Consumers' CHECKBOOK Logo
Guide to Health Plans
For Federal Employees and Annuitants 2016
Read Advice & Explanations Explanations & Advice
Explanations & Advice
CHECKBOOK’s Guide to Health Plans for Federal Employees gives you vital insurance information that you cannot get from any other source. It tells you how much money you can save by changing—or by staying in—your health insurance plan.
Chapter One: Introduction, Basics, and Changes for 2016 & Basics Image for Guide to Health Plans
Chapter Two: Comparing Plan Costs
Chapter Three: Cost Comparisons and Advice for Employees and Former Employees
Chapter Four: Cost Comparisons and Advice for Annuitants
Chapter Five: Cost Sharing
Chapter Six: Coverage Features
Chapter Seven: Dental, Vision and Hearing
Chapter Eight: Plan Types and Flexibility
Chapter Nine: Quality and Service
Chapter Ten: Premiums and Taxes
Chapter Eleven: Key Tips and Final Plan Selection
Chapter Twelve: Our Methods and Data Sources
Glossary: Terms and Explanations as Used in CHECKBOOK's Guide
Visit Guide to Top Doctors

About the Authors

Walton Francis is a self-employed economist and policy analyst, expert in the analysis and evaluation of public programs. He has written on a wide range of subjects including program evaluation, statistical analysis, managed health care, and retirement benefits. His education includes Master’s degrees from Yale and Harvard universities. He developed regulatory, budgetary, and legislative reforms for many policies and programs while working at the Office of Management and Budget and in the Office of the Secretary at the Department of Health and Human Services. He pioneered the systematic comparison of health insurance plans from a consumer perspective, starting with the 1979 edition of the Guide. He has published articles and testified several times before Congress on the Federal Employees Health Benefits and Medicare programs. He evaluated both programs’ performance in Putting Medicare Consumers in Charge: Lessons from the FEHBP.

CHECKBOOK is a magazine and website produced by the nonprofit Center for the Study of Services. CHECKBOOK rates the quality and prices of consumer services, ranging from auto repair shops to home improvement services to health-care providers in seven metropolitan areas: Washington, Boston, Chicago, Philadelphia, San Francisco, Seattle, and Minneapolis-St. Paul. In the health care field, CHECKBOOK rates hospitals, dentists, HMOs, and doctors. The Center has a health care survey research arm that, in addition to conducting surveys for the Center’s own publications and website, routinely conducts surveys under contract for government agencies, employer coalitions, and health plans, including many of the health plans evaluated in this book. The Center also produces national guides Consumers’ Guide to Top Doctors and Consumers’ Guide to Hospitals.

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Chapter 1
Introduction, Basics, and Changes for 2016

What the Guide Does

CHECKBOOK’s Guide to Health Plans for Federal Employees gives you vital shopping information that you cannot get from any other source. It tells you how much money you can save by changing—or by staying in—your health insurance plan. It summarizes thousands of facts about the plans to simplify your choice. The Guide comes in both print and Internet versions. They are almost identical but the print version is more convenient for many, and the online version allows more depth and details. The online version is particularly useful for Federal agencies that subscribe for all their employees, giving the employees invaluable money-saving advice while saving the agencies money as well, since they pay most of the premium cost. We show employees how to save thousands of dollars in unnecessary costs. Federal agencies also save, over a thousand dollars on average, for every employee who switches to a lower-cost plan using our advice. In both versions:

  • Our ratings cover all of about 250 health insurance plans available to Federal employees and retirees, including about 20 national plans, over 200 health maintenance organization (HMO) and other local options, and about two dozen Consumer-Driven and High Deductible plan options. Wherever you live, we rate all the plans in your community.
  • Our ratings of plan costs take into account premiums, catastrophic limits, and estimates of likely out-of-pocket costs for medical expenses of every kind.
  • We compare plans for insurance value in dealing with unforeseen medical expenses, not just for the routine costs you can predict.
  • We compare limits on out-of-pocket costs based on the actual coverage allowed by each plan, not just what the plan seems to say before you read the fine print.
  • We rate plans for each coverage group—employees in different pay systems, annuitants with or without Medicare, former spouses, families of various sizes, children at age 26, part-time employees, and former employees.
  • We rate plans according to how well each covers low, average, or high medical expenses, analyzing coverage of all major types of cost.
  • We adjust our estimates for the tax advantages that reduce the after-tax premium cost to most employees (but not retirees) by about one third.
  • We provide information on coinsurance, copays and other cost sharing, so you can quickly determine whether a plan pays well for a benefit you need.
  • We provide accurate estimates of potential exposure to catastrophic expense by adjusting plans’ claimed limits on out-of-pocket expenses so they don’t omit important categories of cost.
  • We give you data on coverage features of each plan, including skilled nursing, dental, and hearing aid coverage.
  • We address plan quality, and provide data on enrollee satisfaction with each plan’s service. We provide in-depth results from an annual survey in which plan members rate their plans on ease of getting needed care, customer service, claims processing, and other factors.
  • We rate dental and vision plans as well. We provide dollar estimates of likely dental costs, taking into account both premiums and out-of-pocket expense. We compare dental coverage in all plans, not just standalone plans.
  • We provide up-to-date information on changes in the FEHBP program, including the effects of health reform, of Medicare premium changes, and of the new Self plus One option.
  • We provide detailed consumer advice on which plan options work best in different situations, on plan advantages you may not have thought about, and on mistakes to avoid.

As a result, the Guide gives you a solid basis for selecting the best health or dental plan for you and your family. Hundreds of thousands of employees and annuitants have followed our advice over the years, and many of them have saved thousands of dollars a year by finding better coverage for lower premiums. There is no other source of plan comparisons or Open Season advice that provides even half of these features.

The Setting

Almost very Federal employee and annuitant can choose from over twenty plans. Choices include well-known national plans, such as Blue Cross/Blue Shield; local plans available in many areas, such as the Aetna, Humana, and Kaiser plans; and plans sponsored by unions and employee associations, such as the American Postal Workers Union (APWU) and the Government Employees Health Association (GEHA). You are free to join most union and association plans, regardless of your employing agency and whether you are an employee or annuitant. At most you must pay annual dues, which are generally near $30. However, a few plans restrict enrollment. For example, two plans are open only to those involved in foreign affairs, intelligence, or defense—a pool, however, that is very large and covers many agencies.

You can switch plans for the coming year during the annual Open Season, scheduled from November 9 through December 14, 2015. You are also free to switch among plans at certain other times—for instance, if you marry. You are allowed to switch from plan to plan regardless of preexisting conditions, even if you are in the hospital when the new plan enrollment year begins.

Hundreds of thousands of employees and annuitants are still enrolled in plans that are much more expensive than average, and that give them no needed extra benefits. In Open Season almost all of these persons will be able to reduce premium costs greatly while maintaining or even improving benefits.

As always, this year’s Guide reflects changes as plan options have been added or dropped, benefits modified, and premiums gone up in some plans and down in others. For newly hired employees, and those who can change plans after Open Season, the information in the Guide applies throughout the year.

The Savings

Whether your family’s circumstances are “average” or unusual, some HMOs, some national plans such as Blue Cross Basic and GEHA Standard option, and a number of High-Deductible plans offer big savings compared to other plans. To help decide which is best, we estimate likely, and not so likely, costs to you under each plan, and compare coverage features of the plans and several aspects of customer service. In addition to dollar costs, customer service is an important element of plan choice, particularly for HMOs. We present customer survey data on plan satisfaction, data on which plans are least likely to have claims disputes, and data on accreditation.

Our tables rate each plan on total expenses—including premium and out-of-pocket costs. The tables show what each plan will cost you in an “average” year and in years when your medical costs are much higher or lower than average. As our tables show, likely savings available to most employees and annuitants range from hundreds to thousands of dollars a year.

You should not pick a plan on the basis of its premium, benefit coverage, or catastrophic expense guarantee alone. We help you avoid these traps by including all of these complex factors in our ratings.

The information we give you is especially important if you expect a major change in your medical or financial situation. If you plan to have a baby next year, or face heavy dental bills, the plan that was best for you last year may not be best this year. Also, if you will retire, divorce, leave Federal employment, or join Medicare, you should review your choices very carefully.

Even if your plan satisfies you, why not consider switching to another? Those who switch in Open Season save hundreds of millions of dollars every year for themselves and their employing agencies, through migration to lower-cost plans that offer better value. You, too, can share in these savings.

Consider the following examples. If you are a single employee in the Washington, DC area, our estimates show that you are likely to save over $1,000 by joining the Kaiser HMO Standard Option instead of the Blue Cross Standard Option, the most popular plan. If you are unwilling to make such a drastic departure from fee-for-service medicine, you can save almost $1,000 by enrolling in the Blue Cross Basic plan rather than the Standard Option. We rate a half dozen Consumer-Driven (CD) and High Deductible (HD) options as equal to or better than even Blue Cross Basic for most enrollees. All of these estimates include your premium cost, your savings from tax preferences, and your likelihood of a range of expenses up to and including a catastrophically expensive illness.

Perhaps you are a retired couple with Medicare parts A and B. The great majority of such retirees select the Blue Cross Standard Option. But we rate the APWU Consumer-Driven plan, Blue Cross Basic, GEHA Standard Option, and Kaiser Standard Option plan as likely to save you about $2,000. The new Aetna Direct plan can save you about $4,000. Why? Most of these plans, like Blue Cross Standard Option, allow you to pay nothing for hospital and physician charges when you have Medicare parts A and B. In some of them their prescription drug coverage is not quite as good, but their premiums are far lower. So you start the year with major savings in hand. The Consumer-Driven plans have “Personal Care Accounts” that you can spend on dental costs and drugs that Medicare doesn’t cover. In the Consumer-Driven plans, and most High Deductible plans, you have the potential for even larger savings in future years if you build up your account. And the Aetna Direct plan also lets you use your account to pay for the Part B premium. These comparisons show that even the most popular plans may not be the best buys.

Using the Guide

We prepared the Guide because we know that choosing the right plan can be difficult, even if you have time to read hundreds of pages in plan brochures. The coverage details are hard to understand, and trying to compare multiple benefit details simultaneously is very difficult. As a result, it is often hard to determine which plan is best for you. Many employees depend on advice from their friends, or stick with a “name brand” or the plan sponsored by their own union. However, that choice can waste hundreds or thousands of dollars.

The Office of Personnel Management (OPM), which administers the program, sets standards for plan benefits and for information in plan brochures. OPM also publishes an annual Guide to Federal Benefits. This book covers not only health plans, but also other fringe benefits such as life insurance and long term care insurance. It compares health plans for selected coverage and copayment features and presents quality ratings, but does not estimate the overall cost or insurance value of plans.

The complexity of comparing plans is substantial. We have studied and restudied each plan and have checked many details with plan officials. But we have undoubtedly missed a few limitations or special coverages. So, before making a final choice, you should compare the brochures of several plans.

We structure the Guide‘s advice and information as follows:

  • You are reading the “Introduction, Basics, and Changes for 2016.”
  • “Comparing Plan Costs” explains how and why some choices can save so much money.
  • “Cost Comparisons and Advice” for Employees and Former Employees explains and provides our cost ratings for each plan, organized separately by eligibility group.
  • “Cost Comparisons and Advice” for Annuitants provides cost ratings that take into account higher costs for the elderly, and the effects of enrolling in Medicare Part A or Parts A and B.
  • “Cost Sharing” provides basic information on plan benefits for hospital, medical, and prescription drug expenses.
  • “Coverage Features” addresses features such as skilled nursing and mental health coverage.
  • “Dental, Vision, and Hearing” compares standalone plans with each other and with the dental, vision, and hearing aid coverage in the health insurance plans.
  • “Plan Types and Flexibility” explains the various types of plans and how they affect your ability to use the provider of your choice and to achieve additional savings.
  • “Quality and Service” describes several measures of quality of plan service, and presents quality ratings for all plans.
  • “Premiums and Taxes” explains how premiums and out of pocket spending can be tax advantaged and how much employees can save.
  • “Key Tips and Final Plan Selection” reminds you of factors vital to you and gives advice on making a final decision among plans.
  • “Our Methods and Data Sources” explains the information we use to create our ratings.

We rate health plans by their likely cost to you, taking into account your pay system, employment or retirement status, family size, age, health status, location, and other factors. For example, we present information on premium cost to employees using the “premium conversion” tax-advantaged basis available to employees, but not retirees. Online Guide users reach the table applicable to them by answering questions regarding family size, age, retirement status, health status, zip code, pay system, and several other factors. They see a summary ratings table for their area and then have the option to choose whether to look at tables providing detailed cost comparisons, cost sharing, coverage features, plan flexibility, or plan quality for plans in their area. Readers of the print Guide turn to applicable cost comparison and other tables within each of the book chapters. Information on the cost, coverage, and features for local plans in all States is available online simply by entering your zip code, and in the print Guide provided in summary in a table at the end of the “Key Tips and Final Plan Selection” chapter.

The information contained in our print and online versions is almost identical. Both versions allow users to compare plans based on their pay system, age, family size, and health status. Many people prefer to use paper copies. However, the online Guide makes the customization, selection, and presentation of comparative information exceptionally fast and convenient, and you can print out plan comparisons customized to your needs. In the Washington, D.C. area, you can use the online version to see which plan networks include your doctors. Not everyone uses the Internet, so we publish both versions and let individual purchasers decide which they want. In addition, many Federal Departments and agencies purchase special access to the online version for all their employees.

General FEHBP Procedures

The Federal Employees Health Benefits Program (FEHBP) is an unconventional government program. Instead of giving you one “take it or leave it” choice, the government authorizes plans to compete for your premium dollar. It pays most of the premium cost—up to 75 percent for annuitants and most employees, and even more for Postal employees and employees of some other agencies, such as the FDIC and SEC. Taking into account tax advantages, the government pays between 80 and 90 percent of premium costs for most plans for employees (but not retirees). Nationally, about 250 plan options are offered, with most employees and retirees eligible to join 20 or more. You decide which plan you want to join. If you are not satisfied, you can switch in the next Open Season.

The FEHBP enrolls about 8 million persons. Enrollees spend about $50 billion a year through their health plans. About five percent of enrollees switch among plans in Open Season, based on past trends. Until the Medicare Advantage program, which was modeled on the FEHBP, it was the largest “managed competition” system for harnessing consumer choices to contain health insurance costs. Studies have shown that it outperforms both Original Medicare and private employer plans in coverage, cost control, and consumer satisfaction.

OPM sets minimum financial, administrative, and benefit terms and conditions for every plan participating in the program. Insurance companies and OPM agree each year on contracts setting forth both benefits and costs. A few key points about the FEHBP are:

  • All employees and annuitants can enroll in whatever plan they choose, or not enroll at all.
  • Everyone can change plans once per year in Open Season. You also may switch plans or options in circumstances such as marriage, birth of a child, or geographic transfer. If you belong to an HMO and move out of its service area, you may enroll in a new plan.
  • A family or self plus one enrollment covers only immediate family members: your spouse and children. Coverage for children now lasts until they reach age 26, unless they are severely handicapped. In that case they may be eligible at any age.
  • Plans cannot exclude coverage for any preexisting conditions or illnesses your family may have when you switch plans. You may switch to gain the best coverage for your condition, and use the new plan without penalty.
  • Plans must publish brochures in a common format that provides a clear explanation of their benefits and your cost for covered services, how you access plan services, how you get approvals, and your rights in disputes.
  • Each plan must pay for the medical and related costs as explained in its brochure—no more and no less. If a brochure says that a particular category of service is limited or excluded, believe it.
  • Plan brochures may word the same benefits differently. Sometimes the wording used is not clear to a layperson. However, you can often figure out what specific benefit language really means by comparing two or three brochures to see how they differ.

Getting Information

OPM’s annual Guide to Federal Benefits includes plan comparison charts that summarize coverages, provide employee survey results, and give plan phone numbers and premiums. It is available in most personnel offices and on the OPM Web site, and can be accessed and printed at most libraries if you do not have other Internet access.

Most personnel offices have at least one brochure for each plan that is available in their area. Three additional ways to get brochures are to attend health fairs, to call the plan(s), or to use the Internet.

OPM has a Web site with plan brochures and a great deal of other useful information at www.opm.gov/insure. You can access this site at most libraries if you do not use the Internet in your home or office. Unlike many government Web sites, OPM’s are user friendly and easy to navigate.

You change plans by filling out OPM’s form SF 2809 or an online equivalent. Personnel offices have copies and will give you form SF 2809 if you decide to change your enrollment. In many agencies, an online service such as “Employee Express” can be used to change plans. Annuitants are mailed only abbreviated information and should use the Internet to get more details. A special OPM procedure provides an easy way for annuitants to order paper copies of plan brochures.

Contacting National and DC Area Plans
Plan code(s) Plan name Plan telephone Web site# Enrollment limitations
22, F5, JN, N6 Aetna 888-238-6240 aetnafeds.com None
JN Aetna Open Access 800-537-9384 aetnafeds.com Limited areas
47 APWU 800-222-2798 apwuhp.com Pay dues
10, 11 Blue Cross Phone book* fepblue.org None
2G, B6 CareFirst 888-789-9069 carefirst.com/fedhmo None
42 Compass Rose 888-438-9135 compassrosebenefits.com Intel/Foreign Aff/DOD
40 Foreign Service 202-833-4910 afspa.org/fsbp Foreign affairs/DOD
31, 34 GEHA 800-821-6136 geha.com None
LQ Innovation 800-245-7919 ihfederal.com VA suburbs
E3 Kaiser Mid-Atlantic 877-574-3337 kp.org/feds None
JP M.D. IPA 877-835-9861 uhcfeds.com None
41, 45 MHBP 800-410-7778 mhbp.com Pay dues
48 MHBP HDHP 800-694-9901 mhbp.com Pay dues
32,KM NALC 888-636-6252 nalchbp.org Pay dues
38 Rural Carrier 800-638-8432 nrlca.org Rural carrier
44 SAMBA 800-638-6589 sambaplans.com None
L9,LR UnitedHealthcare 877-835-9861 uhcfeds.com None
* The DC area number for Blue Cross is 202-484-1650

If you have a problem getting information from these normal channels, you can call OPM for help. There is an automated phone system, called “Open Season Express” at 800-332-9798 to help annuitants get brochures, change plans, or get other help. In addition, the retirement information office number is 1-888-767-6738 (use 202-606-0500 from the DC area). This office can answer many questions, and help you with enrolling in a Medicare-participating HMO. For persons who are deaf, 1-800-878-5707 is the TDD line.

Of course, CHECKBOOK provides information on contacting each plan directly, including its telephone number and Web address, along with information on enrollment limitations. On our Web site at www.guidetohealthplans.org you can download plan brochures and access the provider list and drug formulary for each plan. On our Web site you can also purchase online access to the Guide, and obtain other consumer information, including national ratings of hospitals and doctors in Consumers’ Guide to Hospitals and Consumers’ Guide to Top Doctors, as well as online articles rating physicians, dentists, and other health care providers for quality and price.

Enrollment Limitations

Many plans are open to all employees. However, HMOs require that you live in a particular area, and a few plans require that you work for a particular agency or join a specific union. Most of the union plans allow any Federal employee to join. This generally means that you can enroll in the plan no matter what agency you work for, but you may have to pay annual dues and become an “associate” member of the union. These dues are modest, and our cost tables include them. Some plans are restricted to particular agencies or categories of employees. For example, the Foreign Service and Compass Rose plans enroll employees who serve in foreign affairs, defense, or intelligence functions (both plans interpret these limitations broadly, but they differ in details as explained in their brochures).

Use and Trust Plan Brochures

Plan brochures are both necessary and sufficient to determine what benefits each plan covers, or does not cover. In some cases a plan does not mention a service at all in its brochure, but has assured us that its claims manual (which is not available to employees) says the service is covered. You cannot fully rely on this, however, since OPM has stated that the brochure “is the only official description of the benefits provided by each plan. Do not rely on statements not contained in the brochure. Study the brochures carefully.” We agree, and endorse OPM efforts to assure that brochures are consistently and clearly written. Indeed, compared to most public and private insurance, the FEHBP brochures are models of clarity. They are particularly well designed to facilitate comparisons among plans by consumers.

Unfortunately, health plan brochures have mushroomed in length. In 1990 the average national plan had a brochure 29 pages in length; by ten years later the average grew to 77 pages. For local plans, brochures grew over the same period from 16 to 65 pages, on average. Some of the increase represents increased clarity through “plain English,” some is due to increased complexity in plan benefits, and some is due to unnecessary detail. Nonetheless, downloading brochures as PDF files either from our Web site or from OPM’s is easily accomplished, and vital to final plan selection.

Why Premiums Differ

The General Schedule (GS) employee and retiree share of the annual premium varies widely among plans. In national plans it ranges from about $1,300 to over $3,000 for individuals, and from about $3,000 to over $9,000 for self plus one or larger families. What explains these vast premium differences?

