Delivered on: Thursday, April 16, 2026
To Watch on YouTube, CLICK HERE
FEHB and Medicare Part B: Obvious or Overkill?
The health insurance decision you can't afford to get wrong
- COVERAGE: What Part B covers and when it starts
- COORDINATION: How Medicare works with FEHB
- CHOICES: Groups who have a choice (and those who don't)
- COSTS: The base cost and why you may pay more
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Prefer to read instead? A Transcript of this Webinar is Below:
Hello and welcome everyone to the FedImpact webinar today on FEHB and Medicare Part B. What we're going to be talking about today is when you're thinking about all the aspects of your healthcare in retirement, what role might Medicare Part B play in it? And ultimately answering the question, is it obvious or overkill?
This is a very subjective question, right? Whether it feels obvious or overkill to you is largely dependent on things like your health and what you anticipate things looking like in the future. We'll talk more about that today, but definitely a lot to talk about.
Most of you guys know me. I'm Chris Kowalik, the founder of ProFeds. I'm really lucky that I get to be able to do the work that I do. Although I've got to say Medicare makes even my head hurt and I deal with federal benefits all the time. That's really saying something.
Knowing that this is my job to unravel these crazy benefits, and it's not your job to do that. I can only imagine how overwhelming all of this feels to you as you're trying to sort through all of these details. I'm going to do my very best to simplify things today.
Although cut me a little slack, if you see the regulations that are Medicare, you will appreciate that it is a tough thing to simplify.
FEHB and Medicare Part B: Obvious or Overkill?
Today's topic, FEHB and Medicare part B, obvious or overkill. Here's the deal, the health insurance decision that you can't afford to get wrong. Doing the wrong thing with respect to your healthcare can have lifelong and catastrophic consequences.
And I wish that that wasn't the case. That's not really the message that I wanted to deliver to you today, but it is something super important that shouldn't be left to chance, shouldn't be left to talking with your other retired friends at the pickleball court and figuring out who got into part B and what's that look like.
Their life is not your life. Their consequences don't need to be your consequences. I want you to really eyes wide open, looking at this program today and having a better appreciation for some of the complexity and some of the nuances that are here that maybe you haven't heard about before.
Agenda
For our agenda today, we are going to be talking about the coverage itself, like what part B covers and when does it start, how the program coordinates with FEHB, the various choices that you're going to have.
And frankly, some of you don't have a choice at all. Some of you are in groups that are required to get into Medicare, whether you like it or not, but we'll be sure to segment those out so that you understand who you are. And then of course, costs.
That is the biggest component of the part B discussion, typically. Because we want you to know the base price and then, why you might pay more. And I would argue there's even an overarching aspect to all of this and how do you know how it fits for you? That's kind of the lens that I want you to look at all of this through today.
What this webinar will NOT cover
There are lots of things we are not going to be covering on today's webinar. I mentioned it a few minutes ago. We cannot get into all the details of the individual health plans and all of the tiny nuances that happen in everyone's lives, but we're going to stay a little higher level today, but still give you guys a great understanding of how Part B works in respect to FEHB.
I mentioned that we opened up our webinar registration form to have a place for you to submit questions. Like I said, lots of you submitted them. This was the best question that I think encapsulated what we are trying to do today.
Roland, if you are on today's session, I'm giving you a shout-out because this is the basis of everything we're going to be talking about today. His comment is, “If FEHB was good enough coverage for me and my family throughout my entire career, why would I need to spend more on Medicare now?”
And I think this is such an honest way to put this question like, “Hey, what gives? This thing has been fine for all these years and now I retire. I take a pay cut and now you're going to charge me more?” Like this doesn't make any sense.
Roland, my friend, I wish that there was a really simple way to answer this question, but it is a fair question and I'm going to do my very best today to give context to this so that you guys can see the bigger picture.
Our objective is to help you see the balance of care, cost and risk.
These are the three things that I always look at when we're thinking about health insurance. And obviously for you, we're talking FEHB and now, we're introducing this idea of Part B from Medicare, but how do we get all of these things to be aligned properly in a way that we're happy with?
Of course, I know nobody wants to pay for health insurance, I get it, but how do we not pay more than we need to, but get everything that we possibly can out of it? That's the care and the cost balance.
And then how do we reduce risk that we might not be experiencing right now, but how do we reduce that for the future? In all the things we're going to be talking about, it will cover at least one of these three things because I want to make sure that we're not just focusing on cost and ignoring the other two things.
Highlights of FEHB in Retirement
It's very easy to do that in a part B discussion, but we've got to look at the bigger picture here. In order for the part B part of our discussion to make sense today, I think it makes sense to lay a little bit of foundation of what FEHB looks like in retirement as far as the big highlights.
We've got six areas that I want to cover with you. I'm not going to go into super great detail, but I just want to touch the wave tops of all of these just to set the stage here.
The first highlight is that you must meet eligibility requirements to keep FEHB in retirement. It's not a guarantee for everyone. Most of you know you need to be in it for five years. You need to be enrolled at the time that you retire, that type of thing.
