We’re on the brink of another open season, so today Micah and Tammy are sharing the information you need to know about this upcoming season. You will learn one of the best benefits you have, how to choose a plan that allows you to take full advantage of your retirement, and what to expect in the next year.
Listen in as Micah and Tammy go over the rules that you need to be aware of in order to carry your health plan into retirement. They will also explain the importance of understanding the timing of your shift into retirement, as well as how to be consistent so you don’t miss deadlines and do notice important changes.
What We Cover:
- What should go into picking your health benefits.
- How to keep health insurance into retirement.
- What to do if you aren’t planning an immediate retirement.
- Why you should have your spouse on your insurance.
- The changes in plans and premiums and how to be more aware of them.
- Tax deductions and tax-free options.
- Understanding and differentiating between Medicare part A and B.
- What happens if you select a plan you don’t like.
Resources for this Episode:
- Medicare Open Season
- Medicare Part A & B
- The Difference Between Postponed and Deferred Retirement
- FERS Deferred Retirement vs FERS Postponed Retirement
- FERS Postponed Retirement – Costly Mistakes
- FERS Deferred Retirement
Ideas Worth Sharing:
Listen to the Full Episode:
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Full Episode Transcript
With Your Hosts
Micah Shilanski and Tammy Flanagan
You can spend. You can save. What is the right thing to do? Federal benefits, thrifts, savings plans, too. You can save your own way, with help from Micah and Tammy. You can save your own way, save your own way…
Micah Shilanski: Welcome back to the Plan Your Federal Retirement podcast. I’m your cohost Micah Shilanski. And with me as usual is the amazing Tammy Flannagan. Hey, Tammy, how’s it going?
Tammy Flanagan: Hey Micah, I’m doing great. We’re getting ready here for another exciting open season. I’m sure everybody can’t hardly wait.
Micah Shilanski: It couldn’t be true that you and I get more excited about this than the vast majority of federal employees that are out there.
Tammy Flanagan: Oh, I think that’s absolutely true, but we’ll try to keep it interesting and share our excitement with the listeners today.
Micah Shilanski: That’s right. Now, we’re going to talk a little bit on this podcast about Medicare. Now, if you’re not Medicare age, stay tuned at least for the beginning, because we do want to bring in some very important things about open season. And while the vast majority of our listeners out there are in Blue Cross Blue Shield and not ragging on them as an insurance company at all, there are some other options out there that you really need to know about to take advantage of retirement. We have an upcoming webinar, the top seven mistakes people make when they’re preparing for retirement. And this can kind of go alongside with some of them, is not understanding getting the most out of your benefits and health insurance is not as simple as just pick one plan that’s the least expensive and move forward. There’s a few more things that go into that. Aren’t there, Tammy?
Tammy Flanagan: Yeah, there definitely is a few things because I always think of it like putting together a puzzle where you get all the pieces in place and then there’s one that was in the wrong spot and they kind of throws the whole puzzle off. You’ve got to start over again. Then the same thing can happen with insurance because you’re looking at the premium, you’re looking at the network of providers and everything’s looking good. Oh, and then you get down to the prescription benefit and it only pays 50% and you need a name brand drug, and then you got to start all over again and look again. So you need to find a way to narrow down your choices and also to evaluate whether or not you’re in the best plan for you and your family, because you do have so many choices.
It’s amazing that federal employees can select all different kinds of plans anywhere from a traditional fee for service plan to a high deductible plan to solid HMO’s that have been around forever. So it just depends on where you live, what’s available, but you have a lot of really good choices. And I don’t think you can make a horrible choice.
Micah Shilanski: I agree.
Tammy Flanagan: But there are some choices that are much better than others.
Micah Shilanski: And before we really get into that aspect of it, I think one of the things Tammy and I would say, and we’re very… Try to be very careful not to recommend from the platform, right? We don’t know you all individually. Every one is going to be different, but one of the things I’m going to say, that’s a 99.9% of the time we’re absolutely going to say is make sure if you can you keep your health insurance into retirement. So maybe Tammy, before we jump into some things in open season, how about we hit the rules real fast about what does it take to actually keep health insurance into retirement? Because from the outside looking in, it’s one of the best benefits that you have. And if you don’t believe me, I’m happy to share with you how much I pay for health insurance, which is not nearly as comprehensive as your coverage.
Tammy Flanagan: Yes, no, I know just talk to anybody who has to buy coverage on the affordable care market if they have an income. If you’re destitute, you can get affordable health insurance, but if you have an income, a decent income, it’s very expensive. And like you said, the coverage is nothing like what we’re used to in the federal plan.
Micah Shilanski: That’s right.