First, plans vary in the kinds of enrollees they attract. Some plans attract families who expect higher expenses. Some have a disproportionate share of high-cost annuitants who joined when premiums were lower and do not realize that their plan is no longer a good buy. Unfortunately, Federal agencies all too often neglect to encourage sensible Open Season choices, and employees and retirees are all too often dilatory about looking for savings. Despite repeated urging over the years, the Congress has failed to address this problem, which could easily be accomplished by a technique called “risk adjustment” and long used by Medicare. Plans that face higher costs have to cover those costs through higher premiums. Premiums in such plans far exceed the fair value of their benefits.

Second, plans differ in the generosity of benefits they offer. Variations include coverage of different expenses; coinsurance, the percentage of each expense you pay; and deductibles, the amount you have to pay before the plan will reimburse any expenses for a service. Plans with higher cost sharing can charge lower premiums. This is one reason the new Consumer-driven plans have such low premiums.

comparison chart

Third, plans vary in how well they manage costs. A well-run HMO can reduce hospital costs by 25 percent or more compared to traditional insurance through case management. Fee-for-service plans review utilization and use panels of preferred providers. “Disease management” techniques are powerful tools to contain costs.

Fourth, cost sharing creates incentives for doctors and patients to be less wasteful. High deductibles discourage unnecessary visits, while 100 percent reimbursement of psychiatric or laboratory and imaging costs encourages overuse of these “free” services. High Deductible and Consumer-Driven plans’ premiums benefit somewhat from slightly younger and healthier enrollees, but mainly from their incentives to reduce unnecessary care. Also, the time and trouble to file claims for expenses slightly above the deductible discourages some enrollees from applying for them.

Fifth, variations in the proportion of enrollees with Medicare Parts A and B has a big effect on plan premiums, since Medicare is “primary” (pays first) for retirees, and covers over four-fifths of hospital and doctor costs. Most HMO benefits are so good that retired enrollees often do not sign up for Part B, which puts these plans at a major disadvantage in keeping premiums low.

Sixth, the formula for sharing premium costs magnifies the differences in what you pay. For GS employees and annuitants, the government pays 75 percent of the overall cost of each plan, up to a maximum amount. This varies each year according to a complex formula. The maximum contribution in 2016 for GS employees and annuitants is about $5,550 for singles, $12,000 for self plus one, and $12,700 for families. There are separate formulas for Category 1 postal employees, and for employees of the SEC, FDIC, and several other agencies, with higher government shares. A few types of enrollees, such as former employees, get no government contribution and must pay the full premium.

Employees pay the entire premium amount above the government’s share. This employee share is far higher for the more expensive plans because the government contribution is capped by an all-plan average. For example, the total premium cost of the GEHA High option for self-only is about $8,150. The government pays the maximum contribution of about $5,550 for GS employees and you pay the extra $2,600. In contrast, under the GEHA Standard option and some other plans, you pay about $1,350 after the government contribution, a premium saving of almost half.

In summary, you pay modestly for insurance from a well-run plan, but you pay more for a plan’s inefficiencies, its unusually generous benefits, or its disproportionate share of high-cost enrollees. Your ability to switch among plans during Open Season gives you a major tool for obtaining the best deal.

The chart “Comparison of Total Cost, Enrollee Cost, and Government Share” shows how the employee’s premium, the total premium (employee and government share), and the employee’s out-of-pocket costs compare for a family of four under several family plans. All these factors contribute to premium differences, and explain why some plans are such bargains. Of course, some of the differences are offset by what you may have to spend out-of-pocket if you pick a plan with less comprehensive benefits. That is why our ratings tables include both the cost of insurance and the cost of medical bills that are not covered. It would be foolish to select a plan just because it has the lowest premium. It would be equally foolish to pick a plan just because it seems to have the best benefits if you wind up paying more in premiums than those extra benefits are worth to you.

For 2016, many plans’ premiums are about the same as this year and a few are lower, but premiums in several plans have risen dramatically. Many plans have changed benefits. As is true every year, opportunities for big savings by switching plans are significant.

Changes for 2016

In recent years, there have been significant program-wide changes to the FEHBP. For example, under Affordable Care Act (ACA) rules have had to expand coverage and eliminate all cost sharing for preventive benefits. The effect on plan premiums has been small, because coverage was already so good in the program.

The ACA change that has been by far the most important to Federal employees is the new coverage of adult children until age 26. One effect of this change has been to raise slightly the cost of FEHBP premiums, probably by about one percentage point. Importantly, adult children enrolled in their parents’ FEHBP plans will also benefit from future eligibility for temporary continuation of coverage for three years after they turn age 26. Of course, this only benefits a small fraction of Federal employee and retiree families, and then only if they pay for a self plus one or self plus family plan option. For single parents, it will in most cases be far less expensive for the adult child to enroll in his or her own employer’s plan, if available, or in a private marketplace exchange plan.

Also, both private and public employees are subject to a legal obligation to enroll in health plans. At present, a substantial number of Federal employees, possibly several hundred thousand, are uninsured. Interestingly, they are probably disproportionately younger and healthier, and over time their participation in the FEHBP would tend to lower premiums. Penalties for failure to enroll grow sharply in 2016.

Under another recent change, a very small group of employees—members of Congress and their personal staffs—were forced by a provision of the ACA to join marketplace exchange plans for coverage. An OPM regulation requires them to enroll in Gold plans on the DC exchange (many of these have national networks), and allows them to be reimbursed “as if” these were FEHBP plans.

Starting with the 2016 plan year, a recent amendment to the FEHBP statute requires each plan to offer separate premiums to families with only two members (“self plus one”) and to families with two or more members (“self plus family”). Couples with no dependents and single parents with one dependent can enroll in either variation, depending on which premium is less costly. Plan benefits are usually identical under both. The fall 2015 Open Season offers eligible families the first opportunity to switch from self plus family to self plus one. In addition, OPM has scheduled a limited enrollment period during February of 2016 for those employees who fail to utilize their Open Season election to make the switch. But unlike the regular Open Season, employees will not be allowed to change plans.

Most self plus one premiums are lower than family premiums, primarily because fewer persons incur fewer expenses. The differences are small (and in some cases self plus one costs more) because “empty nesters” are typically much older and average health care costs rise rapidly with age. The proportion of annuitants in each plan, and the proportion of these with Medicare Parts A and B, also influence resulting premiums. In 2016, the yearly premiums for those who enroll in self plus one will be on average about $200 a year less than for those enrolled in family plans, but the variations are wide.

The savings under self plus one are relatively small compared to the multi-thousand dollar savings that can be achieved by switching to lower cost plans. The two sets of savings in combination, however, offer spectacular savings possibilities for the majority of federal employees and annuitants.

There is one other major 2016 change, for some annuitants. Because there has been virtually no inflation during 2015, this year there will be no Social Security cost-of-living adjustment. Under a “hold harmless” provision of law, Part B premiums for most of those already drawing Social Security payments and having Part B premiums deducted from those payments before the end of 2015 will pay the same premium in 2016 as in 2015. But health care costs continued to rise in 2015, and the law requires that Part B premiums be raised for all other enrollees sufficiently to maintain solvency in the Part B trust fund. Accordingly, those not already paying the Part B premium through a Social Security benefit, and those who are newly enrolling in Social Security, will face a premium increase, as will all those paying “income-tested” Part B premiums, regardless of how they make Part B payments. We discuss strategies for reducing that impact in our discussion of “Cost Comparisons and Advice for Annuitants.” The Congress and the President have informally agreed on a reform that would lessen (but not eliminate) the premium increase from earlier projections, but as the print version of the Guide goes to press the law has not been enacted. We have nonetheless used the agreed reform as the basis for pertinent cost comparisons, and the online Guide will reflect final action if it is different.

Finally, OPM has asked plans to adopt cost-saving coordination with Medicare, a reform that saves money for the program because Medicare usually pays first, which reduces FEHBP premiums, and also offers savings for annuitants because their out-of-pocket costs are reduced. Most national plans already have such “wrap around” benefits. For 2016, dozens of local plans are adding them. Most annuitants now can enroll in a wide range of all plan types—PPO, HDHP, CDHP, and HMO—that provide these savings.

An excise tax of 40% on health plan premiums in “high cost” plans above a certain amount (not on the entire cost of the plan) is scheduled to take effect in 2018. This is also known as the “Cadillac plan” tax. The amount of premium excluded from the tax will not grow as fast as health care costs, so this will create major incentives for plans to take cost reducing steps in the future to avoid the excise tax.

Longer-term effects of these and other changes are impossible to predict with precision, and by definition do not affect individual enrollee decisions for the coming year, since premiums and benefit levels are already set. For now the effects of health reform are minor and for most Federal employees and retirees, with only minimal effects on plan costs or benefits. Our advice is to focus on making wise Open Season choices this fall, and to put aside concerns over future changes.

Special February Enrollment Period for Self-Plus-One

From February 1 to February 29, 2016, there is a special limited enrollment period for self-plus-one changes. Employee families with two members who did not change from Family enrollment to self-plus-one enrollment during Open Season will be able to make that change in February. Annuitants can make this change not only in February but also at any other time during the year. You may not, however, change plans-you can only change from a family enrollment to a self-plus-one enrollment in the same plan. In more than ninety percent of plans families can save money by making this change. But there are some exceptions. If you are in one of the plans in the table below, you should not make this change.

Be careful! If you are in one of these plans do not switch to self-plus-one:
Plan code self-plus-one Plan code family Plan Name Self-Plus-One Annual Premium ($) Family Annual Premium ($) Extra Cost of Self plus One ($)
456 455 MHBP-Std 4,600 4,230 -370
323 322 NALC-Hi 4,220 4,130 -90
403 402 Foreign Service 4,110 4,060 -40
DC Metro Area
F53 F52 Aetna HealthFund CDHP 5,560 5,020 -540
JN3 JN2 Aetna Open Access-Hi 13,640 13,180 -460
E33 E32 Kaiser-Hi 4,790 4,670 -120
Most States
JS3 JS2 Aetna HealthFund CDHP various various -500
JS6 JS5 Aetna Value Plan 5,720 5,180 -400
Arizona
WQ3 WQ2 Aetna Open Access 13,370 12,900 -460
A73 A72 Health Net-Hi 11,910 11,200 -710
A76 A75 Health Net-Std 8,790 8,080 -710
California
2X3 2X2 Aetna Open Access 5,280 4,920 -370
SI3 SI2 Blue Shield Access 6,970 6,680 -280
KC3 KC2 Kaiser-Basic 5,130 4,420 -710
593 592 Kaiser-Hi 11,430 10,710 -710
NZ3 NZ2 Kaiser-Hi 4,800 4,200 -610
623 622 Kaiser-Hi 4,590 4,140 -450
596 595 Kaiser-Std 7,200 6,480 -710
Colorado
653 652 Kaiser-Hi (student POS) 6,710 6,000 -710
Delaware
P36 P35 Aetna Open Access Basic 18,390 17,980 -410
P33 P32 Aetna Open Access-Hi 27,410 27,090 -320
Georgia
2U3 2U2 Aetna Open Access 17,980 17,570 -410
F83 F82 Kaiser-Hi (student POS) 4,590 4,360 -230
Idaho/Utah/Wyoming
SF3 SF2 SelectHealth-Hi 6,420 5,710 -710
9K3 9K2 Aetna Health/Altius-Hi 5,930 5,400 -540
Kansas/Missouri
HA6 HA5 Aetna Open Access-Std 5,110 4,560 -540
HA3 HA2 Aetna Open Access-Hi 5,600 5,060 -540
Michigan
523 522 Health Alliance HMO-Hi 7,270 6,970 -300
GY6 GY5 Health Alliance HMO-Std 4,130 4,120 -10
Mississippi/Tennessee
UB3 UB2 Aetna Open Access 13,310 12,850 -460
New Jersey
JR6 JR5 Aetna Open Access Basic 17,970 17,550 -410
JR3 JR2 Aetna Open Access-Hi 25,660 25,330 -340
New York
JC6 JC5 Aetna Open Access Basic 9,760 9,260 -500
JC3 JC2 Aetna Open Access-Hi 18,560 18,150 -410
Oregon
573 572 Kaiser-Hi (student POS) 5,570 4,850 -710
Pennsylvania
YE3 YE2 Aetna Open Access 9,190 8,690 -500
GG6 GG5 Geisinger-Std 5,910 5,190 -710
Texas
ES3 ES2 Aetna Whole Health 5,390 4,840 -540
P23 P22 Presbyterian-Hi 6,530 6,470 -60
Virginia
J93 J92 Aetna Whole Health 5,340 4,800 -540
D93 D92 Aetna Whole Health 5,510 4,970 -540
Washington
C33 C32 Aetna Open Access 9,540 9,050 -500
Chapter Divider 2

Chapter 2
Comparing Plan Costs

We rate and compare health plans based on their likely cost to you, taking into account your pay system, employment or retirement status, family size, age, health status, location, and other factors. A key element of our ratings are estimates of likely out-of-pocket costs under each plan, based on actuarial estimates of the size and likelihood of low, average, and high spending for families of different sizes and ages. Our ratings also reflect varying premium levels and tax situations faced by different eligibility groups. Full time employees pay lower premiums than annuitants because of tax advantages, and far lower premiums than those who must pay the entire premium. Postal union members and Federal Deposit Insurance Corporation (FDIC) and Securities and Exchange Commission (SEC) employees pay less because the government pays a higher share than for GS employees and annuitants. Neither annuitants nor those who pay full premiums obtain “Premium Conversion” tax advantages. These premium cost differences can reach thousands of dollars a year. We provide separate ratings for each group.

Online Guide users see a summary cost comparison table for their group, and then have the option to look at tables providing more detailed cost comparisons. Readers of the printed Guide see both summary and detailed cost comparison information for their group in one set of tables for all national plans and local plans available in the DC area, and summary cost comparison information on all local plans in a table covering “Cost, Quality, and Special Features of All Plans” in all states at the end of Guide.

Our comparisons take into account not only premiums and potential health care costs, but also plan financial features such as Health Savings Accounts and Wellness benefits that involve cash rewards. We also include dental benefits built into some health plans and, in our separate Chapter on “Dental, Vision, and Hearing,” the costs and benefits of standalone dental plans. For annuitants, our estimates and comparisons also take into account both Medicare benefits and Medicare premiums, depending on choices about Medicare enrollment. Online, we also allow for comparisons for those using Flexible Spending Accounts (FSAs). In summary, we provide a comprehensive set of financial comparisons that allow users to make “apple to apple” comparisons of costs for both premiums and likely health care expenses under each plan and across all plans.

Understanding Health Insurance

Individuals and families buy automobile, life, fire, and health insurance policies to protect themselves from catastrophic financial harm from rare events. No one buys “food insurance” because food costs, though large, are unavoidable and predictable. Why pay a middleman overhead costs to reimburse us for our grocery bills? Nor do we buy rent insurance, or clothes insurance.

We buy life insurance during our working years, because death is very unlikely but financially ruinous to our families if it occurs. For a few hundred dollars a year we can buy support for our families worth hundreds of thousands of dollars if we die. We buy automobile liability insurance because we can protect ourselves from losing huge amounts if we cause an accident.

True health insurance protects our families from ruinous costs of illness. Like most employers, the Federal Government does not offer employees this kind of insurance alone. Instead, it offers various combinations of true insurance and “prepaid” health care. The part of your premium that prepays health care by making advance payment for routine bills will generally equal about what you would have spent by paying the bills directly. However, you wind up paying far less than this because prepaid health care isn’t counted as taxable income. Most Federal employees save about one-third of their health care costs because of this exclusion, as explained in our chapter on “Premiums and Taxes.”

Unfortunately, prepaid health care creates incentives for enrollees to waste money because the insurance company pays the bill. Prepaid health care may be the single largest cause of wasteful health care spending which, according to some estimates, may be as high as one third of all health care expenditures. There are two major ways to reduce waste. First, health maintenance organizations (HMOs) and other managed care arrangements such as preferred provider organizations (PPOs) use payment incentives for doctors and hospitals to contain costs. Second, high deductible (HDHP) and consumer-driven plans with savings accounts create incentives for enrollees to save costs through prudent shopping decisions. We analyze the advantages and disadvantages of these plans in our analysis of “Plan Types and Flexibility.”

How much and what kind of coverage is true insurance? How much is prepaid health care? These questions have no simple answer. A policy protecting against catastrophic medical expense for one family is simply a prepaid health care policy for another family. To a GS-5 with three dependents, $5,000 is a hardship, and $20,000 a heavy burden. To a GS-15 with no dependents, even $20,000 may not be a hardship.

Risk, Premium, and Choice

Since you do not know in advance how high your medical bills will be, there is no way to know which plan will leave you with the lowest total costs. You have to gamble just as you do with any insurance, or indeed with many other choices you make. On sunny mornings you probably won’t take an umbrella to work, and sometimes you get wet. In a good year the best policy, in hindsight, would have been no policy, and your total costs would have been zero. In an expensive year, the best policy would have been one that covered every dollar. But we usually don’t know whether we’ll have a good year or a bad year, which is precisely why we buy insurance. No one but you can decide how much risk you want to bear. Our cost comparisons give you a menu of risk as well as plan choices. They help you think about the level of risk each plan involves, and how much that will cost or save you.

Do not pick a plan either because it has the lowest premium (a seeming best buy) or the highest premium (a seeming set of terrific benefits). As our ratings show, a low premium may hide major coverage gaps, and a high premium may simply reflect expensive enrollees rather than the best benefits. Only some plans have both low premiums and excellent coverage. Pick one of these based on our ratings, which combine both premium and coverage in determining the best buys.

Also, do not pick a plan because it has a lower deductible despite a higher coinsurance amount, or vice versa, and do not try to compare these benefits directly. We use computer programs to perform these calculations, and there are many complexities. For example, whether a plan with a low deductible and a high coinsurance rate is better for you than a plan with the opposites depends on the amount of your expenses, which may not be what you expect. A large body of research shows that very few people are able to juggles cost-sharing variables to pick plans that are the best buys.

Our Ratings

Our cost comparisons cover medical, hospital, dental, and prescription drug costs. They show how you are likely to fare under every national and local plan available to Federal employees. We show how each plan handles various levels of financial risk for you.

Plans are of three main types—combined Preferred Provider Organization (PPO) and Fee-for-Service (FFS) plans, High Deductible (HDHP) and Consumer-Driven (CDHP) plans, and Health Maintenance Organization (HMO) plans, some of which have Point-of-Service (POS) benefits outside the plan network. Most of these options are available in both national and local area plans. Historically, PPO-FFS and HMO plans are distinct approaches. The decision as to which type to join involves service delivery as well as financial factors. The preferred provider or PPO approach now central to most Fee-for-Service plans goes part way toward the HMO model by reducing your cost if you restrict yourself to a network of providers. One national plan, the Blue Cross Basic option, is like most PPOs and HMOs in providing no coverage if you use out-of-network providers. The HDHP plans follow the PPO and FFS model of the national plans, even when they are local. Thus, the differences among plan types are blurring.

Our cost ratings tell you how much you are likely to pay for premiums and out-of-pocket (unreimbursed) medical expenses added together. The tables assume that your bills may be for almost any type or size of expense, including:

  • Hospital room and board for surgical or medical care for any illness;
  • Other types of hospital services (operating room, anesthesia);
  • Surgery, in or out of a hospital;
  • Diagnostic tests, X-rays, and lab tests in or out of a hospital;
  • Doctor visits in or out of a hospital when you are ill;
  • Mental health treatment, outpatient and inpatient;
  • Mammograms, Pap smears, and routine immunizations;
  • Maternity, even if you are in a self-only plan;
  • Emergency care in or out of a hospital;
  • Prescription drugs, including insulin and syringes for diabetics;
  • Nursing care after an illness;
  • Chemotherapy and radiation therapy;
  • Physical and rehabilitation therapy;
  • Cosmetic (“plastic”) surgery or oral surgery—only after an accident;
  • Dental care;
  • Preventive care including physical examinations and vaccines; and
  • All of these expenses are covered even if you have a preexisting condition or are hospitalized on the date when your enrollment begins.

With rare exceptions, no plan will pay for any of the following expenses and we do not cover them in our comparisons (however, some of these expenses are covered by Flexible Spending Accounts and Health Savings Accounts):

  • Cosmetic or plastic surgery, except after accidents or a disfiguring illness;
  • Custodial nursing home care, or any kind of rest care;
  • Personal comfort items such as telephone or television while in the hospital;
  • Non-prescription, over the counter drugs, such as aspirin;
  • Care that is fully paid by another insurance provider;
  • Care that is not medically necessary;
  • Experimental care (clinical trials are partly excepted);
  • Charges that are higher than the plan “allowance” or what the plan has determined to be “reasonable;” and
  • Expenses incurred before joining or after leaving a plan.

