While most federal employees continue to be covered by the FEHB program once they retire from federal service and throughout their retirement years, all federal employees are eligible for Medicare once they become age 65.
In the second of a series of columns explaining the relationship between the FEHB program and Medicare, this column explains the consequences of a federal retiree not enrolling in Medicare when first eligible. The discussion includes consequences for single federal annuitants, married federal annuitants who have their spouses on their FEHB insurance, and those federal annuitants who are also Uniformed Services retirees and eligible for the Uniformed Services group health insurance, TriCare.
Because all federal employees have paid the Medicare hospital insurance tax during their careers, there is no monthly premium when they enroll in Part A. There are no consequences or penalty for late enrollment if an employee or annuitant does not enroll in Part A when first eligible — normally around his or her 65th birthday. When individuals enroll in Part A, they are automatically enrolled in Part B. They should look at the Part B effective date on the front of their Medicare card. If they do not want to keep Part B, they must notify Medicare before that effective date.
Federal employees or retirees do not have to enroll in Part B if they do not want it, and an employee’s or annuitant’s FEHB plan cannot require the employee or annuitant to enroll in it. But there are some definite advantages in enrolling in Part B, including:
(1) An individual must be enrolled in Parts A and B to join a Medicare Advantage Plan:
(2) Uniformed Services retirees who are federal employees or annuitants are also eligible for Tricare health insurance coverage (Tricare for Life) once they become age 65. There is no premium cost for Tricare For Life if the individual is also enrolled in Medicare Parts A and B;
(3) an individual has the advantage of coordination of benefits between Medicare and the individual’s FEHB plan, reducing or possibly eliminating out-of-pocket costs such as copayments and deductibles (to be discussed in a later column);
(4) The individual’s FEHB plan may waive its co- payments, coinsurance and deductibles as a result of being enrolled in Part B;
(5) Some services covered under Part B may not be covered or only partially covered by the individual’s FEHB plan, such as orthopedic and prosthetic devices, durable medical equipment, and home health care and medical supplies; and
(6) An individual enrolled in an HMO may go outside the plan’s network and receive reimbursement by Medicare only if Medicare is the primary payer.
An individual eligible for Medicare Parts A and B should enroll in Parts A and B when first eligible; namely, the individual is retired and does so during the initial enrollment period. The initial enrollment period is a seven month period centered on the month an individual becomes age 65 with the seven month period starting on the first day of the month that is three months the month of the 65th birthday and ending on the last day of the third month that is three months after the month of the 65th birthday.
The following example illustrates:
Example 1. Frank is retired and became age 65 in September 2016. Frank had an initial enrollment period of June 1, 2016 through December 31, 2016 to enroll in Medicare Parts A and B and not be subject to a late enrollment penalty for Part B.
In most cases, if an individual does not sign up for Medicare Part B when first eligible, the individual will have to pay a late enrollment penalty. The individual will have to pay this penalty for as long as the individual has Part B.
The monthly premium for Part B may go up 10 percent of the standard premium for each full 12-month period that the individual could have had Part B, but didn’t sign up for it. Also, the individual may have to wait until the general enrollment period (held from January 1 to March 31 each year) to enroll in Part B. Coverage will start July 1 of that year.The following example illustrates the penalty:
Example 2. Same as Example 1. Frank forgets to enroll in Medicare Parts A and B as of January 1, 2017. He delays enrollment until the Medicare Parts A and B “open season” held January 1-March 31, 2019, enrolling in Medicare Parts A and B in March 2019 with his Medicare coverage becoming effective as of July 1. 2019. Frank’s Part B premium penalty is 20% of the standard premium, and Frank will have to pay this penalty for as long as Frank has Part B. Even though Frank was not covered a total of 27 months (December 2016 through March 2019), this included only 2 full 12-month periods.
There is one exception to an employee having to enroll in Medicare Part B at age 65 in order to avoid a late enrollment penalty. That exception involves individuals who work past age 65 for a company that offers group health insurance to its employees. In the case of the Federal government, federal employees can work past age 65 with FEHB coverage and therefore qualify for the exception.
