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Forget the Pay Freeze: Start Worrying About Health Care Costs

Military retirees’ health care fees will increase on Oct. 1; the jury is still out for federal civilian employees.

Buried in the news over the extended federal pay freeze, the impending fiscal cliff and the umpteenth continuing resolution to avoid a government shutdown is this fact: Many military retirees will be paying a little more for their health care as of Oct. 1.

Day 1 of fiscal 2013 means that some TRICARE Prime beneficiaries now will have to pay $39 to $79 more than they currently do in annual enrollment fees. Specifically, TRICARE Prime military retirees who enrolled in the health care program before Oct. 1, 2011, will pay an annual fee of $269.28 for individual coverage as of Oct. 1, 2012; those with the family plan will pay $538.56 per year under the adjustment. Those beneficiaries -- all under the age of 65 -- currently pay $260 per year in enrollment costs for the individual plan and $460 for family coverage. The 2012 National Defense Authorization Act allows for the annual increase of TRICARE Prime enrollment fees for most retired beneficiaries based on the annual cost-of-living increase.

Those enrolled after Oct. 1, 2011 -- considered new enrollees -- already are paying higher annual enrollment fees ($260 for individual and $520 for family), so their rates will increase too but not by as much. After Oct. 1, both groups will pay $269.28 for individual coverage and $538.56 for dependent coverage. Beneficiaries can pay the fee in one lump sum, or on a quarterly or monthly basis. Active-duty service members and their dependents in TRICARE Prime do not pay enrollment fees.

No doubt the increase will irk some beneficiaries, but when you compare the out-of-pocket costs for TRICARE beneficiaries to the average health care premium contribution for those outside TRICARE, the differences are stark. In 2011, the average annual health care premium contribution for civilian family coverage was $4,129, according to the Kaiser Family Foundation, compared to the $460 enrollment fee for the family plan under TRICARE Prime. TRICARE Prime enrollees do not pay premiums, but they are responsible for co-pays and other costs associated with their coverage.

TRICARE costs are a politically sensitive issue. The expense to the government of providing military health care has more than doubled in the past 12 years and is the most expensive “noncash” benefit the Defense Department provides to service members, retirees and their families. The Obama administration has proposed increases to TRICARE enrollment fees, based on retirement income, and some modest hikes to co-pays and other fees. Lawmakers from both political parties so far have rejected Obama’s proposals.

TRICARE Prime retirees aren’t the only ones in the military health care system who will see out-of-pocket increases as of Oct. 1. Enrollees in the military’s Continued Health Care Benefit Program will see their premiums increase between $73 and $165 per quarter. The CHCBP offers temporary transitional health care coverage for 18 months to 36 months after TRICARE eligibility ends. Basically, it acts as a bridge between military health benefits and an enrollee’s new civilian health plan. The fiscal 2013 quarterly premiums are $1,138 for individuals and $2,555 for families. The current premiums are $1,065 per quarter for individuals and $2,390 per quarter for families.

FEHBP Premiums

Don’t worry, federal civilian employees, you won’t be left out of the premium rate fun. The Office of Personnel Management will announce in the next few weeks the 2013 premiums for the Federal Employees Health Benefits Program. The average amount federal employees paid for their health insurance plans rose 3.5 percent in 2012, after the 7.2 percent hike in 2011. Stay tuned.