Tammy Flanagan: You’re right Micah. So there are some rules to carry FEHB, your Federal Employees Health Benefits into retirement. And the first rule is that you have to be retiring. You have to be eligible for an immediate retirement. That means you’re going to walk out the door at the end of the month and your retirement’s going to start the first of next month. Now there is one exception, of course it’s the government, there has to be exception. So the exception is if you’re taking what we call a FERS MRA+10 retirement, meaning that I’m old enough to retire, I have at least 10 years of service, I met the minimum retirement age, but I don’t have 30 years. So I’m not eligible for an unreduced benefit. I’m going to take your pretty significant reduction if I claim that benefit immediately when I walk out the door. So even though I’m eligible for it, I can delay it. I can postpone it, is the word we use for that.
And so for someone who postpones their federal retirement, they’re also postponing their federal health insurance. So a lot of times that works out because you either have coverage under your spouse, maybe, or you’re going to go onto a second career and have coverage through your second employer while you’re waiting to implement or start receiving your retirement benefits. So that’s the only exception to where you might not think it’s an immediate retirement, but we still consider that it is. So… Yeah.
Micah Shilanski: If I jump in, Tammy, on our website, so for this episode plan-your-federal-retirement.com/10 because this is our 10th episode. We’ll put a link up there because I know you’ve written some articles and so have I on postpone versus deferred and what those different definitions are. So if you got any questions on that, jump on our website and we’ll make sure we have a link to that on this podcast.
Tammy Flanagan: Yes. So when you don’t meet that requirement for an immediate benefit is generally when somebody resigning. Maybe they’re 45 years old, they’re going to go work someplace else so they’re not even old enough to retire yet. So you’re pretty much going to leave your health insurance behind unless you come back and get reemployed with the federal government. So the immediate annuity is a fairly simple one to meet, if you’re planning to retire from the government. The second one can be a little bit confusing, we call it the five-year test. So that means you’ve been covered under the umbrella of FEHB for the last five consecutive years of your federal career. So it doesn’t matter if you switched from Blue Cross to Aetna to Kaiser to whatever health plan, as long as you’ve been in an FEHB plan during that five years, the whole time.
It also doesn’t matter if you’re… We sometimes call this a tandem couple where the husband and wife are both federal and maybe one spouse carried self and family, and now the kids are grown. So now you have to Self Only plans. You’ve still met the five-year test because even though you may not have always paid the premiums, you can show that you were under FEHB for those five years. And you can even use coverage under TRICARE, the military healthcare plan to meet the five years. The condition there is that you have to be enrolled and effectively enrolled on the last day of your federal service to carry that FEHB into retirement. And what a lot of military families do is they’ll carry it into retirement and then they put it into suspension because they’re not really using it, but they like having it in their back pocket. So we’ll talk maybe later about suspending health insurance. But yeah, so the five-year test is important and the immediate retirement, then you get to carry your health benefit into retirement.
Micah Shilanski: Perfect. Now, Tammy, let’s dive into that… I’m sorry, real quick. Because before the podcast, you were just educating me on some good things on making sure the timeline matches up on that five years. For example, sometimes we’ll have one client that maybe it’s dual federal employees, right? As you said, tandem, and one is going to retire early. So they’re going to move to the other one’s coverage for like a Self Plus One. But are there any pitfalls, any things we need to be concerned with timing on when we’re making that shift over? Good reasons to make it, right? We get some tax deductibility of longer premiums, potentially delay Medicare having to go under that, but what’s the timing considerations?
Tammy Flanagan: Yeah, you have to make sure, because when we say five consecutive years of coverage, there can’t be even a three-day break in that coverage. So watch the effective dates of making those changes. So let’s say we’ve got a married couple, husbands going to retire, wife is going to work another four years. So the husband has always carried the health insurance. So now they want to swap it out and put it under the wife’s name because she’ll get the pre-tax benefit. Maybe they’re both over 65 so they can delay Medicare Part B without a penalty. So there’s a lot of good reasons for switching that health plan to the currently employed spouse. So how are we going to do this? Well, if we have time, we have another couple of months before retirement, we can do an open season change while they’re both still working. Just swap it out and put it under the wife’s name. That will all take effect at the same time.
But let’s say the husband’s retiring December 31st and he wants to drop his health insurance to let the wife carry it. Well, when she makes that open season change, it’s not going to take effect till January 3rd. He’s going to drop it on December 31st. So that’s not going to work so well because there’s a three day break and OPM is not real good about honoring any type of break in coverage. So I’d rather see them do that as a qualifying life event. So when the husband drops his coverage at retirement, or right after he retires, she has the option to do a qualifying life event as an employee because she lost her federal health insurance through her spouse. She can pick it up as an employee and she can enroll in Self Plus One or Self and Family if they need it. And then once they’re both retired, they can swap out to two Self Only plans, but she got to make sure it’s all continuous.
