How to Pick a FEHB Plan: The Ultimate Guide

FEHB is one the best benefits that federal employees enjoy.

Most agencies pay about 72% of the premium for their employees.

That means that if you pay $400/month for premiums then your agency is probably paying around $1,000/month on your behalf!

And what makes this benefit even more rare is that you can keep FEHB into retirement (with the government still paying their portion) as long as you are eligible.

The two main eligibility requirements are:

And in order to understand your FEHB we have to define some of the most important terms first.

Out-of-Pocket Maximum : The most you can pay out of pocket in a single plan year. Once you’ve hit this limit then the insurance company will cover 100% of covered services.

Plan Type Basics: HMO, PPO, CDHP, HDHP

There are 4 main types of health insurance plans that you have access to as a federal employee.

The Lines are Blurring!

You will still want to check the details of the plans you are considering as the lines between the different plan types are starting to blur in recent years.

For example, a plan that is an HMO may actually have many characteristics that only a PPO had traditionally.

National or Local?

Some plans are national while others are only for specific locations.

National plans tend to give their participants a much wider range of providers to choose from.

Note : There are also Medicare Advantage FEHB plans but we’ll cover those below in the retiree section.

How to Pick a FEHB Plan for Active Federal Employees

Choosing the right FEHB plan is no easy task.

But the following 7 steps will make it a lot easier.

And there are some online comparison tools that help a lot as well. Here are the two main ones:

OPM’s guide is free for everyone but doesn’t have a ton of functionality.

Checkbook’s guide does a lot more but isn’t always free.

Checkbook’s guide is free for many agencies and really cheap if your agency doesn’t provide it for you. It was $14.95 as of 9/12/2023.

But even if you don’t use the guide, this article will help you know what to consider when picking a plan.

Step 1 – Weed Out The Losers

To simplify the FEHB decision it is important to narrow down all the plans that obviously don’t make sense for you with the following:

  1. Find the plans that cover your location. You can use OPM’s or Checkbook’s tool to do this easily.
  2. Filter those results for only the types of plans that you are interested in. For example, a HDHP, HMO, or PPO.
  3. Filter those results by cost.

Cost Can be Complicated

But you have to be careful to not just look at premiums when comparing plans.

A low premium is great but not if that plan doesn’t cover anything.

A better way to compare costs is to look at premiums, deductibles, and out of pocket maximums.

What you pay for healthcare each year is a combination of the plan premium plus any out-of-pocket expense you’re charged when you use a service.

Premiums + Out of Pocket Expenses = Total Health Care Cost

The Easiest Way to Compare Cost

Wouldn’t it be nice if you could estimate the total you’d pay if you had a low cost, average cost, or high cost healthcare year on a certain plan?

Good news. Checkbook’s Guide makes it really easy to compare plans side by side by cost estimates.

Note : There is a video below that shows you how to use Checkbook to compare plans.

And there can be huge differences between what plans are probably going to cost you.

For example, for a 45-year-old GS employee with a family of four living in the Washington, D.C., area with average healthcare expenses, there is a $10,710 difference between the lowest and highest cost plans.

Using the total cost estimate can help you quickly eliminate expensive plans, leaving you with just a handful that do the best job of covering your likely healthcare expenses.

Step 2 – Check Doctor Status

Another important aspect of plan selection is keeping your existing doctors in-network.

You’ll always pay less in any plan staying in-network compared to what you’d have to pay going out-of-network. Some FEHB plans also don’t have out-of-network provider coverage.

Before enrolling, check the online plan provider directory to see if your current provider(s) will be in-network. Unfortunately, this work must be done on a plan-by-plan basis as there is no all-FEHB plan provider directory available.

Unlike Affordable Care Act insurance carrier requirements, OPM does not mandate FEHB carriers submit a machine-readable electronic provider file. However, most FEHB carriers do a good job on the plan website of making their provider directories easy to find.

Step 3 – Check Drug Coverage

If you or another family member takes any prescription drugs, you’ll want to check if those medications will be covered by any plan you’re considering.

Again, unfortunately, this task must be done on a plan-by-plan basis as there is no all-plan FEHB formulary look-up tool. The carrier website is the place to go to find out more about prescription drug coverage.

Besides finding a coverage answer, many FEHB carrier websites have drug pricing tools that will show which pharmacies offer the lowest price for your prescription.

Step 4 – Big Expenses Coming?

While not all healthcare expenses can be predicted, some can. Known high costs should be factored into your health plan decision.

For example, if you plan on having a baby next year, you should look for an FEHB plan with $0 or low-cost maternity care. Some FEHB plans charge nothing for maternity care when using preferred providers, but not all.

Another example is hearing aid coverage, which varies widely. Some plans provide a $3,000 allowance every four years, some just $500 per ear every three years, and some nothing.

Your choice of plan matters greatly when there are thousands of dollars in known healthcare expenses on the line.

Step 5 – Out-of-Area Care

Before enrolling in an HMO, make sure you understand how/where you’re covered.

HMOs include emergency care outside of their service area but wouldn’t cover routine care of a college student that lives outside the plan’s service area.

If you expect to spend a significant amount of time overseas, you’ll want an FEHB plan that has an international provider network, such as Blue Cross Blue Shield.

All FEHB plans cover emergency overseas care, but only a handful will cover routine overseas care.

Step 6 – Check Plan Quality

Every year, OPM measures the quality of each FEHB plan.

A sample of plan members rate their plan in the follow areas:

You can use these scores to narrow down which ones you want to consider.

FEHB plan quality scores can be found on both the Checkbook plan comparison tool and at OPM .

Step 7 – Triple Tax Savings

For many federal employees, a High Deductible Health Plan (HDHP) will be the least expensive plan type available.

