Federal government employees and their families have access to some of the most comprehensive healthcare benefits in the country through the Federal Employee Health Benefits (FEHB) Program. Family members eligible for coverage include spouses and children under the age of 26, including legally adopted children.These benefits are available to federal employees and their surviving spouses not only while they’re working, but also after they retire. Even better, the cost of FEHB is the same for retirees as it is for active federal employees. This can sometimes make it easier for federal employees to retire comfortably, or even retire early in some situations. Understanding your FEHB options is key, and which plan works best for you will depend upon a number of factors. Those factors include:
- How often you typically need care
- What doctors and hospital systems you want to have included in your plan, and more generally, how much latitude you want to have in choosing your healthcare providers
- What prescriptions you need to have covered
- Your tax bracket
The good news is that, in most instances, the number of options available within the FEHB system means you’ll be able to find a plan that works well for you and OPM provides a tool to compare plans here. Below is some general information about how the types of plans work.
Types of FEHB Health Plans
The FEHB Program offers access to the following types of healthcare plans:
- Fee-for-Service (FFS) plans — These are available with or without a Preferred Provider Organization (PPO). Non-PPO FFS is traditional insurance in which the plan either pays the healthcare provider directly or reimburses you after you file an insurance claim. This option is typically the most expensive, though you’re free to visit any doctor or hospital you choose without any in-network restrictions.
With an FFS plan with a PPO, you must choose doctors and hospitals that are in-network. However, this option is less expensive than a traditional FFS plan and you typically don’t have to file any claims or paperwork. Keep in mind that there’s no guarantee that a PPO will be available in your area — PPOs have a stronger presence in some areas of the country than others.
- Health Maintenance Organization (HMO) — This type of plan provides healthcare through a network of doctors and hospitals in particular service areas. The HMO coordinates the care you receive, which frees you up from having to complete claims and paperwork or get billed for services. Your ability to enroll in an HMO will depend on where you live or work.
The HMO will provide a comprehensive set of healthcare services. As long as you use in-network doctors and hospitals, you’ll just pay a co-pay at the time of service for primary care physician (PCP) and specialist visits and no deductible or co-insurance for hospital care. You’ll choose a PCP who provides general medical care and referrals to other healthcare providers as needed. If you choose a doctor or facility that’s out of network, non-emergency expenses generally won’t be covered.
- HMO with Point-of-Service (POS) — This is an HMO with a bit more flexibility in that it lets you choose healthcare providers that are out of network. If you choose an out-of-network provider, it does come with a cost, as your deductibles and co-insurance will be higher than if you stay in-network. You’ll also have to file an insurance claim to be reimbursed after services are provided.
CDHP Options Through the FEHB
In addition to these plans, the FEHB Program also offers access to several different types of Consumer Driven Health Plans (CDHP). These are different approaches to health insurance that are designed to give consumers more incentive to control healthcare costs. With CDHP, you have flexibility in healthcare spending up to a certain limit while also receiving full coverage for in-network preventive healthcare. The tradeoff is that you’ll be responsible for higher cost-sharing expenses after you’ve reached your spending limit.
One type of CDHP is a High Deductible Health Plan (HDHP). As the name describes, this plan features a high deductible of at least $1,400 for an individual or $2,800 for a family in 2020. Your annual out-of-pocket expenses are limited to $6,900 for an individual or $13,800 for a family in 2020. Co-pays and co-insurance are higher if you choose a non-network provider. Keep in mind that deductibles don’t apply to preventive care.
If you choose a HDHP, the FEHB will also establish and partially fund a Health Savings Account (HSA) or Health Reimbursement Arrangement (HRA) for you. These are tax-favored accounts from which you can pay for current healthcare expenses while also saving for future expenses on a pre-tax basis. Funds avoid current taxation while growing tax-free and can be withdrawn tax-free if the money is used to pay for qualified healthcare expenses.
The amounts that can be contributed to an HSA for tax year 2020 are $3550 for an individual and $7100 for a family. Additionally, if you’re 55 or older, you can make an additional $1,000 catch-up contribution. HSAs can be a great vehicle for additional pre-tax savings, particularly if you’ve already made the maximum contribution allowed to your TSP account. This post provides more details on the plusses and minuses of HSAs.
Note that you must be covered under an HDHP in order to open an HSA. Also, you can’t be eligible for Medicare or covered by another plan that is not an HDHP, nor can you be a dependent on another person’s tax return.
HRAs are similar to HSAs with a few key differences. First, you can’t contribute money to an HRA — the federal government will contribute funds on your behalf. Also, you can’t earn interest on HRA funds or take any balances with you if you leave the plan. More detail on HDHP plans is available in this FAQ from OPM.
Compare Your Options
As a federal government employee, healthcare takes on added importance as you plan for retirement. One step to take as you plan for retirement is to compare what healthcare benefits – FEHB, Medicare, and in some instances ACA benefits and Tricare – to understand your options and plan for the costs. We’ll discuss that process in more detail in a future article.