Should you suspend your health premiums in 2020?

By Mike Causey @mcauseyWFED July 8, 2019 1:00 am

NOTE: Mike Causey is on vacation. The following article was originally published on May 21 of this year.

When budgeting, income and outgo are at the top of most people’s list. And one of the biggest must-have outlays, for both active and retired feds, is health insurance premiums. Even with Uncle Sam paying the lions share, about 72%, workers and retirees can spend thousands of dollars in premiums and out of pocket costs next year. But for Medicare eligible individuals, there is an option.

They can decide to suspend — not drop, but suspend — their Federal Employees Health Benefits coverage, enroll in a Medicare Advantage plan and pay for Medicare Part B. It works for lots of people and it is something to consider now, before the confusion of the 2020 health insurance open season begins in September. Consider the unknowns.

Federal workers don’t know if they will be getting a pay raise in 2020. But if there is one — and that’s a big but — they won’t know the amount until very late this year. Maybe after the health insurance open season has come and gone.

Federal retirees are likely to get some kind of cost of living adjustment. But the final cost-of-living adjustment countdown is yet to come. The government will check on the rise, if any, in the consumer price index from the current third quarter, July, August and September, over the previous years’ third quarter. Then in October, it will announce how much, if anything, federal, military and social security retirees will get in their January cost-of-living adjustment. Oil prices over the next few months will be a major factor.

What both active and retired feds do know for certain is that most health premiums in the FEHB program will be going up. Some maybe by double-digits. In some cases higher premiums will eat into, if not devour, the worker pay raise or the to be determined retiree cost of living adjustment. That means people will have to downsize to a less costly plan, not always a bad idea, or consider another sobering option: suspending FEHB plan coverage. If you suspend, you can always resume coverage the following year. If you cancel, you are out forever.

According to the Consumers’ Checkbook Guide to Health Plans for Federal Employees, a third of retirees now belong to a Medicare advantage plan. They pay only its lower premium and Medicare Part B. The savings can be substantial and the coverage excellent.

As pointed out during the last open season, finding the best deal among 20 to 30 plans, with a wide variety of premiums and benefits, isn’t easy. Especially for retirees who tend to stay in the same plan year after year despite changes in benefits and premiums. Retirees and their survivors often have less money and more medical problems than younger, working feds.

Consumer’s Checkbook Guide to Health Plans For Federal Employees last year says medical expenses for young children typically average about $2,000 per year. Those of folks younger than 55 years old run about $6,000. Those 65 and older average $12,000. Because of their special age-related needs, retirees and their survivors have to decide whether to buy Medicare Part B as part of their federal health program.

Last year, Consumer’s Checkbook said that annuitants with Medicare Parts A and B could save a lot of money in 2019 premiums if they “suspend (not drop) their Federal Employees Health Benefit Program enrollment, join a Medicare Advantage plan, and pay only the Medicare premium.” Checkbook says they can “re-enroll in an FEHBP in the future without penalty, and in the meantime enjoy good catastrophic protection, have low copays and save thousands in premium costs.”

About one in three retirees belong to a Medicare Advantage plan, Checkbook said. Under the “suspend” option, you pay only the Part B premium and sometimes an extra premium charge — usually only a few hundred dollars per year and often nothing at all — that the Medicare Advantage plan charges Medicare participants for additional benefits, such as prescriptions drug coverage.
You can later switch out of Medicare Advantage and rejoin the FEHB Program as if you had never left during any future open season. This works equally well for a couple when both spouses are enrolled in Medicare, or if they are willing to pursue separate health insurance options. If you choose to “suspend” but not drop FEHB coverage, Checkbook says there were four good options for the 2019 open season. Those options could change again for upcoming 2020 open season, but here are the suggestions it made for 2019 coverage:

1.       Enroll in one of the better MA plans and suspend FEHBP enrollment. This taking into account dollar costs only.

2.        Enroll in the Aetna Direct CDHP plan or the Blue Cross Basic plan. Your special account will pay toward the Medicare Part B premium or, in the Aetna Direct plan, for drug or dental costs not otherwise covered. And you also get a Medicare wraparound — several Kaiser plans around the nation (excluding Kaiser DC) will pay almost the entire Part B premium. These plans provide only a partial wraparound, however.

3.       Enroll in an FEHBP plan with rich benefits, such as APWU, NALC, Kaiser or many other HMOs and drop Medicare Part B.

4.        Enroll in a low-premium national plan such as the GEHA standard option along with Part B and get a Medicare wraparound benefit. Or join a low premium HMO and use Part B to fill holes and get services outside the plan’s network

Two of the options permit keeping both Part B and FEHB enrollment, but two “let you pay only one premium. All of them vary in details that you can only assess after studying the procure of one or two plans.”

But all of the options, Checkbook says, provide most annuitants substantial savings. It is complicated but important stuff. Maybe getting a head start, before the November open season, will help you make the right choice. During the open season itself, we’ll have a series of columns and radio shows with insurance expert Walton Francis. He’ll talk about best buys for people of all ages, and financial and medical situations.

https://federalnewsnetwork.com/mike-causey-federal-report/2019/07/should-you-suspend-your-health-premiums-in-2020/