But to avoid a late enrollment penalty, the employee must enroll in Part B during the eight-month period (called the special enrollment period) that begins the month the employee retires from federal service. The annuitant has to make an appointment and go in-person to a local Social Security office to enroll in Medicare Part B. The annuitant needs to fill out Form CMS 40B-E (download from https://www.cms.gov/Medicare/CMS-Forms/CMS-Forms/Downloads/CMS40B-E.pdf).
The annuitant also needs to bring Form CMS-L564 (Request for Employment Information which is completed by the retired employee’s agency). Finally, the annuitant should bring with him or her their last leave and earnings statement (LES) to the Social Security office. In so doing, the annuitant proves to Social Security that he or she was working past age 65 with FEHB group health insurance coverage. The following example illustrates:
Example 3. Carol, a federal employee, is age 65, enrolled in the FEHB program, and intends to retire on Dec. 31, 2022 at the age of 68. Carol is encouraged to enroll in Medicare Part A (only) at age 65 (by enrolling online at www.socialsecurity.gov/medicareonly) because there is no premium cost but delay enrolling in Part B until she retires. When she retires on Dec. 31, 2022, she will have to make an appointment to visit a local Social Security office between Jan. 1, 2023 and August 31, 2023 (her special enrollment period). Carol will fill out Form CMS 40B-E, and bring to the Social Security office Form CMS-L564 (that her agency completed) and her last LES.
How Does FEHB Coverage and Medicare Work With Respect to Married Employees and Annuitants?
The discussion so far has focused on an individual, the federal employee or annuitant who is not married. What if the individual is married? Does the individual’s spouse have to enroll in Medicare Parts A and B? If so, when does the spouse enroll? The answer to these questions depends on three factors, namely:
(1) Under whose (the individual’s or the spouse’s) employer-sponsored group health insurance plan the spouse is enrolled;
(2) the age of the spouse;
(3) depending on when the spouse who holds the insurance retires. To better understand, consider the following three scenarios:
Scenario 1. Tony, age 57, is a federal employee and is married to Elizabeth, age 54, who is not a federal employee. Tony is enrolled in the FEHB program with self plus one coverage, with health insurance coverage for himself and for Elizabeth. Tony intends to retire on Dec. 31, 2019. He will carry his FEHB coverage for himself and for Elizabeth into and throughout retirement. During 2027 when Tony becomes age 65, he will enroll online in Medicare Parts A and B at the time of his 65th birthday. Elizabeth will enroll online in Medicare Parts A and B in 2029 when she becomes age 65. Because Tony retired from federal service before age 65 and kept his FEHB insurance, Tony must enroll in Medicare during Tony’s initial enrollment period (and later Elizabeth enrolls during her initial enrollment period). These initial enrollment period deadlines are so that Tony and Elizabeth can each avoid the late enrollment penalty for Medicare Part B.
Scenario 2. Jennifer, age 62, is a federal employee and is married to Howard, currently age 64, and who is not a federal employee. Jennifer is enrolled in the FEHB program with self plus one coverage, with health insurance for herself and for Howard. Jennifer intends to retire from federal service at age 66. Howard becomes age 65 in September 2019. Howard is encouraged, but does not have to enroll, in Medicare Part A around the time he becomes age 65.
But Howard is not required to enroll in Medicare Part B while Jennifer continues working in federal service and he is enrolled in the FEHB program through Jennifer. When Jennifer becomes age 65, she is also encouraged to enroll in Medicare Part A but she is not required to enroll in Medicare Part B until she retires from federal service. When Jennifer retires at 66, then both Jennifer and Howard must enroll in Medicare Part B during the special enrollment period. They do so in person at a local Social Security office within eight months following Jennifer’s retirement date. Jennifer will fill out and bring Form CMS 40B-E and Form CMS-L564 (that her agency completed) to the Social Security office. Jennifer should also bring to the Social Security office her last LES proving that she was working for the federal government past age 65 and that Howard was on her FEHB insurance.
Scenario 3. Alvin, age 68, is a federal employee who intends to retire on January 3, 2020. Alvin is married to Eva, age 66 and also a federal employee. Eva intends to continue working in federal service until she is age 70. Both Alvin and Eva are enrolled in the FEHB program with each having “self only” coverage. Both Alvin and Eva enrolled in Medicare Part A when they were age 65 but did not enroll in Medicare Part B because each intended to keep working in federal service.
