Studying Helth-Plan Options Now Can Pay Off Next Year
A big deadline, Dec. 10, is drawing closer for federal employees and retirees. That's when the open season ends for selecting a new health-insurance plan and enrolling in a flexible spending account.
Relatively few federal employees and retirees switch health plans each year, but Walton Francis, a policy analyst, argues that a little homework can be turned into big savings. He is the chief author of "Checkbook's Guide to Health Plans for Federal Employees," sponsored by the nonprofit group that publishes Washington Consumers' Checkbook magazine.
The 2008 guide shows that most health maintenance organizations, the Blue Cross Blue Shield basic option, a number of consumer-driven plans and the Government Employees Health Association's standard option can save a family more than $2,000 a year compared with the highest-priced nationally available plans.
The guide also shows that new consumer-driven and high-deductible plans, which provide incentives for enrollees to take more responsibility for their health care, offer most employees substantial savings over more traditional health-insurance plans.
But of the 4 million enrollees in the federal employee health insurance program this year, only 9,000 employees and retirees have signed up for high-deductible plans, 29,000 for consumer-driven plans and about 220,000 for health-care flexible spending accounts.
Inertia, concern over the unknown and busy days keep many federal employees from taking the time to master how the new consumer-oriented plans work. But Francis views them as among the biggest bargains offered federal employees, and he also says more federal employees should take a look at flexible spending accounts, known as FSAs.
The flexible spending accounts are financed through pretax payroll deductions, so federal, state and Social Security taxes are not paid on those dollars. The accounts are then tapped for reimbursements for expenses not covered by health insurance, such as deductibles, co-payments, dental care and over-the-counter drugs.
"Not setting up an FSA is throwing away money," Francis says.
FSAs come with a few rules: You must be an employee, you have to enroll each year to participate, you face a contribution limit of $5,000 per employee for health care, and you forfeit unused balances.
The "use it or lose it" rule apparently turns off many federal employees, but the trick is to forecast out-of-pocket health-care expenses for the coming year, play it safe with a conservative payroll deduction and then see what tax savings are reaped each pay period.
Paying for Part B
Federal retirees face a different kind of homework: They have to figure out whether enrolling in Medicare Part B is worth the cost.
Some services covered by Part B that may not be covered, or are only partially covered, by the Federal Employees Health Benefits Program include orthopedic and prosthetic devices, durable medical equipment, home health care, and medical supplies.
In the Medicare system, Part B covers doctors and outpatient services, and Medicare Part A covers inpatient hospital services. Most retirees do not pay a premium for Part A coverage because they have more than 40 quarters of Medicare-covered employment.
With Medicare parts A and B and any federal health-insurance plan, retirees will have close to 100 percent coverage of medical bills, according to the Checkbook guide. Medicare serves as the primary insurer.
But for retirees enrolled in a federal health plan, Medicare Part B will rarely save as much money as is spent on the Part B premium, according to Checkbook.
That's partly because Part B premiums are linked to income. If a retiree's income is more than $82,000 as an individual or $164,000 for a married couple, then the premium will probably be higher than the standard monthly Part B premium of $96.40.
Many retirees, especially those who feel they are being subjected to what they consider to be an income-related premium penalty, are questioning whether they should continue paying for Part B. Others are increasingly worried about whether they can afford to pay two premiums.
One of the most popular plans for retirees is the Blue Cross Blue Shield standard option, which costs $1,615.92 in annual premiums. That is not much higher than the standard Part B premium, $1,156.80 per year. Together, they add up to $2,772.72 in annual premium payments.
Federal retirees who "are really hard-pressed financially" should shop for a low-cost plan during the open season to supplement their Medicare, said David B. Snell, director of retirement benefits at the National Active and Retired Federal Employees Association (NARFE).
Retirees also need to determine whether the money saved by dropping out of Part B would be enough to offset higher premiums that are imposed on those who have dropped out and then opt back into Part B, Snell said.
NARFE recommends that retirees evaluate Part B by reviewing federal health-plan brochures to see if they waive or discount any deductibles, coinsurance or co-payments. Most low-cost federal plans penalize retirees who go out of their provider networks, so retirees need to take that into consideration when reviewing plans, Snell said.
Such reviews should take into account past medical history and possible medical needs in 2008, NARFE says.
That kind of homework should help clarify the bottom line and identify the health-care benefits that seem to be the best fit.