All plans cover routine exams without deductibles or copayments. Only some plans cover dental care. And most plans expose you to significant out-of-pocket costs, such as not including all prescription drugs in their formularies. Even among plans that cover all services generously, however, there are always some limitations, such as coinsurance and deductibles. Our tables take the major benefit limitations such as these into account in estimating costs. However, we cannot deal with every single coverage nuance or difference (such as which organs are eligible for transplantation, which models of particular medical devices are covered, or which specific medicines are covered). Nor can we assure that all plans will make identical medical necessity decisions in close cases—and they won’t. Nor can we reflect extra benefits the plan may provide if, for example, it can save money by giving you more home nursing than its normal limitation on this benefit.

Hence, all of our calculations should be considered approximations that will be broadly accurate in the great majority of situations but that cannot provide precise predictions that cover every possible situation. What our calculations can do, and you cannot do for yourself even if you try to predict your costs, is take into account the risks of ruinously high health care costs from an unexpected illness or accident.

Using the Cost Comparison Tables

There are many separate sets of comparisons, one for each major group facing different premiums, coverage, or likely medical costs. We generally provide comparisons for self-only, self plus one, and families of sizes two through five. However, we limit certain tables to conserve space and because some situations are very uncommon: for older employees, annuitants, part-time employees, and several small enrollment groups we present only self-only, self plus one, and families of two or three rather than larger family sizes. In all family comparisons the rankings would not change substantially with an additional child. Comparisons for employees and annuitants include:

  • Employees who pay GS premiums (e.g., General Schedule, special rate, Congressional, and Foreign Service employees).
  • Employees who pay lower premiums, including postal and FDIC employees. We present rates for postal Category 1 employees (mainly bargaining unit union members) in our print Guide and online, and Category 2 online (Category 2 premiums are now the same as for GS employees).
  • Older employees, whose costs are much higher on average.
  • For part-time employees, we cover half-time workers and employees who work four days out of five. In almost all agencies, these employees pay part of the “employer share” as well as the regular employee share.
  • Former spouses, children turning age 22 who are not covered by a parental FEHBP plan, and other persons who pay full premiums (both employer and employee share). These persons are not eligible for tax sheltering, and we do not reduce premiums from the nominal rate.
  • Annuitants without Medicare. Again, there are no tax savings in premium rates.
  • Annuitants with Medicare Parts A and B. These tables include not only the FEHBP premium, but also the Part B Medicare premium. No tax savings are available. We cover situations where enrollees pay more, often far more, than the regular Part B premium.
  • Finally, we present tables for annuitants who have only Part A of Medicare, the hospital benefit. You can compare these with the preceding ratings to see how much you gain, or in most cases lose, by paying the Part B premium. Of course, there are no tax savings.

There are many comparisons, but only one cost comparison table applies to your current situation. Of course, your situation may change if your family changes, if you retire, and if you change your Medicare decisions—and you can compare tables to see those differences. Each cost comparison table presents several columns of cost data. Each column except the one for published premium assumes a different level and mix of medical bills, described in the heading. These columns show what your likely costs will be under each plan, including both premium costs and out-of-pocket costs not paid by the plan.

By looking at the different columns in a table, you can find how you will come out under each plan. The columns display:

  • The “Published premium” (including when applicable the Medicare Part B premium) that you will pay biweekly or monthly, expressed as an annual cost;
  • The actual premium you will pay when you incur “No costs” for health care. This takes into account savings from premium conversion for employees, offsetting savings from money the plan puts in your Health Savings Account or Health Reimbursement Arrangement, and any dues;
  • Your premium and out of pocket costs at “Low costs” usage with bills of about $1,000 (self-only) or $3,000 (families);
  • Costs for “Average” usage with medical and dental bills averaged over a wide range of expense taking into account the statistical likelihood of costs at each level;
  • Costs for “High” usage with bills of about $30,000; and
  • The yearly “Limit to you” showing the maximum you will ever be expected to pay for medical (but not dental) bills, also reflecting both premium and out of pocket costs.

We present two different premium columns to reduce confusion over two issues. First, many employees do not understand Premium Conversion. For almost all employees, this tax preference creates about a one-third saving in premium cost. Your average tax rate is much lower, but for those “marginal” income dollars most employees pay about 33 percent, including Federal income tax, State income tax, and Social Security and Medicare taxes. Annuitants are not eligible for Premium Conversion.

Second, many persons find High Deductible plans hard to understand. We believe that the best way to analyze them is to consider the Health Savings Account (HSA) as the equivalent of a reduction in premium. If you don’t spend that account at the end of the year you will have a bank balance in that amount. It is therefore possible for you to have “free” health insurance in some High Deductible or Consumer-Driven plans. If your published premium is about $2,100 you actually pay only about $1,400 after Premium Conversion. However, the plan provides you with a savings account that is in your name. If that account is $1,500 you actually come out ahead if you have no medical expenses. In fact, since these plans all provide a free physical exam and routine vaccinations, you come out ahead this much even after your preventive care. The HSA is your money and can earn interest and grow like any other savings account (in this case, grow tax-free). You can save the HSA as an investment, or you can use it to pay your bills.

If you join a Consumer-Driven plan with a Health Reimbursement Arrangement (HRA), the account belongs to the plan, and must be spent rather than saved if you incur expense, but still has the effect of reducing your “up front and for sure” premium cost. In cases like these where you come out money ahead, we show this in our tables with a negative number in the “Net Premium” column. All HDHP and CDHP plans offer similar net savings, or greatly reduced premiums paid. Even retirees get an offset from HRA savings accounts if they join one of these plans.

extra cost chart

Therefore, the “No costs” column includes your yearly premium adjusted, as pertinent, for Premium Conversion, HSA or HRA account, and any membership dues. These will be your only out-of-pocket costs if you have no medical bills.

We also indicate the percentage chance that you and your family will have bills that are “Low” or “High”—for instance, how likely you are to have bills of about $3,000 or less, or $30,000 or more.

We rank the plans in order of average cost to emphasize the importance of each plan’s treatment of “average” expenses for a family of a particular size and type. Most families fall far below the average in most years, but very expensive cases pull the average up. Because almost all plans reimburse 80 percent or more of average or high expenses, the premium counts for most of this average cost, regardless of medical expenses. Very importantly, the “average” includes costs for the entirely unexpected medical problems that can affect any family, such as a heart attack, automobile accident, or onset of an expensive disease. Moreover, the “High costs” and “Limit to you” columns portray directly the insurance value of these plans. You should not select a plan based primarily on the relatively low costs that most of us can predict.

You begin by making profile choices to find the one table that relates to families of your age, premium category, and size. Assuming that you don’t know something to the contrary, you should expect average expenses in the coming year. The plans that are likely to cost families the least have the lowest dollar figures in this column. Our cost comparisons assume that you use preferred, network providers exclusively. You should select a plan primarily based on using network providers, and plan to use non-network providers only in rare instances. You can see the financial consequences of using non-network providers in the online Guide, and in our table on “Coverages and Copays.”

But do not choose the highest-ranked plan until you consider whether there is some reason the average column does not apply to you or your family.

First, consider your particular health situation. Medical problems are mostly a matter of good or bad luck. However, some people are much more likely than others to have high expenses. In these cases you should compare plans using the “High cost” or “Limit to you” column. A hip replacement is a large expense. A diabetic may have several expensive ailments. A history of cancer or heart disease worsens your odds. You can use the $30,000 (“High”) cost comparisons if you have information that suggests you are much likely to face much higher health expenses than others of your age and family size.

Second, consider your attitude about risk. If you are willing to spend a few hundred dollars extra to be sure you will not have heavy out-of-pocket expenses, you may want to pick one of the plans that is lowest cost for a person with high medical bills. However, all plans have such good coverage that you are well protected from most catastrophic expenses. Most have a dollar limit on the annual hospital, doctor, and prescription drug expenses you must pay—as noted under the heading “Limit to you.” Even where there is a gap, the effect of the generous benefit structure is to create a de facto limit.

In your cost table you will notice that differences among closely ranked plans are often very small. Differences of $100 or less are not important. A different mix of bills from those we use to compare plans could overcome these. Differences of several hundred dollars, however, reflect significant variations in how expensively the plans handle most cases.

Notice that most of the higher-ranked plans will save you money in every year—whether your expenses are high or low—compared to the plans ranked lower. You can also see that most but not all HMO, CDHP, and HDHP plans will save you hundreds of dollars compared to most national PPO plans.

Using Preferred Providers

We rate plan costs based on the assumption that you will always or almost always want to use preferred providers, also known as “staying in the network”. Your cost is always lower, usually far lower, when you do. However, all but one of the national PPO plans and all CDHP and HDHP plans allow you to obtain care out of network. This can sometimes be a valuable flexibility. But you face not only a higher copayment, but also an additional risk. The plans set limits on the fee they will recognize. For example, the plan may charge a flat amount of $20 to PPO users. For doctors outside the PPO, the plan may pay 70 percent of the cost up to $80 for a particular procedure, but if the physician charges $100 you will pay $30 plus the extra $20, or half the total bill compared to only $20 if you use the preferred provider. You can sometimes negotiate fees down, and we urge this strategy for non-preferred providers. This problem goes away if you have Medicare Parts A and B, since most of the national plans waive most doctor and hospital cost-sharing whether you obtain care in or out of the network. Even in HMOs that don’t waive these costs, you can use Medicare to go out of network. Therefore, for retirees who participate in Medicare Parts A and B preferred provider restrictions largely disappear when enrolled in any plan. You can go to any hospital and almost any doctor without penalty. Moreover, persons over age 65 who are in any plan are by law guaranteed a Medicare rate and can use all doctors who have not opted out of Medicare with substantial protection, even if cost sharing is not eliminated.

Catastrophic Coverage

How We Adjust Catastrophic
Limits to Make Them
Comparable Across Plans
Illustrative Plans Brand X HDHP Brand Y High Option Plan
Limit stated in plan’s
summary of benefits
$5,000 $3,000
Excluded amounts:
  Deductibles
None None
  Hospital copays* None $900
  Prescription copays* None $1,000
  Specialty drug limit None None
  Physician copays* None $1,500
Subtotal $5,000 $6,400
Premium $1,000 $1,600
Health Savings Acct. –$1,000 None
Total “limit to you” $5,000 $8,000
* We assume three hospital stays at $300, 50 prescriptions at
$20, and 50 physician visits at $30; typical values in many plans.

The most important reason for buying health insurance is to protect you against financial catastrophe. You may, therefore, wish to approach plan selection by comparing plans on the basis of potential financial risk, rather than average cost. To facilitate this, our cost comparisons include a “Limit to you” column. Our “Limit” calculation includes both the annual premium and the claimed guarantee provided by each plan for hospital, medical, and prescription drug expenses. We combine these two types of expenses because you are sure to incur premium costs and there is little point in picking a plan with $1,000 less in claimed limit if its premium is $2,000 higher. However, no plan includes dental expenses in its guarantee. The “Limits” column, therefore, cannot include these costs. Our figures use a 33 percent premium reduction for tax savings for employees under Premium Conversion (but not for retirees or those paying full premiums, who are ineligible). We also take account of the ability of enrollees in High Deductible plans to reduce costs by using their HSA or HRA accounts. We have not, however, included estimates for additional tax savings from funding high expenses through additional contributions to HSA accounts (see Cost and Taxes). Therefore, these are conservative estimates for High Deductible plans.

Because some plans present catastrophic limits in confusing ways, we attempt to make our limit calculations comparable among plans. For example, we take account of deductibles if these are not included in the claimed limit. A few plans put prescription drug payments under separate limits and we adjust for this difference. Plans calculate limits differently and the dollar numbers published in a plan’s “Summary of Benefits” do not reflect the loopholes and exclusions listed under “Your cost for covered services”). The adjustments we make are necessary to make comparisons that are not inaccurate “apples to oranges.” For plans that do not include certain hospital, doctor, or drug copayments in the limit we have assumed three hospital stays and 50 (single) or 100 (family) prescriptions or doctor visits, and presented the limit on this basis.

Although we included dental costs in most columns, we had to leave dental costs out of the “Limits” column because no plan includes dental costs in its guarantee. Most HMOs have a limit and cover nearly all hospital, medical, and prescription drug expenses. To compare HMOs, our estimates are based on the same number of hospital stays, doctor visits, and prescriptions as for national plans to make the figures comparable. However, the figures we present are not necessarily an actual guarantee by the plan.

The cost tables can be used to find those plans with the lowest limits. From this group, you can select plans with lower average costs. Or you might wish to select one of the plans with the best catastrophic coverage and accept somewhat higher out-of-pocket costs as the price of that guarantee.

If You Have Other Insurance

You cannot use our cost rankings directly if you have health insurance coverage from another source. The best FEHBP plan for you depends on the cost and benefit structure of the other plan, though your best choice will almost always be a low premium plan to minimize unnecessary premium payments. But do not assume that you should not enroll in the FEHBP just because you have other coverage.

If your spouse has a low-cost health plan through a private employer, or you have a health plan from prior employment, check to be sure that it covers you and your children, and has a benefit package as good as the Federal plans. Even if your spouse’s plan is every bit as good as any of the Federal plans, consider the cost of this coverage compared to some of the lower-premium Federal plans. Remember that you must be covered under the FEHBP continuously for the five years preceding retirement to be eligible for enrollment after retirement (there are some very rare exceptions, such as certain agency downsizing situations). You don’t have to be in the same plan in each year, but you must be covered continuously by some FEHBP plan or, in the special case of military dependents, TRICARE.

Most importantly, if you should die while you are not enrolled in the FEHBP in a family plan, your spouse will lose eligibility for the program. Since most employers do not continue coverage past retirement, or cannot be counted on to do so, your only guarantee that your spouse can keep this entitlement is to be continuously enrolled. There is an excellent strategy for doing so at minimum cost. All of the plans showing a very low or negative number in the “No Costs” column are Consumer-Driven or High Deductible plans that give you a savings account as large or larger than the premium. With double coverage you will probably not ever reach the high deductible and will realize this saving in most circumstances. In other words, these plans really are almost “free” if they supplement other coverage from your spouse.

Chapter Divider 3

Chapter 3
Cost Comparisons and Advice for Employees and Former Employees

As explained in Chapter 2 on “Comparing Plan Costs,” we rate and compare health plans based on their likely cost to you, taking into account your pay system, employment or retirement status, family size, age, health status, location, and other factors. A key element of our ratings are estimates of likely out-of-pocket costs under each plan, based on actuarial estimates of the size and likelihood of low, average, and high spending for families of different sizes and ages.

Online Guide users see a summary cost comparison table for their group, and then have the option to look at tables providing more detailed cost comparisons. Readers of the printed Guide see both summary and detailed cost comparison information for their group in one set of tables for all national plans and local plans available in the DC area, and summary cost comparison information on all local plans in a table covering “Cost, Quality, and Special Features of All Plans” in all states at the end of Guide.

All of these comparisons take into account not only premiums and potential health care costs, but also plan features such as Health Savings Accounts and Wellness benefits that involve cash rewards. We also include dental benefits built into some health plans and, both online and in our separate Chapter on “Dental, Vision, and Hearing,” compare the costs and benefits of standalone dental plans. Online, we also allow for comparisons for those using Flexible Spending Accounts (FSAs). In summary, we provide a comprehensive set of financial comparisons that allow users to make “apple to apple” comparisons of costs for both premiums and likely health care expenses under each plan and across all plans.

All of our calculations should be considered approximations that will be broadly accurate in the great majority of situations but that cannot provide precise predictions that cover every possible situation. What our calculations also do, therefore, is take into account the risks of ruinously high health care costs from an unexpected illness or accident, and compare the maximum out-of-pocket and premium costs under each plan.

Using the Cost Comparison Tables for Employees and Former
Employees

There are many separate sets of comparisons, one for each major group facing different premiums, coverage, or likely medical costs. We generally provide comparisons for self-only, self plus one, and families of sizes two through five. However, in the print version of the Guide we limit certain tables to conserve space and because some situations are very uncommon: for older employees, annuitants, part-time employees, and several small enrollment groups we present only self-only, self plus one, and families of two or three rather than larger family sizes. In all family comparisons the rankings would not change substantially with an additional child. Comparisons for employees include:

  • Employees who pay GS premiums (e.g., General Schedule, special rate, Congressional, and Foreign Service employees).
  • Employees who pay lower premiums, including postal and FDIC employees. We present rates for postal Category 1 employees (mainly bargaining unit union members) in our print Guide and online, and Category 2 online (Category 2 premiums are now the same as for GS employees).
  • Older employees, whose costs are much higher on average.
  • For part-time employees, we cover half-time workers and employees who work four days out of five. In almost all agencies, these employees pay part of the “employer share” as well as the regular employee share.
  • Former spouses, children turning age 22 who are not covered by a parental FEHBP plan, and other persons who pay full premiums (both employer and employee share). These persons are not eligible for tax sheltering, and we do not reduce premiums from the nominal rate.

There are many comparisons, but only one cost comparison table applies to your current situation. Of course, your situation may change if your family changes, or if you retire—and you can compare tables to see those differences. Each cost comparison table presents several columns of cost data. Each column except the one for published premium assumes a different level and mix of medical bills, described in the heading. These columns show what your likely costs will be under each plan, including both premium costs and out-of-pocket costs not paid by the plan.

By looking at the different columns in a table, you can find how you will come out under each plan if your expenses range from none to the maximum you could pay in a year. The details are explained in Chapter 2 on “Comparing Plan Costs.” Very importantly, the columns other than “Published premium” all include the tax savings you get from Premium Conversion for employees. These columns also credit you with the savings you gain from a Health Savings Account (HSA) or  Health Reimbursement Arrangement (HRA) in plans that give you these benefits. HSAs and HRAs are the equivalent of a reduction in premium. If you don’t spend that account at the end of the year you will have a bank balance in that amount that carries over to the next year. Therefore, the “No costs” column includes your yearly premium adjusted, as pertinent, for Premium Conversion, HSA or HRA account, and any membership dues. These will be your only out-of-pocket costs if you have no medical bills. We rank the plans in order of average cost to emphasize the importance of each plan’s treatment of “average” expenses for a family of a particular size and type.

You begin by making profile choices to find the table that relates to families of your age, premium category, and size. Assuming that you don’t know something to the contrary, you should expect average expenses in the coming year. The plans that are likely to cost families the least have the lowest dollar figures in this column. But do not choose the highest-ranked plan until you consider whether there is some reason the average column does not apply to you or your family.

In your cost table you will notice that differences among closely ranked plans are often very small. Differences of $100 or less are not important. A different mix of bills from those we use to compare plans could overcome these. Differences of several hundred dollars or more, however, reflect significant variations in how expensively the plans handle most cases.

Notice that most of the higher-ranked plans will save you money in every situation—whether your expenses are high or low—compared to the plans ranked lower. You can also see that most but not all HMO, CDHP, and HDHP plans will save you hundreds of dollars compared to most national PPO plans.

Savings for Couples Using Self Only Enrollments

For a husband and wife who are both employed by the Federal Government and who have no dependent children, it is possible to save on premium costs by enrolling separately as self only rather than together as a self plus one. The premiums for two self enrollments are usually less than the self plus one premium. This option can be particularly valuable in cases where each spouse prefers a different plan, perhaps because no one plan covers both family physicians in its network.

Be very cautious, however, because each person will have to meet a separate catastrophic limit rather than the single limit that applies to self plus one. Most Consumer-Driven and High Deductible plans and most HMOs do not increase your risk very much. While you are still technically subject to meeting two catastrophic limits if you both enroll self-only, the fee structure of most HMOs makes it almost impossible to reach those limits. Therefore, if you and your spouse are HMO enrollees, give consideration to using two self-only HMO enrollments.

However, couples in which one is a federal annuitant and the other still federally employed should almost never use two self only enrollments. It is always less expensive for the employed spouse to enroll in a self plus one or self plus family option, and get the approximately one-third tax savings from Premium Conversion.

Savings for Couples or Single Parents with One Child Under Self Plus One Enrollment

Married couples with no children to cover, and single parents with one child to cover, can enroll as self plus one rather than as a family and, depending on the plan chosen, often save two or three hundred dollars a year in premium costs. Since the benefits of the plan are the same regardless of which enrollment type is chosen, this is a clear saving. You should use our comparison table for self plus one with adults of your age to make your initial plan comparison. But before you make a final decision, check to make sure the premium for a family enrollment isn’t lower for the plan you have chosen. And while you are at it, check our ratings to see other plans that offer even larger savings.

In addition to the regular Open Season, where you can switch plans or enrollment category or both, OPM has scheduled a special Limited Enrollment Period for February 1-29, 2016, to let employees in family enrollments switch down to self plus one. This can only be used for the plan you are already enrolled in, not to switch plans. So use Open Season to make all your decisions at once.

If You or Your Spouse Has Other Employer Insurance

If your spouse has a low-cost health plan through a private employer, or you have a health plan from prior employment, check to be sure that it covers you and your children, and has a benefit package as good as the Federal plans. Even if your spouse’s plan is every bit as good as any of the Federal plans, consider the cost of this coverage compared to some of the lower-premium Federal plans. Remember that you must be covered under the FEHBP continuously for the five years preceding retirement to be eligible for enrollment after retirement (there are some very rare exceptions, such as certain agency downsizing situations). You don’t have to be in the same plan in each year, but you must be covered continuously by some FEHBP plan or, in the special case of military dependents, TRICARE.