When Alvin retires from federal service on January 3, 2020, he will have to make an appointment at a local Social Security office to enroll in Part B, and must do so before September 3, 2020 (his special enrollment period). Because Eva will keep working, Alvin and Eva are concerned with the potential high cost of Part B, which is based on one’s modified adjusted gross income (MAGI) each year. The MAGI could be large because Eva is continuing to work.
Do Alvin and Eva have any alternative? The answer is yes. If, during the FEHB open season held in November 2019 Eva puts Alvin on her FEHB plan (“self plus one” coverage) and Alvin terminates his “self only” coverage (effective January 2020), then Alvin would not be required to enroll in Part B once he retires (because he will be on Eva’s FEHB plan and Eva will continue to work). It is only when Eva retires – four years from now – that both Alvin and Eva would have to enroll in Part B (within eight months of Eva’s retirement- Eva’s special enrollment period), thus saving Alvin four years’ worth of Medicare Part B monthly premiums.
What Is the Relationship Between FEHB, TRICARE and Medicare?
TRICARE is an insurance provider that helps Uniformed Services members and their families receive the medical services they need. TRICARE offers a variety of health care plans and coverage options, pharmacy services and other needs such as cancer treatment and hospice care. In some cases, TRICARE benefits can be used in conjunction with other insurance. Most plans meet or exceed the minimum requirements for health insurance mandated by the Affordable Care Act.
There are federal employees who are also military retirees, either for active duty or as reservists. They are eligible for TRICARE in addition to their FEHB coverage. In fact, in fulfilling the five year requirement of FEHB coverage during one’s last five years of federal service, enrollment in TRICARE counts towards the five years (although an employee with TRICARE would have to be enrolled in an FEHB plan for at least one day during his or her last year of federal service in order to be able to “suspend” TRICARE after retiring from federal service and enroll in a FEHB plan).
Until age 65, a military retiree has various choices for TRICARE coverage, including TRICARE Prime and TRICARE Select. Some federal employees who are eligible for TRICARE are enrolled in both TRICARE and FEHB and their benefits are coordinated. But once a military retiree becomes age 65, the retiree is eligible for “TriCare For Life”. “Tricare For Life” (TFL) is a Medicare wraparound coverage for Tricare beneficiaries who must be enrolled in Medicare Parts A and B. There is no cost for TFL but only under the condition that the retiree (and spouse if covered under TFL) is enrolled in Medicare Parts A and B.
A federal employee who is also a military retiree and who is enrolled in both FEHB and TRICARE may want to assess their situation upon reaching age 65. If the military retiree wants to stay in TRICARE, then TRICARE coverage will be in the form of TFL in which there is no cost but the military retiree has to be enrolled in Medicare Parts A and B.
There is a monthly premium cost for Part B, dependent on the military retiree’s MAGI. The retiree also has to pay for FEHB coverage, and while the retiree continues to work in federal service, the MAGI could be large, leading to higher Medicare Part B premiums. In that case, the military retiree may want to consider taking one of two actions, namely:
(1) Suspending TFL and Medicare Part B and keeping FEHB coverage, thus paying only the FEHB premium; or
(2) suspending FEHB coverage and keeping TFL and paying only Medicare Part B premiums each month.
The decision what to do comes down to a simple comparison: What is more in cost: FEHB bi-weekly premiums for the military retiree (and family if applicable) or the total Medicare Part B monthly premium cost (for the military retiree and spouse if the spouse is also covered under TFL and over age 65). Obviously the comparison may have different results from one year to the next.
For those military retirees who suspend TFL and Medicare Part B while in federal service, there would be no late enrollment penalty for re-enrolling in Medicare Part B after retiring from federal service, provided the retiree enrolls in Part B during the special enrollment period. Another factor for military retirees to consider in choosing TriCare or FEHB coverage: In the area of the country (or world) they live, what do the doctors, hospitals, lab clinics and pharmacies accept? Some doctors, hospitals, lab clinics and pharmacies may accept only FEHB insurance; some places may accept both types of insurance.