Posted on Wednesday, 19th July 2017 by

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The 2018 COLA increase is projected to be approximately 2.1%.  The Senior Citizen’s League’s June 2017 report, “Based on consumer price index (CPI) data through April of 2017, TSCL estimates that the COLA for 2018 may be 2.1 percent — significantly higher than in recent years, which has averaged only 1% since 2012. This estimate could still change, however, as there are several months to go before all the data is in.” The 2018 projected increase for the average Social Security monthly benefit of $1,320 would amount to $27.72 per month, the CSRS average monthly benefit would increase to $3,661 up $75.30, while the FERS average benefit would increase to $1,576, up $33.

Federal Employees Health Benefits (FEHB) Suspension Considerations

My last article titled Caution – Don’t Lose Your FEHB Coverage talked about the difficulties some have encountered when they tried to suspend their FEHB coverage. It also outlined what options are permitted for OPM to approve a suspension. An untimely move out of the FEHB program could be financially catastrophic for your family and considerable research is needed before making this move. Here are some things to consider before leaving the FEHB program:

  1. The first thing to determine – before opting out of the FEHB program – is whether OPM allows you to suspend your FEHB coverage for the new insurance plan you intend to enroll in. Call OPM first before enrolling in a new plan to confirm they will allow you to suspend your FEHB coverage if desired. You are able to suspend coverage if you enroll in an Medicare Advantage Plan (Part C).
  2. It’s important to know the difference between the Medicare Advantage (Part C) insurance option and private sector Medicare Supplemental Insurance policies.
  3. Once you leave the FEHB program, if you are married, instead of having just one plan, such as Self Plus One in the FEHB program, you will need individual plans for both partners. Medicare is based on an individual’s eligibility and each person on Medicare has their own policy for Parts A, B, C and D; whatever combination of plans they desire.
  4. If you decide to sign up for a Medicare Supplement Insurance (MEDIGAP) plan, sold by private insurance companies, you can’t suspend your FEHB, your only option is to cancel it. Once you cancel FEHB you aren’t permitted to return to the FEHB plan.
    1. The only way you can apply for a Medigap policy is if you have Medicare A & B coverage.
    2. Medigap polices sold after January 1, 2006 aren’t allowed to include prescription drug coverage. If you want prescription drug coverage, you can join the Medicare Prescription Drug Plan (Part D).
    3. According to ehealthinsurance.com, “the timing of your enrollment may affect your coverage choices and costs. In general, the best time to enroll in a Medicare Supplement plan is during your Medigap Open Enrollment Period. This is the six-month period that starts on the first day of the month that you are both 65 or older and enrolled in Medicare Part B. Throughout this period, you can enroll in any Medigap plan offered in your service area with guaranteed issue. This means that insurance companies aren’t allowed to use your medical history or pre-existing conditions as the basis for charging you more for coverage or denying you altogether.
  5. Individuals that sign up for a Medicare Advantage (MA) Plan will be able to suspend their FEHB plan however there are a number of issues to be aware of. First, if you now have a FEHB Self + One or a Family Plan and your spouse isn’t age 65 and on Medicare your spouse will lose their FEHB coverage.
    1. Timing is critical. Open season periods overlap but are different for the FEHB and Medicare Advantage (MA) Plans. For example, the 2016 FEHB open season ran from November 14th through December 12th whereas the MA plan open season always runs from October 15 through December 7th of every year.

Another major issue that needs your attention is prescription drug coverage. FEHB prescription coverage is generous in most cases compared to Part D Medicare coverage. The only way to get prescription drug coverage if you purchase a Medicare Supplement (Medigap) plan is through Medicare Part D. Many Medicare Advantage (MA) plans (Part C) include prescription drugs.  If you are thinking of joining an MA plan talk to the provider to ensure they include this coverage. The rules on what options you have to pick up drug coverage varies depending on what type MA plan you join.

One of our readers who transferred to a Medigap policy and left FEHB was blindsided by the difference in coverage. Her husband requires two injections montly for a serious illness and their FEHB plan covered the majority of the $1500 needed for each treatment. Under Medicare Part D she was advised that Medicare would only cover three shots and  then she would have to pick up the entire cost for the remainder of the year! Because she had enrolled in a Medigap policy and canceled her FEHB coverage she wasn’t able to return to the FEHB program during the next open season. With a Medigap policy OPM will not permit you to suspend your FEHB coverage, your only option is to cancel it. I know I’ve mentioned this several times however it is so important to understand this critical fact.

Fortunately for our reader she was able to enter a program with the company that produces the drugs and received a significant discount.