If you should die while you are not enrolled in the FEHBP in a family plan, your spouse will lose eligibility for the program. Since most other employers do not continue coverage past retirement, or cannot be counted on to do so, your only guarantee that your spouse can keep this entitlement is to be continuously enrolled. There is an excellent strategy for doing so at minimum cost. All of the plans showing a very low or negative number in the “No Costs” column are Consumer-Driven or High Deductible plans that give you a savings account as large or larger than the premium. With double coverage you will probably not ever reach the high deductible and will realize this saving in most circumstances. In other words, these plans really are almost “free” if they supplement other coverage from your spouse.

Part-Time Employees

Many career Federal employees work part-time schedules. In these cases, the government does not pay its regular share of the premium. Instead, employees receive a pro rata amount based on their work schedules. For example, an employee scheduled to work 40 hours per biweekly pay period receives only one half of the regular government contribution and must pay the regular employee contribution plus the extra one half, or about two thirds of the total premium cost for the plan. There are many possible part-time schedules. We present comparisons on the basis of 50 percent and 80 percent of the regular work schedule. Almost all part-time employees are reasonably close to one of these scenarios.

Persons Who Pay Full Premiums

The FEHBP also provides coverage for former spouses, former employees, children turning age 26, and others. In each of these cases, the covered enrollee must pay the full premium without government contribution. This often results, nonetheless, in a better price than is available for non-group insurance purchased individually, which is the only other insurance available to many.

Persons eligible for continuing coverage for as long as needed include:

  • Those former spouses who have a qualifying court order and meet other conditions. They may enroll in any plan on the same basis as employees and annuitants, except for premiums.
  • Temporary employees who have worked for one full year also may enroll on the same basis as employees, except for premium cost. (Such employees should switch to permanent employment if at all possible to reduce premium costs by three-fourths.)
  • @Para between bullet = Time-limited coverage is also available for several categories of persons. They pay a small surcharge—two percent of the premium—and are eligible only for a limited time:

  • Employees separating from Federal service for any reason may continue their coverage for 18 months.
  • Children reaching age 26 are, unless severely handicapped, no longer eligible for coverage under their parents’ family plan. They may obtain coverage in their own name for 36 months.
  • Former spouses without a qualifying court order also may enroll for 36 months.

For all purposes except premium contribution, tax shelter, and time limit, a temporary enrollee is treated like a regular enrollee. For example, there is no disqualification for preexisting conditions. There is a 60-day time limit for applying after the qualifying event, but once enrolled a person may switch plans in the next Open Season just like any employee or annuitant. At the end of the temporary period, these persons may switch to a “conversion” plan that is not part of the FEHB program and is sold at individual rather than group rates. However, the costs and coverages of these conversion plans are generally far worse than one can get by shopping on the private market. Some young adults will not have a parent with a family plan, or will become ineligible for family coverage upon reaching age 26. You can usually (but not always) get better deals from marketplace exchange plans than you would from paying full premiums for the regular FEHBP plans, but must pay careful attention because bronze and silver plans have much higher deductibles and other cost-sharing than FEHBP plans.

For persons who pay full premiums, we compare plans based on paying both the government and employee share. Although some of these persons must pay a two percent surcharge, we have omitted this factor to avoid the need for extra tables. Under any of the less-costly plans, the surcharge would be under $100 per year for singles and $200 per year for families. These tables do not include premium tax savings because persons who are not current employees are not eligible for this benefit.

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Chapter 4
Cost Comparisons and Advice for Annuitants

As explained in Chapter 2 “Comparing Plan Costs,” we rate and compare health plans based on their likely cost to you, taking into account your pay system, employment or retirement status, family size, age, health status, location, and other factors. A key element of our ratings are estimates of likely out-of-pocket costs under each plan, based on actuarial estimates of the size and likelihood of low, average, and high spending for families of different sizes and ages. Our ratings also reflect varying premium levels and tax situations faced by different eligibility groups. For example, unlike employee annuitants do not obtain “Premium Conversion” tax advantages.

Online Guide users see a summary cost comparison table for their group, and then have the option to look at tables providing more detailed cost comparisons. Readers of the printed Guide see both summary and detailed cost information for their comparison group for all national plans and local plans available in the DC area.

All of these comparisons take into account not only premiums and potential health care costs, but also plan features such as Health Reimbursement Arrangements and Wellness benefits that involve cash rewards. We also include dental benefits and premiums, both benefits built into some health plans and the costs and benefits of standalone dental plans. For annuitants, our estimates and comparisons also take into account both Medicare benefits and Medicare premiums, depending on choices about Medicare enrollment. In summary, we provide a comprehensive set of financial comparisons that allow users to make “apple to apple” comparisons of costs for both premiums and likely health care expenses under each plan and across all plans.

All of our calculations should be considered approximations that will be broadly accurate in the great majority of situations but that cannot provide precise predictions that cover every possible situation. What our calculations also do, therefore, is take into account the risks of ruinously high health care costs from an unexpected illness or accident, and compare the maximum out-of-pocket and premium costs under each plan.

Using the Cost Comparison Tables for Annuitants

We provide provide rating comparisons for self-only, self plus one, and families of two for annuitants in the print Guide, and additionally for families of sizes three through five online. Comparisons include:

  • Annuitants without Medicare.
  • Annuitants with Medicare Parts A and B who pay regular premium rates. These tables include not only the FEHBP premium, but also the current Part B Medicare premium paid under a “hold harmless” provision.
  • Annuitants with Medicare Parts A and B who will pay higher rates for 2016 because they don’t have a “hold harmless” guarantee. These tables include not only the FEHBP premium, but also a higher Part B Medicare premium.
  • Annuitants with Medicare Parts A and B who will pay higher rates for 2016 because they must pay higher “income-tested” rates (online only) These tables include even higher 2016 rates than normal because these enrollees don’t have a “hold harmless” protection.
  • Annuitants who have only Part A of Medicare, the hospital benefit. You can compare these with the preceding ratings to see how much you gain, or in most cases lose, by paying the Part B premium.

There are many comparisons, but only one cost comparison table applies to your current situation. Of course, your situation may change if your family changes or if you change your Medicare decisions—and you can compare tables to see those differences. For example, if you are trying to decide whether to enroll in Medicare Part B or not, you can compare plans with or without this option—but be careful to read our advice on this decision, since there are important advantages to Part B enrollment that for most annuitants outweigh its premium costs.

By looking at the different columns in a table, you can find how you will come out under each plan if your expenses range from none to the maximum you could pay in a year. Very importantly for those with Medicare Part B, the “Published premium” column, as well as following columns, includes both FEHBP and Part B premiums. These columns also credit you with the savings you gain from a Health Savings Account (HSA) or Health Reimbursement Arrangement (HRA) in plans that give you these benefits (annuitants get the HSA amount as an HRA contribution, as explained in Chapter 8 on “Plan Types and Flexibility”). HRAs are the equivalent of a reduction in premium. If you don’t spend that account at the end of the year you will have a bank balance in that amount that carries over to the next year. Therefore, the “No costs” column includes your yearly premium adjusted, as pertinent, for the Medicare Part B Premium, HRA account, and any membership dues. These will be your only out-of-pocket costs if you have no medical bills. We rank the plans in order of average cost to emphasize the importance of each plan’s treatment of “average” expenses for a family of a particular size and type.

You begin by making profile choices to find the table that relates to families of your age, premium category, and size. Unless you know something to the contrary, you should expect average expenses in the coming year. The plans that are likely to cost families the least have the lowest dollar figures in this column. But do not choose the highest-ranked plan until you consider whether there is some reason the average column does not apply to you or your family.

In your cost table you will notice that differences among closely ranked plans are often very small. Differences of $100 or less are not important. A different mix of bills from those we use to compare plans could overcome these. Differences of several hundred dollars or more, however, reflect significant variations in how expensively the plans handle most cases.

Notice that most of the higher-ranked plans will save you money in every situation—whether your expenses are high or low—compared to the plans ranked lower in each group on your comparison. You can also see that many HMOs and CDHP and HDHP plans will save you hundreds of dollars compared to most national PPO plans, but that many will not.

Preferred Providers and Annuitants Over Age 65

We rate plan costs based on the assumption that you will always or almost always want to use preferred providers, also known as “staying in the network”. However, network problems largely disappear if you have Medicare Parts A and B, since most of the national plans waive most doctor and hospital cost-sharing whether you obtain care in or out of the network. Even in HMOs that don’t waive these costs, you can use Medicare to go out of network. Therefore, for retirees who participate in Medicare Parts A and B preferred provider restrictions largely disappear when enrolled in any plan. You can go to any hospital and almost any doctor without penalty. Moreover, persons over age 65 are by law guaranteed a Medicare rate and can use all doctors who have not opted out of Medicare without fearing very high charges, even while enrolled in plans that offer no reduced cost sharing for those with Part B of Medicare.

You should be aware, however, that there are many complexities. For example, some doctors do not accept new Medicare patients, even if the patients are in a plan whose network includes these doctors. Some doctors accept no insurance of any kind. And still others will accept new Medicare patients but do not “take assignment” and have their patients pay in full and submit Medicare claims. In such cases a 15% higher Medicare rate called the “limiting charge” may apply. The great majority of doctors do not present such problems, so your best option will often be to avoid those who do.

Savings for Couples Using Self Only Enrollments

For a husband and wife who are both Federal annuitants and who have no dependent children, it is possible to save on premium costs by enrolling separately as self only rather than together as self plus one. The premiums for two self enrollments are usually less than the self plus one premium. This option can be particularly valuable in cases where each spouse prefers a different plan, perhaps because no one plan covers both family physicians in its network.

Be very cautious, however, because each person will have to meet a separate catastrophic limit rather than the single limit that applies to self plus one. Most Consumer-Driven and High Deductible plans and most HMOs do not increase your risk very much. While you are still technically subject to meeting two catastrophic limits if you both enroll self-only, the fee structure of most HMOs makes it almost impossible to reach those limits. Therefore, if you and your spouse are HMO enrollees, give consideration to using two self-only HMO enrollments. If two Federal annuitants both have Medicare Parts A and B your risk exposure is low in all plans, and very low in plans that offer a Part B wrap-around. This strategy also makes sense if one without Part B chooses an HMO plan and one who has Part B chooses a PPO plan.

However, couples in which one is a federal annuitant and the other still federally employed should almost never use two self only enrollments. It is always less expensive for the employed spouse to enroll in a self plus one or family option, and get about a one-third savings from Premium Conversion.

Savings for Couples or Single Parents with One Child Under Self Plus One Enrollment

Married couples with no children to cover, and single parents with one child to cover, can enroll as self plus one rather than as a family and, depending on the plan chosen, often save two or three hundred dollars a year in premium costs. Since the benefits of the plan are identical (or in a few cases even better) in the self plus one plan, this is a clear saving. You should use our comparison table for self plus one with adults of your age to make your initial plan comparison. But before you make a final decision, check to make sure the premium for a family enrollment isn’t lower for the plan you have chosen. And while you are at it, check our ratings to see other plans that offer even larger savings.

In addition to the regular Open Season, where you can switch plans or enrollment category or both, OPM allows annuitants to switch “down” to from family to self plus one at any time during the year. This can only be used for the plan you are already enrolled in, not to switch plans, unless there is a “qualifying life event” such as death of family member or divorce.

Annuitants Without Medicare Part B

Older persons, on average, incur much higher expenses than do younger persons. Children’s expenses average about $2,000 a year, and those of an adult below 55 years of age about $6,000 per year. Expenses for people age 65 and older average about $12,000 per year. Of course, most enrollees have much lower bills. The average cost is pulled up by a small fraction that has much higher bills, a fraction that rises sharply with age. To reflect these large differences, our cost tables for annuitants compare plans on the basis of expenses faced by older persons. We provide separate results for annuitants age 55 to 64, and over age 65, as their expense profiles are quite different. In either age group, the plans with better coverage tend to rank higher despite bigger premiums. A safe approach for couples in which only one member has Medicare coverage is to use the cost comparisons for retirees without Medicare.

Once you reach age 65, a special rule applies whether or not you enroll in Medicare Part B. It is illegal for doctors who have not opted out entirely from Medicare to charge patients covered by Medicare more than a “limiting charge.” This restriction applies to all FEHBP annuitants over age 65, whether or not they have Medicare. Under this provision, you will not be exposed to high charges that neither Medicare nor your FEHBP plan recognizes as reasonable. You do not have to sign up for Medicare Part B to get this guarantee. Therefore, unlike employees, if you are over 65 you can use non-preferred providers without fear of being charged substantially more than the plan will recognize as reasonable. You do, of course, have to pay higher deductibles and coinsurance if the provider is not in your plan’s network.

Annuitants With Medicare Part A or Parts A and B

Obviously, if Medicare covers you, the rankings in our regular cost comparisons do not apply, since Medicare is “primary” for retirees and will pay most expenses. Therefore, we present tables for single persons and couples with either both Parts A and B of Medicare, or Part A only. Since couples can choose either self plus one or family enrollments, we provide comparisons for both. Although these tables are presented in terms of preferred providers, it is important to understand that the main advantage of preferred providers, guaranteed low rates, is available once you reach age 65 from almost any doctor you might use, whether or not you have Medicare Part B. The online Guide also presents a comparison for couples in which one spouse does not have Medicare and the other has both Parts A and B. Each comparison takes into account:

  • Premium costs for the FEHBP plan and, in the “both Part A and B” tables, for Medicare Part B (Part A has no premium for Federal annuitants who retired after 1983);
  • Each plan’s coverage for services, such as prescription drugs and dental care, that are not covered by Medicare Parts A and; and
  • Elimination of all or most hospital and medical cost-sharing offered by many plans for Medicare Part A and B enrollees.

Should You Stay Enrolled in the FEHBP After Age 65?

You could drop the FEHBP once you enroll in Parts A and B. But this would be a bad decision. Medicare Part B requires you to pay 20 percent of the cost of doctors’ fees, and deductibles, with no upper limit. The Medicare Part A hospital deductible is about $1,300 and the Part B medical deductible is $170. To obtain Medicare coverage roughly comparable to FEHBP plans you would have to pay a Part B premium of at least $105 a month, or almost $1,300 for the year (many pay more, as discussed below), and a Part D premium for drug coverage of about $40 a month and $480 for the year (there is a wide range of prescription drug premiums, some lower and some higher). The total premium cost for all three parts of Medicare is about $1,800 a person—higher than in many FEHBP plans and with cost-sharing worse than most and no protection against catastrophically high expenses. You could improve your protection by enrolling in what are called “Medigap” plans, but only at the cost of paying another $2,000 a year in premium, the exact amount depending on the Medigap plan chosen. Therefore, if paying both FEHBP and Medicare premiums presses you financially, and you are not sure which program to retain, the FEHBP alone is a better bargain than Medicare alone, unless you are willing to enroll in a Medicare Advantage plan (discussed below). And even then you should never drop the FEHBP completely, but “suspend” enrollment with the option of rejoining in the next Open Season. Moreover, almost all Federal annuitants over age 65 have premium-free Medicare Part A, and in combination with almost all FEHBP plans will never have to pay more than a few hundred dollars for hospital costs. Finally, FEHBP plans, unlike Medicare (except in parts of Canada and Mexico), cover you if you travel or live abroad.

Should You Enroll in Part B After Age 65?

There are advantages to enrolling in Part B as a complement to the FEHBP (technically, Medicare is “primary” and pays first). Almost all of the national PPO/fee-for-service plans waive their hospital and medical deductibles, copays, and coinsurance for members enrolled in both Medicare Part A (hospital) and Part B (medical). In effect, they “wrap around” Medicare. HMOs generally have only nominal deductibles or copayments and most of them do not provide such waivers. However, an increasing number do. For example, in the Washington, DC area CareFirst and M.D. IPA provide wrap around benefits to retirees with both parts of Medicare. With Medicare Parts A and B and most national Federal plans, you will have close to 100 percent coverage of almost all medical expenses (a few services are not covered by either program and would not get this coverage). Coverage for dental and prescription drug expenses will still differ depending on which plan you choose.

However, Medicare Part B will rarely save you nearly as much money as you spend on the Part B premium. This is because the cost sharing for physician visits and tests in almost all FEHBP plans is already so low. And as we discuss below, for those who pay more for Part B than the normal premium, it is almost always a bad buy in purely financial terms.

By comparing tables for those with Part A only, versus those with Parts A and B, you will see that in most plans you are likely to spend several hundred dollars a year more for this combination than by retaining the FEHBP plan alone. Simply put, Medicare Part B is of limited dollar value to someone already covered by a good health plan. If you join an HMO, the Medicare premium gains you very little in dollar benefits. If you are willing to use preferred providers in national plans, or to join an HMO and use its network, you can usually save several hundred dollars per year or more—often a thousand dollars a year or more—by not joining, or dropping, Medicare Part B. Even if you do not use preferred providers, you will do almost as well without Medicare Part B, because of the special rate ceiling discussed above.

Part B does have some important advantages. Perhaps most importantly, in almost all the plans that wrap around Part B, enrollment in Part B gives you the freedom to go outside the plan’s network at no cost.

Even if you enroll in one of the plans that don’t wrap around, you can use your Part B benefit to go outside the plan’s doctor network and pay only 20% of the Medicare allowed charge. For example, for access to a specialist at the Mayo Clinic, you could simply go the specialist and charge the visit to Part B without your HMO or PPO plan’s permission,

Part B provides more generous benefits than most FEHBP plans in a few categories, such as physical therapy and home health care, and it covers more of the costs of prostheses and durable medical equipment than many. Still, Medicare Part B rarely reduces overall costs enough to pay for the extra premium. For those plans that waive cost sharing for services covered by Part B, in almost all situations it will likely save you several hundred dollars a year—but rarely anywhere near the “for sure” premium expense.

Also importantly, Part B gives you the option of joining a Medicare Advantage plan—either PPO or HMO—through Medicare and suspending your FEHBP enrollment and premium payment, as discussed below.

For everyone, enrollment in Part B gives you some “political insurance” against the possibility that the Congress would enact some major adverse change to the FEHBP.

Finally, for many the value of “peace of mind” that you get from coverage under both programs exceeds the increase in premium costs.

There is an important innovation under way that reduces the cost of enrolling under both programs that will be attractive so many. The national Aetna Direct plan lets you use your personal care account to reimburse most of your Medicare Part B premium, or offset dental and other expenses not covered by FEHBP plans or Medicare. This gives you the advantage of wrap-around coverage at a significantly lower cost than you would otherwise pay. Since the plan also waives its deductible and other cost sharing if you have parts A and B, this plan winds up costing less with Medicare than without Medicare for those who pay normal Part B premiums. Several other HDHP and CDHP plans, including the national Mail Handlers HDHP plan and the CareFirst HDHP plan in the DC metro area, offer similar advantages.

If you do decide to drop (or not start) Part B you can join it later. But there is a 10 percent a year penalty if you later decide to join or rejoin. As a financial matter, however many years you elect to do without Part B, you will be money ahead for approximately the first five or six years after joining or rejoining (those who start out paying the higher income-tested premium well be much more money ahead). After that, the penalty will outweigh your earlier savings (except for those who were once above, but now fall below, the income-tested premium). If you never join or rejoin, you will (on average) save annually roughly the amounts indicated in our tables showing costs with and without Parts B—generally about half the cost of the Part B premium, though this varies somewhat from plan to plan. Thus, either not joining or dropping Part B is not an irrevocable decision, and later rejoining Part need not be highly costly.

There are some circumstances to which the conclusions above do not apply:

  • Working employees over age 65 with Medicare Parts A and B coverage face a different situation. The special waivers of deductibles and coinsurance do not apply, because Medicare is by law the secondary rather than primary payer (except for firms with fewer than 20 employees). Your best choice is to stay in your preferred FEHBP plan, and postpone joining Medicare Part B until you actually retire. There is no penalty for joining after age 65 if you were working and covered by employer insurance (subject to the same exception for small firms).
  • A few people over age 65 did not earn Medicare Part A and can join by paying a very substantial premium—about $5,000 a year. We recommend strongly against this purchase. Almost all FEHBP plans charge you at most a few hundred dollars for hospital admissions, far less than the Part A premium.

Income-Related Part B Premiums

Historically, the taxpayer has funded three-fourths of the Medicare Part B premium and the enrollee has paid only one fourth of the cost. Under current law, however, some higher income enrollees pay more than the traditional one-fourth share.

This only affects individuals with Adjusted Gross Income (AGI) of $85,000 or more, and married couples filing jointly with income of $170,000 or more. These thresholds are not adjusted for inflation. The actual calculation includes adding some forms of income, such as tax-exempt interest income, to AGI. In 2015 the resulting annual Part B premium is about $1,760 for individual AGI of $85,000 to $107,000; $2,520 for income of $107,000 to $160,000; $3,270 for income of $160,000 to $214,000; and $4,030 for income of more than $214,000. The corresponding amounts for married couples filing jointly are twice as high. But as explained below, for 2016 there will be higher Part B premiums, and these amounts will be about 20% higher at each of these higher income thresholds.