Micah Shilanski: That’s such a great point right there. Right? So using those qualified life events for what they’re intended to, right? So as you said, the open season could work well, but in this case, it really wouldn’t because so many people want to retire at the end of the year. So not making a change in open season, waiting until retirement happens and then using that qualified life event. And Tammy, do you remember off the top of your head and this might be too much in the details, how long do we have to use a qualifying life event from when it happens? Do we do it before? Do we do it at the time? Do we do it after?
Tammy Flanagan: It’s generally 31 days before, up to 60 days after. So you usually have about a three-month window surrounding that time. And one other example of that, that you really got to be careful about because in your mind it kind of makes sense, but when it goes into practice, it can be a disaster. There was another couple who the husband was federal, the wife was private industry and she was getting the pink slip. She was getting laid off and it was right during open season this year, not this year, but a previous year. So, he decided as the husband, he says, “Okay, she’s going to get laid off on December 31st. So I’ll pick her up during open season and put that into effect, when the open season change takes effect.” Well, as you might guess, disaster struck, the husband passed away, the week before Christmas that year. So the open season change hadn’t been processed. It wasn’t going to be effective till later. She did not have the right to carry health insurance, she was not honored under that plan.
Micah Shilanski: Wow.
Tammy Flanagan: Yup. So that’s another example of where he could have put that in as a qualifying life event, picked her up 31 days before she lost her coverage and everything would have been fine, but who would have guessed, who would have thought of that? But if you have a chance to do a qualifying life event, do that instead of the open season change, because you can have more control over when it takes effect.
Micah Shilanski: And this is one of the things, unlike those types of things, I always encourage federal employees, even if it’s going to be more cost to have your spouse, especially if they’re a non-federal employee, have your spouse on your coverage, just in case, this is the reason we’re buying insurance is for just in case things, right?
Tammy Flanagan: Yeah, get your money’s worth.
Micah Shilanski: No, you never want to get your money’s worth. That’s not a good deal. Right? And then the other thing with this on these qualifying life events, and there’s so many times planning retirement that you have windows to get things done. And if we don’t follow directions, we don’t do things within a window, it comes with a pretty severe penalty. So my rule of thumb, again, I’m working with clients all across the US, I need to be consistent to make sure it gets done. I always use the date of the event as the deadline to get it done. So with the qualifying life event, I wouldn’t do it a month earlier, two months later, it would be great if retirement’s 1231, 1231 is when we want this done by. Got to sign up for Medicare. There’s a seven month window, great, it’s their birthday, we’re going to sign up. Just so we can be consistent to make sure it happens. Don’t wait till the end, really, really important. We can come up with dozens of stories that we’ve seen about waiting to the end of the deadline and you completely missed it.
Tammy Flanagan: Yup. Yeah. It happens more often than you think. Not a pleasant thing to realize has happened to you. So try to follow those tips.
Micah Shilanski: All right, Tammy. Well, let’s transition, talk about the rules which are so important to understand how those work to make sure we get this benefit. Let’s talk about this open season, right? There’s a couple of, well, I’m going to say new things, right? New in the health insurance world, anyways, that have come out for federal employees, especially ones that are going to be eligible for Medicare. So I want to talk about that in just a little bit, but then we’re also seeing a little bit more adoption in high deductible healthcare plans and some other options with those, aren’t we?
Tammy Flanagan: Yeah. Micah those are a great option for a lot of people. And I think before you do anything this open season, look at your plan. Because I was just looking through the premiums while you were talking about what’s happening for 2021. And if you read any of the news articles, you saw that the average increase was like four and a half percent, which you’re thinking, Oh, that’s not bad. But that includes the government share, the average employee share is a little higher of an increase. And there are some plans, I’m looking at one right now that went up $316 a month for what… No, I’m sorry. Went up $67 a month for what the employee pays.
Micah Shilanski: Wow.
Tammy Flanagan: $148 for Self Plus One, herself and family. So that’s a big shock if you weren’t aware of that premium was going to go up that much in the coming year. So look at your current plan. Look at the premium. Look at the network. Our plan, we were in changed networks on us last year. So I had to make sure that our doctors were still going to accept that plan because it was the same name of the plan, it’s just the underlying network went from Aetna to UnitedHealthcare.
Micah Shilanski: Right.
Tammy Flanagan: So that’s something to be aware of. So make sure and the way you can tell us if you at your health plan brochure, the front cover, there’s a little box there, it’ll say how we changed for this year. And I’ll give you a page number in the brochure. Just turn to that page and read what it says. It’ll tell you about the premiums, the deductibles, the catastrophic cap limit changes, all those things that could incur big out-of-pocket expenses, if you’re not aware that those things are changing. So that would be my first step. And then the second step would be to look at other plans or even other types of plans. Like we’re talking about these high deductible plans, which fortunately are starting to catch on with our federal audience, not gangbusters, because I think a lot of people still don’t understand them or don’t trust, anything called high deductible.
