For federal retirees, understanding how Medicare works with the Federal Employees Health Benefits (FEHB) Program is an essential part of ensuring a financially secure and healthy retirement. At United Benefits, we help employees and retirees make informed decisions about their coverage so they can enjoy peace of mind and lasting financial protection. In this article, we’ll walk through how Medicare and FEHB coordinate in retirement, what the “5-Year Rule” means, and how to make your transition to retirement health coverage seamless.
How FEHB Works in Retirement
The Federal Employees Health Benefits Program remains one of the most valuable benefits for federal workers—offering a wide selection of high-quality health insurance plans. When you retire, you may continue your FEHB coverage as long as you meet certain eligibility requirements. The key requirement is the 5-Year Rule: you must have been enrolled in an FEHB plan for the five years immediately preceding your retirement (or for all service since your first opportunity to enroll, if less than five years). This ensures retirees don’t lose access to their FEHB plan when they stop working.
According to the U.S. Office of Personnel Management (OPM), meeting this 5-Year Rule grants you the same level of FEHB coverage and government contribution toward your premium as active employees, significantly reducing health insurance costs throughout retirement. This continuity is a major advantage compared to private-sector retiree plans, which are often more costly or discontinued altogether.
Understanding Medicare Options
Most federal retirees become eligible for Medicare when they turn 65. Medicare has four parts:
- Part A (Hospital Insurance): Covers inpatient hospital stays and skilled nursing facility care. Most people do not pay a premium for Part A.
- Part B (Medical Insurance): Covers doctor visits, outpatient services, and preventive care. It requires a monthly premium.
- Part C (Medicare Advantage): Private plans that bundle Parts A and B, and often Part D coverage.
- Part D (Prescription Drug Coverage): Helps pay for prescription medications.
Enrolling in Medicare isn’t mandatory if you have FEHB, but understanding how they work together can help ensure you aren’t overpaying for coverage you don’t need—or missing out on benefits available to you.
How Medicare and FEHB Coordinate
When you have both Medicare and FEHB, the two programs often coordinate to provide nearly comprehensive health coverage. The coordination depends on whether you are actively employed or retired:
- Active Employees: FEHB is the primary payer, and Medicare pays second (if you are eligible).
- Retirees: Medicare is the primary payer, and FEHB becomes secondary.
This coordination means FEHB can cover many costs that Medicare doesn’t pay, such as coinsurance or deductibles. For many retirees, this results in fewer out-of-pocket expenses and smoother claims handling. Importantly, retirees can often keep both programs for robust coverage while potentially lowering total medical costs compared to relying on one plan alone.
Should You Enroll in Medicare Part B?
One of the most common questions we receive at United Benefits is whether federal retirees should enroll in Medicare Part B. The answer depends on several factors, including your health needs, financial situation, and preferred providers. While Medicare Part B requires a monthly premium (based on income), many retirees find that combining Part B with FEHB reduces their overall healthcare costs through lower copays and minimal out-of-pocket bills.
According to the Centers for Medicare & Medicaid Services (CMS), Medicare Part B has a standard monthly premium that adjusts annually. By pairing FEHB with Part B, you may have fewer gaps in coverage and gain access to a wider network of providers who accept Medicare. Since FEHB plans often reduce or waive certain costs if you have Medicare, evaluating your plan’s coordination benefits is crucial before making a decision.
The 5-Year Rule Explained
The 5-Year Rule ensures that only employees with consistent participation in FEHB are eligible to continue coverage into retirement. To satisfy the rule, you must:
- Be continuously enrolled in FEHB for the five years immediately before retirement, or
- Have been enrolled in FEHB for all service periods since you first became eligible, if less than five years.
If you don’t meet this condition, you cannot carry FEHB into retirement (unless granted a rare waiver by OPM). Meeting the 5-Year Rule is often part of a broader retirement strategy that should begin well before your intended retirement date.
By maintaining FEHB coverage leading up to retirement, you ensure not only continued healthcare protection but also the option to adjust your plan as needs change. Once retired, you can still make changes during the annual Open Season or after qualifying life events, giving you ongoing flexibility.
Combining Medicare and FEHB: Key Benefits
There are several reasons retirees opt to keep FEHB even after enrolling in Medicare:
- Comprehensive Coverage: Medicare pays first, and FEHB fills in many of the gaps like deductibles and coinsurance.
- Global Protection: FEHB often provides emergency medical coverage overseas—something Medicare typically does not.
- Prescription Savings: FEHB plans usually include strong prescription drug benefits, which may eliminate the need for Medicare Part D.
- Flexibility: Retirees can keep their current doctors within FEHB’s network while gaining access to Medicare providers across the country.
According to the U.S. Office of Personnel Management (OPM), combining Medicare with FEHB can also reduce copayments and coinsurance by as much as 20% for certain retirees. This dual coverage often helps manage high-cost procedures or ongoing medical conditions without significantly increasing premiums.
Common Coordination Scenarios
Let’s look at a few examples of how coordination might work in practice:
- Hospitalization: Medicare Part A covers most inpatient costs, and FEHB may cover any remaining amounts not paid by Medicare.
- Outpatient Care: Medicare Part B pays 80% of approved services, while FEHB generally pays most of the remaining 20%.
- Prescription Drugs: Most FEHB plans include drug coverage that is at least as good as Medicare Part D, making enrollment in Part D optional.
The result is usually more comprehensive protection, fewer billing surprises, and fewer gaps in coverage during retirement.
How United Benefits Can Help
Navigating the intersection of Medicare and FEHB can be complex, but you don’t have to manage it alone. At United Benefits, our specialists are trained to help federal employees and retirees evaluate their options and choose the right combination of benefits based on their unique needs. Our resources on Medicare education and retirement planning are designed to simplify the process and help you save money over the long term.
We can help you understand how your FEHB plan coordinates with Medicare, which parts to enroll in, and how the 5-Year Rule affects your eligibility. Personalized support ensures you retain full coverage without unnecessary costs or penalties.
Take the Next Step
Whether you’re nearing retirement or already retired, reviewing your FEHB and Medicare options early can make a lasting difference in your financial and physical well-being. Contact United Benefits today to speak with a benefits specialist about your situation.
United Benefits
Phone: 866-558-2121
Email/Address: 3295 County Road 47, Florence, AL 35630
Website: https://unitedbenefits.com/
Planning your retirement coverage doesn’t have to be overwhelming. With the right strategy and expert guidance, you can maximize your federal benefits and enjoy a more secure, confident retirement.