A Retirement Journey: Health Insurance Issues

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Over the past two weeks, we’ve focused on the story of Bob, a recent retiree. We’ve gone over his pre-retirement experience and his journey through the processing of his retirement application. This week, we’ll have a look at his medical insurance decisions.

Bob has an ongoing dilemma on the subject of medical insurance. He arguably doesn’t actually need Federal Employees Health Advantages coverage or Medicare, because he’s a veteran with a service-connected disability. Which means all of his medical needs (service-connected and otherwise) are provided by the Veterans Health Administration, at no charge. VHA does bill private insurers (including those in FEHB) for the non-service connected care it provides.

Nevertheless, Bob enrolled in FEHB during his civilian service on the Federal Aviation Administration for a few reasons: in case he should need it for a future spouse, should he remarry, and as a way to meet the requirement of being enrolled for the five years prior to retiring. Now that he’s retired, if he cancels his FEHB coverage, it’s a one-way ticket out. Bob isn’t eligible to suspend his FEHB, since having VA health advantages just isn’t certainly one of the explanations an enrollee can take this motion. And he isn’t eligible for TRICARE because he isn’t retired from military service. 

Since Bob is over 65, he’s enrolled in Medicare Part A. But he selected to not enroll in Part B (coverage for doctors and outpatient services). This won’t put him at great risk, because FEHB doesn’t require Medicare enrollment to take care of coverage. Bob has considered dropping FEHB, but he believes it’s possible Congress may not provide enough funding in future years for the VA to take care of all veterans. Veterans who’re in certainly one of the lower priority groups could conceivably lose health care advantages in the long run.

Bob could enroll in Part B later in a future general enrollment period. These are held annually from Jan. 1 to March 31, with coverage effective July 1. But he may be subject to  a late enrollment penalty for each 12-month period by which he might have been enrolled but selected to not. Currently, Bob has the chance to take part in a Part B special enrollment period,during which he can enroll without penalty. It would end eight months after his retirement last December. 

Here’s Bob on his insurance decisions: 

I enrolled in FEHB with the GEHA Standard Option FEHB plan once I onboarded in 2012, but switched to the GEHA High Deductible Health Plan about 4 years ago. My current premium is $136.95 per thirty days. The HDHP features a Health Reimbursement Arrangement, since I’m not eligible to have a Health Savings Account. Having other medical insurance, resembling Medicare, disqualifies members from using the HSA, so GEHA establishes an HRA that doesn’t earn interest and just isn’t portable if I switch to a different plan. However it does provide $900 annually to spend on co-pays for qualified medical expenses, as defined by the IRS.

The way in which I see it, having this extra $900 a yr profit effectively reduces my monthly premium. The way in which it really works is when the VA sends the bill for my care to GEHA, GEHA pays the quantity that might be covered by the plan. The rest is roofed by the VA, leaving me with $0 out of pocket expense for my care. I don’t need to worry about meeting the deductible or paying copayments for the reason that VA covers my medical expenses.

Upon reaching my sixty fifth birthday, I enrolled in Medicare Part A, since there isn’t a premium for this coverage that helps cover the price of in-patient hospitalization. Post-retirement, I’m continuing my FEHB plan with GEHA but not Medicare Part B. Still, I query whether I actually need it, when all of my medical care is free on the VHA. Veterans make up 30 percent of the federal workforce. And a few 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 that TRICARE for Life was free, until I told them that they’d to enroll in Medicare Part B as well. With only a few exceptions, all of my VHA visits are non-service-connected.

Bob’s Bottom Line

Bob’s top piece of retirement planning advice just isn’t to be afraid to ask questions. He told me the people he spoke with at various federal agencies actually looked as if it would enjoy helping with whatever questions he had. Have in mind that Bob communicates very clearly and takes his time. Customer support is a two-way street.

After all, on the subject of retirement preparation, everyone must run the numbers. Make some rough financial projections, so you may have a general idea of your income and expenses in retirement.

Bob has about half of his retirement income coming from his Social Security profit, slightly lower than 20% from his federal retirement profit, about 30% from a personal sector pension that doesn’t receive a value of living adjustment, and roughly 3% coming from the VA. He doesn’t must withdraw from his investments yet.

Overall, Bob is in very solid financial shape, attributable to his foresight, patience and planning.

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