Kevin Moss of Consumers’ Checkbook breaks down Medicare coordination with the Federal Employee Health Benefits program.
For plan year 2024, the Office of Personnel Management highlighted how Medicare Advantage plans can unlock Part D drug coverage and other savings on out-of-pocket medical costs. Medicare Advantage plans for feds are not a new perk, there are some important distinctions for feds looking to overlap coverage and maximize their benefits.
Here’s what you should know.
What is Medicare Advantage?
Medicare Advantage, or Part C, is a type of Medicare health plan offered by private insurance companies. MA plans are a different way to receive Part A and Part B benefits instead of through original Medicare. Most also bundle a Part D plan for prescription drug coverage, and many MA plans offer extras that typically aren’t covered by Medicare, including vision, hearing, dental, and wellness benefits.
You must have Medicare Parts A & B to enroll in MA plans. If you’re an individual filer with income above $103K or a joint filer with income above $206K, you’ll be subject to an Income Related Monthly Adjustment Amount and have to pay more than the $174.70/month Part B premium. The first IRMAA income tier adds an additional $69.90/month. Since most MA plans also bundle Part D for prescription drug coverage, IRMAA applies to Part D as well, and the first income tier adds $12.90/month.
Sign-ups for MA plans has risen substantially over the last few years with more than half of all eligible Medicare beneficiaries enrolled. Some of the reasons for their growth include extra benefits, having the protection of an annual out-of-pocket limit (not present in original Medicare), and the convenience of having one plan instead of a Medigap plan and separate Part D plan.
MA plans have been offered to federal annuitants by several FEHB plans for the last four years.
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How do Medicare Advantage plans work?
Several MA plans charge $0 for Medicare-covered services — doctor visits, inpatient and outpatient hospital, labs, scans, acupuncture, chiropractic, and more. There are still out-of-pocket charges for prescription drugs, but starting in 2025 there will be a $2,000 out-of-pocket maximum per person for prescription drugs in all MA plans.
Many MA plans include generous Part B premium reimbursement, significantly lowering the net Part B premium. The reimbursement amount varies by plan, but here are a few examples:
- Aetna Advantage - $100/month
- GEHA High - $100/month
- UnitedHealthcare - $150/month
- Kaiser Northern CA High Senior Advantage 2 – Up to $250/month
Part B premium reimbursement amounts from MA plans are higher than what can be found in standard FEHB plans. With Kaiser plans in certain markets, the Part B premium reimbursement can be higher than the Part B premium to help annuitants that face IRMAA or a Part B late-enrollment penalty.
Most MA plans have other additional benefits not typically found in FEHB plans. GEHA and UnitedHealthcare plans both offer a $40 credit each quarter for approved over-the-counter pharmacy items. Many plans offer Silver Sneakers gym memberships and home-delivered meals after inpatient or skilled nursing facility stays.
There are 40 different MA plans available to federal annuitants in 2024 to choose from. Aetna, APWU, Compass Rose, Foreign Service, Mail Handlers, NALC, Rural Carrier, and SAMBA offer MA plans nationally. CDPHP, Health Alliance HMO, Healthnet of California, Kaiser, MDIPA, and UnitedHealthcare offer MA plans in the markets they serve.
There is a three-step process for enrolling:
- You must have Medicare Parts A & B to enroll in an MA plan. Medicare enrollment can take the longest, so start here.
- Next, enroll with OPM in the FEHB plan that offers the MA plan.
- Finally, call the FEHB plan directly to enroll in the MA plan. Each MA plan has a dedicated toll-free number for MA enrollment. You may want to wait to perform this step after enrolling with OPM as it can take 1-2 business days for the FEHB plan to be alerted of your enrollment.
How much money can you save enrolling in an Medicare Advantage plan?
With generous Part B premium reimbursement and $0 for most out-of-pocket healthcare expenses besides prescription drugs, some MA plans will be the least costly plan choice for federal annuitants. How much you’ll save depends both on your current FEHB plan and the MA plan you’re considering enrolling in.
Checkbook’s Guide to Health Plans ranks all FEHB and MA plans on estimated yearly cost—the combination of the for-sure expense of premium and likely out-of-pocket costs you’ll face in a year. This benchmark ranking of plans shows massive price differences.
