The Federal Employees Health Benefits (FEHB) program will have its annual open season starting on Nov. 13, 2023 and ending Dec. 11, 2023. During the FEHB open season, federal employees and annuitants can change their FEHB program health insurance plans for 2024.
Medicare-eligible federal annuitants will be presented with enhanced Medicare Advantage plan and Medicare Part D (Prescription Drug program) choices.
This column is the first of two columns discussing these enhanced choices and with respect to adding Medicare Part D coverage with or without enrollment in an FEHB-program sponsored Medicare Advantage plan.
The enhancement to Medicare Part D is a result of Congress’ enactment of significant reforms to Medicare Part D in August 2022. Some of these reforms will be implemented for the upcoming 2024 plan year starting Jan. 1, 2024.
These reforms will result in prescription drug expense savings, possibly making it advantageous for Medicare-eligible annuitants to join Medicare Advantage and a Medicare Part D plan that are specifically targeted to federal annuitants who are enrolled in the FEHB program.
But there are a number of questions that Medicare-eligible federal annuitants will need to ask before they enroll in an FEHB program-sponsored Medicare Advantage and/or Medicare Part D plans.
Medicare Advantage Plans for Federal Annuitants
About two years ago, FEHB program health insurers began offering a new type of Medicare Advantage plans specifically designed to serve federal annuitants’ special retirement health insurance needs while interacting with the mostly federal government paid FEHB program.
There are two types of Medicare Advantage plans that are now available in the FEHB program:
(1) Medicare Advantage HMO and
(2) Medicare Advantage PPO. An enrollee in either plan must also be enrolled in Medicare Part A and Medicare Part B.
Both types of plans offer health, dental and vision benefits. The differences in the two types of Medicare Advantage plans include: Enrollees in Medicare Advantage HMO plans are restricted to an HMO network of doctors, dentists, hospitals, laboratories (for example – for blood tests), ophthalmologists and other eye specialists and optometrists. Enrollees in Medicare Advantage PPO plans can frequent doctors, dentists, hospitals, ophthalmologists, laboratories and optometrists who are in the PPO network. If they are not in the network, then the enrollee may have to pay out-of-pocket for a portion of the cost of the visit to a doctor, dentist, hospital or laboratory.
However, it is possible that if the doctors, hospitals or laboratories accept Medicare, then Medicare will pay most of the expense while the Medicare Advantage plan will pay most, if not all of what Medicare does not pay.
Some of the other benefits offered through FEHB program-sponsored Medicare Advantage PPO plans:
(1) Medicare Part B monthly premium reimbursement- sometimes the total amount – with significantly reduced or no cost-sharing for health care expenses;
(2) Prescription drug coverage;
(3) Free-gym membership;
(4) House calls – an in home visit designed to complement a doctor’s care;
(5) Rewards – enrollees can earn rewards for taking an active role in his or her health and wellness by completing and reporting certain health care activities; and (6) Over-the-counter (OTC) drug allowance.
At this time, those FEHB program carriers offering the revised and enhanced Medicare Advantage program have provided little or no information about the Medicare Advantage plans they plan to offer starting in January 2024. Information will hopefully be provided within the next 2 weeks to allow federal annuitants to analyze these plans in order to determine whether a particular plan is worth enrolling in.
Medicare Prescription Drug Plan (Part D) Changes
Until August 2022, Medicare Part D enrollment was of limited benefit to most federal annuitants. This was because FEHB program drug coverage was as good as, or better, than what Medicare Part D plans offered.
Furthermore, if a federal annuitant did incur at some point catastrophic prescription expenses, the annuitant could enroll in a Medicare Part D prescription drug plan at any age and not be subject to a late enrollment penalty. This is because the FEHB program offers what is considered to be “creditable prescription drug” coverage.
The passage of the Inflation Reduction Act (IRA) in August 2022 changed the choices for many federal annuitants with respect to prescription drug coverage.
The following are the most significant changes resulting from the IRA passage affecting Medicare Part D:
(1) Insulin charges were capped at $35/month, starting in January 2023. Federal annuitants should check their FEHB program health plans to find out if their plan offers insulin coverage for less than $35 per month before deciding to enroll in Medicare Part D:
(2) Starting January 1, 2024, the catastrophic coverage requirement under Medicare Part D (this occurs when an individual’s total prescription drug spending during the year exceeds $7,400) will be eliminated. Currently, under Medicare Part D, an enrollee must pay a 5 percent share of the prescription drug cost after an enrollee has already paid a sufficient amount out-of-pocket through earlier phases of coverage – namely a deductible, initial coverage of 25 percent and a “coverage gap” of 25 percent. In practical terms, only those individuals with costly prescription drug expenses (for example, gene therapy, cancer drugs and expensive specialty drugs) will benefit from this Medicare Part D rule change; and
(3) Starting in January 2025, a $2,000 annual out-of-pocket spending cap will be implemented. With the $2,000 out-of-pocket spending cap, which means that federal annuitants with average-to-high prescription drug expenses could save money if the $2,000 spending cap is lower than the amount of the catastrophic spending limit for prescription drug expenses in a FEHB program health plan.
At the end of January 2023, the Office of Personnel Management (OPM) issued a letter to FEHB program insurance carriers highlighting these changes. OPM did this to encourage carriers to offer more FEHB program sponsored Medicare Advantage and Medicare Part D plans in order for federal annuitants enrolled in Medicare to benefit from the IRA reforms.