Micah Shilanski: High deductible is scary. Right? What is that? I don’t want to pay high deductibles for anything, I want the low deductible, right?
Tammy Flanagan: Exactly.
Micah Shilanski: So we get this head trash around it. Yes, ma’am.
Tammy Flanagan: Exactly. But there’s a lot to like about a high deductible health plan. I just wish they called them something different. There are some plans that do give them a little different twist on the name. But if you look under the type of plan it is, it’ll still say HDHP or High Deductible Health Plan. So that you know you’re getting a plan that generally is going to have low premiums because these plans put more of the onus on the participant to manage their healthcare costs. So I know that sounds tricky or hard, but it isn’t. It’s not much different than what you’re doing right now. So they have a low premium, they have a high deductible, to be considered a high deductible plan, they have to have a high deductible that has to be about 1500 a year for Self Only, about 3000 a year for Self Plus one or family, but they give you money back. They give you a health fund. And in the form of one of two types, it’ll either be called a health savings account or a health reimbursement arrangement. So if you have other health insurance like Medicare, like TRICARE, like your spouse’s coverage under their private sector employment, then you won’t get an HSA, you’ll get an HRA, a health reimbursement arrangement. But you will get some money in there to help you meet your deductible. It’ll help you pay your expenses up until you get to that place where you’ll have to pay out of pocket. So if you’re in really good health right now, and you hardly go to the doctor other than for preventative care, an HRA is going to be okay. That works.
But I’m much more interested in the HSA. So for someone who doesn’t have any other health insurance, other than FEHB, then look at those high deductible health plans because you’ll still get the money from the plan into that account, may call it a health savings account, but it’s a bank account. It’s FDIC insured, it’s safe, it belongs to you. It’s not a use it or lose it arrangement. So the money they put in there is yours to keep. But the really icing on the cake is you can add your money to it. You can add more money to that account up to the tune of about 4,000 a year for Self Only enrollment, up to 7,000 a year for Self Plus One or self and family minus what they’re giving you. So if they hand you 1500, or if they put whatever 7900 a year into it, if you’re Self Only, then you have to take that out. But it’s a huge amount of tax free money. I know Micah you like tax-free money, don’t you?
Micah Shilanski: I got a big smile on my face, right? How do you even say tax-free without smiling? This is such a great tool because as you said, the contributions that you… And this is like a triple tax-free, right? Because not only are the contributions that you make into an HSA tax deductible, no income limits on this, by the way, we got some higher income earners that are phased out of a lot of deductions. You’re not phased out of this deduction. So you get a tax deduction for putting money in, it then grows tax free, now interest rates in bank accounts, aren’t exactly paying a lot right now, but there are savings that you can put them in with like a TD Ameritrade. And you can do other things to have it grow a little bit more. So you absolutely have options inside of there. Plus any withdrawals that you take as long as it’s for a qualified medical expense, which is fairly broad, by the way, there’s a lot of things which are qualified medical expenses that you get to pull money out for it. The money comes out a hundred percent tax free.
Tammy Flanagan: Yup. And that includes premiums for Medicare once you’re 65. So you can hold that money in cash reserve. And then once you’re 65 pull from it to pay your Part B premiums, totally tax-free. So you’re not going to feel the sting of those Medicare premiums because you’re pulling out of a 20, $30,000 health fund.
Micah Shilanski: Right. And again, this is a… Tammy as you said, I just like to highlight this one more time. It is not use or lose. This is not an FSA, a Flexible Spending Account, which has a use or lose provision on it. This is always your money that’s going to be there. So it’s a great thing that everyone should really take a hard look at to see if it’s appropriate for you.
Tammy Flanagan: Yeah. And even if you leave the plan, so let’s say you stick with it for a couple of years, then you decide to either you’re going to go on Medicare or you’re going to pick a different health plan, that money that’s in there, you can still spend it. You won’t be able to add to it if you left the high deductible plan, but you can spend that money still tax-free for either eligible healthcare expenses, dental, or vision, long-term care premiums, you can use some of it for that. And even Medicare Part B premium. So it’s really a cool deal. I think people are starting to catch onto it slowly but surely. I’m in the federal plan, we have several, there’s GEHA offers one, Mail Handlers has one, UnitedHealthcare, one in the DC area might be available throughout the country is BlueChoice plan.
