The Truth About Federal Employee Health Insurance After Retirement- What You Need to Know Now

By Sam •  Updated: 01/28/22 

As I’ve written before, your FERS retirement benefit is more than just your pension.

In fact, if you do your retirement planning correctly, you can take your federal employee health benefits, or FEHB, with you into retirement. I strongly believe that being able to keep your FEHB coverage after you retire is the best of the many retirement federal employee retirement benefits.

In this article I explain how federal employee health insurance changes upon retirement. I have a passion for helping feds understand their benefits package so that they can make informed decisions.

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Table of Contents


Please do not confuse my personal blog for financial advice, tax advice or an official position of the U.S. Government. This post may contain affiliate links. If you make a purchase after clicking on a link, I get a small percentage of the sale at no additional cost to you.

What are the US Federal Governments retirement benefits?

Federal employees receive generous retirement benefits. Many people know that federal employees receive a pension. However, few people understand the full complement of federal retirement benefits. Employees in the federal employee retirement system, also called FERS, receive three benefits. (1) A retirement annuity (pension). (2) A supplemental pension from ages 57-62. (3) A continuation of their FEHB plan into retirement. (Not to mention the government gives a hefty 5% match to your Thrift Savings Plan contributions)

Previously, I have written extensively about all of the benefits of federal employment. Today I’ll try to explain federal employee health insurance benefits after retirement.

Does a federal employee get free health insurance after retirement?

Unfortunately, federal employees do not receive free health insurance upon retirement.

However, federal employees can keep their current federal employee health benefits (FEHB) plan upon retirement.

Employees continue to pay the employee portion of the premium. The government pays the remainder of the retiree’s premium at the same rate as they do for current employees. (Up to 75% of the premium, depending on the plan).  

Why is health insurance important?

Almost 2/3rds of bankruptcies in the United States were caused by medical bills. Health insurance is not just insuring your health; it insures your wealth. Even after the passage of the Affordable Care Act, most people in the US receive their health care through their employer. Insurance can be difficult to obtain if you retire before you’re eligible before Medicare. The ability to have access to any sort of coverage between retirement and Medicare is a huge benefit. Not just for federal employees, but also their spouses, and family members.

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How can a federal employee keep their health insurance after retirement?

OPM states that federal employees can keep their health insurance after retirement as long as you meet the following conditions:

Federal Employee Retirement System FERS

How much does health insurance cost when you retire?

The health insurance premiums remain the same both before and after retirement. However, federal employees pay their portion of the premium on a biweekly basis. Retirees pay their portion on a monthly basis. However, if you remain on the same health plan before and after retirement, your total yearly premiums and benefits will remain the same.

It is important to note that part time federal employees typically have to pay more for their health insurance than full time employees. (That is, the government contribution is prorated based upon the number of hours worked). However, upon retirement, part time and full time employees receive the same government contribution (the full contribution).

Another important fact is that you are not allowed to participate in flexible spending accounts, also called FSAs, upon retirement. The IRS has specified that FSAs are a salary benefit and therefore cannot be used by people receiving an annuity.

Where can I find FEHB health insurance premiums as a federal employee after retirement?

You can find information about specific plans for federal employee health insurance after retirement on the OPM webpage on the FEHB program. The OPM also allows you to make a plan comparison of every FEHB plan offered throughout the country with this tool.

Federal Employee Health Insurance After Retirement- what you need to know now about FERS FEHB Medicare and Medicaid.
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Federal employee retirement health benefits and Medicare

There are a lot of factors when trying navigate FEHB, Medicare, and Medicare Advantage (i.e. Medicare part C).

As someone decades away from being about to apply for Medicare, I haven’t studied them deeply and do not feel qualified to discuss this in great detail. To get more information on the topic, I interviewed Brian Sigwart. Brian is a certified financial planner with Cummins and Associates Financial Group. He has been providing financial wellness classes for over a decade at over 25 federal agencies in the DELMARVA area.

Understanding Medicare

Medicare has 4 parts.

FEHB and Medicare Parts A & B

You can (and should- it’s free) enroll in Medicare part A when you’re 65.

On the other hand, Medicare Part B is more confusing.

You’re expected to enroll in Medicare Part B when you turn 65 if you are retired. If you do not enroll at age 65, you will be penalized if you try to enroll later.

FEHB and Medicare parts C & D

Federal employees should definitely enroll in Medicare Parts A & B according to Brian.

However, when it comes to Medicare Advantage, Brian recommends declining that coverage and sticking with your FEHB instead. Typically the FEHB has more benefits and greater coverage than Medicare part C. Finally, most FEHB plans also cover prescription drugs, so you should not need to enroll in Medicare Part D.

Medicare and red cross

However, you may want to double check that your FEHB plan does cover the prescription drugs you need before declining Medicare Part D. If you decide you want Medicare Part D, you can add Medicare Part D during a future open enrollment period but may face a penalty in the form of an increased premium. Furthermore, you can only add Part D during the open season.

So, in summary, most federal employees should:

If you want to go deep into the weeds on this topic, OPM published a 20 page book that walks you through the decision making process. Be warned that it is extremely dry reading.

Long term care

One final note Brian wanted me to share is that neither FEHB nor Medicare cover long-term care and are not a substitute for long term care insurance. While Medicaid may pay for nursing home care, that you’re not eligible for Medicaid until you have depleted all of your assets. I write this blog to help federal employees grow their wealth (and maybe retire early). Therefore, I feel like I need to mention wealth preservation strategies along with my other content. While no one wants to imagine themselves in a nursing home, you should at least have a plan for your assets if that happens to you.

What if I die before my spouse?

As a federal retiree, you may enroll in a family plan, a self plan, or a self plus one plan, if offered by your insurance. Given that the FEHB is such a valuable benefit, if only one member in the household is a family employee, you should plan on utilizing his or her insurance in retirement. However, if the federal spouse dies first, it’s important to look at survivor benefits.

If you are enrolled in a “self plus one” or family plan at the time of your death in retirement, your survivors can continue coverage with the FEHB. Surprisingly, the government continues to pay the full government portion of the premiums and your survivors only need to come up with the employee portion (25%). These amazing survivor benefits are the same for both employees and annuitants. However, you should know that if you’re enrolled in a “self plus one” plan, your partner cannot change his or her coverage to a family plan after your death. You can find full details in the FEHB handbook.

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Summary

Hopefully after reading this article you realize just how amazing your FEHB benefits are. (I wish all federal employees knew this from day one!) FEHB doesn’t just help you pay for care while you’re a federal employee, but it is even more valuable after you retire.

Sam

Sam i.e. "Gov Worker" started working for the government at age 18 and loved it so much that he never left. He started GovernmentWorkerFI in 2019 to help fellow federal employees understand their benefits, take control of their finances, and live their best lives.

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