For plan year 2024, a retired couple enrolled in Medicare Part B with income below $206K, self-plus-one enrollment, and average health expenses could save thousands of dollars in estimated yearly costs by switching from popular FEHB plans to one of the low cost MA plans.
The cost savings from some MA plans are so dramatic that every federal annuitant needs to consider them during Open Season.
What makes Medicare Advantage plans for feds different from commercial Medicare Advantage plans?
Every fall for the last few years, you may have seen television ads from Joe Namath pitching MA plans that feature doctor appointment rides, meals, and other benefits at no additional cost. While those ads do discuss available benefits, there are big differences between how commercial MA plans featured on television differ from MA plans offered by FEHB plans.
Commercial MA plans greatly restrict the provider network. Before enrolling in a commercial MA plan, you would have original Medicare (Parts A & B) with access to all providers that accept Medicare. Only around 1% of all non-pediatric physicians formally opted out of Medicare in 2023. With commercial MA plans, you replace access to all providers that accept Medicare with a much smaller network of doctors and facilities.
With MA plans offered by FEHB plans, the tradeoff isn’t as severe. All federal employees have had to choose a plan with a limited network of providers throughout their career, and with MA plans, the job remains the same. You’ll need to use the online provider directory of the MA plan to confirm that existing providers, and any providers you may want to use in the future, are in-network.
Because MA plans offered by FEHB plans require you to first enroll in the FEHB plan and continue to pay that premium, MA plans give you the option of covering a spouse below age 65 and/or dependents. The Medicare-eligible person would receive the MA benefits and the spouse below age 65 or dependent would receive FEHB plan benefits. This option is not available through commercial MA plans. Make sure to review both the benefits and provider network that non-Medicare individuals would receive and keep in mind that any deductible or catastrophic out-of-pocket maximum provided by the FEHB plan would only be met by the non-Medicare individuals.
MA plans offered by FEHB plans are considered Employer Group Waiver Plans (EGWP), and they offer more flexibility with Part D prescription drug coverage compared to commercial MA plans. MA plans are allowed to enhance standard Part D benefits so that benefits federal employees receive from FEHB plans can still be used when on Medicare. Weight loss drug coverage is one example of this. They’re excluded from Part D coverage, but MA plans, like FEHB plans, are required to include coverage of at least one GLP-1 drug for weight management. MA plans enhance their Part D formularies to meet the GLP-1 requirement, something commercial MA plans can’t do.
Finally, almost all MA plans offered by FEHB plans provide Part B premium reimbursement. In the commercial MA marketplace only about 19% of plans are offering any Part B premium reduction. The reduction, and in some cases elimination, of the Part B premium from MA plans drives their total yearly cost down in a way most commercial MA plans do not.
Are there reasons to not enroll in an Medicare Advantage plan?
While MA plans will be the lowest cost plan for most federal annuitants, they might not be the right choice for everyone.
For annuitants with income above $103K for individual filers or above $206K for joint filers, you’ll pay both Part B and Part D IRMAA in MA plans. If your income places you just in the first IRMAA tier, MA plans will still be the lowest cost plan type available as many have higher Part B reimbursement and more $0 out-of-pocket benefits than what can be found in FEHB plans. However, once your income rises above the first IRMAA tier, the financial value of MA plans begins to erode. If you expect that level of high income throughout your retirement, you’ll need to carefully consider whether enrolling in Part B makes sense. You’ll likely save money by not enrolling in Part B and sticking with an FEHB plan.
Before enrolling in an MA plan, check the provider directory to make sure your doctors will be in-network. While most MA plans claim that you can see any doctor that accepts Medicare, the doctor must also accept the plan.
If you live abroad or travel extensively overseas, MA plans might not be the right plan type for you. MA plans cover emergency care overseas, but not routine care. There is also a Medicare rule that prevents Part D from reimbursing or covering international prescription drugs. Since Part D is bundled with MA plans, that means there is no international prescription drug coverage. However, there is a workaround for this problem: Most travel insurance policies reimburse healthcare expenses not covered by your health plan.
Have questions about your federal health insurance plan? Send a question to benefitsexpert@federaltimes.com
Kevin Moss is a senior editor with Consumers’ Checkbook. Watch more of his free advice and check if the Guide to Health Plans for Federal Employees is available for free from your agency.
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