When Medicare Pays First
If you are retired or no longer work in your federal job, then Medicare typically becomes the primary payer. This includes if you are over 65 or if you qualified for Medicare at a younger age. Once Medicare becomes the primary payer, your FEHB premiums will not change.
If you didnt qualify for Part A and just have Part B, then Medicare will pay for any Part-B-covered treatments or services and FEHB will pay for anything else.
How Does This Correlate With Fehb
It may help to look at an example of a recent retiree:
State department Jane retired from a high paying federal career and went on to a second career as a contract worker. Her second career is paying a salary of $160,000 and she is collecting a FERS Annuity of over $50,000. This puts Jane in the IRMAA category where she has to pay $475.20 a month for Part B.
Janes FEHB plan has a maximum annual out of pocket cost of $4,000 a year. The benefit to having Part B is no out-of-pocket health expenses, but the Part B cost for Jane is incredibly high! She is paying over $5700 to eliminate the $4000 annual out of pocket expense.
Of course, there is no guarantee that you will hit the annual out of pocket cost to your FEHB. Most retirees I speak with dont, but the probability of doing so varies from person to person.
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If youre on a payroll, you may have seen a FICA tax deducted from each paycheck. FICA, or Federal Insurance Contributions Act, is a U.S. federal payroll tax that funds both Social Security and Medicare programs, providing benefits to retirees, the disabled, and children.
A question that comes up often is whether you pay Medicare tax on retirement income. After retirement, your source of income switches to investment income and retirement benefits, and you typically are not required to pay Medicare or FICA tax on most or all of your retirement income.
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To Take Part B Or Not To Take Part B That Is The Question
If you dont take Part B when you are first eligible there is a 10% penalty on the current year premium added for each year you delay enrollment. You will need to pay this penalty for as long as you have Medicare.
You wont owe a late enrollment penalty if you qualify for a Special Enrollment Period . This allows you to enroll in Medicare Part B and enroll through an SEP if you have health coverage based on current employment .
Its important to know that not all coverage qualifies you for an SEP. The following types of coverage wont qualify you for creditable coverage based on current employment and wouldnt exempt you from paying the Part B penalty if you delay enrollment:
- TRICARE and Medicare If youre Medicare-eligible, you must be enrolled in Part B to continue receiving TRICARE benefits.
- Veterans benefits
- Retiree benefits
If you have coverage through a current employer you may decide that you dont need extra coverage. There is no penalty for delaying Part B enrollment if you or your spouse have other coverage based on current employment.
You can sign up for Part B through an SEP anytime that youre still covered by the group plan or in the eight months after your employment or group coverage ends.
If youre an active duty service member, you may delay enrollment, keep TRICARE and sign up for Part B during an SEP without paying a late enrollment penalty.
Why Is Health Insurance Important
Almost 2/3rds of bankruptcies in the United States were caused by medical bills. Health insurance is not just insuring your health it insures your wealth. Even after the passage of the Affordable Care Act, most people in the US receive their health care through their employer. Insurance can be difficult to obtain if you retire before youre eligible before Medicare. The ability to have access to any sort of coverage between retirement and Medicare is a huge benefit. Not just for federal employees, but also their spouses, and family members.
Fehb Coverage After Retirement
Its never mandatory to take Medicare yet, there can be consequences to delaying enrollment. When you have FEHB, youre safe from the Part B late enrollment penalty for as long as you or your spouse is actively working.
When you or your spouse retires, however, things get more complicated. FEHB is not , so you should take advantage of the Special Enrollment Period youll have when you or your spouse retires. Otherwise, youll be subject to the late enrollment penalty whenever you enroll in Part B.
As long as you keep FEHB, whether or not youre working, your prescription drug coverage is sufficient and youll avoid the late enrollment penalty for Part D.
Is It Beneficial To Have Both Medicare And Fehb Coverage
FEHB, or Federal Employee Health Benefits, coverage is something that all government employees are given the option to enroll in. For those who take advantage of it, a small fee is automatically deducted from their paychecks each pay period to cover the premium.
At retirement, all federal employees have the option to continue their FEHB coverage. However, they must continue to pay the monthly premium costs on their own.
Should they choose to do so, the FEHB will become backup coverage for their emergency care at the very least. According to OPM , once Medicare goes into effect automatically, it is treated as your primary coverage at all times. Then, if there are things that Medicare doesnt cover or wont pay for entirely, your FEHB insurance can kick in at that point.