And there are lots of little nuances to that. But first things first, if you're thinking about how do you add part B to FEHB in retirement, you first have to make sure that you've got FEHB in retirement. Be certain that that is true for you.
Next, retirees can participate in open seasons just like you can if you're employed. The only difference for retirees is that you are not allowed to enroll during the open season. You already had to be enrolled and then you can switch around to different plans, carriers, the high option, the low option, switch the high deductible plan back to a regular plan. They don't care.
Once you're in, you can chess game all around there, but you won't be able to enroll in FEHB as a retiree. Very, very important that you realize you've got to meet the eligibility requirements to be able to get into the coverage and once you're in, you're able to move all around.
Next up, the government continues to pay about 72% of the overall premium. That's what they're paying right now. The premium for you as an employee will be the same. Once you're retired, you're going to pay the exact same amount for that plan as a regular employee does, but you're no longer going to receive a tax break.
Right now as an employee, for those of you who are still working, that income that you're using to pay for your FEHB premium is not reported as income to you. It doesn't show up on your W-2 when you go to file your taxes.
It is important that you realize that cool perk that you have right now as an employee goes away when you retire. Although the premium itself on paper is the same, it feels more expensive. It's a heavier premium because you have to pay the tax on top of that premium and that will feel heavy.
That will be kind of baked into your taxes when you go to file as a retiree and you're like, “Gosh, what gives? How am I paying more in tax?” And it's because of things like this that kind of get hidden. The second to last bullet here is your FEHB premiums increase faster than your pension.
In our retirement workshops, one of our favorite slides to talk about is this revelation that people have that based on how your CSRS or FERS pension increases, that's your monthly retirement check, that increases at a slower rate than your FEHB premiums.
What ends up happening is that FEHB premium that you are paying ends up gobbling up more and more and more of your pension as time goes on.
And so obviously everybody's pensions are going to be different levels, but if one increases at a faster rate, it makes sense that over time it is going to take up a much larger piece of your pension and that is unsettling for a lot of people.
In our retirement workshops, we're obviously teaching this material. And then when people have a chance to meet one-on-one for that individual help, they're able to start to put those pieces together where they see those premiums increasing and realize they have to do something to control some of the healthcare costs.
And I'm not just talking about premiums, but we're going to be talking about all the other aspects, all the other costs associated with healthcare today. The last highlight I'm going to give on FEHB and retirement is that if you cancel FEHB, you're done so, you're out for good.
Anybody who says, “Hey, leave FEHB, go get this other plan.” It's great. You just need to realize if you do that, you cannot come back.
There are some very limited exceptions, and I'm going to talk about those today, but very important that you realize, especially if you're working with somebody or you're talking with somebody who has no idea how federal benefits work and how your FEHB plan has put all these rules in place, you do not want to walk away from a plan that you can never get back into.
Overview of Medicare and other Plans
Medicare
Let's talk about a quick overview of Medicare and some other plans. Again, just to give a little context to what we're talking about today. There's so much jargon in this industry that I want to at least lay the foundation of what we're talking about so everyone's on the same playing field.
Let's talk about the different types of Medicare. There are technically more than four parts, but these are the ones we're going to talk about today. I'll explain why here in a moment. Part A is hospital insurance.
This is the part of Medicare that all of us have been paying for our whole lives because any income that we receive from an employer, self-employment income, any of that, 1.45% of that goes to Medicare and it's to fund part A.
When they say it's free at 65, it just means that it's been prepaid, right? Over your whole working lifetime up until the time you were 65, you've paid your dues and now you get this for, quote, free. Part B is medical insurance.
This is the part we're going to be exploring much deeper today, but generally speaking, part B pays for 80% of whatever the quote, Medicare approved charge is for a particular service that you have received.
They have a whole list of all the potential charges that Medicare is willing to approve and they have their dollar amount of what they're willing to pay for that service to be rendered to you, that care to be rendered.
Medicare is willing to pick up 80% of that number. The question is, who picks up the other 20%? And that's what we're going to be talking about today. Part C, this is technically not part of Medicare. The reason is it's because it's a private coverage that includes part A, B, and usually part D, which is the prescription drugs.
Medicare Advantage plans, or again, Medicare Part C is private coverage. It just so happens that they're utilizing parts of the Medicare plan as part of the private coverage. It gets a little bit confusing.
We are not going to dive into Medicare Advantage plans today. That is for another webinar, but Part C can be confusing because this is what you see on TV. This is how you get bombarded when you turn 65.
Of all of the things between Medicare Advantage plans and Medicare supplements that we'll talk about next, this gets really quite confusing. Then Part D are prescription drugs. This is private coverage for prescriptions.
The vast majority of you do not need Part D for Medicare because your FEHB program has prescription drug benefits that are as good as Part D benefits are.
And so just something to think about. We wanted to at least give a little bit of familiarization of the four different types of Medicare.
You might hear some other plans referred to by letters. You might hear N or G, right? Those are different types of plans that we're going to talk about next.
Medicare Supplemental Insurance
Next up is the Medicare supplemental insurance. This is private insurance designed to cover the gap in coverage when someone has Part A and B. Remember that 80% that Medicare is willing to pay. This would pay the other 20%.
Sometimes you hear this referred to as Medigap or just a supplement for short, but this is quite different than the Medicare Advantage plan, that part C that we talked about on the previous slide.
For a Medicare supplement, it is very important that you realize that the supplement only helps pay the portion of the Medicare approved charge that parts A and B do not cover.
If Medicare pays 80%, the supplement pays 20%. But this note here at the bottom, this is going to be a really important thing for everyone to take away from today's session. And that is, if there is a charge that is not approved by Medicare, it cannot be paid by a Medicare supplement.
We hear stories all the time of employees saying, “Well, when I go to the doctor, they may have diagnostics, they may need to see me more often,” whatever it might be. And if Medicare doesn't approve it, then they're left to pay it all out of pocket if they have a supplement.
That supplement doesn't fix that problem if there's a charge that is not approved by Medicare. This will come in handy and very relevant here in a bit when we talk more about the FEHB plan.
Healthcare for Veterans
Next up, let's talk about healthcare for veterans. Lots of moving parts here, so bear with me here. TRICARE is for the veteran and their eligible family members. At 65, the normal TRICARE program becomes TRICARE for Life and it is free. The catch is the participants must enroll in parts A and B. You don't have a choice.
This is just how it goes. If you wish to have TRICARE for life at 65 or older, you must be enrolled in both parts A and B. For the VA healthcare, so this is the healthcare for the specific veteran, this is received at VA hospitals and clinics. You do not have to enroll in part A and B, but it might help pay for private care.
There may be care that you don't get at the VA or one of their facilities and you have to go to the private network. Medicare Parts A and B can help pay for that kind of care because the VA doesn't pay for private care. Lastly is CHAMPVA.
This is for a spouse, widow, or a child of a service connected permanently and totally disabled veteran. If your family or you are enrolled in CHAMPVA because you are one of these people, you need to understand that Parts A and B will be required for you just like it is for TRICARE members.
That gives you a little bit of an idea of those different types of coverage. I know we have a lot of veterans on here. I know that by all the questions that we got about TRICARE and how all this works and going to VA facilities and all that.
I wanted to address this early in the presentation today and give a little context. We're going to get into the real meat of this program. I had to lay the foundation first because there's a lot of moving parts, but getting into Medicare Part B and how all of this works.
Details of Medicare Part B
Medicare Part B is the closest thing that there is to your FEHB plan right now, as far as all the different parts of Medicare, Part B is the closest.
Because it's going to cover your healthcare provider services, any outpatient care that you might receive, if you need durable medical equipment, you're in need of home healthcare services and some other preventative services.
Not all providers accept Medicare, and it's important that you know who they are. We'll show you how to know if they accept Medicare and if they don't just accept Medicare, but that they are in a participating status with Medicare. We'll talk about that here in a bit. We'll give you a little cheat to know for sure.
Typically Medicare pays 80% of the approved charge and you have to pay the rest either out of your own pocket or out of the insurance company's pocket. You can use programs like FEHB or TRICARE to pay for the other 20% that Medicare is not going to cover.
This is a real win. In this respect, this looks like a supplement where there's that 20% hanging out there and instead of you paying out of your pocket, you get to pay it out of somebody else's. A lot of people ask, “Well, are there any charges that Medicare doesn't approve and what are they?” Well, here's a list. This isn't even the whole list.
But it gives you an idea of the types of things that Medicare is not interested in paying for. I'm going to guess none of these seem too outlandish. I want to give everybody a little bit of perspective here to have an appreciation for the limitations of Medicare and why having it by itself is not ideal for most people.
And some people, frankly, don't have the choice that you do as an FEHB recipient. Somebody who doesn't have an employer sponsored plan, this might be the best that they can do. And so they're going to have to figure out how to pay out of pocket for any of these items that they need.
The Decision to Enroll
Let's talk about the decision to enroll in Medicare. For the vast majority of federal employees, the decision to enroll in Medicare Part B is purely optional. There are some notable but really common exceptions. We've talked about the first one, which is those enrolled in the military's TRICARE program.
They also have to enroll in part B at 65, regardless if they're still working or not. And of course, they've got part A as well, but that's the free part. I'm not as focused on that today and we're going to stay more narrowly focused on the part B in this part of the discussion.
The other group that we haven't talked about just yet are those in the Postal Service Health Benefits Plan that are retired, January 1st, 2025 or later.
They must enroll in Medicare Part B at 65 once they are retired. There were some exceptions. This was a brand new program, and so they had to have a little bit of a phase in, but if they're willing to do this for the postal service and all the employees that are there, and they've done it with the military group, with TRICARE, who do you think is next?
Who do you think is next? I'm going to guess it's all of you who are in FEHB. Don't think that this is some far off outlandish thing that will never happen to you. It's very possible that by the time you get to Medicare age at 65, this isn't going to be an option for you anymore.
It's just going to be the requirement like it is for these two groups. But so far, we're going to teach what the program looks like today.
Part B Premiums for 2026
Let's talk about the premiums. For 2026, the Part B premiums go anywhere from about $203 a month to $670 a month per person, depending on income. We'll talk more about the income here in a moment. The premium that you're going to pay is, it really can be paid in two different ways.