There are additional factors that may determine whether this affects you. For example, if you marry or divorce or suffer a casualty loss you may become exempt. If your income fluctuates from year to year you may be subject to the increase one year but not the next (generally, the calculation is based on your AGI two years previously). If you have just retired with previous income above these thresholds, it is very important to apply to the Social Security Administration to use your lower retirement income to reduce or eliminate the higher premium. The premium calculation is made based on your income two years ago, which for many is a much higher pre-retirement amount, unless you apply for an adjustment. The “bottom line” is that if your income is above these thresholds and likely to remain there, the case for enrolling in Medicare Part B becomes far weaker. Dropping Part B will not affect your continued premium-free enrollment in Part A. The sensible solution for many will be to drop out of Medicare Part B and rely on your FEHBP plan. Why pay $1,760 or more annually for a Part B benefit that rarely results in reduced cost sharing of more than a third of that amount?

The Higher Medicare Part B Premiums for 2016

Inflation has been so low in 2015 that there will be no cost of living increase for Social Security recipients. Under a “hold harmless” provision in current law, most retirees receiving Social Security and paying for Part B will pay the same premium in 2016 as they are paying now. The problem this creates is that the law also requires overall premiums to cover their share of program costs, which rise even when overall inflation does not. As a result, those who are not held harmless will have to make up the difference. Affected federal annuitants include those paying the higher income-tested rates regardless of when they enrolled in Part B, those who don’t begin receiving Social Security payments before the end of 2015 regardless of income, and any already enrolled in Part B who didn’t begin paying for the premium through a deduction from their Social Security payment before the end of 2015. Unfortunately, this means that the many annuitants with Part B who never earned a Social Security benefit will have to pay the higher premium, as will those just now starting to receive Social Security benefits. These increases could have been very substantial, but legislation enacted in November of 2015 holds them to about 20% over the level they would otherwise have paid. Accordingly, our comparison tables include the extra amounts in the legislation, for those who are not held harmless.

Some will be able to avoid paying extra. If you are still employed at age 65, this is an additional reason not to enroll in Part B until you retire. If you are undecided about retirement you could postpone it. And if you do retire you have an 8-month period to enroll in Part B before the late enrollment penalty starts, and you could delay until near the end of that period. Of course, those who are already retired who newly reach age 65 can elect not to enroll in Part B. But most who are not held harmless will have no choice but to pay the higher premium or to drop Part B.

Medicare Advantage

Almost a third of Medicare beneficiaries now enroll in a Medicare Advantage plan, rather than sticking with Original Medicare. Medicare Advantage (MA) is a program designed to be very similar in operation to the FEHBP. Retirees can choose from a wide range of PPO and HMO plans in an annual Open Season. These plans’ premiums are paid mainly through the Medicare Part A and B payments (with some adjustments) that the government would otherwise have paid in direct benefits. The enrollees continue to pay their Part B premium. Almost all of these plans include prescription drug coverage and various improvements over the original Medicare structure. For example, most eliminate most of the hospital deductible. In some cases, these plans charge no extra premium for drug coverage and other benefits. Very importantly, all of these plans now provide protection against catastrophic costs. The MA program is thoroughly described in the Medicare & You brochure mailed to all Medicare participants. The Medicare web site at www.medicare.gov contains additional information and contains an MA plan comparison tool that includes many of the same features as the online Guide, including comparison of total costs including premium and out-of-pocket expenses.

This is important to Federal retirees because if you join an MA plan you are allowed to temporarily suspend your FEHBP enrollment and stop paying two sets of premiums. Under this “suspend” option you pay only the Part B premium and sometimes an extra premium charge (usually only a few hundred dollars per year and often nothing at all) that the Medicare Advantage plan charges Medicare enrollees for additional benefits such as prescription drug coverage. You can later switch out of Medicare Advantage and rejoin the FEHBP as if you had never left during any future Open Season. This works equally well for a couple when both spouses are enrolled in Medicare, or if they are willing to pursue separate health insurance options.

Suspending your FEHBP enrollment generates substantial savings because you will pay one premium instead of two. How much you will save depends on the precise benefits the MA plan offers to Medicare enrollees and whether or how much it charges in extra premium. Most MA plans are comparable to FEHBP plans in hospital and medical benefits, but the prescription drug benefits will not be as good as in the FEHBP because the plans have a “coverage gap” where you are responsible for all or most drug costs until you reach a catastrophic limit. Assuming you join a plan with no extra premium, you would pay only the Part B premium, at an annual cost of about $1,300 (for those who are held harmless in 2016).

Your Final Decision on Medicare Part B and the FEHBP

Throughout our advice we have highlighted specific advantages and disadvantages of enrolling in Medicare Part B in addition to your FEHBP enrollment. On the minus side there is one large factor—paying two costly sets of premiums instead of one. For those who pay the higher part B “income-tested” premiums, this is a very considerable cost, between about $2,500 and $4,000 extra to join Part B, depending on exact income level (and much more than that for the extra high Part B premiums in 2016). On the plus side there are several factors, including avoiding network restrictions, better coverage for a few services, and having the option to join Medicare Advantage plans and paying only one premium without losing FEHBP eligibility.

By now, you should realize that you have many options, each with advantages and disadvantages. Taking into account dollar costs only, there are four good sets of options. One of these is to enroll in one of the better Medicare Advantage plans and suspend the FEHBP enrollment. A second option is to enroll in the Aetna Direct CDHP plan, the Mail Handlers HDHP plan, or in the DC area the CareFirst HDHP plan. Your HRA account will pay towards the Part B premium or for drug or dental costs not otherwise covered, and you also get a Medicare wrap around. A third cost-saving choice is to enroll in an FEHBP plan with rich benefits such as APWU, NALC, Blue Cross Basic, or many HMOs, and drop Medicare Part B. As a fourth choice, you can enroll in a low-premium national plan like GEHA Standard option or Blue Cross Basic, and get a Medicare wrap around benefit, or join a low-premium HMO and use Part B to fill holes and get services outside the plan’s network. Two of these good options involve keeping Part B and the FEHBP, but two let you pay only one premium. All of them vary in details that you can only assess after studying the brochure of one or two plans. All of them can provide most annuitants substantial annual savings.

What you should generally not do is stay in a high premium FEHBP plan to get the Part B wrap around benefit when you can join a less costly FEHBP plan with an equally good wrap around benefit. Of course, there are always cases where even the most expensive combination provides a benefit essential to you. And differences in prescription drug formularies or cost sharing can make a seemingly more expensive option actually a less expensive option. So there is no simple “once size fits all” answer. What you should do, regardless, is at least be aware of the dollar costs or gains of whatever decision you reach.

Medicare Part D

The Medicare Part D prescription drug program benefits millions of low-income elderly with premium-free drug coverage and extremely low cost sharing. It fills a major hole in Medicare that lasted fifty years. But it will rarely benefit those, like Federal retirees, who have good drug coverage from their former employer.

Few Federal retirees should join a Part D plan. A typical plan will cost four or five hundred dollars in premium and provide little improved benefit for most. Also, there is no penalty for joining Part D at a later time if you have current “creditable” coverage. This test is met by all FEHBP plans. There are two exceptions. First, a few Federal annuitants have incomes and liquid assets low enough to qualify for special help. For example, a divorced former spouse may receive so little in pension that he or she qualifies for low-income assistance (the income cutoff is approximately $18,000, depending on state of residence). In such a case, the annuitant may be able to reduce drug costs to almost nothing. You apply to the Social Security Administration to obtain an official decision. Second, the Part D benefit can offer savings to annuitants in plans with relatively weak prescription drug coverage, like GEHA Standard option. This GEHA plan only reimburses half the cost of name brand drugs. An enrollee with a name brand drug costing at retail $2,000 a year would be out of pocket $1,000 under GEHA. Many Part D plans would pay more of this cost for a premium of $500 a year or less, and GEHA would pay half the rest.

Unfortunately, the national plans are not offering extra benefits such as copay waivers to those who join Part D, unlike their improved coverage for those with Parts A or B. They simply promise to “consider” paying part of your Part D costs, whatever that means. And having two drug plans can involve a lot of paperwork. Hence, only if you can achieve substantial savings for your particular drugs is it worthwhile to join Part D. Also, before enrolling in Part D check whether or not you are subject to income-related premiums. The law now subjects Part D enrollees to the same income-tested levels as under Part B. If your adjusted gross income in 2011 was $85,000 or more for single people, or $170,000 or more for couples, you would have to pay a premium surcharge for Part D.

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Chapter 5
Cost Sharing

Health insurance plans never 100 percent of all health-related expenses. Every plan limits coverages in various ways. For example, no plan pays for elective cosmetic surgery. Most plans pay little or nothing towards expensive dental procedures. Almost all plans charge something—usually $20 to $40—for physician visits. Almost all plans charge much more for name brand drugs than for generic drugs. Many plans charge deductibles, either before reimbursing any expenses or before reimbursing particular categories of expenses, such as hospital or prescription drugs. These and other payment limitations are complicated and vary from plan to plan. Taken together, they dictate what you will pay out-of-pocket at various levels and mixes of health care expenses. We estimate these out-of-pocket costs for you, but in some cases you may want to focus on particular coverages and copayments of concern to you.

Deductibles, Copayments, and Coinsurance

You can use cost sharing details to assist you in choosing a plan by pinpointing strengths and weaknesses for cost items of particular concern to you. If you are especially concerned about a broad area of coverage, such as reimbursement for prescription drugs, copayment information can identify plans that are most acceptable to you for that feature, and be used together with the cost rankings to narrow your choice. Our comparisons of deductibles, coinsurance, and copays display many—but by no means all—of the cost sharing provisions taken into account in our overall cost comparisons. (In the printed Guide we present a cost-sharing table for national plans and DC area local plans, but not for the local plans in other parts of the country that we are able to display online.)

In recent years prescription drug copayments have become increasingly complex. Plans require you to pay more for “name brand” drugs than for “generic” drugs. Name brand drugs, once past their patent protection period, are usually met with competition from generic drugs that the Food and Drug Administration has determined to be therapeutically identical. As a result, generic drugs tend to be much less expensive, and it is in the financial interest of both you and the plan that you select them. Most plans now use at least a six-tier reimbursement structure for prescription drugs: generic, preferred name brand, and non-formulary name brand at the local pharmacy for a one-month supply; and the same three categories for a three-month supply by mail order (multi-thousand dollar “specialty drugs” are often yet another tier). Our cost comparisons reflect these differences, but if you have unusually high (or low) name brand drug costs, you can use our tables to identify plans most likely to match your needs.

You should not rely primarily on cost sharing information to select a plan. Choosing a plan with the best rate for a particular benefit without taking into account its premium and all its other benefits would be a mistake. You could try to compare key factors two or three at a time, but this approach necessarily either omits other key factors or requires so many oversimplified comparisons as to become meaningless. For example, whether or not and how much a separate hospital deductible matters compared to premium dollars depends on a key unknown: your likelihood of a hospital stay. With few exceptions (e.g., routine visits and maintenance prescription drugs, and some planned operations if you escape without complications) you cannot forecast just what medical expenses of each type you will incur next year, and even if you could it is very complex to make all the interactive calculations involved. Furthermore, cost sharing can be and often is expressed in annual, monthly, biweekly, per dollar spent, and per service unit for different benefits in the same plan. It can be expressed as the dollar amount you pay, the dollar amount the plan pays, the percent you pay, or the percent the plan pays. Converting all these disparate measures to the common metric of annual cost is essential to making comparisons. Otherwise, you are comparing apples to oranges—how much biweekly premium equals how many annual physician visit copayments or what coinsurance percent for name brand prescriptions? We not only handle these messy computations for you, but also use actuarial information on the probability of different kinds and amounts of costs. Most importantly, you cannot sensibly compare plans based only or primarily on expenses you already expect—that misses the main purpose of insurance: to protect you against unknown and potentially devastating future expenses.

Each of the table entries for costs of various types shows the dollar copayment or coinsurance percentage you must pay for bills of each type. In some cases a plan uses both methods of payment for the same benefit, or a different amount depending on which type of provider or prescription drug is involved. These amounts and percentages do not take into account deductibles, and can be very misleading. A plan that pays all expenses in excess of a deductible of $300 pays none of your bills in a year when your costs are less than $300, and only half in a year in which your costs reach $600.

In most cases, our entries are the same as those given in the plan brochures. Unfortunately, the reimbursement structure for many plans is so complicated that there is no simple way to present or compare these payments, even organized by type of expense. For example, some plans vary your hospital copayment based on how many days you stay as a patient, and while some use dollar copayments others use percentage coinsurance. Therefore, unless you are quite confident as to a high level of spending in a particular category, and are willing to compare several plan brochures carefully, do not rely on cost sharing details to inform your decision.

The High Deductible and Consumer-Driven plans’ copayments are particularly subject to confusion because they change by expenditure level. You start the year with a savings account you can use for any physician, dental, drug, or other expense. In addition, just as in all other plans you get complete coverage of a physical exam that will cost hundreds of dollars. Your copayment for these expenses is zero. If and when you exhaust the savings account, you pay a substantial deductible. After that, you pay a small proportion of hospital and physician costs until you reach the catastrophic limit. So your coinsurance ranges from zero, to 100 percent, to 10 or 15 percent and, once you reach the catastrophic limit, back to zero. The purpose of this is to give you incentives for careful decisions on medical spending. However, these plans’ designs make it very difficult to estimate your costs.

Non-Preferred Providers

You face far higher costs if you use non-preferred providers. Plans not only charge you more for deductibles, copayments, and coinsurance, but also require you to pay the entire cost above the rate the plan sets as its allowance for a particular procedure. In general, we advise you to stay with preferred providers whenever possible. Remember that these alternative cost-sharing provisions are valid ONLY if the non-preferred provider accepts the plan’s allowance. In most cases this will not be true unless you bargain, and the plan will likely pay less than half the bill. Half is better than nothing, but you should plan your health care to stay in network wherever possible. There is almost always a wide range of high quality preferred providers in network.

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Chapter 6
Coverage Features

Using the Guide‘s cost comparisons, you should first select several plans for which your costs are likely to be relatively low. The second step in selecting a plan is to focus on any special needs or circumstances that the cost tables do not fully reflect. The third step is to consider how important it is to you to retain a particular doctor(s) and, if necessary, to find out whether your doctor belongs to particular plans. The best way to do this is simply to call the doctor’s office and ask. You can also go to the plan’s Web site, or get a provider list at a health fair, but those provider lists are sometimes out of date. You can reverse the order of these steps, but it never makes sense to pay an extra $1,000 in premium if the most you will spend on a particular physician or service is a few hundred dollars. You should save the “for sure” premium cost and if necessary pay for a particular visit directly, without using your insurance.

Even if you know you are going to use a particular service, you can enroll in a plan that costs less overall but doesn’t necessary have a particularly good benefit in that area. Use the savings to establish a Flexible Spending Account and focus that spending on that special need. Flexible Spending Accounts give employees (but not retirees) a way to reduce foreseeable costs substantially. If you anticipate, for example, having substantial dental or talk therapy expenses even after your coverage by health or dental insurance, you can set aside up to $2,550 in a health care FSA account ($5,100 for a couple) and that income will not be subject of Federal and State income taxes, or to Social Security taxes. For most, this has the effect of reducing the amount you actually pay by about one third. You estimate your likely spending and set up this account during the same Open Season used for selecting health plans. An FSA is perfect way to get about a one-third discount on a benefit for which your plan restricts coverage. FSA accounts are no longer “use or lose” and you can carry over up to $500 into the next without penalty.

Still, it is best to choose the low cost plan that best covers an expense you can predict. Our Coverage Features analysis and tables focus on benefit categories that vary widely across plans, such as non-network psychiatric care. Online our tables show Coverage Features for all plans in the program, nationwide. In the printed Guide we present these detailed tables only for national plans and DC area local plans, and very selectively for plans in other States in the “Cost and Coverage Features of Local Plans” table at the end of the “Key Tips and Final Plan Selection” section.

We have worded the comparison headings to allow standard entries, such as “Yes,” “Some,” or “No.” A “Yes” always means broader coverage and a “No” always means narrower coverage. However, even though a number of plans are rated “Yes,” this does not mean that the benefits are identical. You need to compare brochures.

Very importantly, if you know that you will need some specific and expensive type of care, whether or not it is in our tables, and whether or not the brochure seems clear, it is always a sensible strategy to talk to at least one potential provider and ask the simple question “Which plans pay best for the care I need?” You can also talk to a plan representative, but the information you get is not always reliable and carries no guarantee. The actual providers (or their office staff) know which plans pay best in the real world. Explore especially carefully if the service is near some boundary of coverage. For example, some hospitals provide regular hospital care, skilled nursing care, and custodial care in the same facility. You need to be sure that whichever level of service you get will be billed and paid under a category paid by your plan.

Nursing Care

There are four kinds of nursing care: skilled care while in a hospital, skilled care in a special “extended” or “skilled” care facility, care in your own home provided by visiting nurses, and “custodial” care either in your own home or in a “nursing home.” No health insurance plan will pay for custodial care, the kind where your principal needs are to be fed, bathed, and clothed and where you need help with ordinary life tasks rather than to recover. At the other extreme, all plans pay for necessary care by nurses while you are in the hospital. Similarly, all plans cover some form of home health care, usually with at least 90 days or visits.

Plans differ in their coverage of care in an “extended” or “skilled” nursing care facility. Most national plans offer no coverage; but a few cover 60 or 90 days per confinement, usually at the same cost to you as hospital treatment. Most HMOs, however, cover skilled nursing care, usually 90 or 100 days.

We did not reflect the value of skilled care in a facility in our cost tables. Since very few younger persons ever need such care, the plan rankings would not have changed much if we had taken into account the statistical probabilities. Virtually all retirees over age 65 have a substantial Medicare Part A benefit for skilled nursing care. Accordingly, they will rarely if ever need any FEHBP benefit for this care.

Nonetheless, stays in skilled nursing care facilities cost about half as much as in hospitals. This is one of the potentially substantial expenses to which some plans leave you exposed. If you think you are likely to need more than a month of this care, we recommend careful attention to brochure language in relation to your particular needs. Remember, moreover, that these stays are subject to plan approval and must involve rehabilitative needs, not simply help with daily living.

For custodial care, either in your own home or a nursing home, OPM sponsors a Long Term Care insurance program, separate from the FEHBP. This program pays for long term care services if you can’t take care of yourself because of an extended illness, such as Alzheimer’s disease. The program covers both institutional and home care. Premiums are substantial, and there is no government contribution. You can find out more about it at www.opm.gov/insure/ltc. Similar insurance can be purchased individually from the same companies that underwrite the OPM program. If your retirement income and assets are relatively low, and you otherwise cannot afford needed custodial care, you can ultimately rely on the Federal/State Medicaid program.

Value of Outpatient Mental Benefits

OPM has long required that plans pay the same benefits for physician visits or hospital stays whether due to either physical or mental illness. This requirement is called “parity,” and, at face value, seems to eliminate any distinction between physical and mental health benefits. It represented a significant advance in covering clinically necessary hospital stays for mental illness. In 2010 the government issued regulations requiring all employer-sponsored health plans to meet an even stricter version of parity. Under these regulations, plans are no longer allowed even to charge separate deductibles for physical and mental health or substance abuse services. In theory, all FEHBP plans will now pay for unlimited mental health services without even such a small difference in cost sharing.

The catch is that all plans select the providers for their networks, and will rarely if ever use providers whose practices emphasize weekly sessions of “talk therapy.” Nor will plans reimburse full costs for services provided by a psychiatrist of your choosing. Instead, they provide a limited number of plan-affiliated psychiatrists, and often rely mainly on the services of clinical psychologists, clinical social workers, and other non-M.D. staff.

Few of the HMO plans offer any mental health services outside of the plan network, or outside of pre-approved treatment plans. The major exceptions are the HMOs with an Opt-Out or “Point of Service” provision. In contrast, all of the national fee-for-service plans except Blue Cross Basic offer a relatively unconstrained out-of-network benefit, as do Consumer-Driven and High Deductible plans. If you expect to use an out of network provider, consider setting up a Flexible Spending Account during Open Season.

Other Coverage Features

Most plans limit reimbursement for most of the following services. Current employees can cover any of them through a Flexible Spending Account.

