Don't Cancel Your Health Insurance if You're Furloughed

Federal employees across government are concerned these days about the possibility of widespread furloughs. Some are clearly beginning to plan for the prospect of losing a portion of their income -- but maybe not in the best way.

According to the Office of Personnel Management, some employees are calling the agency and expressing interest in canceling their coverage under the Federal Employees Health Benefits Program if they lose income under a furlough scenario.

You may be thinking: "That's a crazy idea." If so, you're right. Canceling your health insurance coverage is not a good strategy on several levels:

• If you participate in premium conversion where you are paying for your health insurance with pre-tax dollars, you won’t be able to cancel your coverage until the next open season since being furloughed is not one of the permissible events that would allow you to change your coverage.

• If you don’t participate in premium conversion and cancel your coverage, you would need to wait until the next open season to reenroll.

• If you are within five years of retirement, you cannot continue FEHBP into retirement if you haven’t been covered for the last five years of your career -- unless you're covered under a spouse’s FEHBP or you’ve had coverage under TRICARE for the five years.

But the most important reason not to cancel your health insurance is because you might need it.  Having an accident or an illness can cause much more severe financial problems than a furlough.

For specific information on how health insurance coverage is affected in a furlough situation, see OPM's guidance on administrative furloughs. It says, "If the employee’s salary becomes insufficient to pay FEHB premiums due to the furlough, [then] leave without pay/insufficient pay rules apply. If the employee chooses to remain covered, the enrollee share of the FEHB premium will accumulate and be withheld from pay upon the employee’s pay becoming sufficient to cover the premiums."

Tammy Flanagan is the senior benefits director for the National Institute of Transition Planning Inc., which conducts federal retirement planning workshops and seminars. She also writes the weekly Retirement Planning column on GovExec.com.