HDHPs tend to have lower premiums than popular PPO plans, and the HDHPs fund a health savings account (HSA) to help you pay for qualified healthcare expenses.

Depending on the plan, that amount ranges from $750-$1,200 for self-only enrollment and $1,500-$2,400 for self-plus-one and self-family enrollments.

Additionally, voluntary contributions can be made to an HSA that are triple tax advantaged —they go in tax-free (either as a pre-tax payroll deduction or as a deduction when you file your taxes if you make a lump-sum contribution), grow tax-free, and exit tax-free if used for qualified healthcare expenses.

For plan-year 2024, there will be higher HSA contribution limits. For self-only enrollments, between the plan and enrollee, $4,150 can be contributed, and that contribution limit doubles to $8,300 for self-plus-one and self-family enrollments.

If enrolling in an HDHP is not something that you’re considering, you should at least have a flexible spending account (FSA).

All federal employees will have out-of-pocket healthcare costs, especially considering dental, vision, and many over-the-counter items are FSA eligible. Because FSAs are funded with pre-tax payroll deductions, you’ll save about 30% on any items paid through the FSA. For more information on the FSA program, go to FSAFEDS .

The Final Choice

Using total cost estimates is a helpful starting point for narrowing down the plans you want to consider.

That’s because you can eliminate a couple dozen higher cost plans, saving you the hassle of reviewing provider directories and prescription drug formularies for all of them.

Once you have just a handful left, you can dig in to see how your current providers and prescription drugs will be covered, the plan member quality scores, and how other important benefits are included in each plan.

You may find in the end there are two or three plans that are very close in cost, quality, and coverage, and you can’t decide between them.

Here are a few benefits to consider that might help break the tie:

Most FEHB plans also offer some form of wellness benefits, including smoking cessation programs, discounted gym memberships, a free Peloton subscription, or even cash.

That’s right: Some plans will pay you in the form of a prepaid flexible spending card to have annual physical and current biometric screenings.

While an FEHB plan shouldn’t be selected solely because of fringe benefits, they can be considered when you can’t decide between two closely ranked plans.

Your FEHB plan selection is not a permanent decision. You can switch plans during any Open Season, or outside of Open Season if you experience a qualifying life event.

Overall, fewer than 5% of all federal employees switch plans in any given year. That means most stick with their current choice, often ignoring plans that could save them thousands of dollars in annual healthcare costs.

Picking a FEHB Plan as Federal Retirees/Annuitants

Choosing an FEHB plan doesn’t get easier when federal employees retire. In fact, the task becomes harder as annuitants consider how Medicare impacts their cost and coverage, plus the dozens of plans available—including Medicare Advantage for those with Medicare Part B.

Additionally, overall costs can rise as tax-advantaged methods disappear.

This guide will walk you through everything you need to know, from changing healthcare costs to Medicare Advantage plans and enrolling in Medicare Part B to the increased importance of Part D prescription drug coverage.

How FEHB Changes in Retirement

Your core FEHB benefit doesn’t go away when you retire but there are some notable differences.

But before we dive into the changes, the main thing that does not change is your premiums.

As a retired federal employee you have access to the same premiums that active employees do.

However, (as explained below) the cost does change because of the loss of tax benefits.

Tax Benefits They Take Away in Retirement

There are several tax-preferred healthcare savings programs available only to active employees:

IRS rules limit pre-tax benefits to active employees. The impact of losing this benefit varies based on your locale and tax bracket, but many federal annuitants will pay 35% more for their enrollee share of premium.

So while their premium may stay the same, the after-tax cost will go up in retirement.

By losing these programs, annuitants will spend more on healthcare in retirement. Choosing a lower cost FEHB plan and maximizing the benefits of enrolling in Medicare Parts B and D become essential items for annuitants to help control their healthcare budget.

Medicare Basics for Federal Employees/Retirees

If you are like most federal employees, you have had the same FEHB plan for a long time…a very long time.

But Medicare is the #1 reason I see that feds change their FEHB plan after decades of loyalty.

Because Medicare changes everything.

Medicare is Different From Medicaid

Before we go any further, we have to make the distinction between Medicare and Medicaid.

Medicare is what the vast majority of Americans use starting at age 65 while Medicaid only covers those in severe poverty.

This guide is 100% about Medicare, not Medicaid.

What Parts of Medicare do Federal Retirees Need?

Most federal retirees use Medicare A and B. I’ll explain why below.

But with some recent changes part D will be more relevant as well.

Medicare Part A (And What it Covers)

Medicare Part A covers these sorts of things:

When To Get on Medicare Part A

65 is the magic age when you can enroll in Medicare for the first time. The enrollment window generally includes the 3 months before your age 65 birthday month, the month of your 65th birthday, and the 3 months after your birthday month.

So, all together, your enrollment period is 7 months long.

People will often get on Medicare A even if they are still working as Medicare A is free.

The Cost of Medicare Part A

For the vast majority of federal employees, Medicare Part A will be free of charge because you already paid the premiums in FICA taxes while you were working.

Should I Get On Medicare Part A as a Federal Employee?

Because Medicare Part A is free for most feds, there is almost no reason not to enroll. Even if you are planning to continue working past age 65 there is still no reason not to sign up as soon as you can.

It will simply provide another layer of coverage.

And if you are only enrolled in Part A (and not Part B as well), then your Federal Health Insurance (FEHB) will remain your primary insurer and Medicare will be your secondary.

Medicare Part B (And What It Covers)

Per the Medicare Website, Part B covers 2 types of services:

  1. Medically necessary services: Services or supplies that are needed to diagnose or treat your medical condition and that meet accepted standards of medical practice.
  2. Preventive services: Health care to prevent illness (like the flu) or detect it at an early stage, when treatment is most likely to work best.

Part B tends to cover things like: