When you plan for retirement from federal service, there are a few major decisions to tackle. In addition to coordinating income from your FERS pension and TSP withdrawals, you need to make sure your healthcare coverage is set up correctly. As a federal retiree, you’re in a strong position: you have access to two excellent health insurance systems — FEHB and Medicare — and they can work together to give you comprehensive coverage.
Both work together, but depending on your age and employment status, one will be your primary and the other your secondary coverage. Here’s what you need to know.
Federal Employee Health Benefits (FEHB) is the catchall term for your health insurance as a federal employee. During your employment, you are able to choose from many different healthcare plans within the FEHB program, whether an HMO, PPO, or high-deductible plan with an HSA. As long as you are working and are under the age of 65, your FEHB plan will be your primary—and only—health insurance option.
If you retire before the age of 65, you are allowed to keep your FEHB health insurance as long as you:
Have been enrolled in FEHB for the five years before retirement — or for your entire federal career if less than five years.
For almost all federal retirees under 65, staying enrolled in FEHB makes financial sense. You retain the same premium structure you had while working, and you maintain strong coverage until Medicare begins.
Important: If you cancel FEHB after retirement, you cannot re-enroll.
At age 65, you become eligible for Medicare, the national health insurance program for older Americans. Most retirees enroll in Medicare Part A, which covers hospital expenses and is premium-free for anyone with 40 quarters of work history.
Once you retire after age 65:
Medicare pays first; FEHB steps in to fill gaps such as deductibles, copays, and services that Medicare may not fully cover. This combination is strong and often results in low out-of-pocket costs.
Because Part A has no premium, almost every federal retiree enrolls at 65.
As long as you continue working as a federal employee at age 65 or older, the rules change:
You can choose to enroll in Medicare at 65 while still working, but it’s optional. Many employees sign up for Part A because it’s free and can help offset certain expenses as a secondary payer.
Once you retire — even if you retire at 66, 67, or older — Medicare becomes your primary insurer immediately, and FEHB shifts to secondary coverage. FEHB also continues to cover items Medicare doesn’t, including dental, vision, and prescription drugs (if included in your chosen FEHB plan).
Medicare Part B functions like standard health insurance (as opposed to Part A, which is hospital coverage). Unlike Part A, it is not free—you will have to pay additional premiums to enroll. To enroll or not to enroll is a tricky question for federal retirees. On one hand, your FEHB benefits may provide all the coverage you need, and Part B would just be an extra expense. On the other, if the coverage is similar, it may make sense to compare your FEHB and Medicare Part B premiums to decide which coverage to keep.
Of course, any decision about your health insurance should be made with your personal health and wellness in mind. If you have a chronic illness or a worrying family history of medical issues in old age, you should speak with your doctor about the kinds of care you should expect to need. This is crucial information that will help you decide which medical coverage is right for you when you retire.
Pro Tip: If you want to experiment with Medicare Part B, you can sign up and suspend your FEHB coverage. Just be sure you don’t cancel your FEHB coverage, as you will not be able to get it back.
As a federal employee, you will enjoy excellent healthcare coverage during retirement through a one-two punch of Medicare and your FEHB plan. While you don’t have to worry about coverage, you should take a look at your needs to find the best possible combination of the two to keep you healthy and save you money.
While only your doctor can help you decide what care you’re likely to need, we’re here to help you crunch the numbers! As federal retirement benefits professionals, we’ve helped hundreds of federal employees develop a personalized retirement plan that maximizes benefits, minimizes worry, and sets them up for an incredible third act in life. Get in touch today for answers to all your federal retirement questions.