So there’s four or five of them where you live that you can pick from. So it doesn’t have to necessarily be one particular plan. There’s several options to choose from. And they each have a little difference, as far as they fund the health fund, premiums vary a little bit, the prescription coverage and some of the little extras like dental or vision ad-ons are in some of those plans. So if you can narrow it down that you want to look at a high deductible plan, look at the ones where you live and compare those side by side. There’s some nice comparison programs on OPM’s website. You can use the checkbook guide, the federal health plan to compare those plans side by side. So there are tools that once you narrow down your choices, then it’s a little easier to compare.
Micah Shilanski: And also go ahead and one of the things I like to encourage clients with Tammy, this is not a lifelong decision, right? This is only a one-year decision. You still got open season next year. So what’s the worst case that happens. You move this plan, you don’t like it. As Tammy said, with how much money they’re giving back to you, yep, you got a little bit higher deductible. So you could be out of pocket a little bit theoretically, right? Realistically, because your premium goes down so much and you get money back or put into your plan, you really not going to be out of pocket very much money if you move to this direction. But even if you are, guess what? Next year, make a change, right. Go back to the other plan. But this may be something you really want to give a shot.
Tammy Flanagan: Yeah, there’s a lot. I mean, we could talk about these for an hour, but one last thing I’ll tell you about them is that your ease of using couldn’t be any easier. Get a debit card, and it says MasterCard or visa. So when you’re paying your deductibles or copays or whatever it is, you have to spend money on for healthcare, you just pay it with that credit card, just like you would with any other card. Although it’s a debit card, debiting the money right out of your HSA bank. If you’re doing a bill that comes in the mail, you can just go online and pay the bill online on the HSA bank site. So it’s very simple to use once you kind of understand the concept and how it works. But it’s different, but it’s definitely a good different for many people.
Micah Shilanski: Absolutely. All right. Well, let’s make a little bit of a gear change, Tammy. Let’s talk about a question we get all the time, either from people who are coming up into retirement and are thinking about this, or when you’re starting to reach the magical age of 65 years young. Because when we reach the magical age of 65 years young, we have to be thinking about Medicare. Now, Medicare of course happens at 65. There’s many parts to Medicare, and this is where it starts to get confusing. And then there’s some sites out there and some people out there that actually say that you should drop your FEHB and you should go into a Medicare only plans, Tammy freaked out, by the way, you can’t see her face, but she was like, “What is he saying though?” We are not suggesting that, but that is something that’s out there.
We highly recommend you keep your FEHB forever. At least from this point in time, we see no reason to get out of it. But when you’re 65, you do have a few options making changes to it because most of us need to go under Medicare Part A as an alpha and B as in Bravo. And there’s an extra cost for Medicare Part B. So Tammy, how does that work? Talk us through that a little bit, then jump into that question about what your health plan could look like with Medicare. Is that okay?
Tammy Flanagan: Sure. Yeah. So when you’re approached age 65, whether you’re working or you’re retired, 65 is kind of the magic age that you qualify for Medicare. And some of you may have heard all the different ABCs of Medicare. So there’s four parts. When we say original Medicare, or when we talk about Medicare for federal retirees, we’re mainly referring to original Medicare, which is A and B. Medicare Part A covers hospital care like your room and board or nursing fees. When you’re inpatient hospital, when the doctor says, “We’re admitting you.” That’s generally going to fall under Medicare Part A. Medicare Part B is doctor visits, outpatient care, outpatient care in a hospital setting, if you’re there for observation, or if you’re there for emergency room visits, that’s all going to come under Part B of Medicare. Now, when people look at this, they say, “Well, don’t I already have hospitalization and outpatient?”
Micah Shilanski: Yes, all covered under my FEHB to now. So why am I signing for Medicare? Because I’m 64 and a half, what changes in six months?
Tammy Flanagan: Right. And why do I need two insurances?
Micah Shilanski: Right.
Tammy Flanagan: One is bad enough keep track of. But what we are saying is to consider adding Medicare, not substituting it, but adding Medicare to your FEHB. And we’ll talk more about that in just a second. But there’s also Part C, that’s where it really gets confusing.
Micah Shilanski: Mm-hmm (affirmative).
Tammy Flanagan: And Part D, now Part D is the newest part, which federal retirees for the most part don’t need that because that’s the prescription benefit. And most federal retirees have just as good, if not better, but usually better prescription benefits through their federal health plan. Part C of Medicare is sometimes called MA or Medicare Advantage plans. This where they incorporate original Medicare with supplemental benefits, like covering your co-pay maybe, or maybe providing some gym membership discounts and your prescriptions could be included in there. So a lot of people right now are looking at Medicare Part C plans in the private sector because they’re having an open season, it just predates our federal open season by about a month.