It is paid out of your social security benefit if you're already drawing Social Security, or it will be paid directly by you to Medicare if you're not already drawing Social Security benefits.
They're going to try to make it as easy as possible because there's already a check being cut from Social Security. They'll kind of coordinate with Social Security to make all that math work. Otherwise, if you're not drawing Social Security, you're going to have to strike that check over to Medicare.
There are some FEHB plans that offer a rebate of some or all of the Part B costs. We'll talk about those. We'll go into a little bit greater detail on that, but I do want to point out over in the blue box to the right-hand side, a question that we get all the time and we wanted to highlight it here.
The comment is enrolling in Medicare Part B does not reduce your FEHB premium. I've already mentioned that part, but having Part B in conjunction with FEHB may very well lower some or all of your out of-pocket expenses, such as copays, co-insurance, and deductibles.
It's not just premium that we're talking about here today. It's the bigger picture of all of the pieces of risk that you have of having to hit that max catastrophic limit for your out of-pocket expenses that can really put you in a bind when you are retired. Frankly, it can put you in a bind at any time, but as a retiree, even worse.
FEHB Plan Reimbursement with Part B Enrollment
Let's talk about the plan reimbursement for Part B enrollment. Every plan brochure that's out there for FEHB, they're all structured in the exact same way, which is really nice for everybody navigating all of that. I'm sure it's a pain in the neck for the carriers to abide by OPM's rules of how all that needs to be laid out, but for you guys, it's really great.
You can go to section nine of any of the plan brochures to see what reimbursement, if any, your plan provides. And if you feel so inclined to look at other plans, you can look at the section nine on those plans as well.
And be able to see any of the qualifications for reimbursement, how it works for that individual plan. Most of the time, those reimbursements range somewhere between 800 and $1,200 a year per person. It is important to realize that spouses, if they're enrolled in Medicare too, they're going to get reimbursement as well.
We're just going to double whatever that number is, assuming that both of you are enrolled. I'm going to throw a wrench into all of this, and I debated even mentioning this today because it really complicates things.
There are certain FEHB plans that are labeled as “Medicare Advantage.” I really wish that they would have named these differently because it's not actually the same kind of Part C that typical Medicare Advantage plans are. It mimics that, but it's not actually offered by Medicare. It is through your FEHB plan.
It kind of confuses everybody. It confused me the first time that I looked at it, but it's important to know that if you were to explore those plans and decide that that's a route you want to go, they offer a much more generous reimbursement plan of up to $3,000 per year per person.
Something to at least consider. We will do a webinar on Medicare Advantage, these Medicare Advantage plans within the FEHB plan at some point, but it is a relatively new plan in the last 10 years or so, and not a lot of people know about them. And frankly, the way that they've couched them has been a little bit confusing.
I think a lot of people back off for that reason, but it is worth at least noting that they do have higher reimbursement levels.
Rising Cost of Medicare Part B
Let's talk about the cost. We're going to kind of circle back to the premium that we talked about a moment ago. There are tons of factors that lead to the rising cost of Medicare Part B premiums.
When we have periods of high inflation, all these technological advances that are causing us to live longer, those are all reasons from an actuarial standpoint for all the number crunchers to realize people are staying on this plan longer and needing more care, and so naturally that increases the premium.
In 2022, the largest Medicare Part B premium was recorded at 14 and a little over a half percent, and boy, did it make retirees mad. You guys have experienced similar increases in your FEHB plans in the last couple of years, but for the average retiree out there who was on Part B, they were certainly not excited to have that big increase.
On the right-hand side, you'll see kind of historically what those premiums have looked like. Over the last 10 years, there's been over a 50% increase in premium. We have a reason to believe that it's not going to get better from here.
When You Might Pay More
Next up, let's talk about when you might pay more. Medicare Part B premiums are what we call means tested, and they're based on this thing called your modified adjusted gross income. Essentially … and we'll talk more about the MAGI, this modified adjusted gross income here in just a moment, but essentially the more income that you have, the higher your premium is going to be.
And this includes income from accounts like your traditional TSP, your pension, and your social security benefits. It's not just income that you have from a job, it is income from all of these different types of sources. This premium increase is called the IRMAA. It's the income related monthly adjustment amount.
The actual premium that you will pay will be based on your modified adjusted gross income from two years ago. If you are enrolled in Medicare Part B right now in 2026, they would've looked at your 2024 MAGI. They're going to look back, skip over last year, go to the year before, and that is what they're going to use to determine how much you pay.
This modified adjusted gross income, if you're kind of curious what this looks like, it's going to start with your adjusted gross income. You can find that since we just filed taxes a couple of days ago. You can see the IRS form 1040, go to line 11 and you can see what your starting AGI is.
Then they're going to add back in all the adjustments and credits that you received for your AGI. Any deductions that you had for contributions to a traditional IRA, not the TSP, but a traditional IRA in the private sector. Any deductions that you claim for a student loan interest or any tax-exempt interest.
That'll give you an idea. For a lot of you, the AGI and the MAGI are going to be exactly the same, but it's certainly quite possible that it won't be. Here's what you guys want to know. Well, how bad can it be and is that me? There's kind of a lot going on on this slide.
