The Old Switcheroo

When it comes to our health, we want the best care possible. When it comes to our time, we seem to have less than ever to spend on the decisions we must make every day.

Out of 8 million enrollees in the Federal Employees Health Benefits Program, only about 5 percent typically switch plans during the annual open season, according to Walton Francis of the Consumer's Checkbook Guide to Health Plans for Federal Employees and Annuitants.

Part of the reason, of course, is that it's complicated to consider switching. There are many plans to choose from, more types of insurance than ever (FEDVIP, FSA, HDHP, HAS and HRA are a few of the newer acronyms), and many variables besides the cost of premiums to consider.

Last week, I outlined some resources that are available to help you decide whether to switch plans. This week, I've spent a little time going through some of the 2008 FEHBP providers' brochures and Web sites. I'll share a few things that might help you realize that it could be worthwhile to take some time between Nov. 12 and Dec. 10 (this year's open season) to evaluate the best plan for you and your family.

Did you know . . .

• There is a $3,550 per year (self and family) or $1,845 (self only) cost difference between the lowest- and highest-cost FEHBP plans that are open to all? That's around $300 a month (self and family) or about $150 a month (self only). If you are in good health with no chronic medical problems, it is possible that you could be paying too much for health insurance. All federal plans have catastrophic limits on your out-of-pocket expenses. If you want to switch plans, you are free to change even if you have a pre-existing condition.
• The Mail Handlers Benefit Plan is offering a new "value option"? If you like the Blue Cross Basic option, you may like this alternative. It offers the lowest-cost preferred provider organization in the FEHBP. The co-pays and deductibles are on the high side, but if you use preferred providers, the value plan offers excellent preventative benefits and a catastrophic limit of $4,000. There are also limited benefits if you go out of network.
• Retirees can use a special Office of Personnel Management Open Season Online Web site to make changes to their FEHBP coverage?

Medicare Options

Are you retired with Medicare coverage? You might want to consider a lower-cost PPO such as the GEHA or Mailhandlers Standard Option along with Medicare Parts A and B. The PPO plans will waive your deductibles and co-pays for most inpatient and outpatient medical expenses if Medicare A and B is your primary health insurance. One note of caution: If you fill a lot of prescriptions every month, be sure to compare prescription benefits before switching to a low-cost PPO.

You also might want to look at the health maintenance organizations in your area if you are trying to save some money and are willing to stay in the HMO's network of providers. Some of the FEHBP HMO plans offer a Medicare Advantage option with enhanced benefits. These plans also are available outside of the FEHBP. If you choose a Medicare Advantage plan outside of the FEHBP, you can suspend your FEHBP plan.

There's no need to enroll in Medicare Part B if you are over 65 and still working and covered by your employer's health plan (or the health plan of your working spouse). You will be able to sign up for Part B without a late enrollment penalty as long as you contact the Social Security Administration within eight months of your retirement (or your spouse's retirement, if you are covered by his or her health plan). Not enrolling in Part B will provide a savings of $100 per month or more. You will gain the most from Part B when you are retired (and Medicare becomes the primary payer) and when you are in need of more medically necessary care. But you should enroll in Medicare Part A when you are within three months of your 65th birthday, whether you are still working or not.

High-Deductible Health Plans

If you consider an HDHP for 2008, here's what you'll like:

• You can choose your own doctor (but if you stay within your PPO network, you will have very limited out-of-pocket expenses).
• You can set up a Health Savings Account. This is much like a Flexible Spending Account, only you don't have to "use it or lose it." An HSA can accumulate from year to year to cover future medical needs.
• HDHP plans provide you with a portion of your premium to use to meet your deductible. For example, GEHA's HSA gives you back $60 per month (self only) or $120 per month (self and family) to use toward out-of-pocket expenses. In essence, this lowers the premium from $95.20 a month to $35.20 a month for self only, and $217.45 a month to $97.45 for self and family.
• Most preventative care is covered 100 percent, with no out-of-pocket deductible or co-pay.
• Unlike Flexible Spending Account allotments, employees who elect HSA allotments may modify their allotments at any time so long as the change is prospective. The 2007 HSA maximum contribution limit is $2,850 for single coverage or $5,650 for family coverage. Individuals who are 55 or older may make an additional catch-up contribution of $800 in 2007. FEHBP enrollees in HDHPs should be aware that the premium pass-through amounts that they receive from their health plan count toward the IRS limits. More information on this is available at the OPM Web site.

Here's what you won't like:

• You can't have an HSA if you have other insurance (including Medicare, VA benefits or if you are a dependent on someone else's tax return). But you can have a Health Reimbursement Account, under which you will receive part of your premium deposited in an account for your use.
• If you go outside of network, the co-payments can be steep.
• The catastrophic limits may be higher than you are used to with other traditional FEHBP plans.

To compare all available HDHPs, check out this OPM fact sheet. Also, look at OPM's 2008 Guide to Federal Health Plans, in which you'll find the premiums for every plan available in your area along with the catastrophic limits and the plan's premium contribution towards your HSA or HRA.

All Grown Up

Are your children turning 22 next year? There is one plan -- SAMBA -- that offers separate, non-FEHBP, dependent child coverage at a reasonable rate ($184.17 a month for the first child, $86.67 for each additional child) for your dependent children aged 22-27. (Yes, believe it or not, that's reasonable.) The only problem is that this plan is restricted to employees of law enforcement agencies, the intelligence community, the Homeland Security Department and the U.S. courts. You must enroll your child in this plan within 60 days of the 22nd birthday.

If you're not eligible for SAMBA, look at the Mail Handler's Value Option for your children over 22. They can have temporary continuation of coverage for up to three years for $177.71 per month.

You will have 31 days after your child turns 22 to find a new health plan for them. You may contact your current plan to see if they qualify for a less expensive coverage directly through your current provider. All FEHBP plans offer temporary continuation of coverage for children over 22, but require payment of the employee as well as the employer share of the cost.

Retiring Soon?

Remember that you will continue to have open seasons after retirement, and you will be able to change from self only to self and family, if necessary. To continue your health benefits enrollment into retirement, you must:

• Have retired on an immediate annuity (that is, an annuity which begins to accrue no later than one month after the date of your final separation), and
• Have been continuously enrolled (or covered as a family member) in any FEHBP plan (not necessarily the same plan) for the five years of service immediately preceding retirement -- or if less than five years, for all service since your first opportunity to enroll.

If your spouse is not a federal employee or retiree, you will also need to be sure to choose a survivor annuity for your FERS or CSRS retirement benefit. This will ensure that they can continue coverage under FEHBP should you happen to die first. You must be covered under a self and family enrollment for your surviving spouse to be able to continue coverage after your death.

If you leave a partial survivor annuity, and the amount of the benefit is not enough to cover the premium, they can either switch to a lower cost health plan or they can pay the premium directly to the retirement system. Keep in mind, however, that if you don't leave enough of a survivor annuity to cover the cost of health insurance, your surviving spouse -- who may be a lot older and more feeble than today -- will have to remember to pay this premium every month or risk losing health coverage.

Tammy Flanagan is the senior benefits director for the National Institute of Transition Planning Inc., which conducts federal retirement planning workshops and seminars. She has spent 25 years helping federal employees take charge of their retirement by understanding their benefits.