This is essentially part II of a previous blog explaining how employer retiree benefits work compared to Medicare benefit options. See blog: https://www.cdi-cares.com/blog/employer-retiree-plans-and-medicarewhat-you-should-know. In this blog, we are going to dive deeper into Federal Retirees specifically. Federal Retirees include people who worked for and retired from government/legislative offices, military bases, post offices, etc. These individuals have access to a special benefits program that includes medical, prescription drug, dental, vision and hearing benefit plans. Some have access to plans as early retirees before turning 65, and others have special plans for over the age of 65 and retired. However, there are cost and coverage restrictions to be aware of. In some cases, it may be beneficial to combine these benefits with Medicare or not use the Federal Retiree offering at all. Let’s explore…..
Creditable Coverage
Most Federal Retiree benefit plans do not require enrollment in Medicare at all. The federal plan is primary and can last the remainder of the retiree’s life. There are many options that include medical fee for service, high deductible plans (HMO/PPO), prescription drug coverage, dental, vision and hearing plans. The prescription drug coverage offered by the Federal program is considered ‘creditable’ to Medicare Part D. So, you wouldn’t necessarily need to have Medicare Part D and will not incur any penalty for not having it. However, you should understand that the medical portion of the plan is NOT considered ‘creditable’ to Medicare Part B coverage. This means that if you do not enroll in Medicare Part B when eligible, you can incur penalties should you decide to add Medicare later. Why would someone want to add Medicare Part B and use Medicare? The answer is simple – cost and options. The Federal benefit plans have monthly premiums that increase typically each year, and many times increase above what the rate Medicare does. By the time some Federal Retirees realize Medicare may be a good option, they may have penalties.
Can You Have Both and Avoid Penalties?
There is a way to utilize both the Federal Retiree benefits plan and Medicare plans that can be cost effective and add great benefits. As stated above, you don’t necessarily need a Medicare Part D plan as the Federal drug coverage is just as good. Interestingly, there are special Medicare Advantage Plans that are $0 premium and offer additional benefits when you keep the Federal drug coverage. Some of these plans include a Part B ‘giveback’ or premium reduction at no cost. So, in this scenario, you can have the best of both worlds. When you have both Medicare A and B, an Advantage Plan with added benefits and the Federal Retiree plan, the Medicare Advantage Plan becomes the primary payer for all medical care. The Federal plan then is secondary and has prescription drug coverage. The Federal plans win when you enroll in Medicare. It lowers their cost, so they have ways to incentivize you to add Part B. One such situation is a Part B annual reimbursement for some of the premium if you are enrolled in certain types of the Federal Retiree plan. These individuals can get reimbursed from both the Retiree Plan and a Medicare Advantage Plan. There are a lot of options, so research it or have an independent agent help you do all the comparisons!
Suspending FEHB
When you decide to enroll in Medicare Part B and choose coverage, it may be advisable to suspend the Federal Retiree benefit plan while you work out the value and use of your Medicare benefits. This can be done so that you do not have to pay the monthly premiums for the Federal benefit plans but still have the ability to get back in during the ‘Open Season’ without penalty. In this scenario, your Medicare plans are the only coverage you will be using and accessing. This is a great feature to allow retirees to try the Medicare plans and ensure they are working as they need to and have the coverage they need.
New for 2025
Just recently announced, the US Postal Service is now requiring its retirees to enroll in Medicare Part B to continue their federal retiree benefits. This is a cost saving measure for the US Postal Service. Implementation begins January 1, 2025. All retirees should apply for Medicare Part B by January 1 to avoid penalties. Due to this new requirement, they are going to waive any previous penalties if an individual was eligible for Part B prior and did not enroll at that time. Since this is a special situation, we would recommend going in person to a local SSA field office to apply. We would normally recommend applying online through your My SSA Account, however, this scenario may need to be explained to avoid penalties since this is a new requirement.
CDI is here to help you manage your healthcare costs and find the best options for your unique situation. We can meet in person or virtually. Reach out if you would like more information. Email carrie@cdi-cares.com or check out www.cdi-cares.com for a contact page and other helpful blogs.
Resource:
https://www.opm.gov/healthcare-insurance/healthcare/medicare/
