Most people just stick with the plan they’ve had for years but that could be a costly mistake, especially during a pandemic.
Selecting health insurance under the Federal Employees Health Benefits Program can be overwhelming. Health benefits are complicated; the nuances of deductibles, copays, coinsurance, and maximum out-of-pocket cost limits make it hard to meaningfully compare plans. Potential savings may not be obvious or easy to understand.
That’s why the nonprofit Consumers’ Checkbook created the “Guide to Health Plans for Federal Employees.” It’s something we’ve thought about quite a bit since we began publication 42 years ago. To help you weigh your options, we’ve sought to answer some basic questions.
What should federal employees look for?
The 2019 Federal Benefits Survey administered by the Office of Personnel Management and released this past summer confirms most federal employees rank total cost as the No. 1 most important factor in plan choice. But what many don’t take into consideration are the out-of-pocket costs that their insurance doesn’t cover. No one can predict whether they’ll have a serious accident, be diagnosed with a disease or require new treatment, but there are certain known health-care expenses. Those include premiums, planned doctor visits and maintenance prescription drugs. To find the best health plan requires you to consider both predicted and unpredicted health-care expenses.
To help you understand how plans cover the combination of predicted and unpredicted expenses, our guide offers an estimated yearly cost for each FEHB plan. These are single-dollar amount estimates for good, average, and bad health-care years, which include premiums plus out-of-pocket costs for households similar to yours in age, family size, and expected health-care usage. This should be the most important decision point to consider when selecting a plan.
When comparing estimated yearly costs across plans, there are substantial savings to be found. For example, a family of three would expect to have $7,650 in yearly costs on average in Blue Cross Standard but only $4,700 in yearly costs on average in Blue Cross FEP Blue Focus, a savings of almost $3,000.
Besides the yearly cost estimate, other elements to consider include the catastrophic coverage of each plan, which we define as the “most you could pay in a year.” It provides a worst-case scenario and shows consumers their potential risk in a plan. Whether your curren doctor is in the plan and the provider network the plan offers is also important. Our guide for the greater Washington, D.C., area has a provider directory that shows which doctors participate in which plans, but it’s always good to call your doctor to confirm they’ll be participating with the plan in the upcoming year.
If you like your plan, does it still make sense to shop around?
Yes, absolutely. Even if you’re happy with your existing plan, it may not be the same in the coming year and there may be other plan options that could save you money.
Don’t assume your plan is unchanged. The enrollee share of the average plan premium for 2021 will increase 4.9% compared to 2020. Many plans have benefit changes in 2021 as well. For example, some plans have added coverage for acupuncture and some plans have eliminated acupuncture coverage. Many plans have changed their catastrophic coverage, for example.
There are six new FEHB plans in 2021, including one new national plan, UnitedHealthcare Advantage. Eight plans are leaving the program or terminating an existing plan option. There is one new FEDVIP vision plan this year and two new FEDVIP dental plans. Your doctors may have left your plan. An expensive drug may no longer be on the formulary. In short, there are numerous reasons to both find out how your existing plan has changed and see if there are other options that can save you money or provide desired coverage.
Active federal employees should also consider the benefits of joining a high deductible plan with a health savings account (HSA). These plans offer an important benefit not available in regular health plans: the ability to save money that is not taxed, the ability to grow that money over time without paying taxes on investment income, and the ability to take money out for health care expenses, also untaxed. For active employees considering such a plan, one important strategy is to add up your known out-of-pocket expenses and contribute that amount to your HSA. This will lower your taxable income immediately, and instead of using the HSA contribution the plan provides, that plan amount will grow tax-free year over year and will be tax-free when used for health-care expenses in the future. Employees enrolled in high deductible plans with an HSA cannot sign up for a general-purpose FSA but are eligible to sign up for a Limited Expense Health Care FSA (LEX HCFSA) that can be used for dental and vision care expenses.
There’s no downside to shopping around other than the time you’ll spend comparing plan choices—there are numerous plans to choose from with plan brochures of 100 pages or more to review. Fortunately, both the Checkbook and OPM plan comparison tools are available to help make the task easier.
As feds retire and Medicare comes into play, what changes should you plan for?
The question we get asked most often is, “Should I take Medicare Part B?” Medicare Part A (for hospital costs) is available automatically and for free starting at age 65, but Part B (doctor costs) is an elective choice.
There are advantages to enrolling in Part B. Almost all the national plans waive their hospital and medical deductibles, copays, and coinsurance for members enrolled in both Medicare Parts A and B. In effect, they “wrap around” Medicare. With Medicare Parts A and B and most national FEHBP plans, you will have close to 100% coverage of almost all medical expenses (a few services are not covered by either program). Even if you enroll in one of the plans that doesn’t wrap around, you can use your Part B benefit to go outside the plan’s doctor network and pay only 20% of the Medicare allowed charge. There is also a growing list of FEHBP carriers that offer Part B premium reimbursements. Coverage for dental and prescription drug expenses will still differ depending on which plan you choose.
However, Medicare Part B will rarely save you nearly as much money as you spend on the Part B premium. This is because the cost-sharing for physician visits and tests in almost all FEHBP plans is already so low. In most plans, you are likely to spend more than a thousand dollars more a year for the Part B premium (over $1,800 next year) than you will get back in reduced costs. Simply put, Medicare Part B is of limited dollar value to someone already covered by a good FEHB plan.
As with active employees, we see large plan-to-plan yearly cost differences for annuitants. For a self plus one enrollment with both Medicare Parts A and B, estimated yearly costs on average would be $8,450 with Blue Cross Basic and $12,770 with Blue Cross Standard, a difference of over $4,000. As with anything else, it pays to shop around.
Our guide provides yearly cost estimates for all FEHB plans for annuitants with either Medicare Part A alone, or with Medicare Parts A and B. We show the effects on premium costs of adding Part B after any Part B premium reimbursement, and the likely savings due to having both Parts A and B.
Check here to see if your agency provides free access. The Guide is also available for purchase. Government Executive readers can save 20% by entering promo code GOVEXEC at checkout. Dallen Haws is a financial planner and host of the “Plan Your Federal Benefits” YouTube channel as well as a podcast at PlanYourFederalBenefits.com. Kevin Moss is director of marketing at Consumers’ Checkbook.