HOW MEDICARE WORKS WITH FEDERAL EMPLOYEE BENEFITS

Michael T. Braden April 10, 2025 MEDICARE 101

HOW MEDICARE WORKS WITH FEDERAL EMPLOYEE BENEFITS

How Medicare works with your FEHB (Federal Employee Health Benefits)

Many individuals who work for a Governmental Agency or Department have Federal Employee Health Benefits. In this article, we aim to inform people about how Medicare works with FEBH plans and what federal employees should understand about how their benefits align with Medicare.

Braden Medicare Insurance Poster About Federal Employee Health Benefit Plans and Medicare

Suppose you are one of the thousands of Federal Employees who receive their Health Care covered by Federal Employee Health Benefits, and you become eligible for Medicare. In that case, you likely have questions about which coverage to choose or whether you can have both. Below, we review all possible scenarios for those on FEHB and Medicare. Thus, ensuring you have a clear understanding of how the two coverage types work together.

FEDERAL EMPLOYEE HEALTH BENEFITS EXPLAINED

Did you know that the Federal Employees Health Benefits Program (FEHB) is the most extensive employer group health plan in the world? FEHB covers federal workers, federal retirees, and their families.

Through the FEHB, federal employees (retired or currently employed) can choose to enroll in a variety of health insurance plans. Those federal employees who enroll in a health insurance plan through the FEHB program receive a government contribution to their plan costs and can have their coverage continue into retirement.

What happens when I become eligible for Medicare if I have coverage through the FEHB program? Let's take a deeper dive into your FEHB options to ensure you have a clear understanding of your Medicare and Federal Employee Health Benefits options.

HOW FEDERAL EMPLOYEE BENEFITS WORK WITH MEDICARE

Like Medicare, FEHB includes coverage for inpatient and outpatient services. Retired, former, and active federal employees who are eligible for both their FEHB and Medicare often wonder if they can have both Medicare and FEHB coverage simultaneously.

The short answer is yes. Enrolling in Medicare when you turn 65 will not cause you to lose or be disenrolled from your FEHB plan.

Here are considerations for enrolling in Medicare if you receive benefits through FEHB.

Depending on your individual needs, it may make sense to:

• Keep your FEHB plan and opt out of Medicare coverage.

• Maintain your FEHB plan and only enroll in Medicare Part A

• Keep your FEHB plan and enroll in both Medicare Part A and Medicare Part B.

• Pause your FEHB and enroll in Medicare, then get a Medicare Advantage plan.

• Cancel your FEHB and enroll in Original Medicare with a Medicare Supplement plan.

Although most people who are eligible for Medicare and FEHB won’t need a Medicare Supplement or Medicare Part D plan, the truth is that FEHB can get pretty pricey, which is why we hear from a good number of FEHB beneficiaries each year asking us if there is a way to lower their out-of-pocket costs.

HOW DOES MEDICARE COORDINATE BENEFITS WITH FEHB BENEFICIARIES

For those enrolled in FEHB and planning to enroll in Medicare, it is essential to understand that Medicare will pay secondary to FEHB while you or your spouse is still employed. Although the coverage may look similar, most FEHB beneficiaries discover that Medicare offers better coverage for DME (Durable Medical Equipment), Home Health Care, and prosthetics.

You will have 30 days before your Medicare eligibility date to change your current FEHB plan. This enrollment opportunity is only available once, and you can switch to any currently available plan. If you’re planning to retire, you may consider switching to a lower-cost plan or one that waives some out-of-pocket costs when Medicare is the primary payer.

Once you retire, Medicare will become your primary payer, and your FEHB plan will become the secondary payer. Your FEHB plan premium will not change when Medicare becomes your primary payer. During retirement, you will still have the opportunity to change your FEHB plan during the annual Federal Benefits Open Season.

HOW FEHB FITS WITH PART A OF MEDICARE

Individuals who are enrolled in a plan through the FEHB Program can benefit from enrolling in Medicare Part A as soon as they become eligible. If you or your spouse have paid Medicare taxes for 40 or more quarters, you will be eligible for Medicare Part A with a $0 premium.