Another factor to consider is that once you decide to sign up for either the MA (Medicare Part C) or a Medigap Supplement plan each party carries their own policy based on Medicare eligibility. Therefore, unlike the FEHB plans that allow Self + One and Family enrollments you will now have individual policies (coverage) for each election you make. For example, a couple under any of the FEHB plans is covered under one policy and that covers everything from hospital and doctor care to basic dental and prescription drugs. That same couple would have to enroll in numerous Medicare plans between them for the same coverage under the MA and Medigap programs. Each party in the MA program would require Medicare part A, B, C, and possibly D.  Many MA programs do provide prescription drug Coverage. Those in the Medigap program would require Medicare part A, B, and Part D Prescription Coverage plus pay the premiums for their private supplemental insurance.

Once you turn 65 and sign up for Medicare, it becomes your primary insurer. You will need to know exactly what your current FEHB provider pays once you sign up for Medicare Part A and B. Most pay coinsurance, deductibles and copayments once they become the secondary insurer except for prescription drug copayments. Since turning 65 and signing up for Medicare A and B I’ve paid no coinsurance, deductibles and copayments, my GEHA plan picks this up except for prescription drugs. This isn’t always the case, some FEHB plans DO NOT pay more of your out-of-pocket expenses when you sign up for Medicare. This is why the reader that first contacted me about this issue decided to change to anther plan.  She assumed that her plan, after signing up for Medicare A & B, would automatically pick up these costs, they didn’t and she was stuck with several large and recurring copayments and deductible costs. Review section 9 of your FEHB benefit brochure carefully, it describes what they will pick up once you sign up for Medicare. Call your FEHB provider if you have any questions about what they will cover after they become the secondary provider.

Many private insurance companies sell Medicare Supplemental (Medigap) polices including AARP and others. Their salesmen often push hard to get you to sign up. I would guess that most know little to nothing about the Federal Employees Health Benefits (FEHB) program and its advantages. There primary goal is the sale and commissions that they earn for signing you up. Ask them specific questions about how their plan is different and more advantageous than the FEHB plans you have to choose from. Take nothing for granted and do your own research using FEHB plan brochures to confirm what you were told.

Proceed with caution when changing plans and especially if you are thinking about leaving the FEHB program. Many that sign up for Medicare change to a lower cost FEHB plan since they now must pay Part B Medicare premiums and many if not most of the FEHB plans cover coinsurance, copayments, and deductibles once you are on Medicare.  Other articles about what to do when you become eligible for medicare are listed under Helpful Retirement Planning Tools below. I changed to the lower cost Standard GEHA Self + One plan when I turned 65 and they pay for the majority of coinsurance, copayments and deductibles that I’ve encountered since. There are many FEHB plans available, check them out to see if they meet your needs before leaving the program to ensure you aren’t going to regret it later.

Retiree Jobs Update

Employers recruiting federal retirees and those soon to retire post job vacancies on our Jobs Board. A good number of new part and full time listings were posted recently. One company is looking for part time sales representatives in Palm Beach Florida and another is recruiting federal benefits educators to conduct seminars throughout the U.S.  Flash Technology Group is hiring Hardware Support or Maintenance Technicians for their offices in Tampa Florida and Colorado Springs. Other positions are posted for various jobs including several work from home options.

Private companies, contractors, and state government departments use our Jobs Board to hire skilled federal retirees for part and full time positions nationwide. Many opportunities exist for those looking to supplement their retirement income or to start a second career. We provide this free job listing service to companies that are seeking to hire experienced retired federal workers.

Request a  Federal Retirement Report™  today to review your projected annuity payments, income verses expenses, FEGLI, and TSP projections.

Helpful Retirement Planning Tools

Distribute these FREE tools to others that are planning their retirement

Disclaimer: Opinions expressed herein by the author are not an investment or benefit recommendation and are not meant to be relied upon in investment or benefit decisions. The author is not acting in an investment, tax, legal, benefit, or any other advisory capacity. This is not an investment or benefit research report. The author’s opinions expressed herein address only select aspects of various federal benefits and potential investment in securities of the TSP and companies mentioned and cannot be a substitute for comprehensive investment analysis. Any analysis presented herein is illustrative in nature, limited in scope, based on an incomplete set of information, and has limitations to its accuracy. The author recommends that retirees, potential and existing investors conduct thorough investment and benefit research of their own, including detailed review of OPM guidance for benefit issues and for investments the companies’ SEC filings, and consult a qualified investment adviser. The information upon which this material is based was obtained from sources believed to be reliable, but has not been independently verified. Therefore, the author cannot guarantee its accuracy. Any opinions or estimates constitute the author’s best judgment as of the date of publication, and are subject to change without notice. The author explicitly disclaims any liability that may arise from the use of this material.

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