1.Picking a FEHB plan can be overwhelming. What are the key few things that a federal employee should look for?
That’s the primary reason why we created the Guide to Health Plans for Federal Employees, and it’s something we’ve thought about quite a bit since we began publication forty-two years ago. Health benefits are complicated; the nuances of deductibles, copays, coinsurance, and maximum out-of-pocket cost limits make it difficult for consumers to meaningfully compare plans. Potential savings may not be obvious or easy to understand.
The 2019 Federal Benefits Survey administered by OPM and released this past summer confirms most federal employees rank total cost as the #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, new disease, or new treatment, but at the same time there are certain known health-care expenses such as premium, planned doctor visits, and maintenance prescription drugs. Deciding on the right health plan forces the consumer to consider both predicted and unpredicted health-care expenses.
To simplify the decision-making process and help consumers 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 premium 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 available plans, there are substantial savings available. 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 in the Guide 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 doctor is in the plan you’re considering and how broad of a provider network the plan has is also important. Our Guide in 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.
2. I have seen that once a fed has picked a plan, it is very rare that they switch. Should more people consider shopping around more often? What are the pros and cons of doing this?
Yes, absolutely. Even if you’re happy with your existing plan, you should know how your plan will change for the upcoming plan year and if there are other plan options that might 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. For example, some plans have added coverage for acupuncture and some plans have eliminated acupuncture coverage. Many plans have changed their catastrophic coverage this year, including one plan that had a more than 50% increase. 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 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 a High Deductible Plan (HDHP) 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 a HDHP 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 isn’t really any downside to shopping around. It’s true that it will take some of your time to compare plan choices, and there are numerous plans to choose from with plan brochures of 100 pages or more to go through. Fortunately, both the Checkbook and OPM plan comparison tools are available to help make the task easier.
3. As feds retire and Medicare comes into play, what changes should they expect and 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 FEHB plans, you will have close to 100% coverage of almost all medical expenses (a few services are not covered by either program and would not get this coverage). 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 FEHB 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 FEHB 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.