We recommend that everyone eligible for premium-free Medicare Part A enroll in the coverage, even if they are still working and have a FEHB plan. While you are working, your Medicare Part A will pay secondary to your FEHB plan and may help cover some of the costs that your FEHB plan doesn’t cover.

For example, some Federal Employee Health Benefits plans may not cover or only partially cover home health care. If you need home health care services and your plan doesn’t cover them, they would then be billed to Medicare, and Medicare Part A would cover eligible services.

MEDICARE PART B WORKS WITH FEHB

If you are enrolled in a Federal Employee Health Benefits plan and are wondering if you should enroll in Medicare Part B, there are a few things you should consider.

For Medicare Part B outpatient coverage, you’ll need to pay a monthly premium – no matter how many quarters you paid Medicare taxes. Additionally, you’ll still have to pay the monthly premium for your FEHB plan. Due to this, some individuals delay enrolling in Medicare Part B until they retire.

MEDICARE VIEWS FEHB AS CREDITABLE COVERAGE

If you (or your spouse if you’re covered under their FEHB plan) are still employed, Medicare considers your FEHB plan as creditable coverage. This means FEBH beneficiaries are not subject to any Medicare Part B Late Enrollment Penalty if they decide to delay their Medicare Enrollment until they retire.

However, you must understand that if you (or your spouse if you’re covered under their FEHB plan) are retired, your FEHB coverage will no longer be viewed as being creditable, meaning that you must enroll in Medicare Part B within 8 months of your employment ending, otherwise you could face a penalty if you sign up for Part B later.

When deciding whether to pick up Medicare Part B, calculate what you’d pay in Medicare Part B premiums for the year (higher-income earners are responsible for larger premiums). Then, calculate your best estimate for the dollar amount you’d need to pay in copayments for outpatient services on FEHB.

If you find that you would pay more in premiums, you’ll indeed save money by delaying Medicare Part B. However, suppose your copays on FEHB in an average year are higher than your would-be Medicare Part B premiums. In that case, you should consider enrolling in Medicare Part B. Remember, if you enroll in Medicare Part A and Part B while you’re still working, Medicare will be your secondary coverage. At the same time, FEHB acts as your primary insurance.

You may also consider enrolling in Medicare Part B in conjunction with your FEHB plan to enhance your coverage. For example, your FEHB plan may have limited coverage for prosthetic devices, durable medical equipment, and some medical supplies, which are generally covered by Medicare Part B.

FEHB AND PRESCRIPTION MEDICATIONS

When you have FEHB, it is generally not necessary to enroll in Medicare Part D, as all Federal Employee Health Benefits Program plans include prescription drug coverage comparable to that of Medicare Part D.

You may still choose to enroll in a Medicare Part D plan and keep your FEHB plan. In this circumstance, your Medicare Part D will pay first. You can contact your Part D plan provider to double-check how they will coordinate coverage with your FEHB plan.

Federal Employee Health Benefit coverage for Prescription drugs is considered creditable drug coverage. If you decide you want to enroll in a Medicare Part D plan down the road, you will not be subject to a late enrollment penalty. However, suppose you lose or terminate your Federal Employee Health Benefits. In that case, you must enroll in a qualifying Medicare Part D Prescription Drug plan within two months after your coverage ends to enroll in Medicare drug coverage without incurring a penalty.

CHOOSING A MEDICARE PLAN IF YOU HAVE FEHB

MEDIGAP POLICIES AND FEHB

As an FEHB member, you are under no obligation to enroll in a Medigap Plan or to purchase a Medicare Supplement policy.

Your FEHB plan will coordinate benefits with Medicare to provide comprehensive coverage. If you decide you would like to get a Medicare Supplement plan (Medigap) in addition to Medicare Part A and Medicare Part B, you will be required to terminate your FEHB.

If you prefer to terminate your FEBH benefits and enroll in a Medicare Supplement plan, you will also need to enroll in a Stand-Alone Medicare Part D Prescription Drug plan.

