Quickstart Guide to Your Federal Employee Health Benefits

The Federal Employees Health Benefit (FEHB) Program provides comprehensive health care coverage for you, your spouse, and your children under age 26. The program does not have waiting periods nor restrictions for pre-existing conditions.      

Who Is Eligible?

Most Federal employees are eligible, and retirees may be eligible to continue their FEHB coverage if they meet certain requirements. You must enroll within the first 60 days after becoming eligible, or you will be treated as if you declined coverage and will have to wait until the next annual enrollment season (mid-November to mid-December) or a qualifying life event, such as marriage, divorce, or birth to enroll.

Enrollment Options

There are three enrollment options: Self Only, Self Plus One, and Self and Family. A Self Plus One enrollment covers you and one eligible family member. A Self and Family enrollment covers you, your spouse, and your children under age 26. It is worth noting that there can be minimal cost savings between the Self Plus One and Self and Family enrollment options. Therefore, you should keep in mind that you are free to choose either enrollment option to cover yourself and one other eligible individual.

Key FEHB Facts

  • Most Federal employees and certain retirees are eligible for FEHB
  • There are three enrollment options: Self Only, Self Plus One, and Self and Family
  • FEHB does not have waiting periods nor restrictions for pre-existing conditions
  • The government pays about 72% of the premium cost
  • Paying premiums pre-tax saves you money (premium conversion – automatically enrolled)
  • Changes to FEHB are only allowed during annual enrollment season or if a qualifying life event occurs
  • For 2020, the average monthly premiums are $198.66 for Self Only, $424.78 for Self Plus One, and $460.44 for Self and Family

Types of FEHB Plans

There is a wide selection of plans to choose from, which can make the task seem daunting. But the plan you choose will help determine your out-of-pocket costs and which doctors you can see, so you must know the differences between each plan. The options available resemble an alphabet soup with Health Maintenance Organizations (HMO), Fee-for-Service (FFS) plans, Preferred Provider Organizations (PPO), and High Deductible Health plans (HDHP). But hang in there, and we’ll cut through this maze.

Health Maintenance Organizations (HMOs): HMOs have strict networks and require referrals from your primary care physician before scheduling a procedure or visiting a specialist. If you use services outside of the network (unless an emergency), your plan will not pay for those services. Because of the restrictive network, you must live or work within the plan’s service area to be eligible for the plan. So, your location will dictate which HMO plans are available to you. Although HMOs tend to be more restrictive than other plans, they are usually the cheapest type of health plan, overall.Typically,HMOs pay 100% of your eligible expenses after you pay a co-payment, and there are no deductibles. 

HMOs tend to be the cheapest type of health plan

HMOs with Point of Service (POS): HMOs with POS allow you to use out-of-network providers; however, you will pay more, and you will have to file a claim for reimbursement.

Is an HMO right for you?

An HMO plan may be right for you and your family if you don’t mind your primary doctor choosing a specialist for you. An added benefit of an HMO plan is there’s less work for you since your doctor’s staff coordinates visits and handles medical records.

Fee-For-Service (FFS): Generally, you will see two types of FFS plans, the traditional and the Preferred Provider Organization (PPO). The main difference is that traditional FFS plans don’t have a defined network, meaning you can see the doctor of your choice. But this optionality comes with a cost, and typically you will pay more for the flexibility of the traditional FFS (similar to HMOs with POS).

Preferred Provider Organizations (PPO): PPOs provide more flexibility than HMOs, such as not requiring referrals to see a specialist, and having a broader network. PPOs will also allow you to go outside of your network at a higher cost.

Is a PPO right for you?

If you want more options and flexibility, a PPO may be a better fit than an HMO. If you are considering a PPO and expect to have a lot of healthcare costs during the year, you may want to opt for a PPO plan with a lower deductible, which will have a higher monthly premium. On the other hand, if you expect to have few healthcare costs throughout the year, you can save money by going with a PPO plan with a higher deductible and lower monthly premium.

High Deductible Health Plans (HDHP): HDHPs have lower monthly premiums with a higher deductible. They are also the only plans that qualify you to open a Health Savings Account (HSA) or a Health Reimbursement Arrangement (HRA) if you are ineligible for an HSA. HSAs are tax-advantaged accounts that you can use to pay health care costs. If you’re interested in this plan, be sure to learn the ins and outs of HSAs (Read More About HSAs Here).

Is an HDHP right for you?

If you expect to have a few healthcare costs throughout the year, you can save money by going with an HDHP. But be aware that if an unexpected healthcare incident does occur, you will pay a larger share of the cost via the larger deductible.

How much does it cost?

The plan you select will determine your overall cost, but the Federal Government will pay up to 75 percent of your healthcare premiums, and you will pay the remainder. With the exact percentage covered by the Federal Government varying by year and is based on the annual weighted average cost of Federal employee healthcare. For 2020, OPM published the following costs:

“The monthly program-wide weighted average subscription charges for Self Only, Self Plus One, and Self and Family enrollments are $709.50, $1,517.04, and $1,644.46, respectively.

The 2020 monthly Maximum Government Contribution (72% of the weighted average) is $510.84 for Self Only, $1,092.26 for Self Plus One, and $1,184.02 for Self and Family.”

The average Federal employee monthly premiums are $198.66 for Self Only, $424.78 for Self Plus One, and $460.44 for Self and Family.

Therefore, on average Federal employees are paying a monthly premium of $198.66 for Self Only, $424.78 for Self Plus One, and $460.44 for Self and Family.

An added benefit available to Federal employees is the premium conversion. The premium conversion essentially allows you to pay your healthcare premiums with pre-tax dollars. The benefit of paying your premiums with pre-tax dollars is twofold; first, it increases the money you have to pay your healthcare premiums since taxes haven’t been taken out yet. Secondly, it reduces your taxable income for the year, potentially reducing your tax bill. If you are eligible, you will automatically be enrolled unless you opt-out.

Last Thoughts

Deciphering the alphabet soup of plan options can be complicated but choosing the plan type with the right out-of-pocket costs and network for you and your family can save you from future heartache. Determining which plan is right for you and your family will depend on many factors, including your family’s composition, your family’s health, and your ability to pay the costs. It is worth mentioning that you should use this guide to support your evaluation, along with reviewing the FEHB plan brochures (which can be found on the FEHB home page or the OPM website) and consulting your human resource personnel. If you have a complex need or want a professional opinion, you should consult with a qualified financial planner.

Author: Jose Armenta, MsBA, CFP®, ChFC®, EA

Hi, I’m Jose Armenta, a Certified Financial Planner practitioner. For over 14 years, I have worked with or among federal employees, from serving in the Marine Corps to my stint as a police dispatcher and now as a financial planner specializing in helping FERS federal employees. In that time, I have spoken to hundreds of federal employees about their benefits and retirement. Helping federal employees maximize their benefits, reduce taxes, and live confidently is a passion of mine. When I am not perfecting financial plans, you’ll find me at the shooting range, playing the drums, or breaching blanket forts with my three little ones.