I wanted to put this table here for you as a reference. I'm not going to go through all of these numbers. You're welcome. But I do want to kind of give a little bit of context here. Remember, they're going to look back to your MAGI from 2024, if we're talking about 2026 premiums.
And it will be based on whether you are filing individual or head of household, married and joint or married and separate. You need to know how you filed in 2024, because that will tell you which column to look at. And then off to the far right-hand side, you've seen kind of the bookends of these numbers, the one that's about $203 a month, and then the $690 a month.
A lot of you might think, “Good Lord, I don't think I'm ever going to get to this point of having to pay these extra amounts.” I want you to think about some really important sources of income that you have.
You obviously have your pension, you have your social security benefits. All that money you take out of the TSP from the traditional side of your account is going to count here.
And what's especially true and what I want to highlight for all of you today is that just this year, in fact, just a couple of months ago, the TSP opened the door for in plan Roth conversions, where you can take some of that money that's in your traditional TSP and make it Roth TSP by paying the tax on it. When you do that, all of that money that you convert in that tax year counts towards your MAGI.
You want to be really careful when you choose to do those things. And that's part of my concern with the TSP opening up this option is that people don't really understand the magnitude of the decision that they are making and how it affects other seemingly unrelated things like how much your Medicare premium is going to be.
You need eyes wide open with all of this and get some professional help if you can.
When a Decision Must be Made
Let's talk about when a decision must be made. There seems to be a lot of confusion around this, so we want to kind of break this down for everybody.
The decision window that you have for enrolling in Part B is based largely on your employment with the federal government. That is where your group health insurance is provided. Everything I'm going to be talking about today with respect to Part B is assuming that you have FEHB in retirement.
Not that you're on a spouse's health plan for their employer, anything like that. Some of this might apply to that, but for everybody's situation today, we're going to assume that everyone is enrolled in FEHB. The rules are different based on what your status is when you turn age 65.
If you are still working in federal service, that is at the job where your health insurance is provided, at the age of 65, you're going to do one thing, and if you're already retired from federal service at 65, you're going to be able to do something different.
Let's break down both of these. If you are still working in federal service at age 65, you are allowed to delay your Part B decision until you retire. You're going to have this enrollment window where you can avoid any penalties.
Once you retire, you're going to have eight months to enroll in Part B. If you don't enroll within that window and later you decide you want to enroll, you are going to pay a higher premium. That's a penalty. We're not talking about the premium that you're going to pay if you made a lot of money, right?
You had high income, you did Roth conversion, all that. That's a totally separate deal. This is simply because you enrolled late. I do want to make a special note, this blue box down here at the bottom. If you are still working at 65 and your spouse is enrolled in your FEHB plan, they can delay their enrollment in Medicare Part B without penalty.
They're going to follow the same rules above in this enrollment window that you will. Important to realize that if you are still working and you're under that FEHB plan, if your spouse is older and they have tripped that 65 wire, they do not need to scramble to enroll in Medicare Part B.
They have a grace period because of your employment continuing that once you finally retire, both of you have eight months to enroll at that point, assuming that you're 65 by that point. If you are already retired from federal service at the age of 65, the decision that you're going to need to make for part B is going to be made at that time.
There's an enrollment window to be able to avoid those penalties. It's basically the seven-month window around your 65th birthday. It's going to begin the three months before the month you turn 65, includes the month you turn 65 and ends three months after the month you turn 65. S
omewhere in there, you need to pony up and enroll in part B if that's what you want to do. Again, you're not required to do this. The majority of you aren't, but if you want to and not have any penalties, this is the time to do it.
If you do not enroll within this window and later you decide that you want in, you will simply pay a higher premium because it's going to include a penalty at that time.
When You May Have a Penalty
When you may have a penalty, if you do not enroll in part B during the stated window that we've just described, there will be a permanent penalty that will apply if you later decide you wish to enroll in part B. Here's what the penalty is.
The penalty is 10% for each full 12 month period you have been absent from the plan. Let's say that you've delayed three years, right? At 65, you're like, “I'm not doing that. I don't need part B.”
And then you realize like, “Oh gosh, maybe I do.” At 68, you decide to enroll. You delayed three years. That means you're going to pay 130% of the part B premium, right?
The 30%, 10% per three years, you're going to have 130% of that premium. We're looking at about $203 a month times 130%. We're looking at $264 a month and that penalty will be for the rest of your life.
No matter your premium won't always be that amount, but the penalty of 130% is going to be … or the penalty of 30%, but looking at the total amount that you're going to pay will always be 130% of the base Part B premium.
As that rises over the years, guess what? Your penalty goes up with it because it's a percentage.
Choices in Retirement for FEHB and Medicare Part B at 65
Let's talk about the choices for FEHB and Medicare Part B at 65, just to give everybody a little bit of context to see what the options are.
Combination number one is don't enroll in Medicare Part B and just keep your FEHB as it is right now. It will remain as your primary coverage. It is the plan you have been operating on probably for many years, and this is the one you're probably most familiar with.