Regardless of whether you plan to suspend or terminate your current FEHB plan, you are advised to reach out to the U.S. Office of Personnel Management or your retirement office.

FEHB AND MEDICARE ADVANTAGE (MEDICARE PART C)

If you have a FEHB plan with Original Medicare and decide you want to enroll in a Medicare Advantage plan, you’ll first need to pause or suspend your FEHB coverage. Suspending FEHB is not the same as cancelling.

When you suspect your FEHB coverage, you will no longer be responsible for paying your FEHB plan premium. You may choose to re-enroll in the FEHB program later if you choose to drop your Medicare Advantage plan. If you decide to return to your FEHB plan, you can do so during the Federal Health Open Season.

Your Medicare Advantage plan will become your primary payer. Remember, you need both Medicare Part A and Medicare Part B to enroll in a Medicare Advantage plan. Since FEHB plans include drug coverage, you’ll want to ensure your Medicare Advantage plan also provides drug coverage so you don’t end up without coverage for medications.

AS AN FEHB BENEFICIARY, WHAT HAPPENS AFTER YOU RETIRE

One qualification for having FEHB when you retire is receiving verification that you had FEHB coverage for at least five consecutive years before retiring. Though it’s never mandatory to take Medicare, there are some considerations you should make if you have FEHB coverage and are retiring.

While you (or your spouse) are actively employed, your Federal Employee Health Benefits are considered creditable coverage by Medicare. This means you can delay your Medicare Part B without incurring a Part B late enrollment penalty. However, once you or your spouse retires, your FEHB coverage will no longer be considered creditable coverage.

You will be granted a Special Enrollment Period that will allow you up to 63 days to enroll in Medicare Part B. If you choose to enroll in Medicare Part B after this Special Enrollment Period ends, your monthly premium could be higher due to the late enrollment penalty.

As mentioned above, you are not required to enroll in Medicare, but if you do, it is recommended that you do so as soon as you become eligible.

As long as you keep FEHB, whether you’re retired or still working, your prescription drug coverage is sufficient, and you’ll avoid the late enrollment penalty for Medicare Part D.

RETIREMENT PLANS FOR FEDERAL EMPLOYEE HEALTH BENEFITS BENEFICIARIES

There are over 200 FEHB plans to choose from when electing coverage. With that being said, the most utilized FEHB plan carriers include Blue Cross Blue Shield, Aetna, and GEHA. When selecting a FEHB plan in retirement, there are a few things you should keep in mind:

• If you have Medicare and are retired, you may consider an FEHB plan with lower costs.

• You can change your plan annually during the Open Season (November 15th to December 31st)

• Some FEHB plans provide coverage for services Medicare doesn’t cover, such as dental.

• Some FEHB plans waive deductibles, copayments, and coinsurance when Medicare is your primary payer.

  
  

LETTER CARRIERS INSURANCE AND MEDICARE

The Mail Handlers Benefit Plan (MHBP) has been serving federal and postal employees for over 50 years. Aetna administers the MHBP, which offers plan options including Self Only, Self Plus One, and Self and Family – similar to the FEHB.

MHBP will coordinate your benefits with Medicare once you enroll. Just like FEHB, your MHBP will be your primary coverage while still employed, and Medicare will be secondary. Once you retire, Medicare will become the primary insurance, and your Mail Handlers Benefit Plan will pay secondary.

Your MHBP will provide creditable prescription drug coverage and will help cover many of the out-of-pocket costs left behind by Medicare (when Medicare is your primary coverage).

WRAPPING THINGS UP

Whether you are enrolled in the FEHB plan as an employee or as the spouse of an employee, you must request a meeting with your local plan Administrator. You have been participating in the FEHB for a long time, and it makes sense for you to request a meeting so they can fully explain all your options regarding Medicare, including Medicare Eligibility, Enrollment, and Retirement.

Your plan Administrator will also explain the differences between pausing or suspending any of your benefits and the repercussions of terminating your FEBH plan.