  • Dental care—We indicate which health insurance plans pay for routine and accidental dental expenses, and show the better benefits with a “Yes.” Our separate chapter on “Dental, Vision and Hearing” provides dollar ratings of these plans along with the standalone dental plans. Those standalone plans charge a premium, but offer stronger benefits. Nonetheless, our ratings show that for most people joining an FEHBP plan with modest dental benefits is a low cost option.
  • Vision care—All plans pay for medically necessary care of your eyes, such as cataract surgery. No national plans pay for eyeglasses or contact lenses, although several of them have arranged for discounts at some chains. A few pay for examinations to determine the prescription you need. Among HMOs, many pay just for an “Exam,” and some for most of the cost of glasses or contact lenses (“Yes” in our tables). You may want to join one of the vision plans described in our chapter on “Dental, Vision and Hearing,” but a combination of prudent shopping and Flexible Spending Account will often match the value of the standalone vision plans.
  • Chiropractic services—Most national plans and some HMO plans reimburse some chiropractic services. The medical establishment has traditionally viewed chiropractors unfavorably because chiropractors are not trained as medical doctors. However, chiropractic services have been proven useful in treating some problems of the muscles, back, and joints.
  • Acupuncture—Another non-traditional treatment that an increasing number of plans reimburse, often for a dozen or more visits.
  • Hearing aids—Most plans pay for diagnostic hearing tests performed by a physician or audiologist, and all pay for medically necessary treatment for hearing problems. At OPM urging, most plans now pay for hearing aids for both adults and children, and others for hearing aids for children only. In our table, a “Yes” indicates both a relatively generous allowance, and coverage of both children and adults. The “Dental, Vision and Hearing” chapter provides detailed comparisons.
  • Infertility treatment—Very few plans pay for the costs of in vitro fertilization or for the most advanced and expensive infertility treatments such as assisted reproductive technology procedures. However, many plans pay for fertility drugs or for treatments such as artificial insemination. Generosity varies so you should compare brochures or consult providers before choosing a plan.
  • Diabetic supplies—Some plans cover drugs but do not cover the cost of syringes and/or special testing supplies and kits needed by diabetics. Even for the plans listed as “Yes,” a diabetic should check the brochures to determine the precise coverage the plans provide.
  • Durable medical equipment—All national plans pay for prostheses, or artificial limbs. Some plans limit such coverage. Some plans also fail to pay for the purchase or rental costs of hospital beds, walkers, and other equipment you may need while recuperating from surgery or illness. Others pay only a limited benefit, such as 50 percent of the cost. This is another area to compare brochures and consult providers.
  • Nurse advice—Most plans let you call a service to discuss medical problems that confuse you. Nurse advisors can greatly assist you in deciding, for example, whether to call a doctor and, if so, which specialty you need. Nurses can also advise you on handling minor medical problems of all kinds, on compliance with your medication needs, and diet and health, and on other issues. For plans that offer this, we enter the telephone number of the advisory service.
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Chapter 7
Dental, Vision and Hearing

The Federal government offers standalone “FEDVIP” dental and vision plans, separate and distinct from the FEHBP. These plans share the same Open Season dates as the health insurance plans, but you join them separately. To enroll, you can use the special OPM Web site at www.benefeds.com, or call 1-877-888-3337. In sharp contrast to regular health insurance benefits, there is no direct Federal government contribution to the cost of the premium. You pay it all, though with substantial tax savings to employees (but not annuitants).

While these plans do have an element of insurance, in that they protect you against some unforeseen dental or vision expenses, they are best thought of as primarily pre-paid care. Most people enroll in these kinds of plans because they know roughly what kinds of expenses to expect, and plan to do a little better than breaking even. In effect, you pay for those new contact lenses or your recurring dental expenses on the biweekly or monthly installment plan, with protection against some unanticipated expense.

The dental and vision plans save you money in two ways. First, they use affiliated providers who provide discounts because of the increased business the plans attract. Second, because employees (but not retirees) pay the premiums with “pre-tax” dollars, you save approximately one-third of the premium cost. As explained in our analysis of “Costs and Taxes” almost all Federal employees face a marginal tax rate close to or above 33 percent, taking into account Federal income tax, State income tax, the Medicare tax and, for FERS employees, the Social Security tax. Any money an employee spends on dental or vision insurance is not subject to these taxes and employees get what amounts to a one-third discount on the premium, depending on their tax bracket.

On the other hand, these plans charge a premium, averaging about $400 a year for self-only dental and about $100 a year for self-only vision, with family premiums about three times as high. Also, the companies that underwrite these plans know that they will attract persons who are heavy users of these services. This means that the premiums have to be higher than would otherwise be the case.

Virtually all FEHBP health insurance plans provide insurance coverage for accidental dental or vision injuries. Typical brochure language says, “We cover services and supplies necessary to promptly repair sound natural teeth” when services are needed due to an “accidental injury.” For vision services, typical brochure language says the plan will cover testing and evaluation and fitting for implanted ocular lenses or contact lenses when the impairment is “caused by accident or illness.” More importantly, most FEHBP plans have some dental and vision benefits. These are often substantial benefits (though never as good as in these supplemental plans). By joining a health insurance plan with better than average dental or vision benefits, you can eliminate much of the need for a supplemental plan. As an example, the Aetna Consumer-Driven plan offers a special $300 fund for self-only enrollees (and double that for families) that covers dental costs.

You can also use a Flexible Spending Account to provide prepaid dental or vision care. By earmarking several hundred or even several thousand dollars of your salary, you avoid paying taxes on that income and effectively gain the same one-third discount that the FEDVIP plans provide. To set up an FSA, you estimate your likely spending for dental, vision, or other anticipated out of pocket expenses. You create an FSA during the same Open Season used for selecting health plans and FEDVIP plans.

You can use all three approaches simultaneously. For example, suppose you enroll in a health insurance plan that pays for preventive dental care and an annual eye exam. You can also enroll in a supplemental vision or dental plan, or both. The health insurance plan will be “primary” and pay first, and the FEDVIPs plan pay second. You can then use your FSA account to pay the residual that the first two sources do not cover. This three-part approach may, of course, require more planning and more paperwork than you are willing to tolerate. There is the further complication that your favorite provider may not be a plan participant under either the FEHBP or FEDVIP plan. But it does give you maximum wrap-around coverage.

Annuitants do not get the same tax advantages as employees. They may sign up for supplemental dental or vision plans, but do not get the pre-tax “discount.” They are not allowed to create FSAs. However, annuitants do get the government contribution towards their FEHBP health insurance plans, which averages about 70 percent. A health insurance plan with a good dental benefit may be an excellent choice for retirees with low to moderate dental or vision expenses, and with heavy anticipated expenses a FEDVIP plan is a sensible choice even without the taxpayer subsidy.

 Consumer-Driven and High Deductible health plans are particularly flexible and comprehensive options for funding dental and vision expenses. These plans allow you to shelter from taxes a personal savings account that you can use for dental and vision expenses, and carry over from year to year. Several of them have special dental funds, and all of them allow employees (but not annuitants) to augment savings accounts during the year if unanticipated expenses arise. These accounts may be used for dental or vision expenses quite apart from those expenses that the plan normally covers, and without restrictions on provider choice (though you may lose discounts if you use non-plan providers). If you already know your dental expenses will be high next year, you can even set up a special account called a Limited Expense Health Care FSA (LEX HCFSA) during Open Season. This will provide dental and vision funding over and above the normal limits on your tax-free contributions to personal savings accounts.

Dental and vision benefits are areas in which you can plan, and in which it pays to plan. Unlike true insurance, where your main need is to guard against large and unpredictable expenses, you probably have a pretty good idea what you are likely to spend on dental and eye care expenses. You can structure your decision around those predictable costs, keeping in mind of course that a tooth, crown, or bridge can break unexpectedly, or some other dental emergency arise. Be careful to read the fine print of the plan brochures carefully, however. The plan may be unlikely to pay for a denture if the need arose before you joined the plan, for example.

The dental and vision plans offer a three-part premium structure—self only, self plus one, and family of three or more. The premiums for families of two or three are almost always about double or triple the self-only premium. If you have a family of three (or more) you may enroll as self plus one and designate which two persons will be eligible for benefits.

Dental Care

Plans’ dental benefits differ widely in details, and many of the brochures use technical terminology such as “gingival” (gum, in English), “alveolar” (the part of the jawbone that holds teeth in place), and “amalgam restorations” (filling cavities). Moreover, many plans use schedules of allowances so you don’t know if the full charge will be paid (usually not). Since most of the plans limit coverage to the items listed in the schedule of allowances, the particular problem you have may not be covered at all. Worst of all, no plans offer a catastrophic dental benefit that would cover you if, for example, you developed a chronic infection of the jaw and required dental procedures costing thousands of dollars. If you are not sure that a plan adequately covers the particular dental problems of your family, or to be sure you get the network discount, you should talk to your dentist before choosing that plan. For example, most dental plans now cover dental implants, a very expensive procedures. But exactly which parts of the procedure are covered for sure, which options are best, which of these parts or options require plan approval, and how likely a case like yours is to get plan approval, varies from plan to plan. You can call the plan to discuss your case, but the best way to find out which dental plan will cover your implant at least cost to you is to ask your dental surgeon what his patients’ experience has been.

In recent years OPM has not allowed most health plans to expand dental benefits. However, OPM has allowed plans to offer “non-FEHBP” benefits to plan members, as shown on a special page in brochures. In many cases, extra dental benefits are offered (usually through a panel of dentists who provide discounts for the extra business the plan brings). When these do not involve an extra premium, and represent a significant benefit that can be determined from the brochure, we have included their value in our ratings and tables. While they are not part of the OPM contract and will not be enforced by OPM, they are nonetheless plan commitments to you.

The new standalone dental plans give you a good deal more advance assurance about what is covered and how much you are likely to pay than most of the health plans. However, how much each plan will cover depends importantly on whether your expenses are mainly for children or for adults, and whether for preventive and diagnostic services, or for more expensive restorative services (including surgical, endodontic, prosthodontic, etc.).

Our dental benefit tables help you sort this out. First, we provide estimates of the cost to you under each plan that provides dental benefits, organized by type of plan. There are no extra premiums under the health plans, but there are for the standalone dental plans and we show the annual premium cost together with the likely out of pocket cost under low, average, and high usage scenarios. Because the premium cost is a “for sure” expense we include it in each column.

We also show which plans cover roughly how much on average for child preventive, child restorative, adult preventive, and adult restorative services. These estimates are based on a market basket of dental procedures that are among the most common in each category. For example, we assume that children receive the following preventive and diagnostic services through an annual visit: periodic examination, prophylaxis, bitewing x-rays, and fluoride treatment. For adult restorative services, our index includes fillings, extractions, crowns, root canal treatment, periodontal treatment, and dentures. We also provide estimates for some individual procedures. Although the tables show specific percentages, these are rough estimates, based on national average prices. Your dentist may charge more or less. Also, we had to translate varied plan reimbursement approaches into the “percent you pay,” and sometimes this is only an approximation. However, these data can steer you towards particular plans’ brochures if there are particular benefits you want to check out in detail for the best coverage.

We also show you the maximum benefit levels (if any) of each plan. Most health plans do not have maximums because their benefits are low enough that they do not face substantial cost exposure. However, most of the standalone plans impose maximum ceilings on what they will pay. If you expect very high expenses, consider a plan with a high or even unlimited maximum, but expect to pay more in premium.

Orthodontic coverage is important to some. All of the standalone dental plans have a substantial orthodontic benefit, as to the Foreign Service and SAMBA national plans. The coverage terms vary, so you should compare them carefully. Especially importantly, the dental plans try to discourage you from joining at the last minute to take advantage of these benefits, usually by imposing 24 month waiting periods on eligibility. Humana Dental, however, imposes no waiting period and uses a schedule of benefits without any limit on overall spending. Orthodontics is the perfect dental expense for combining a dental plan with an FSA account for expenses the plan doesn’t cover. It is also an area where it makes sense to talk to providers about getting the lowest cost, taking into account which networks and plans they have joined.

In sum, even if you and your family do not need substantial dental work, one of the health plans may be worth several hundred dollars per year, or more, a benefit that costs you no additional premium. The standalone dental plans provide a distinctly better benefit than almost all health plans, but at a premium cost that largely offsets their better benefits. The dental plans make the most sense for persons who are sure they will have moderately or very high dental expenses, want some protection against an unexpected expense, and like the predictability of paying a regular premium and reducing wide fluctuations from month to month in what they may pay.

Before selecting a dental plan, be sure to check with your family dentist as to which plan(s) he or she affiliates with. Our estimates are based on the assumption that you use network providers. But plan coverage out of network is both lower and loses you the network discount. These plans are good buys only when you use network providers.

Vision Care

All FEHBP plans pay for medically necessary care of your eyes, such as cataract surgery. Many pay for annual refractive examinations to determine your prescription for eye glasses or contact lens, and some pay for part of the cost for the lens and frame, or arrange for a discount at plan-affiliated providers (this is often stated as an unofficial non-FEHBP benefit in brochures.) Our Cost and Coverage Features table indicates which health plans pay the most toward vision services. In addition, some of the new FEDVIP dental plans, including Aetna and GEHA, provide discounts for lens and frames as “unofficial” benefits.

The nation-wide standalone FEDVIP vision plans provide tax-advantaged premiums for employees (but not retirees), and use the purchasing power of their enrollees to obtain discounts for all enrollees. They are not true insurance plans, and will pay neither for lost or broken glasses nor for medical or surgical care. Instead, they are a way to prepay your anticipated and routine costs for refractive eye examination, glasses and frames, contact lenses, and related services and supplies. If you plan to purchase unusually expensive frames, or multiple pairs of glasses, you will need to rely on discounts rather than direct plan benefits.

Unfortunately, the vision plan brochures do not present benefits in a consistent format, making them very hard to compare. We have attempted to capture most of the important features of the plans in our table on “National Vision Plans” to help you decide whether, and which, plans you may want to examine in depth. In general, their benefits and premiums are similar, but most offer both high and standard options with differences in both premiums and cost sharing. If you have a preferred optician or eyewear outlet you should ask which plan(s) if any it affiliates with in order to inform your decision.

You have several alternatives to enrolling in these plans. You can simply decide to pay for your predictable dental and vision expenses without the bother of using a plan, or being restricted to its providers. If you combine this with prudent shopping, you can achieve substantial savings. For example, Washington Consumers’ CHECKBOOK magazine has rated dozens of DC area providers for optical services and found that prices one-fourth or more below (or above) the average for glasses or contact lenses were not uncommon. Also, most FEHBP health insurance plans have unofficial plan benefits and discounts for eyewear from particular chains, without paying any extra premium.

You have two other major alternatives for vision care. As for other categories of expense, employees (but not retirees) can establish a Flexible Spending Account that covers vision along with other expenses. Or you can join a Consumer-Driven or High Deductible plan and use its savings account feature to pay for vision costs. You can even supplement a High Deductible plan’s savings account with a LEX HCFSA. Either of these options gives employees the same tax advantage—about a one third saving—as a separate vision plan. If you use any FEHBP health insurance plan, of course, the government pays most of the premium.

The primary advantages of joining a vision plan are that it enables you to lock in a provider discount as well as a tax saving while budgeting for your eye wear. You pay roughly $10, $20, or $30 a month (depending on your family size and which plan you select) knowing that each covered family member will be able to get a good deal on a refractive examination and one good set of eyewear equipment.

Hearing Aids

All plans cover medical problems, such as infections, that affect any part of your body, including your ears. All plans cover routine hearing testing for children. Almost all will pay most of the cost for hearing-related medical procedures, such as cochlear implants. But only in recent years have plans begun to cover the cost of hearing aids to compensate for deafness. Coverages vary widely, with some plans covering only children, ages of child coverage varying, frequency of replacement varying, and big differences in the cost amount the plan will cover. We compare these coverages in our table on hearing aid benefits. Before selecting a plan on this basis, it is worth checking with providers for special discounts, some tailored to specific plans. Publications read by Federal employees or annuitants, such as the magazine of the National Active and Retired Federal Employees Association, often carry ads that promise high quality hearing aids at no cost to enrollees in specific plans.

 

Chapter Divider 8

Chapter 8
Plan Types and Flexibility

All FEHBP plans impose restraints on provider choice, using networks as a key strategy to reduce payments and hold down premium costs. The only significant exception to this pattern is for retirees with Medicare Parts A and B, who in most national plans and some HMOs can go to almost any hospital or physician at no cost. This flexibility is allowed because Medicare pays first for these enrollees, and the Federal government uses its legal power to force Medicare-participating providers to accept government fee limitations regardless of their actual costs.

Although all plans, not just HMOs, now provide significantly reduced benefits if you do not use “preferred” or “network” providers, there remain significant differences between PPO plans, PPO plans with fee-for-service (FFS) benefits for using out-of-network providers, local HMOs, and the Consumer-Driven (CDHP) and High Deductible (HDHP) plans. All national plans use PPO networks and no HMOs are national, but each type of plan can be found in local offerings in most large cities.

Type of Plan

In national plans—whether PPO/FFS, HDHP, or CDHP—you generally get a much larger selection of preferred providers, national as well as local. In addition, in all national plans except for Blue Cross Basic you can go to virtually any doctor or hospital you choose—provided you are willing to pay much more (often half or more) of the bill. Under this FFS coverage of providers outside the network, you are covered if you choose to use a world-famous facility, such as the Mayo Clinic, even if it is not a preferred provider. This flexibility gives you maximum freedom of choice, but imposes higher costs on you. The national plans offering broad PPO networks and out of network coverage usually but not always charge higher premiums than most local HMOs, although the gap has narrowed in recent years. HDHP and CDHP plans also provide this flexibility, usually at lower premiums than traditional plans.

Most HMO plans are quite different. They operate through a relatively limited group or network of physicians who share your fees, regardless of which doctor you use. Our analysis below on “Joining an HMO” presents their important advantages and disadvantages in detail. Although cost and benefit comparisons are the key considerations in assessing most plans, other factors are important in deciding whether to enroll in an HMO plan and, if so, which one. Most HMOs will not cover you at all outside of their provider network except in emergencies, but some offer fee-for-service coverage for non-network providers, similar to the national plan (see the point-of-service discussion that follows). Others offer non-emergency out of area benefits to students or, in some cases, to your whole family.

HDHP and CDHP present yet another dimension of choice. These plans provide incentives to you to hold costs down by prudent shopping. The plans provide savings accounts, which, if not fully used, roll over their balances so they can be used in future years. In fact, in some of these plans the amount in your savings account at the end of the year will exceed what you paid in premium (after Premium Conversion savings), if your usage is low. However, once the savings account is used up, you face a high deductible before complete health insurance kicks in. Thus, these plans seemingly present more risk than traditional PPO or HMO plans, as described below in “Joining a High Deductible Plan.” However, they have significant tax advantages that largely negate their seemingly higher risk, and their catastrophic cost protection is generally as good or better than in other plans.

Cost Controls

Plans engage in many forms of cost control. All plans now use preferred providers, who agree to accept lower fees and avoid unnecessary utilization. All plans also engage in other measures, such as second opinions before surgery, penalties for non-emergency hospital admissions without a “preadmission certification,” priori approval of expensive services or products, case management, or a combination. Some cost control measures, such as second opinions before elective surgery, are good for both you and the plan since neither wants you to have an unnecessary operation. Another “win-win” measure is high discounts on generic drugs that are therapeutically equivalent to name brand drugs. Others pose problems if you are not careful.

In the national PPO and FFS plans, there is a $500 penalty for any non-emergency hospital admission without a “preadmission certification.” HMOs can refuse to pay for unauthorized admissions. This means that you must obtain permission from the plan, not just your doctor, before you enter a hospital. Likewise, with the major exceptions of routine visits and emergencies, some HMOs do not pay for care that is not arranged through, or approved by, the plan. In recent years most plans have begun to actively supervise this way certain kinds of extraordinarily expensive treatments, such as “specialty” drugs for cancer or other diseases. Plans also use “case management” to reduce expenses in costly cases. For example, if you have a stroke, the plan may authorize extra home health benefits in lieu of prolonged hospitalization. This can benefit you as well as the plan, but you must use the procedure specified by the plan.

Preferred Providers

All national plans now contract with hospitals, doctors, and pharmacies to obtain reduced rates from “preferred providers,” operating through PPO networks. You share savings through elimination of deductibles or lower copayments if you use one of these preferred providers. These providers also guarantee that their fee will be accepted by the plan. Such PPO plans are similar in some ways to HMOs. The main difference is that the number of preferred providers in a community is often much larger. At any time, you can switch to a provider of your choice rather than a preferred provider. However, you get the low copayments only from preferred providers, and the plans will not recognize costs above their fee schedule.

Each national plan, except Blue Cross Basic, allows you to use non-preferred providers on a fee-for-service basis, but limits reimbursement for doctors who are not in the network to a schedule of charges. These schedules often reflect usual rates (or less), but never allow higher rates. The problem is that your doctor may be one who charges much more than the plan will allow. Moreover, in recent years most plans have reduced the generosity of the fee schedules they use with non-participating doctors. You should never use a non-preferred provider without first checking to be sure that the provider will accept the plan’s payment level, including your coinsurance, as payment in full. The way to find out is simple: BEFORE incurring an expensive procedure, ask the provider point blank if he or she will accept your plan’s payment level. Do not accept an equivocal answer—they know what the plans pay. Moreover, you can bargain for a network or Medicare rate. (Retirees over age 65 face little such risk, since by law almost all physicians must give them a Medicare rate.)

