicare. This means, if your wife does not enroll in Part B as soon as she is eligible, she will have to pay a penalty the rest of her life when she does enroll later.

  8. Lindsay – inquiring for my Mom who has both Medicare and MHBP coverages. A number of years ago around 2013 when Mom had to receive PT from a SNF Medicare was her primary provider and MHBP was secondary and her treatment extended beyond the 100% Medicare covered initial 20 days, the co-pay amount for days 21+ had been covered by MHBP. Unfortunately Mom has had another incident requiring SNF PT and I being told that MHBP no longer will cover the co-pay if her PT extends beyond the 20 Medicare covered days since Medicare is her primary coverage. Was there a change to the MHBP coverage of co-pays when Medicare is primary? Thank you

    1. Hi Kevin! I don’t see any changes to the benefits, on page 14 you can see changes for 2021. It states that SNF is only covered for 40 days if MHBP is primary, but that is not a recent change. But that doesn’t mean it hasn’t changed since 2013. I would contact MHBP directly to find out what your options are.

  9. I am a federal employee under FERS, age 62, planning to retire next year. My wife, covered under my FEHB plan, turns 65 later this year. Should she apply for Part A and/or Part B this year even though I am still working and we are covered by FEHB?

    1. Hi Mike! Since Part A is premium-free, your wife should enroll. Regarding Part B, I would ask your benefits administrator to see if your wife is exempt from the late enrollment penalty since you are still working. I’m not sure how it works if the husband is still working but the wife is not. Normally, if you’re retired, you would need to enroll in Part B when you’re first eligible to avoid paying a late enrollment penalty later.

  10. My BCBS Federal Employees Program will not be accepted come January 2021 at my hospital and most doctors. What should I do? Locate and sign up for a new insurance plan by December 14th?

  11. I am turning 65 in Jan 2021. My wife is 61. If I have Medicare Part A and B, I understand that my FEHB will become secondary coverage for me. Will the same FEHB insurance remain primary coverage for my wife?

    1. Hi David! Unfortunately, we have no way of knowing how many retirees are currently covered under FEHB. Regarding premiums, they vary from state to state. According to FedSmith, the average monthly premium in Alaska for a family plan is around $400.

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