So those plans are already in full swing. People are looking at those. Federal retirees could use a Part C plan on the open market. I wouldn’t necessarily advise it because they tend to be more restrictive. You will pay out of pocket a little bit more. The only time I would recommend a Part C plan is maybe if you qualify for any extra help from the government. If you’re very low income, you’re looking for a way to try to stretch your dollars as far as they’ll go, and you don’t mind those restrictions, you might find a Part C plan that you’ll get the discount on the Part B premium from the government, and that might be more affordable for you. But the majority of our federal retirees, I think they’re best served to stay with the federal plan and add original Medicare.
But like you said, we do have to pay the two premiums, but there are some big perks to it. So there’s some reasons to do that. Kind of like the hidden benefits of a high deductible plan. There are some hidden benefits to combining Medicare A and B with a federal plan that really works well with that Medicare coverage.
Micah Shilanski: So again, the additional premium, if you will, Medicare Part A is an alpha is already paid up when you’re 65 years young, you’ve been paying into that as part of your paycheck. So there’s no additional cost. Medicare Part B is in Bravo, which is the second part of that original Medicare. That’s going to be an additional cost. Not only is it… I forgot what the premium is coming up this year. It’s a little over $140 in change.
Tammy Flanagan: 144, 60 this year, next year that hasn’t been announced yet, but it looks like it’s going to be about 155.
Micah Shilanski: Okay. So about 155. So 1455 to 155, somewhere in there for Medicare Part B. And again, as Tammy said, that’s in addition to your FEHB premium that you’re going to be making. But it becomes kind of an important part in our plan. So with most of my clients, we plan on paying this into retirement. So Tammy, how do we marry up those benefits? What are those hidden gems? If we do sign up for Medicare Part B as in Bravo.
Tammy Flanagan: Yeah. So first of all, there are several, more than several because several three, right? So there’s more than three plans that really work well with Medicare Part B and some of them really try to attract federal retirees because they offer a Medicare reimbursement. So you’ll get part of that Part B premium covered. Many of the plans will waive their own cost sharing. That’s your deductible, your copays, your co-insurance. So what’ll happen is Medicare pays first. So we’re retired, we’re over 65, we have that dual coverage on FEHB and Medicare. So when we go to our doctor visits, we’re going to show them two cards and the receptionist’s is going to take both of those cards and make copies of them and put them in our file. And the billing office is going to bill Medicare first, they’re going to send the bill from that doctor visit to Medicare.
And for outpatient care, Medicare will pay 80% of the Medicare fee schedule. And most doctors participate with Medicare across the country. It’s like 98% of doctors participate with Medicare or they’re non-participating, which means they’ll take Medicare patients, but they can charge a little above the fee schedule about 15% over. So Medicare gets billed, they pay whatever they’re going to pay, the balance of the bill goes to your secondary payer, which is typically the federal plan. And those plans that wave the cost sharing will pick that up a hundred percent. So you’ll end up with a statement, it’ll say, “Medicare paid this, Blue Cross or GEHA or Aetna paid that.” And your obligation should be zero-
Micah Shilanski: Got you.
Tammy Flanagan: -For that year. So that’s the biggest perk. And then if you can find a plan that’s low cost, the premiums are relatively inexpensive because it gathers a lot of those Medicare beneficiaries that lower the cost for the health plan, then that’s even better, especially if it has a good drug benefit and has a Medicare reimbursement account.
Micah Shilanski: No Tammy, one thing just to throw out there. And I got to throw on a little Alaska fondness in here because why not? That is one challenge we do see in Alaska is there’s a lot of Medicare providers, but a lot of general physicians do not take Medicare up here still. So that’s one thing a lot of our clients have to do is they do have to change doctors. So it’s one thing we encourage them to do sooner rather than later. So if you live in a state that is potentially an issue, now we don’t not have any Medicare providers just to be clear, right? We have plenty of Medicare providers, in order to do this, but not all the physicians, especially the general physicians are under Medicare. So that is your family doctor, you may want to check with them to make sure they’re going to be under Medicare. If not make a change. Again, this is more of an Alaska issue than a Lower 48 issue.
Tammy Flanagan: Yep. And also make it clear that you’re going to have original Medicare with a federal health plan, not Medicare Part C because a lot of doctors don’t take Part C because of the restrictions or they’re not in that network.
Micah Shilanski: Yup.
Tammy Flanagan: So they may take original Medicare with FEHB as your secondary payer. So sometimes you have to kind of have a little conversation, maybe even with the billing office to make sure you’re on the same page. The other thing we’re seeing new last year or new this year for 2020, but second year in 2021, our Medicare, this is really confusing to me-
Micah Shilanski: Yes it is.
Tammy Flanagan: -But it’s a Medicare advantage plan that’s run through the FEHB. So it’s not the Part C plans that people were signing up for before the federal open season starts, it’s the federal health plan during open season, you can pick… Now has one, they’ve had it last year. They’re at renewing it again this year. It’s the Aetna Federal Medicare Advantage plan, UnitedHealthcare has it. And those are both nationwide plans. You can get those anywhere in at least in the 48. You’ll have to check Alaska because Alaska is different. You’re correct. They’re in Hawaii.
Micah Shilanski: That can be a special.
Tammy Flanagan: We got captive audience there because he can’t get to another provider very easily. But…
Micah Shilanski: No, and again, these are good things. And again, sorry Tammy to jump in, just to be clear, right? We’re saying Medicare advantage. And again, this means now multiple things because in FEHB in their wisdom, they decided to call it the same thing, but be very careful it’s not a plan outside of FEHB. That the whole thing inside of this is looking for a Medicare advantage plan inside of the federal health benefits program to kind of marry these up a little more, to make sure you continue that FEHB coverage.
Tammy Flanagan: And to further complicate it, it’s a two-step process to enroll. Yeah. So the first step is you make your typical open season change. So you that with OPM, if you’re retired or with your agency, if you’re still working. The second step is once you get your card or just wait two weeks, basically once they’re notified that you’re enrolled, then you’re going to contact the health plan. And they’re going to need confirmation of your Medicare enrollment to be-
Micah Shilanski: Got you.
Tammy Flanagan: -In that advantage part of that FEHB plan. So that means you’re going to send them a copy of your Medicare enrollment card or something that shows that you’re paying Medicare A and not A, but Part B premiums. And that you’re enrolled in Part A.
Micah Shilanski: And that would be almost the same thing if you maintained to do a Blue Cross Blue Shield basic plan. Because in Blue Cross Blue Shield basically offer a reimbursement if you stay, you still have to notify them, right? That there’s not a connection between Medicare and FEHB, you have to create that connection to let them know. So that makes sense.
Tammy Flanagan: Yep. And in any plan, if you’re going to sign up for Medicare, once you’re retired, contact your plan and let them know. Communication is key because we always hear stories about people’s billing getting screwed up because somebody sent the bill to the wrong place. And it’s usually because we didn’t tell everybody what we’re doing. So go on the back of your health plan card, there’s an 800 number, give them a call and say, “Hey, I’m just turning 65. I want to let you know either I’m not signing up for Part B or I’m going to sign up for Part B.” Just to let them know. And they can note that in your file. So when the bills come they’ll know who’s primary, who’s secondary. Because it can get confusing. Also if you’re working or retired can be a difference.
Micah Shilanski: Yeah. It very much is. And also make sure your provider knows this, right?
Tammy Flanagan: Absolutely.
Micah Shilanski: So one of the things we tell our clients, when they’re signing up at 65, for Medicare of saying, every time you go into the doctor for the next year, make sure they know you have now the two insurances in place so that they bill them correctly. Otherwise they may just forget, bill Blue Cross Blue Shield or FEHB, right. Then FEHB kind of rejects it because they know that you’re supposed to be under Medicare and you end up getting the bill in the mail. So make sure you go out of your way to make sure that receptionist knows about the two plans so that they bill them correctly.
Tammy Flanagan: Yeah. And the providers are getting pretty good about that too. Although, it’s not always fun when you walk in the door and the first thing is they hand you a clipboard and say, “Here, we need to update your record.” So it’s to your benefit as well as theirs that you do that. Because then there’s less chance of a billing error.
Micah Shilanski: Right. And Tammy, if someone selects one of these plans, let’s say they’re over 65. They go under Medicare A and B, alpha and Bravo. And then they check one of these FEHB Medicare advantage plans. And they don’t like it, for whatever reason, it just doesn’t work out for them. Are they stuck with this for the next hundred years. And they can’t make any changes.
Tammy Flanagan: No, of course not. They can change the next open season if they want to hang on to it for that year. But if it’s really bad or if it’s really not covering what they thought it was going to cover, it’s causing them extra out-of-pocket or they can’t see the doctor they want to see, you have in your back pocket as a federal retiree, a once in lifetime, you only use it once, but I call it your ace in the hole where you can change health plans just because you’re 65. So for no other reason, other than 31 days before your birthday, or any time thereafter, once in a lifetime, you can change health plans outside of open season.
Micah Shilanski: Sorry, yeah, I know that’s such a great thing, right? Any time after 65, just that once in a lifetime. So whenever I’m working with clients is I always have them make this change into the Medicare advantage or changing their plan at open season, right? Because what did this do, this now in our back pocket, as you said, now we’ve got this special card we could pull out at any time, if something changes and we need to move to another plan. Now, as you said, we always have open season, but it gives us just that a little bit more flexibility that God forbid that we need it. And Tammy, do you know how many clients I have had need to pull this out in the last, I don’t know, 20 years. And they had to make a change?
Tammy Flanagan: Probably quite a few. I would think.