For provider choice, the value of the PPO benefit depends in part on how many doctors and hospitals participate. Blue Cross has agreements with about half of all physicians and most hospitals to be preferred providers. Most other plans also offer you a wide choice. For example, GEHA has an almost equally wide network. However, it is prudent to check provider lists, particularly if you live in a rural area. The best way to check for overall choices is to use plan Web sites. For a specific provider, simply call the office and check not only whether he or she is currently participating, but also whether he or she intends to continue with the plan.

Point of Service

Some HMOs provide a Point of Service (POS) option under which you may, by paying a deductible and coinsurance, use any doctor or hospital. Our comparisons indicate which HMO plans offer this. In effect, these HMOs operate as dual plans, in which you can go to any doctor of your choice if you pay a deductible and coinsurance. In most cases the deductible is $250 or $300 and you pay coinsurance of 25 or 30 percent. These arrangements allow you to join an HMO, get most of your health care with little out-of-pocket cost, but preserve the ability to go out of plan “just in case” you want a doctor not participating in the plan. In other words, if you join an HMO with a POS benefit, you get essentially the same choices as if you join a national plan with both PPO and FFS benefits. Some HMOs offer this benefit limited to college students while away from home.

Joining a Traditional HMO

HMO plans provide not just insurance, but also a different approach to health care delivery from traditional fee-for-service medicine. Therefore, although cost and benefit comparisons are the key considerations in assessing most plans, other factors are important in deciding whether to enroll in an HMO plan and, if so, which one.

There are two main types of HMO plans. One is the facility-based group practice where enrollees agree to receive their health care from a group of doctors working together at the plan’s facilities and at hospitals chosen by the plan. The doctors usually are on salary or in a form of partnership. They generally are paid no more if their patients receive more extensive surgery or other medical treatment, thus, their incentives are different from those of doctors working in the traditional fee-for-service system, who can increase their incomes by increasing the amount of care. The Kaiser plans are the largest of this type.

A much more common type of HMO plan is the individual practice association (IPA). In IPAs, physicians agree to share costs and premium income. Each physician continues to practice in his or her own office and continues to serve some patients who are not plan members. All IPAs have a system to assure that physicians do not give costly, excessive service. In a typical system each physician negotiates a fee schedule with the plan. After seeing a patient, the physician bills the plan for the agreed fee, but the plan pays only part of the bill, such as 80 percent. The remaining 20 percent is kept in a reserve. If costs are held down, the plan will later distribute the reserve to the physicians. To protect against physicians who might deliver excessive services, a committee of physicians regularly reviews treatment practices of each physician. Joining an individual practice association plan is a more modest departure from the fee-for-service system than joining a group practice plan. Some have both groups and individual physicians. Each HMO brochure describes which of these models it uses, and how you get service.

Some features of HMO plans considered desirable by many consumers are:

  • They generally have systems for doctors to review each other’s practices.
  • They eliminate the inconvenience of submitting claims for costs of services.
  • They assure you access to a group of doctors.
  • They prevent a doctor charging more than the plan will reimburse for a procedure.

Some features of HMO plans considered undesirable by many consumers are:

  • The IPA plans often have many participating physicians and hospitals, but rarely a majority of those in the community, and rarely prestigious facilities in other states, such as the Lombardi Center or Mayo Clinic. In contrast, the preferred provider panels offered by the national plans are generally far broader, and cover many facilities around the country.
  • The group plans require you to go to one of their office locations except in emergencies. Some group plans have only a few locations. They limit your choice of doctor even further: to those who work for the plan. You will have to give up your existing doctors when you join a group plan. In contrast, IPA plans use doctors in private practice and your physician may well participate in one or more IPA HMOs.
  • Both types of plan impose barriers to obtaining care as rapidly as you might like, such as waits for the next available appointment for “non-urgent” visits or obtaining the approval of a “gatekeeper” primary care physician in order to see a specialist.

Some features that you may or may not like are:

  • Some HMOs rely very heavily on mid-level professionals such as nurse practitioners and physician assistants.
  • HMOs generally put patients in hospitals less frequently and keep them there for a shorter time than fee-for-service physicians. This is the major reason HMOs usually have lower costs. A number of studies have found no overall difference in medical outcomes between HMOs and traditional practice. On the other hand, if you want quick surgery to relieve a painful but not life-threatening problem, you may not want to wait while an HMO tries more conservative therapies.
  • Few HMOs offer the extra benefits to Medicare enrollees that are found in most national plans, although the number that do so is increasing.

Joining a High Deductible Plan

Several national companies and some local HMO organizations now offer High Deductible or Consumer-Driven plans. Aetna offers such plans in almost all parts of the country, and UnitedHealthcare in many places. These plans differ in details, but all share two main features. First, they provide some form of savings account for health care expenses, financed on a tax-free basis through the premium paid to the plan and, in some cases, additional contributions. This account is typically about $750 to $1,000 for a self-only enrollment, and twice as much for a family enrollment, although a few are higher. During the year, you can use this account to pay for any of your qualified health care expenses, including expenses that the plan does not otherwise cover, such as a hearing aid. Second, if you use up the account on other expenses (or decide to save it rather than use it), you face a high deductible, usually about $1,000 to $2,000 for a self-only enrollment and twice as much for a family enrollment. Thereafter, you typically pay 10 or 15 percent of expenses, up to an out-of-pocket spending limit, though some plans pay everything above the deductible. The main focus of these plans is to encourage you to be a prudent purchaser. If you are relatively healthy and spend wisely, you may avoid any out of pocket expenses. Furthermore, your unused account balances “roll over” and you can build up a substantial cushion that even earns interest. Your total cost under these plans can be LESS than your tax-preferred premium share.

Because of this design, there is no simple answer to “what is my copayment” or “what is my deductible.” If you stay within your spending account both are zero. After your account is used up you pay 100 percent, until you pass your deductible amount. In our tables we provide the percentage that applies after your deductible and until you hit the catastrophic limit.

Two other important features that these plans share is that routine preventive care does not count against either the spending account or the deductible, and you have good catastrophic expense protection. Most of these plans’ limits have none of the loopholes found in other plans.

The High Deductible plans offer two kinds of spending accounts. Which one you get depends on your eligibility. A “Health Savings Account” (HSA) not only lets you accumulate funds, but also lets you retain the savings account when you change plans or retire. Moreover, you can earn interest, tax-free, for decades to come. The HSA is your property. In contrast, a “Health Reimbursement Arrangement” (HRA), or “Personal Care Account” as it is called in some plans, works almost the same but terminates when you change plans. In that case, the unspent balance remains with the plan. The Consumer-Driven plans offer only HRAs. Unlike HSAs, HRAs do not let you grow the account through interest. You can use an HRA, but not an HSA, if you are covered by other health insurance, such as TRICARE, a spouse’s plan, or Medicare. In the HDHP plans, annuitants with Medicare get an HRA in the same amount as the HSA received by other enrollees. To fully understand these complex plans, you should read the explanations in their brochures carefully, and you may want to consult material on the OPM Web site.

The other important characteristic of an HSA account (in contrast to an HRA) is that you can make voluntary contributions to it during the year. This feature comes into play if your expenses are much higher than you expected, but you can make contributions regardless of your expected expenses. In an HSA you can make voluntary contributions up to the amount of the deductible, less the personal account amount funded by the plan. Your contributions are tax preferred. Thus, if you need to spend an extra thousand dollars, rather than pay it directly to providers you can contribute it to the HSA account, lower your taxable income by a thousand dollars, and pay providers from the HSA account. If you are in a 33 percent tax bracket, this saves you over three hundred dollars compared to traditional health insurance plans. This is a better arrangement for you than under Flexible Spending Accounts, because there is no “use or lose” penalty. HSA accounts are sometimes described as “Trifecta” benefits because the contribution is tax-free, the account grows tax-free, and disbursements from the account are tax-free when spent for health care.

Annuitants are eligible for these plans, but most of these plans do not provide extra benefits for having Medicare Parts A and B (significant exceptions are the Aetna Direct CDHP and MHBP HDHP national plans, and CareFirst HDHP in the DC metro area). However, these spending accounts cover many expenses that Medicare does not, and Medicare protects you from substantial copayment expense. For hospital expenses, you will almost always get the zero percent Medicare rate (after deductible) rather than the plan’s rate of cost sharing. Therefore, they can work well for retirees with Medicare. Once you have Medicare the law allows you to contribute only to an HRA, not to an HSA.

Plan Flexibility

Our comparisons of flexibility capture as best as we can the features of each plan that affect your ability to select the providers of your preference. We would like to display the number of affiliated providers in each local area, but such data are not available for many plans. Of course, staff model HMOs would always show a relatively low number, because they ordinarily limit you to primary care providers on their staff.

In our comparisons, we show first which HMOs allow you to get regular plan benefits from providers located outside the plan’s main service area. For example, the Kaiser plans allow you to use Kaiser facilities and providers anywhere they are located. Of course, national plans all cover the entire nation. All plans cover emergencies throughout the world (not shown). Second, we show how plans deal with providers who are not preferred. National plans and some HMOs let you use non-preferred providers with a significantly higher cost sharing. Third, we show which plans provide annuitants with Medicare Parts A and B wrap around benefits to make all hospital and doctor care cost-free, in or out of network.

We show which plans allow women to visit a gynecologist without having to be referred by a primary care provider. Almost all HMOs now allow self-referral, at least for an annual exam (those which allow only an examination without referral are marked “Exam”). Unfortunately, some HMOs do not allow self-referral to other specialists, though the number that do so is growing.

Our entry for “open formulary” indicates whether the plan will pay for any name brand drug that your physician prescribes, or just for those that are on the plan’s list of approved drugs (commonly called a “formulary”). Most plans will pay for any drug but require higher copays for non-formulary drugs. We indicate these with a “Pay More” entry.

Finally, we indicate whether each company sponsors a Medicare Advantage (MA) plan, so that Medicare participants can elect to stay with their health plan while paying only one premium. However, even though we enter “Yes” you have to check further to see if the Medicare Advantage plan covers the exact area where you live. Not shown, all Medicare Parts A and B enrollees have access to at least some MA plans, and most have access to dozens.

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Chapter 9
Quality and Service

For traditional fee-for-service insurance plans, service quality was up until recently not a major issue. The main service concerns were how easily you could get help from plan representatives regarding coverage questions and how fairly and promptly claims were paid.

However, even fee-for-service plans now have some involvement in the quality of your health care. All of these plans require you to get authorization before hospitalization or surgery. And almost all have assembled networks of preferred providers and have prescription drug formularies. By using providers from these networks and preferred drugs in these formularies, you can save money; so the availability and quality of preferred providers and the lists of preferred drugs are important to you.

Meanwhile, many prepaid (HMO) plans are available and now substantial numbers of Federal employees have selected these plans. Your choice of HMO can have a big effect on the quality of medical care and service you receive. Not only does an HMO offer you a selected list of providers to choose among; your HMO may be set up so that your primary care doctor is a “gatekeeper” who decides whether to authorize you to get specialist, hospital, and other types of services. In addition, an HMO may be able to manage care so that members get better service than they would get in a less structured system. For example, some HMOs have succeeded in reducing asthma problems by having doctors, nurses, pharmacists, and other HMO staff work together to train patients and families in self-medication and other self-care techniques.

Customer Satisfaction Ratings

This Guide’s most important information on quality and service is the plan-by-plan customer satisfaction ratings. Ratings of plans come from a 2015 survey in which a standardized questionnaire was sent to a sample of each plan’s members.

The table tells you how respondents answered when asked to use a 0 to 10 scale to rate their personal doctor, their most frequently seen specialist, all the health care they received, and the plan overall. For the overall rating of the plan, the table shows the percentage of respondents who gave a rating of 10, the combined percentage who gave ratings of 8 to 10, and the combined percentage who gave ratings of 6 to 10.

In addition, the table shows how plans were rated across several questions that relate to key aspects of service, for example—

  • Getting needed care
  • Getting care quickly
  • How well doctors communicate
  • Plan’s customer service
  • Coordination of care
  • Plan information on costs

For these aspects of care, the table shows the percent of respondents who gave either the highest possible rating or one of the top two possible ratings.

Finally, the table shows how plans were rated on more specific aspects of care and service, for example, “seeing a specialist.”

Interpreting the Survey

We advise that you keep several points in mind when using the customer ratings:

  • Some of the ratings are based on opinions. Your opinions might not be the same as those of survey respondents.
  • The way enrollees rate their plans can be affected by their age, education level, state of health, and other characteristics. For example, older individuals tend to rate their plans relatively high. If one plan has attracted a large proportion of members over age 65, its ratings might be high for that reason. The scores reported here have not been adjusted for member characteristics. Within the group of HMO and POS plans, it does not appear that such differences in member characteristics had much effect on scores; very few plans’ overall scores would change by more than two percentage points if the scores were adjusted for member differences. But the effects might be greater among fee-for-service plans.
  • Since the survey included only a sample of plan members, it is possible that a plan’s ratings were affected by “the luck of the draw”: a disproportionately large number of satisfied or dissatisfied members happened to respond.
  • Some enrollees did not return the questionnaire. It is possible that those who responded are more satisfied or less satisfied than those who did not. Our analysis of these and similar survey data has indicated that younger members and men are less likely to respond than women and older members. Young male members also tend to give somewhat lower ratings than older members of either gender. Fortunately, with roughly 40 percent of surveyed members responding for most plans, the respondents do at least represent a substantial portion of members. And we have some evidence from follow-up survey tests we have done that scores would not have changed much even if an additional 10 or 15 percent of surveyed members had responded.

In interpreting member ratings, also keep in mind that comparing across different types of plans is at best imperfect. First, it is not possible directly to compare regional plans (primarily HMO and POS plans) to national plans. For example, high or low ratings of “personal doctors” by enrollees in a national plan don’t tell you how that plan’s members in a particular region rate their doctors, and yet it is the national plan’s doctors in that region who should be compared to the doctors of members of regional plans serving only that region. Second, for the national plans (and the Blue Cross and Blue Shield Ratings by State), the ratings are only from FEHBP enrollees, while the ratings for the regional HMO and POS plans include ratings from non-FEHBP enrollees. Third, the plans for which only ratings from FEHBP enrollees were included reflect scores given by over-65 annuitants covered by Medicare while the plans for which ratings from non-FEHBP enrollees are included generally do not include ratings from enrollees who are over-65 and on Medicare. It is known that over-65 Medicare participants in any plan tend to give substantially higher ratings than younger members.

Disputed Claims Per 10,000
Federal Enrollees Filed With the
Office of Personnel Management
(National Plans With at Least 10,000 Enrollees)
October 1, 2014—September 30, 2015
Plan name Disputed claims Disputed claims in which plan’s initial decision was changed or reversed
Blue Cross/Blue Shield 2.64 0.61
Rural Carrier 4.59 1.77
Foreign Service 4.80 1.20
SAMBA 7.93 1.40
NALC 10.40 3.35
GEHA 11.77 2.16
APWU 12.70 4.89
MHBP 12.76 4.89
Compass Rose 26.50 7.57
Aetna HealthFund CDHP/HDHP 27.74 2.89
These plans are not open to all.

Even among HMO and POS plans, you should be aware that the ratings given by non-Federal members may have been given by members who were in a different variant of the plan than the variant offered to Federal employees and retirees. We have found, for example, that among members of the same plan, POS users are about two to three percentage points less likely than basic HMO users to give high ratings to the overall plan.

It should also be noted that differences in the way the survey was administered might explain small differences in plan scores. All of the plans are required to use an independent firm to conduct their surveys under the supervision of the nonprofit National Committee for Quality Assurance (NCQA) using standardized survey procedures. But there is some room for variation in procedures. For example, some plans allow members to respond by the Internet in addition to mail and phone calls, and Internet responders tend to give somewhat lower ratings. Also, some plans get a relatively high percentage of their responses by phone (as opposed to mail), and phone responders tend to give higher ratings than mail responders.

Disputed Claims

Along with the customer satisfaction survey results, we have another indicator of service quality for the fee-for-service plans. We checked “disputed claims” on file at OPM. A “disputed claim” is a case in which a plan member has been denied benefits and has followed the required procedure to appeal the denial to OPM.

The Disputed Claims table shows disputed claims per 10,000 Federal enrollees for the period from October 2014 through September 2015. The table also shows in how many cases per 10,000 enrollees a plan’s initial decision in a disputed claim was changed or reversed. The disputed claim information is shown for national plans.

There are several possible explanations for differences in incidence of disputed claims. For example, some plans may have an unusually large share of hypercritical members, be more aggressive than others in enforcing their policy limitations to prevent benefit abuses, or have benefit limits that enrollees tend not to notice or not to understand. Most of the disputed claims are resolved in favor of the plans on the grounds that they involve matters that are not within the plans’ coverage. But do you want to be in a plan where you will feel the need to file a disputed claim? Everything else equal, it seems preferable to join a plan where the coverage limits are easily understood, communication is good, benefit limitations are interpreted broadly—and disputed claims are rare.

Accreditation

The National Committee for Quality Assurance (NCQA) is the largest organization that accredits health plans. The table at the end of the print Guide, and under the quality tab online, shows whether or not plans are accredited by NCQA or by URAC or AAAHC, two smaller accrediting organizations. These organizations have procedures to determine whether plans meet the organization’s accreditation standards. The standards cover many areas of performance, such as whether the plan takes appropriate steps to check the credentials of its physicians, whether the plan has appropriate health promotion and disease prevention programs, and whether the plan has appropriate protections of patients’ rights. NCQA includes in its accreditation process assessments of plan performance on member satisfaction survey measures and effectiveness of care measures, such as the percentage of two-year-olds who have had all recommended immunizations and the percentage of heart attack patients who are given a specific type of recommended medication.

All accredited plans are not of equal quality, and there are many aspects of quality that accreditation reviews can’t measure. But accreditation is a plus, and absence of accreditation should raise concerns about quality.

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Chapter 10
Premiums and Taxes

There are major tax advantages for health insurance. The “employer share” of health insurance—paid by agencies for employees and by OPM for annuitants—is part of employee compensation but by law is exempted from being counted as taxable income. For Federal employees and annuitants, the non-taxable premium share paid by employing agencies and OPM averages about $5,500 for self-only enrollments, about $12,000 for self plus one, and about $12,700 for families in 2016. The tax laws also allow employers to make the “employee share” of the premium tax-free to employees, and to set up tax advantaged Flexible Spending Accounts for employees. The average tax-sheltered employee share of premium for Federal self-only enrollees is about $2,000 and for families about $4,900. In total, employees in family plans shelter about $17,600 in employee compensation for health insurance from Federal, State, and local income taxes, as well as from OASDI taxes. This saves employees a tidy sum, about $6,000 per family on average. By law, only the tax benefits for the employer share, but not the annuitant share, are available to retirees in either the public or private sectors. But annuitants in Medicare Parts A and B also get over $9,000 per person of untaxed insurance benefits on top of their FEHBP savings, for a total tax shelter of about $22,000 for a retired couple.

Tax Savings for Employee Premium Share

Federal employees shelter their share of the FEHBP plan premium from income taxes through what is called “Premium Conversion.” Employees have the right to opt out of this program. This increases very slightly future Social Security benefits. However, in what economists call “present value” terms, that offsetting amount is a very small fraction—a few pennies on the dollar—of the gains from the Premium Conversion program. We strongly advise all employees NOT to opt out of Premium Conversion tax savings.

How much employees gain from this tax subsidy varies depending on employee salary, spousal salary, other income, state income tax rate, number of dependents, amount of deductions, whether or not they file jointly, and whether or not they are in FERS (and hence paying Social Security taxes). We present two tables that show the likely percent of premiums that will be offset by tax savings under several typical scenarios. The tables show the marginal tax rate, which represents the rate that applies to dollars earned or premium dollars tax sheltered slightly above or slightly below current total income levels. When Social Security, Medicare, and state taxes are added, the overall marginal tax rate can reach 41 percent, or even more in some high tax states. Our tables on marginal tax rates for single and family earners present marginal tax rates at various income levels. For each income level, they also present equivalent General Schedule salary ranges using pay rates for the DC area.

At income ranges typical of Federal employees, whether in single- or dual-earner families, and whether in the FERS or CSRS retirement systems, these tables show that almost everyone will save at least 25 percent, and very few will save much more than 40 percent, from tax-sheltered health care premiums or other expenses.

How Much Tax Sheltered Premiums Are Reduced

We provide a table showing how this tax shelter affects your total costs. This table present our estimates of the likely average premium cost to GS enrollees under some of the plans available in the Washington metropolitan area, including both local plans and national plans. As the table shows, the effects of Premium Conversion are substantial.

Because the effects of different marginal tax rates are relatively small in comparing plans, and never change our relative rankings or the general magnitude of plan-to-plan differences, we use a 33 percent premium savings estimate in all Guide tables for persons who are eligible for Premium Conversion. This simplifies presentation and gives you the essential information you need to compare plans. You can, of course, make your own calculation of marginal tax rate, but this is complicated and will not affect most plan comparisons substantially.

