Federal Employee Health Benefits (FEHB) and Medicare

Government programs, by themselves, can be complicated. Combine two federal government programs, and you can have even more challenges to understanding all of the benefits, requirements, costs and more.

Here’s a perfect example: Some retired federal government employees qualify for insurance called the Federal Employee Health Benefits program (FEHB). Once they reach age 65, the typically also qualify for Medicare.

Which program should they use? Do they need to enroll in Medicare if they already have FEHB benefits?

You guessed it – it’s complicated.

What Is the Federal Employee Health Benefits Program?

The FEHB program provides health insurance coverage to federal retirees and their spouses.

If you have FEHB coverage, Medicare coverage is optional for you. Having Medicare could potentially help lower your out-of-pocket health care costs with your FEHB coverage. It’s important to keep in mind, however, that you’ll likely have to pay an additional premium for your Medicare coverage, such as the Medicare Part B premium. The standard Part B premium is $148.50 per month in 2021.

Do You Have to Enroll in Medicare If You Have FEHB?

No – but you might want to anyway.

The rules for enrolling in Medicare are different for those with FEHB. For example, most people need to enroll in Medicare Part A and Part B when they first become eligible. If they don’t enroll in time, there may be penalties for late enrollment.

But federal retirees don’t have to enroll in Medicare. Their FEHB plan becomes their primary insurer. If you enroll in Medicare while also having FEHB coverage, Medicare would become your primary insurer and your FEHB plan would be your secondary insurer, sometimes called the "secondary payer."

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Should You Enroll in Medicare Part A?

Most people qualify for premium-free Part A. So it may make sense to enroll in the coverage if you don’t have to pay a monthly premium for it. Part A can be combined with FEHB coverage to help cover some of the out-of-pocket costs for such expenses as inpatient stays in a hospital or skilled nursing facility.

One drawback is that if you enroll in Part A, you cannot contribute to a Health Savings Account (HSA). You might consider delaying enrollment in Part A if your FEHB coverage qualifies you for an HSA and you want to continue making contributions to it.

Should You Enroll in Medicare Part B?

Part B is more complicated, mainly because everyone must pay a premium for it.

There are differences between what Medicare and an FEHB plan cover. According to the U.S. Office of Personnel Management (OPM), some FEHB plans may cover certain items that Medicare doesn’t cover, including but not limited to:

• Routine physicals
• Emergency care outside of the United States
• Some preventive services
• Dental and vision care

Medicare may cover some services and supplies that some FEHB plans may not cover, including but not limited to:

• Some orthopedic and prosthetic devices
• Durable medical equipment
• Home health care
• Limited chiropractic supplies

Part B also may help if you are in an FEHB HMO plan. These plans have a limited provider network. Part B coverage would allow you to use a Medicare-participating provider outside the HMO network.

It’s important to note that if you don’t enroll in Medicare Part B when you first become eligible, you may be required to pay a Part B late enrollment penalty if you decide to enroll in the future. Your Part B premium would increase 10% for every 12-month period you could have had Part B coverage but didn’t take it, and you would pay this additional fee for as long as you have Part B.

One benefit of enrolling in Part A and Part B of Medicare is that this allows you to enroll in a Medicare Advantage (Medicare Part C) plan. A Medicare Advantage plan covers everything Original Medicare (Parts A and B) cover, and most Medicare Advantage plans also offer additional coverage for things like dental, vision, hearing, fitness memberships, transportation and more.

Should You Enroll in Medicare Part D and FEHB?

Typically, no. An FEHB prescription drug coverage may have fewer restrictions on quantity limits, prior-authorization and other things than a Part D plan.

Also, FEHB plans have a yearly limit what you have to pay in prescription drug costs, but Part D plans do not.

The exception to this is if you qualify for the Medicare Extra Help program. This program, also called the Low-Income Subsidy (LIS), is for individuals with low income. It offers lower costs than FEHB plans when used in combination with Part D.

Which Is Your Primary Coverage?

If you have FEHB and both Medicare Part A and B, Medicare is primary. The FEHB plan will pay after Medicare does. Many FEHB plans waive the cost-sharing requirement for those who also have Medicare, which can help lower your out-of-pocket costs.

Even without the cost-sharing waiver, having both FEHB and Medicare would mean you only have to pay the difference between what Medicare and your FEHB plan pay and Medicare’s limiting charge.

If you have FEHB and Part A but not Part B, Medicare is primary for Part A services, and FEHB is primary for other services.

Will Enrolling in Medicare Reduce FEHB Premiums?

Enrolling in Medicare Part A and B will not reduce your FEHB premiums, but it may let you switch to a less expensive FEHB plan. Some FEHB insurers waive deductibles, co-pays and coinsurance if you have Parts A and B.

How Do You Decide Between FEHB vs. Medicare?

Deciding whether to enroll in Medicare Part B may depend on whether you have a high income. If you had a high reported income in 2019, you may pay a higher Part B premium in 2021: from $207.90 per month to $504.90 per month in 2021, depending on your income. This is called the Medicare income-related monthly adjusted amount (IRMAA).