Combo number two is to do the opposite, to enroll in Medicare Part B and drop FEHB completely and permanently. You want to be very careful with this combo because remember, once you leave FEHB, you can never return.
If you're a retiree and you leave FEHB because of something you heard and you decide to go to Medicare or frankly any other program or no program at all, if you just drop FEHB, it is gone forever.
We don't love combo two because it doesn't give you any options if you don't like what you did and want to come back. Combination number three is to have a hybrid approach between Part B and FEHB.
Combination number three has you enroll in Medicare Part B. In retirement, this becomes your primary coverage and your FEHB will remain in place and that will be your secondary coverage. And I know what you're thinking.
If it's my secondary coverage, does it mean I get to pay less for it? And the answer is no, that is not the way this works at all.
The premium remains the same for employees and for retirees, and so there will be no adjustment to the premium. We're going to get to that here in just a moment, but that combo three is something we're going to be talking about more today. Why would we do combo three?
This seems crazy like to be doubly insured for what seems to be no good reason. Well, here's the reason. Combination number three, having both Medicare Part B and FEHB does a number of things.
FEHB Acts as a “Super Supplement”
This is a big one that I'm going to highlight here. FEHB ends up acting as a super supplement. When a person has both FEHB and Part B in retirement, Medicare is the primary payer and FEHB is the secondary. We've already established that part. For charges that are approved by Medicare, Medicare will pay their portion, their 80%. FEHB pays the second. They're 20%.
That's the split. That's the arrangement that Medicare has with how this works. 80/20. Here's where the super supplement part comes in. If there are charges that are not approved by Medicare, FEHB steps up to be the primary payer.
And then you have your normal copays and co-insurance like you do right now as you're using it. Every time you go to the doctor, you've got a copay, right? You've got a co-insurance.
If you have an outpatient procedure, those types of things, it would operate like you'd kind of come out of the Medicare world and operate more in the normal FEHB realm, and then you step back into the Medicare world when you go back for an approved charge.
This is something … the reason we call this a super supplement is because if you remember the way I described Medicare supplements earlier, I was very clear to tell you that Medicare supplements only pick up the 20% of the charge that Medicare has already approved.
If they don't approve the charge, if Medicare does not approve the charge, the supplement can't pay anything. This is some insulation for you that if there's something wonky that happens that Medicare isn't on board with, or that big long list of things that I said Medicare doesn't cover at all, those are perfect opportunities for the FEHB plan to step up into the spotlight and be able to pay those things and keep that as seamless as possible.
We get to our frequently asked questions. These are some good ones.
Frequently Asked Questions
I am so appreciative that so many great questions were submitted. Of course, lots of duplicates and all that stuff and some that were getting way into the weeds on stuff, but I sifted through all of them and pulled out the common themes that I think are going to be great for us to talk about today.
Q1: Will I automatically be enrolled in parts A and B, or do I need to sign up somewhere?
A1: The answer unfortunately is it depends. If you are already drawing social security benefits, you are automatically going to be put into both parts A and B. You can cancel this coverage. You can let them know that you don't want that. You return your Medicare card and all that.
They just have this on autopilot here, but you would automatically be enrolled if you're already drawing social security benefits. But if you've not started those benefits, you're going to need to apply online to be able to start part A and B. Next question.
Q2: What if I change my mind? Can I cancel my enrollment in Medicare Part B?
A2: The answer is yes. You can cancel part B at any time, but yeah, you're free to choose, but you're not free from consequence.
If you later re-enroll, you're likely going to suffer a late enrollment penalty just like you would have, had you enrolled after the age of 65 when you first got in.
Just like the penalty we talked about before, the same type of thing will happen. So yes, you can leave, but if you come back later, there will be a penalty.
Q3: Should I change FEHB plans when I enroll in part B? For instance, should I switch from a “high” plan to a “low” plan?
A3: Gosh, you certainly can change plans, but I want you to be super, super careful to weigh all of your options, thinking about things like in and out of network requirements, any of those potentially high out of-pocket expenses or costs that you have by switching to another plan that maybe isn't as generous as the one that you have right now.
You want to be looking at all the things, don't just look at premium, look at all of the factors that go into that. And I'll give you a good example.
A lot of people have Blue Cross, a lot of you are asking questions specifically about Blue Cross in your forms and the deal with Blue Cross is they have a high option, the standard plan, and it covers in and out of network providers. Well, the low plan, the basic plan doesn't.
If you've got a lot of providers that you see or anticipate seeing that are not in network, you are on the hook for any of those out of network charges on your own.
That wouldn't make any sense for you if you're trying to save money by doing that. Again, you want to look at the whole picture here. And I do want to make a special plea to you to make sure that we're all really clear.
Retirement in and of itself is not a qualifying life event for FEHB. If you want to make a change to your FEHB plan, you need to do that during an open season.
If you're going to retire in December of a given year and you decide that you want to switch up your plan, you've done all the research, you've looked at all the factors and you want to make a change, you can certainly do that.
You're going to want to do that in that open season prior to retiring. There's lots of people that will say, “Hey, try not to do that right at the same time that you're retiring because everything gets messed up.
There's big delays and when your retirement application gets to OPM and the changes made and all that, and there's a lot of validity to that, but sometimes you don't have the luxury of hindsight and doing things differently.
And so if you need to make a change, the open season will be your opportunity to do so.”
Q4: What if I am in a high deductible plan, a HDHP? Can I still enroll in part B?
A4: The answer is no. You are not allowed to be in an HDHP and Medicare at the same time. If you enroll in part B at age 65, you can keep your HDHP all the way up until the time you hit 65.
But again, if you need to make a change, you need to do it in the prior open season because if you turn 65 in July and you're still in a high deductible plan, you have no choice but to let it ride all the way through the end of the year, which means you're going to have some tax penalties because you contributed to a program that you are not qualified to contribute to, through your health savings account that's attached to the high deductible plan.
But if you're going to retire … or I'm sorry, if you're going to enroll in part B right at 65, that HDHP is good all the way up until 65, you're good to go.
But if you decide to enroll in part B after the age of 65, maybe you retire at 67 and you decide to enroll at that point, you want to ensure that you have changed to non-HDHP coverage, so a regular fee for service plan, not a high deductible plan, at least six months prior to enrolling in Medicare Part A and B, or really either one of them, A or B.
The reason is, I don't know why they did this, for Medicare, when you enroll, they backdate your enrollment by six months.
If you've had a high deductible plan that you were contributing to an HSA through, and whether you put any money in it or not, doesn't matter.
The plan puts in money on your behalf. If that happens six months prior to you enrolling in part B, you are now in violation of the rules. You want to pay special attention, I know there aren't a whole lot of you that are enrolled in high deductible plans, but it's something to think about.
Q5: A related question is, what if I'm in an HSA? As part of that high deductible plan, can I still enroll in part B?
A5: The answer is kind of no and yes. No, you can't contribute to an HSA while you're enrolled in Medicare, but you can still own one. Remember, HSA is the health savings account. We did that webinar last month. The HSAs are designed to help you save money that you can save now to spend on healthcare later.
We have arrived at later, when you're enrolling in Medicare Part B and you're like, “Well, I have all this money in the HSA. Do I have to take all of it out? Like what happens to it if I'm not allowed to have an HSA?”
It's not that you're not allowed to have an HSA, it's that you're not allowed to contribute to it while you're on part B or in Medicare at all. The yes part of this is you can use the money that's already in your HSA to pay for those Medicare premiums. That's an important distinction that I want to make there.
Q6: I heard I can suspend instead of cancel FEHB to go to Medicare and then I can return to FEHB later. Is that true?
A6: My goodness, we hear these comments all the time in our retirement workshops and we are here to set the record straight.” Not exactly.
You can suspend your FEHB plan to go to a Medicare Part C, a Medicare Advantage plan, but not Medicare Part B. If you leave FEHB in retirement, you can never return. Very important.
There's a different rule with respect to leaving to go to TRICARE and all of that. I'll let all of our TRICARE recipients in on that little secret. You could suspend FEHB and go use TRICARE and then have the ability to come back to FEHB later if you want.
But with respect to this, the reason this part is so confusing is because people hear Medicare, they just don't hear the Part C part. If you suspend FEHB to use Medicare Part C and you don't like it, you can return back to FEHB.
But if you leave FEHB to go on Part B, you cannot come back. It's an important distinction that I feel compelled to really drive home because it is just such a final decision that I don't want you to have any regrets.
Q7: If I plan to live or travel a lot overseas, does it make sense for me to enroll in Part B?
A7: If you live or are traveling overseas, Part B will likely not cover you at all. There are extreme examples of when they do, but it is so rare. I'm not even going to put it up here. You want to keep in mind that anybody who is required to enroll to keep their coverage like TRICARE for Life or Postal Workers, you have to enroll anyway.
Whether you like it or not, whether you're here in the United States, whether you're overseas, doesn't matter, you are required to enroll even if Part B provides you absolutely no benefit. It's really frustrating, I know, but those are the rules.
Q8: If I am late to enroll in Part B, do I pay the late enrollment penalty forever?
A8: I want to reiterate this part. Yes. A late enrollment penalty is a lifelong penalty. It doesn't matter how long you are on Medicare Part B, you are going to pay this penalty.
This is the example I gave before. I'll reiterate it here. If you enrolled in part B late, if you're say 68 years old, you're three years late, you're going to have a 30% penalty.
Every year that that part B premium increases, you'll always pay 130% of that base amount. I do want to share with you … I mean, I know we talked a little bit about IRMA and those higher premiums. You don't pay 130% of the higher premium for your penalty.
You pay 130% of the base premium just to make that distinction here. In the event that you did have high income and you're affected by IRMA, you might pay more than that 130% as far as your total premium, but the penalty that we're kind of isolating here is really that 30% that you're going to pay in addition to the 100% of the regular premium for part B.
Q9: If I had higher income and I'm subject to the IRMA surcharge, am I charged the higher amount forever?
A9: The answer to this luckily is no. Every year, the IRMA surcharge is reset because they're based on your modified adjusted gross income from two years ago.
Let's say you had a really high year, you did a Roth conversion, you took a bunch of money out of TSP, whatever it is, and you exceed that income limit and you pay that higher premium or the surcharge.
The following year, if you're not seeing that same kind of income anymore, that is going to be reflected in your new premium.
You'll just pay the normal premium, assuming you didn't trip any of those wires that would cause you to pay a higher amount.
Q10: I am almost 65 and retired, but my spouse is younger. Do we both sign up for Part B at the same time?
A10: Each of you are going to sign up for Part B separately. And listen, these can be independent decisions for you.
Both of you don't have to enroll unless both of you are under the Postal Service Health Benefits Program or TRICARE, those are separate deals, but since you're already retired and turning 65, you can sign up now, but your spouse doesn't sign up until they get to their 65th birthday, right?
That same enrollment window that you have, they're going to have that same opportunity when they reach their birthday.
Q11: I'm almost 65 and retired, but my spouse is older. Should they have already signed up for part B?
A11: The answer to this largely depends on how long ago you retired. If it's been recent, like the last eight months, your spouse can enroll in part B without penalty because they're still in that special enrollment period that goes out eight months from the time that you retire from government service. They have that grace period of the eight months.
But if it was more than eight months ago, you retired two years ago, then your spouse can enroll in part B, but they're going to have a penalty because they should have enrolled at the time that they were 65.
The only exception here that we're talking about is your spouse having the ability to delay their part B decision because you are still an active employee under your employer sponsored health plan.
But in this scenario that we're talking about in this question, this person is already retired and if they've been retired for more than eight months, we've tripped that penalty wire and the spouse unfortunately is going to pay that.
Q12: I'm 60 and still working, but my spouse is already 65. Do they need to enroll in part B now?
A12: Remember, if they are under your FEHB plan, they can delay their part B enrollment without penalty until eight months after you retire. In this scenario, this person is still working and they're curious what their spouse needs to do.
In the prior slide, that person was already retired and then they were wondering what their spouse was supposed to do. Essentially the same thing, but we want to make sure that you know that your spouse can delay and not have any penalty as long as once you retire, they get in within that eight month window if they're already 65 at that time.
How do I know if a doctor participates in Medicare? The good news is the Centers for Medicare Services has a great tool online. I've linked to it here on the screen. You can view all participating providers and there's tons of helpful tools on this.
The one we're looking at is the participant tool to see who the doctors are, but there's actually quite a number of tools that you might find helpful. Keep this link nice and handy for you to be able to reference and check out those providers if you've got them.
Wrap-Up & Next Steps
Quick wrap up here. The two parts of the FEHB and Medicare equation. I haven't said it in these particular words here today, but you want to look at what it costs you and what it gets you in return. It's not just the premium that you are looking at.
You have to be looking at the whole picture and each of you have very unique health needs and you're used to being on certain plans and changing, I know can be tough, but it's important to look at that whole picture and make sure that you're not making a snap judgment based on only the premium, but looking at the whole picture. In retirement, the financial risk of experiencing a catastrophic medical event is high and it's dangerous.
I want you to pay special attention to those max out of-pocket expenses or catastrophic limits, as many of the plans call them, to look at if everything goes to hell in a hand basket, what am I really out of pocket? That's what you have to be prepared for. If you do not have part B added on to FEHB, you have to be willing to pay that catastrophic limit in a given year.
If you don't like that limit, adding part B can help you to eliminate all or some of that risk. Keep in mind, the decision about whether to add part B to your FEHB plan, it's more about the bad years than it is about the average years.
I mean, sure, nobody wants to pay more for coverage that they don't feel like they're getting a whole heck of a lot more for. But at the same time, when the really bad years come and there are huge medical bills, that is something that will bring you to your knees as a retiree.
When we think about part B and the ability to reduce a lot of that financial risk of those big spikes in costs, it may flatten out some of that exposure that's a little bit more predictable for you each year. Like I mentioned, we do a lot of retirement training throughout the country. Medicare's always a hot topic when we are in those sessions.
I encourage you, if you haven't already, attend one of our in person sessions. There is no cost for you to attend, and we're going to cover all of the federal benefits topics and the decisions that you're going to need to be making. My favorite part of these workshops is you actually get some one-on-one help afterwards.
If today, you're like, wow, there are lots of moving parts to all of this. How do I put all this together? I encourage you to get to a workshop because part B is part of the big retirement story that you're going to have. And it's an important part, but it's not the only part. I want you to look at all of it.
You can see all the details for those in person sessions at FedImpact.com/attend. If you are already retired, which I know many of you are based on the questions that you asked, you are certainly welcome to attend, or if you're looking for some one-on-one help, you can click the link at the bottom of the webinar portal to request an introduction to a financial professional if you're looking for that kind of help.
I want to thank you all for joining us. I love being able to put sessions like this together. Frankly, it was hard to decide what to include in today's session, but I hoped I picked some highlights for you that are helpful.
As a reminder to find a workshop near you, you can go to FedImpact.com/Attend. And to sign up for that next webinar or watch any of the replays that we have in our extensive library, go to FedImpact.com/Webinar. Thank you all so much. We'll see you next month.
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