For the past two weeks we have focused on the story of Bob, a recent retiree. We reviewed his pre-retirement experience and his journey through the processing of his retirement application. This week, we’ll look at his health insurance choices.
Bob has a constant dilemma when it comes to health insurance. He probably doesn’t really need Federal Employees Health Benefits or Medicare coverage because he’s a veteran with a service-connected disability. This means that all of his medical needs (service-related and otherwise) are covered by the Veterans Health Administration, free of charge. VHA bills private insurers (including those in FEHB) for care unrelated to services it provides.
However, Bob enrolled in the FEHB during his civilian service with the FAA for several reasons: in case he needed it for a future spouse, if he remarried, and to fulfill the requirement to be enrolled for five years before to retire. Now that he’s retired, if he cancels his FEHB coverage, it’s a one-way ticket. Bob does not have the right to suspend his FEHB because receiving VA health benefits is not one of the reasons the enrollee can take this action. And he does not qualify for TRICARE because he is not retired from military service.
Because Bob is over 65, he is enrolled in Medicare Part A. But he chose not to enroll in Part B (coverage for doctors and outpatient services). This won’t put him at much risk because FEHB doesn’t require Medicare enrollment to maintain coverage. Bob is considering giving up the FEHB, but believes that Congress may not provide enough funding in the coming years for the VA to care for all veterans. Veterans who are in one of the lower priority groups could lose health benefits in the future.
Bob can enroll in Part B later in a future general enrollment period. They take place every year from 1 January to 31 March, with coverage taking effect from 1 July. But he may be subject to a late enrollment penalty for any 12-month period in which he could have enrolled but chose not to. Bob is currently eligible to participate in a special Part B enrollment period during which he can enroll without penalty. It will end eight months after his retirement last December.
Here’s Bob on his insurance decisions:
I enrolled in FEHB with GEHA’s standard option FEHB plan when I joined in 2012, but switched to GEHA’s high deductible health plan about four years ago. My current premium is $136.95 per month. The HDHP includes a Health Care Reimbursement Agreement as I am not eligible for a Health Savings Account. Having other health insurance, such as Medicare, disqualifies members from using an HSA, so GEHA establishes an HRA that does not earn interest and is not portable if I switch to another plan. But it provides $900 a year in copayments for qualified medical expenses as determined by the IRS.
In my opinion, this additional benefit of $900 per year effectively reduces my monthly premium. The way it works is that when the VA sends the bill for my care to GEHA, GEHA pays the amount that would have been covered by the plan. The rest is covered by the VA, leaving me $0 out of pocket for my care. I don’t have to worry about meeting the deductible or paying a copay because the VA covers my medical expenses.
After I turned 65, I enrolled in Medicare Part A because there is no premium for this coverage to help cover the cost of hospital stays. After retirement, I continue my FEHB plan with GEHA, but not with Medicare Part B. Still, I doubt I really need it when all my medical care is free at VHA. Veterans make up 30 percent of the federal workforce. And some of those veterans, like me, have service-connected disabilities and access to free medical care through the VHA. I also know retired veterans who thought TRICARE for Life was free until I told them they also had to enroll in Medicare Part B. With very few exceptions, all of my VHA visits are non-service related.
Bob’s bottom line
Bob’s top tip for retirement planning is to not be afraid to ask questions. He told me that the people he spoke to at various federal agencies actually seemed to enjoy helping him with whatever questions he had. Note that Bob communicates very clearly and takes his time. Customer service is a two-way street.
Of course, when it comes to preparing for retirement, everyone has to do the math. Do some rough financial projections so you have a general idea of your income and expenses in retirement.
Bob has about half of his retirement income coming from his Social Security benefits, just under 20% from the federal retirement benefit, about 30% from a private sector pension that does not receive a cost-of-living adjustment, and roughly 3% coming from from the VA. I don’t need to pull out of my investments just yet.
Overall, Bob is in very solid financial shape thanks to his foresight, patience and planning.