Micah Shilanski: None.
Tammy Flanagan: Oh, really.
Micah Shilanski: I have never heard anyone at 65, above that, have to make a change in their plan. Because when we made a healthcare plan change, it didn’t fit their needs. It’s always been a concern, but I’ve never had anyone actually have to use it. What about you?
Tammy Flanagan: Actually it happened twice. One time was right after open season, she was a retiree. She wasn’t a client, but she just asked a question that she got her February annuity statement and there was hardly any money in it. She’s like what happened? We got a cost of living and I’m getting hardly nothing in my check. I can’t pay my bills. Well, what had happened, she was in one of those plans that had like $150 increase in the cost of the premium.
Micah Shilanski: Oh, yeah.
Tammy Flanagan: She didn’t pay attention. She says, “I’m happy with this plan.” She didn’t even look at it during open season. So since she was over 65, we pulled that out and allowed her to switch plans right then and there. And she was able to get into something much more affordable that was even going to save her money from what she had before. So she was thrilled.
Micah Shilanski: Oh my gosh, this is what I love doing podcasts with you, Tammy. I always learn something new. I mean, listen to that, that just came in. There’s another great reason to keep that qualifying life event, 65 plus in your back pocket. What if you miss the plan change that went into effect. So you picked a good plan, three years later, they made a change, a huge dollar increase, and he had to make a change, such a wonderful option.
Tammy Flanagan: Yup. And the same thing happened with another person who had an expensive medication. What do they call it? Specialty medication, it was an infused drug that are sometimes thousands of dollars per month to refill that prescription. Well, we were able to get them to switch into a different health plan because of that once in a lifetime open season that had a cap on the cost of that drug. So they were only going to pay like $300 a month as opposed to $3,000 a month for that medication. So you never know when that’s going to come in handy. So keep it just in case.
Micah Shilanski: And it comes back to almost one of my favorite quotes, right? It’s not what you don’t know that’s the problem, it’s what you think you know, that just ain’t so that creates so many problems when we’re planning in retirement. And that’s the whole highlight around this, on the benefit side as well. It’s what we think we know, what we heard at the water cooler, or we heard from someone else who’s not a federal employee and what they had to do and decisions they had to make and you are completely different. You have such a phenomenal, unique benefit set that’s there, but it becomes a little complicated. And you really need to take action to make sure you understand your benefits because you’re the person’s going to affect for the rest of your life. And we just learned there’s another little nuance to things that you may want to really know about.
Tammy Flanagan: Yep. That’s so true. And I have a slogan for you too Micah, I like the one that says, the educated consumer is our best customer and that’s dates back to my younger days. You may not remember a guy, he was a famous retailer. But that was his slogan for his stores, the educated consumers is our best customer. And I use that all the time because I think federal employees, the more they learn about their benefits, the easier it is for people like you and I to help them because they have a basic knowledge, but they don’t know these little twists and turns.
Micah Shilanski: Exactly. Yeah. I mean, all of my clients I’m sure as well as yours, very well educated, very smart. And especially in their particular field, but that doesn’t mean they’re an expert in every field, which is sometimes where they reach out for help in these things.
Tammy Flanagan: Right. Exactly.
Micah Shilanski: All right. So this podcast is all about taking action in your retirement, not only learning, and hopefully it’s a little bit of fun for you guys. It’s fun for Tammy and I, so at least two people are enjoying it. But it’s really about you taking action in your retirement planning. So it’s open season, that’s the reason this podcast is dropping when it is. So take action, go and look at your plan. As Tammy said, the very minimum thing you should do is go and find out what changed in your plan that affects every single person out there. What’s your premium going to be? What’s your coverage changing right? Look at those. Number two, if you’re eligible for a high deductible healthcare plan, you may really want to think about one, right? You may really want to see if it makes sense.
And again, not just for the health reimbursement side of it, but the health savings account side of it, being able to put money away that’s there. And I would say number three is really make sure you understand those rules when it comes to the eligibility of maintaining health care into retirement. I can’t tell you it comes up again and again and again in my client communications and in talking with people about making sure we understand these rules so that they can keep this benefit into retirement.
Tammy Flanagan: Right. Yeah. We always tell people retirement planning, it should start on day one, but at the very latest five years before you retire, because we have these five-year tests.
Micah Shilanski: Amen. Very, very much so. And of course I can’t leave without saying one of the last action items is we have an upcoming webinar, The Seven Classic Mistakes People Make When Preparing Retirement, Tammy and I will be live on a webinar going through these particular seven topics. And we’re going to be answering your questions. We have limited seating available. So jump on our website, plan-your-federal-retirement.com, jump on our website and make sure that you register for that upcoming events so we can help answer your questions. And until next time happy planning.
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