For some employees, this could save money. For most, however, paying the FEHB premium expense is a waste of retirement earnings. In fact, most federal retirees find that theres no benefit at all to paying both the Medicare Part B and FEHB premiums.
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Combo #: Keep Fehb And Enroll In Medicare Part B
The final combination that we have is a hybrid between these two programs . A retiree enrolls in Medicare Part B AND keeps his FEHB coverage in place. On the surface, most people are not excited about this particular combination, because it means that theyre going to be paying both the Part B premium of $149/mo per person and their FEHB premium as well.
This feels pretty steep but listen up. Theres planning GOLD that Im about to share with you.
When youre weighing different decisions that you have, there are two parts that you need to consider. The first is what that decision COSTS you, and in this case, the decision costs us the premium of $149/mo plus the cost of the FEHB premium. But, thats only half of the equation when youre thinking about the real ramifications of this decision. The other half of the equation is what this decision GETS you in return.
This is where Combination #3 really stands outthe scenario where you have Medicare Part B and FEHB coverage in force. If you remember from the previous combination, Part B picks up 80% of covered medical expenses. In Combination #3, since you have another insurance program in force , its going to pick up the remaining 20% . By having Medicare Part B and FEHB coverage in force, you essentially have very limited out-of-pocket expenses like copays, deductibles, and coinsurance.
Heres where having Medicare Part B and FEHB together really makes a lot of sense.
Mail Handlers Insurance And Medicare
The Mail Handlers Benefit Plan has been serving federal and postal employees for over 50 years. Aetna administers the MHBP, whose plan options include Self Only, Self Plus One, and Self and Family similar to FEHB.
Its best to have MHBP and Medicare when you become Medicare-eligible. Medicare will be the primary insurance, and MHBP will give you access to things Medicare doesnt cover like additional options for chiropractic care.
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Can You Opt Out Of Plan B
Yes, you can opt out of Part B. (But make sure your new employer insurance policy is primary for Medicare. Medicare is pushing for an interview to make sure you know what the consequences will be if you dont part B steps. for example that you may have to pay a late fine if you want to re-enrol for the course in the future.
Can you have Medicare Part B without Part A?
While it is always advisable to have Part A, you can purchase Medicare Part B without having to purchase Medicare Part A , as long as you are: 65 years of age And a U.S. citizen or legal resident who has at least five years in the US.
Can I stop my Medicare Part B?
You can voluntarily terminate your Medicare Part B . However, as this is a serious decision, you may need to have a face-to-face meeting. A Social Security representative will assist you in completing Form CMS 1763. You may also contact the nearest Social Security office.
What Can You Do Prior To Age 65
One big takeaway for those that arent yet Medicare age is the benefit of a lower income. This is something that can be achieved through contributions to Roth TSP, Roth IRAs, and Roth conversions. Distributions from these accounts are not considered taxable income nor are they added to your AGI or used in calculations for IRMAA. If you look at law enforcement Joe above, he would pay lower premiums for Part B if his 31k distribution was from a Roth IRA vs traditional or TSP.
The decision on whether or not to take Medicare Part B is an important one, and your income range should play a role in that decision. IRMAA is just one way that retirees can incur extra, unnecessary costs in retirement. Addressing seemingly little things like IRMAA can help you enjoy a fruitful retirement.
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Fehb And Medicare Parts A & B
You can enroll in Medicare part A when youre 65. Youre expected to enroll in Medicare Part B when you turn 65 if you are retired. If you do not enroll at age 65, you will be penalized if you try to enroll later. You should know that while you can continue your FEHB benefits for life, your FEHB insurance company expects you to enroll in Medicare Part B. Therefore, if you dont enroll in Medicare Part B at age 65 because you participate in the FEHB, you may find an unpleasant surprise in the form of the coverage gap when you visit a doctor.
Which Is Better Medicare Or Fehb Coverage
The answer to which program is better isnt something that comes with a straightforward answer. It largely depends on the lifestyle you plan to lead after retirement and what sort of doctors you expect to be seeing.
For example, Medicare Part B covers a significant portion of the out-of-pocket costs for visiting an out-of-network healthcare professional. This can be extremely useful if you expect to be traveling a lot or live in a rural area with few options for general care.
On the other hand, FEHB covers the cost of most in-network care with pleasantly small copayments at the time medical services are rendered. Not to mention, some places simply dont accept Medicare.
