One of the most valuable benefits federal employees receive is access to the Federal Employees Health Benefits program, better known as FEHB. But as retirement gets closer, many federal employees start asking the same questions.
Can I keep FEHB after I retire?
Do I need Medicare Part B?
What happens to my spouse’s coverage if something happens to me?
These are important questions, and there is a lot of confusion around how FEHB and Medicare work together. The good news is that federal retirees often have more flexibility than many people realize.
Here are seven of the most common FEHB and Medicare questions federal employees ask as they prepare for retirement.
Can I Keep FEHB in Retirement?
Yes, absolutely.
As long as you meet the eligibility requirements, you can continue your FEHB coverage into retirement. In many ways, the coverage works very similarly to how it did while you were still employed.
The government continues paying a large portion of the premium, usually around 72 percent, while retirees pay the remaining portion through deductions from their pension.
For many federal retirees, FEHB remains one of the best healthcare benefits available anywhere.
But there is one important requirement you need to understand before retirement.
What Is the Five-Year Rule?
To keep FEHB in retirement, you generally must be enrolled in FEHB for the five years immediately before you retire.
This becomes important for employees who may have stepped away from FEHB at some point during their career. Maybe you joined a spouse’s health plan or used other coverage for a period of time.
If that happened, you want to make sure you re-enroll in FEHB at least five years before your planned retirement date.
Meeting this rule allows you to carry your FEHB coverage into retirement and keep it for the rest of your life.
Do Federal Retirees Need Medicare Part B?
The key word here is “need.”
If you retire with FEHB coverage, you are not required to enroll in Medicare Part B.
Your FEHB coverage can continue operating much like it always has. You still have access to plan choices during open season, and your copays and premiums continue under the structure of your FEHB plan.
This is different from many private sector retirees who often depend heavily on Medicare because they lose employer coverage once they stop working.
Federal retirees have another option because FEHB can continue after retirement.
That said, some retirees still decide to enroll in Medicare Part B because of the way Medicare and FEHB work together.
What Happens If I Decline Medicare Part B?
If you decide not to enroll in Medicare Part B, your FEHB plan simply remains your primary health insurance.
Your healthcare coverage continues much like it did while you were working.
You may have heard people mention Medicare penalties for delaying Part B enrollment. In general, that penalty applies when someone delays enrolling and later decides they want Part B coverage.
The penalty is usually 10 percent for each twelve-month period you delayed enrollment after becoming eligible.
However, if you decide to keep FEHB as your primary coverage and never enroll in Medicare Part B, many federal retirees never actually experience that penalty because they never sign up later.
For some retirees, keeping FEHB alone feels like the simpler and more affordable option.
Does FEHB Become Secondary If I Enroll in Medicare?
Yes.
If you enroll in Medicare Part B, Medicare becomes your primary insurance and FEHB becomes secondary coverage.
Many retirees like this combination because it can significantly reduce out of pocket medical expenses. Medicare pays first, and FEHB can help cover additional costs that Medicare does not fully pay.
For retirees dealing with expensive medical care or major procedures, having both programs working together can create very strong coverage.
The tradeoff, of course, is cost.
You will continue paying your FEHB premium while also paying the Medicare Part B premium.
For some retirees, that extra cost is worth it. For others, FEHB by itself may still provide enough coverage.
Can I Suspend FEHB?
Yes, in certain situations you can suspend your FEHB coverage.
The important word is suspend, not cancel.
For example, some federal retirees are also eligible for TRICARE through military service. In that case, a retiree may decide to use TRICARE instead of FEHB for a period of time.
When FEHB is suspended, you may have the ability to return to FEHB later during a future open season.
That flexibility can be valuable, but it is important to fully understand the rules before making any changes to your health coverage.
What Happens to My Spouse’s Coverage?
Your spouse can remain on your FEHB plan while you are alive in retirement.
However, many federal employees do not realize that continuing FEHB coverage for a spouse after the retiree’s death is tied directly to the survivor benefit election.
If you want your spouse to continue FEHB coverage after you pass away, you generally must elect a survivor benefit when you retire.
Without that survivor benefit election, your spouse could lose access to FEHB coverage after your death.
This is one of the most important healthcare decisions married federal employees make during retirement planning, and it is often overlooked until the last minute.
Final Thoughts
FEHB is one of the strongest retirement benefits federal employees receive, but understanding how it works alongside Medicare is an important part of retirement planning.
There is no one size fits all answer when it comes to Medicare Part B. Some retirees prefer the additional protection that comes from combining Medicare and FEHB. Others are comfortable keeping FEHB as their primary coverage and avoiding an additional premium.
The right decision depends on your health, your budget, your retirement goals, and how you want your healthcare coverage structured long term.
If you want to learn more about federal retirement planning, FEHB, Medicare decisions, or how your retirement benefits fit together, you can learn more at Christy Capital Federal Retirement Resources.