This is just one of the lifestyle factors you have to take into consideration when choosing between FEHB coverage and Medicare coverage. Other issues you might have to take into account are your budget and whether you need to cover someone other than yourself. Additional fees apply for extra beneficiaries.
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Do I Need Medicare If I Have An Fehb
In most cases, you can elect to not use your Medicare coverage and just keep using your FEHB plan. Medicare is an optional plan, meaning you dont have to have either Part A or Part B coverage.
If you have any other FEHB plan, the choice is up to you. You can decide what works best for your budget and needs. Keep in mind, however, that Medicare Part A is normally premium free. Having Part A as extra coverage in the event of hospitalization is a good idea for most people since they have additional protection without paying higher costs.
While you dont have to enroll in Part B during your initial enrollment period, if you decide you want it later, youll pay a fee for signing up late.
This rule only applies if youre already retired when you become eligible for Part B. If youre still working, you can enroll in Part B once you retire. Youll have up to 8 months to enroll before you need to pay a late enrollment penalty. There is no late enrollment penalty for Part A.
When Is My Fehb Plan The Primary Payer
There are some cases when your FEHB plan would be the primary payer, meaning it pays for the cost of services first and Medicare covers the rest. If you or your covered spouse are age 65 and have Medicare, your FEHB plan is the primary payer when you:
- Have FEHB coverage on your own as an active employee, or through your spouse who is an active employee
- Are a reemployed annuitant with the Federal government and your position is not excluded from the FEHB
- Are enrolled in Part B only, regardless of employment status
- Have Medicare because of ESRD and it’s within the first 30 months of eligibility for or entitlement to Medicare. If you’re eligible for Medicare due to ESRD and the FEHB plan was already the primary payer, it will continue to be for the 30-month coordination period
- Are eligible for Medicare due to a disability and have FEHB coverage on your own as an active employee, or through a family member who is an active employee
Most of the time, the primary payer depends on your employment status, as well as other factors. You should share with OPM if you or a covered family member has Medicare so they can ensure requirements are administered correctly.
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Does A Federal Employee Get Free Health Insurance After Retirement
Unfortunately, federal employees do not receive free health insurance upon retirement. However, federal employees can keep their current federal employee health benefits plan upon retirement. Employees continue to pay the employee portion of the premium. The government pays the remainder of the retirees premium at the same rate as they do for current employees. .
When Is Medicare The Primary Payer
If you or your covered spouse are age 65 and have Medicare, it is the primary payer when you:
- Have FEHB coverage on your own as an annuitant, or through your spouse who is an annuitant
- Are a reemployed annuitant with the Federal government and your position is excluded from the FEHB, and you are not covered under FEHB through your spouse
- Are a Federal judge who retired under title 28, U.S.C., or a Tax Court judge who retired under Section 7447 of title 26, U.S.C.
- Are enrolled in Part B only, regardless of employment status
- Have Medicare because of end stage renal disease and are beyond the 30-month coordination period when you’re entitled to Medicare
- Are eligible for Medicare due to a disability and have FEHB coverage on your own as an annuitant
- Are covered under the FEHB Spouse Equity provision as a former spouse
After Medicare pays its share, your FEHB plan pays the remaining costs. This could help reduce your out-of-pocket costs since many FEHB plans waive cost sharing for enrollees who have Medicare. Cost sharing is the out-of-pocket costs you’d have such as deductibles, co-payments, and co-insurance.
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Benefits Summary When You Select Aetna Medicare AdvantageTable of rates.
If Medicare Parts A & B are not your primary coverage , you will be responsible for the deductible and coinsurance. For coverage details on the Aetna Advantage plan without Medicare, please visit our plan brochure. Please see the Medicare Advantage plan benefits guide for coverage details on the Aetna Medicare Advantage Plan.
Aetna is the brand name used for products and services provided by one or more of the Aetna group of subsidiary companies, including Aetna Life Insurance Company and its affiliates .
Aetna Resources For LivingSM is the brand name used for products and services offered through the Aetna group of subsidiary companies . The EAP is administered by Aetna Behavioral Health, LLC. and in California for Knox-Keene plans, Health and Human Resources Center, Inc.
This is a brief description of the features of this Aetna health benefits plan. Before making a decision, please read the Plan’s applicable Federal brochure. All benefits are subject to the definitions, limitations, and exclusions set forth in the Federal brochure.
All Aetna plans include discounts on eyewear, LASIK eye surgery, gym memberships, massage therapy, acupuncture, weight-loss programs and more.