Flexible Spending Accounts

Health Care Flexible Spending Accounts (FSAs) provide a way to shelter even more health care spending from taxes. FSAs allow you to shelter the out-of-pocket costs that you incur for copayments, coinsurance, deductibles, charges above customary and reasonable, and uncovered health care expenses. Under health reform, you can no longer use an FSA account to pay for over-the-counter drugs without a physician prescription (insulin is an exception) but all other categories of expense are unchanged. For most people, the favored categories for using FSAs are dental expenses, vision expenses, and your share of costs for services covered by the plan—for example, the coinsurance you pay for mental health services, or the annual deductible.

Under IRS rules, you have to set up your FSA account and amount in advance. OPM allows you to use the regular Open Season period for setting up your account. For health care, you can elect to choose any amount from a minimum of $100 to a maximum of $2,550. (You can also elect to set aside additional amounts for “Dependent Care.”) You establish the account by enrolling online at www.fsafeds.com or by calling 1-877-372-3337. Unlike Premium Conversion, you have to elect this benefit and will NOT be enrolled automatically. Until recently, enrollees in Consumer-Driven and High Deductible plans were not allowed to create FSAs. However, they may now set up “Limited Expense” FSAs that cover only dental and vision expenses that are not reimbursed by insurance.

You can carry up to $500 in unused FSA accounts into the next year. But any amount over $500 that you elect to set aside for an FSA must be spent by the end of the year, or it will be forfeited (a “grace period” of 2 1/2 months is no longer allowed). You should plan carefully based on your best “guesstimate” as to health care expenses that you are virtually certain to incur, such as maintenance prescription drugs, routine dental care, and routine eye care or any services for which you make multiple and foreseeable provider visits.

Only about one in ten Federal employees are signing up each year for FSA accounts. This means that about nine out of ten employees are leaving money on the table each year. Almost everyone has at least a few hundred dollars in foreseeable out-of-pocket health care expenses. Those who don’t sign up are throwing away a one-third discount on these costs. We recommend that ALL employees who are not in High Deductible plans establish an FSA if they have foreseeable expenses. For some, the $2,550 maximum will be the right amount to establish.

Health Savings Accounts

Both Health Reimbursement Arrangements (HRAs) and Health Savings Accounts (HSAs) provide significant tax advantages, beyond those available through Premium Conversion and FSAs. The simpler case involves HRAs, where your savings account can grow as long as you stay with the same plan (if you change plans the entire amount is lost), and you can also use an FSA to supplement the HRA amount set aside by the plan. For example, if you expect out of pocket drug and dental expenses of five hundred dollars next year, you could place that amount in an FSA in the expectation that the HRA amount paid through your premiums would remain available for unforeseen expenses next year or in future years. Unfortunately, retirees cannot use the FSA method of supplementing HRAs.

HSAs convey far larger advantages. First, you can add to your HSA account by advance planning, just as if it were an FSA. Second, while you can only establish an FSA account in advance, you can add to your HSA account at any time during the year. Thus, if you have unanticipated expenses late in the year of an extra thousand dollars, in most High Deductible plans you can have a thousand dollars transferred from your pay to your HSA, lower your taxable income by a thousand dollars, pay the bill through the HSA, and obtain what amounts to a one-third discount on your unplanned expenses. Or you can transfer the extra thousand dollars even if you don’t have any unexpected expenses, saving one third in taxes, and build up your account for future years. Since you retain the HSA account for life, regardless of Open Season plan changes or retirement, and it can accumulate tax-free earnings, it can become a very substantial lifelong protection against health care expense.

This account augmentation advantage is dramatic if you consider the catastrophic guarantee provided by most FEHBP plans. Consider a traditional plan, national or local, that holds self-only total out-of-pocket cost to $6,000, without significant loopholes. Compare that to a High Deductible plan, with a guarantee of $7,000 for a self-only enrollment, also without significant loopholes. The traditional plan seems better. However, under the High Deductible plan your plan-paid HSA account of $1,000 (a typical amount) can be used to defray large expenses, thereby reducing your potential loss to $6,000. Beyond that, you are allowed to make tax advantaged voluntary contributions of over $2,000 and pay your bills through your augmented account. This lets you save approximately $700 through lower tax payments if you face catastrophic expense. Hence, your total cost exposure is only about $5,300, lower than that claimed by the traditional plan, and reversing the conclusion as to which plan has a better guarantee. Most HDHP plans, evaluated this way, offer catastrophic expense protection as good as or better than most traditional plans.

While retirees over the age of 65 cannot establish HSAs, those nearing retirement not only can take advantage of HSAs, but also are eligible for “catch up” contributions after age 55, until enrolled in Medicare. These contributions can reduce after-tax expenses by hundreds of dollars a year more, or simply be added to the growing HSA balance. Upon retirement, the HSA balance remains available for the rest of your life, and continues to earn tax-free returns.

 

 

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Chapter 11
Key Tips and Final Plan Selection

The data we have presented should help you to quickly and easily narrow your choice to two or three of the plans, out of the dozens you are offered. At this point, compare the brochures of these carefully. Underline key points, or parts of the plans that confuse you, and compare these points among the plans. It is very easy to use our online Web site, or OPMs, to find copies of plan brochures for your area. Then you can search on a word such as “maternity” or “surgery” “chiropractor” in the brochure for each plan and find the benefit details in seconds. Probably the plans will be similar on most things, so concentrate on differences that are important to you.

When you have figured out the major differences among the best plans, you are ready to make your final decision. One way to do this is to write out the most important ways in which the plans differ. These differences may not be strictly financial. For example, suppose it turns out that your choice is between a national plan and an HMO. Let’s say that our ratings show that the HMO costs $1,000 dollars a year less on average, and has slightly better coverage for a benefit you need. But you are unwilling to give up a particular doctor you have been using for years. This seems to be an impasse, but there are several possible ways to resolve it. Perhaps your doctor is affiliated with the HMO—why not ask? Or consider using part of the money you will save by joining the HMO to continue going to your doctor and paying out-of-pocket (using an Flexible Spending Account will cut this cost by a third). Or you may have more than one doctor you want to keep and conclude that the national plan is well worth the higher cost.

Throughout this Guide we have argued that your best strategy is to make the primary factor in your plan selection the overall predicted cost of the plan, taking especially into account that none of us can predict whether or not we may have a heart attack, a stroke, a cancer, or other costly condition that strikes unexpectedly. You should use your known, predictable routine expenses to calculate how much to put in a Flexible Spending Account, not to choose an insurance plan whose main purpose is to protect you against unexpected and high expenses. There is an important exception to this general strategy. If you know that you will need some particular service next year, and it is very expensive (for example, hip surgery or maternity) and likely to cost you tens of thousands of dollar, it makes sense to talk select the physician you would like to use (or several you are considering) and ask two simple questions: “What plan networks are you in?” and “In your experience, which Federal employee health plan or plans pay best for the care I need?” Sometimes the answer will be that all of them pay well. But sometimes the answer will be that only a few plans pay well. In that case, look first at these plans and choose one of them after you complete your detective work by reading the brochure section on your procedure, calling the plan, or checking with other people who have been in your situation. But do not forget that some other disease may strike, so factor in both known problems and overall ratings in choosing among these few plans.

Whatever your personal decision turns on, you may be overwhelmed by details and confused by the choices you face. So here are some concluding thoughts based on some of the most common questions we have heard. Try to focus your decision on several key questions. Are you willing to join an HMO or a High Deductible plan? Do you expect big bills for a particular event such as surgery? Do you really want to have a particular benefit, such as chiropractic or hearing aid? Do you really “have to have” doctor sawbones in the plan network? (Hint: in the DC metro area we have a “doc find” feature that tells you which plan networks include doctor sawbones.) Perhaps you can afford a higher premium to get the benefits you want, or perhaps you cannot and must pick a plan that at least gives you good catastrophic protection.

Tips

Throughout the Guide we have provided vital tips. We repeat some here:

  • Getting “Free” Health Insurance—Some Consumer-Driven and High Deductible FEHBP plans provide you a savings account larger than your actual premium cost after taxes. You can end the year with more money than you started if your medical costs are low.
  • Avoid a Big Risk—Many people who are covered by their spouse’s insurance drop FEHBP. This saves premium costs. However, if you are not enrolled and die suddenly, your spouse cannot ever enroll again. Your best option is to carry an FEHBP family policy and drop the spousal insurance.
  • Protect Your Retirement—It is not expensive to enroll in the FEHBP for the five years before retirement. Several plans have annual premiums that are about $1,500. These plans cost about $1,000 after tax savings. Some plans give you savings accounts higher than the tax advantaged premium cost.
  • Be Sure to Elect a Survivor Annuity for Your Spouse—If you die and your spouse receives no Federal pension, your spouse will lose FEHBP health insurance coverage forever. If you die while enrolled as self-only, your spouse will also lose coverage.
  • Be Wary of Misleading Catastrophic Cost Protection Claims in Plan Summaries—Some plans exclude deductibles, physician copayments, or drug costs in the figure they claim for catastrophic limits. This can understate your risk by thousands of dollars.
  • Bargain with Out of Network Providers—Most plans have very low payments for non-preferred providers. You MUST negotiate with these doctors before any expensive procedure in order to protect yourself. One good tactic is to ask for either their “preferred” or Medicare rate.
  • Check Your Brochure—Do not stay in the same plan without reading at least “How We Change” for next year or join a new plan without checking any benefits of particular importance to your health care.
  • Flexible Spending Account—You can only establish your FSA during Open Season. Be sure to consider carefully this important option to reduce your health costs. Almost all employees should set up an FSA.
  • You Can Keep Flexibility Only at a Price—The best two arguments for paying the Medicare Part B premium are to preserve your choices over time, as both the FEHBP and Medicare evolve, and to get you low costs for providers who are not in your plan network. However, this choice is costly.
  • Huge Annuitant Cost Saving—Annuitants with Medicare Parts A and B can suspend their FEHBP enrollment, join a Medicare Advantage plan, and pay only the Medicare premium. They can reenroll in an FEHBP plan in the future without penalty, and in the meantime enjoy good catastrophic protection, have low copays, and save thousands in premium costs.
  • Dealing with a Known High Expense—There is an exception to our general advice about focusing on overall plan costs, not just one benefit category. If you know for sure that you will need a some expensive service, you should look for the answer to “Which plans pay best?” If several plans pay equally well, then you can choose whichever of these is an overall better buy.

Questions and Answers

Here is a short list of frequent questions and their answers:

  • What if I expect to have a baby? What plan offers the best maternity benefits? Most plans offer low or no cost maternity coverage. Check brochures for this, and check network lists online to make sure you will have a good selection of obstetricians. Or select an obstetrician and then use her experience to steer you towards a few plans from which to choose.
  • What if I am going to have a major operation? Pay particular attention to catastrophic limits. If you know for sure that you are going to face bills of $25,000 or more, then pick a plan with a tight limit on your costs. In comparing catastrophic expense limits, use Guide figures. Our estimates include the “for sure” premium expense and adjust for inconsistencies among stated catastrophic limits, such as failing to include deductibles in the stated limit. If you are not sure what plans will work best in your case, check brochures and consult your surgeon to discuss which plans work best. Be sure your surgeon is in your plan network or will give you a network rate.
  • My two doctors aren’t preferred providers for any plan. What should I do? Set up an FSA account for about half the amount you expect to spend on those doctors. Then pick one of the top ranked plans that includes a fee-for-service benefit, use that benefit for whatever it will pay (which will probably be about half), and use the FSA to cover the rest. Or change doctors.
  • I need over 30 psychiatric visits. What plan is best? The mental health parity requirement—which theoretically allows unlimited visits at a low cost—might arguably make all plans meet your needs. But plans require using preferred providers to get network rates. First, talk to your provider and see if he or she is “preferred” under any plan. If so, this plan is likely to be your best choice. Alternatively, most plans will pay sixty or seventy percent of the “plan allowance” for out of network visits. Since that is well below what most providers charge, you will likely pay half or more of the cost of each visit. Try making an arithmetic calculation. Estimate the number of visits you are likely to make and how much each of several plans will pay for these visits. Then add the annual premium cost to the amount that you will pay the doctor under each of those plans. If one of them stands out, you have an answer. If they are all about the same, choose on some other basis (like our overall ratings). Finally, you are a perfect candidate for a Flexible Spending Account, and your FSA tax savings will reduce your cost by about a third.
  • I really like the service from plan X. But it is rated halfway down your cost table. Would I be a sucker to stay with it? No. Differences of several hundred dollars in estimated costs can move a plan up or down the table a long way. Our methods of estimating average costs are only approximations. Differences of $100 or less are not significant, and a national plan even halfway down the table is a perfectly acceptable deal. Furthermore, staying with the same plan will eliminate the hassle of changing doctors and of dealing with a plan bureaucracy that may not be as customer friendly as the one you have now.
  • You rated the plan I am in highly last year, but this year it has moved way down. Why did this happen and should I switch? Premium differences are the biggest factor in our cost rankings, and premiums can swing widely from year to year. That is probably why your plan moved so far—but check the brochure’s change page for a benefit cutback that could have affected our ratings. Or other plans could have improved their benefits. One of the big change factors, for example, is the catastrophic limit promised to you by the plan: these often move up or down by thousands of dollars and are big factors in our ratings. You can stick with your plan if it has not become unreasonably costly and has given you good service. But consider the possible savings from the plans we rank higher.
  • I don’t have much money and can’t afford an expensive premium. Is it safe to join one of the plans with a really low premium? All plans are reputable, and all will pay the benefits they promise. Every plan, not just the ones with the lowest premiums, has gaps or loopholes of one kind or another. But the lower-premium national plans generally expose you to higher copayments and deductibles, so they may not save you as much money as you think. Look at our ratings tables and several brochures carefully, and then decide. A lower premium does not mean a worse plan, or a higher premium a better plan. Our estimates of average costs are a far better guide to likely costs than premiums alone.
  • I’m not very healthy and could easily have expenses of many thousands of dollars next year. So I don’t think that your rankings based on average costs are what I should use. What should I do? A good method is to skip the average column and look at the column for high expenses of $30,000. Within that column, choose among several plans that our comparisons indicate are relatively low-cost. Another approach is to compare catastrophic limits. But keep in mind that our “average” columns include some very expensive years.
  • I can’t decide whether I should get Medicare Part B and join a plan that guarantees I won’t pay anything at all for medical bills, or plan to drop Medicare Part B and save about $1,300 a year in premium cost. If your doctors are mostly preferred providers, consider dropping Part B. You won’t save the entire amount of the Part B premium, but you will save most of it in most years. The main argument for keeping Part B on top of the FEHBP is that you have complete flexibility to use any doctor who accepts new Medicare patients, even if he is not preferred. But this flexibility costs you hundreds of dollars per year. Whatever you do, do not drop out of the FEHBP. If you decide to keep Part B, move to a low premium plan that waives cost sharing for those with Medicare Parts A and B, such as Aetna Direct, Blue Cross Basic, GEHA Standard, or in the DC area the CareFirst options.
  • My spouse has excellent family coverage from his or her employer and pays no premium. Is there any reason why I should not drop out of the Federal program? If you are within five years of retirement, do not even consider dropping out. That private plan will go away sooner or later and you and your spouse will be stuck. You are not allowed to remain in the FEHBP after retirement without five years of continuous prior enrollment immediately preceding retirement (there are some narrow exceptions, such as layoffs).
  • I read that High Deductible plans are bad buys for older and less healthy individuals. Nonsense. These plans are among the best deals in the program. Taking into account their tax advantages and savings accounts, they rival or beat many other plans. If you know for sure that your routine physician and drug expenses, priced at retail, will be three or four thousand dollars next year, you will probably do better in an HMO or national plan with low copayments. But high expense, in and of itself, is not an argument against High Deductible plans. They have some of the best catastrophic limit guarantees.
  • I have an expensive condition that I am not sure is covered by several plans that you rank high. What should I do? The first step is to get those plan brochures and compare them side-by-side. OPM’s policy for standard brochure formats is one of the best things about the FEHBP. If you read and compare the specific language you may find the answer. If you do not, call at least one plan, and preferably several plans, and call again to protect yourself against mistakes that plan representatives sometimes make. If you are still not sure, consult providers who deal with your condition, or other patients with your condition, or both. Sometimes there is no way around doing your homework.
  • Skip all the details. What is the best plan? There is no one best plan. Every plan is best for at least some people. Our rankings give you a good starting point, but only a starting point. If you don’t want to be bothered with details, then check out only one or two plans carefully. But whatever else you do, read the “how we change” pages of the brochure, along with the “summary of benefits” near the end of the brochure, before you stay in the plan you are in or sign up for a new plan.
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Chapter 12
Our Methods and Data Sources

We compare plans in terms of their likely dollar cost to you, including both the “for sure” expense of the premium and the out-of-pocket (OOP) expenses you face for costs the plan does not pay. We estimate OOP expenses using actuarial methods to evaluate the cost-sharing details of each plan for various categories of costs. All FEHBP plans cover 80 percent or more of most types of expenses whenever your costs are high, and provide a reasonably solid catastrophic limit guarantee. Therefore, the premium covers not only true insurance for rare, high-cost situations, but also pre-payment of routine expenses. When your medical costs are zero the premium is the only expense, but when your medical costs run into the tens of thousands the catastrophic limit (which in most plans is between $6,000 and $12,000 a year) comes into play. Most of the analysis underlying the Guide is aimed at quantifying, and expressing in terms of annual costs, the various risks you face and the reimbursement provided by each plan at each level of risk. We calculate costs assuming that you use only preferred providers, or providers who will agree to network fees, both because sensible consumers will avoid leaving the network if they can, and also because there is no realistic way to estimate the many unknown rates that individual providers may charge.

We calculate likely out-of-pocket costs, taking into account the probabilities of families of various sizes and ages incurring relatively low, medium, or high levels of expense (we actually use eight different expense levels, but do not present detailed results for all of these). The low cost situations are most common but, when weighted for dollar amounts, accounts for a relatively small portion of likely spending. In statistical terms, health care expenses are a highly “skewed” distribution, and the average (or “mean”) is far higher than the typical (or “median”) spending level.

Although most persons do not know whether they will incur large expenses or not—heart attacks, serious accidents, and most other costly scenarios are relatively unpredictable—some persons do have a pretty good idea of some future costs. For example, they may be planning major surgery for a congenital problem. We present data for both groups: persons with and without good information on next year’s expenses and, for those with good prior information, estimated out-of-pocket expenses at several expense levels for each plan. We caution users, however, to beware of attempting to estimate the costs of “known usage” expenses for anything much beyond maintenance drugs. The problem is few are likely to know, and few to have access to, information on such simple questions as the number of visits involved in dealing with a pinched nerve, or with the mix among hospital, surgical, and rehabilitation costs for a condition such as a knee or hip replacement. No one is likely to know if he or she will have a heart attack, a stroke, or a case of Lyme disease next year. Our methods do not force you to make guesses over such matters, or to pretend that the worst will not happen.

Most of the data used in the Guide come from the plan brochures themselves. Plans have several different benefit levels: one for most enrollees when using preferred providers, one for enrollees with Medicare, and one for enrollees when using out-of-plan providers (for most HMOs, reimbursement is zero in this last case, except in emergencies). When analyzed carefully, taking into account the exact wording of benefit descriptions, the brochures tell a clear story. The premiums tell another clear story. However, more is needed to compare the plans usefully and completely.

The estimates of annual expenses we use in the cost tables are based on information taken from a number of sources. The most important of these is the Medical Expenditure Panel Survey (MEPS) of the Agency for Healthcare Research and Quality. This survey produces information on what proportions of the population incur expenses of what kinds and at what dollar levels. We adjust MEPS data slightly to “smooth” the estimates and to cover persons most likely to approximate current FEHBP spending levels. Our cost tables also use rounded estimates to make them easier to read, and the cost headings represent ranges. For example, the entries for expenses of $3,000 represent a range from about $2,000 to $4,500.

Because some plans impose different deductibles and coinsurance for different services, the distribution of costs between hospital and other expenses can affect significantly the amount that a plan will require you to pay for a particular expense total. We model our comparisons closely to average experience. Though few persons or families will have exactly the same cost profile as used in our tables, most situations will be at least close. Our profile, when weighted for probability, corresponds closely to projected expenses of the employed and retired American population as a whole, both in total and in category of expense. Some of the details are shown in the table “Profile of Expenses Used for Cost Tables.”

Our cost comparisons make several other simplifications. First, in analyzing most plans we have to make assumptions about the number of doctor visits and prescriptions to calculate the patient’s share of expenses.

Second, we assume that all bills are for amounts negotiated between plans and preferred providers. Many doctors who are not in the plan network charge more than the plan allows, and all plans do not have the same “profiles” for calculating their maximums. Absent any basis for adjustment, we simply assume what is generally true: all preferred doctors have agreed to limit their charges to plan allowances, and some others will agree to meet that level (or will do so if you tell them what plan you have and explain your cost concerns). There are instances in which some plans’ schedules for some procedures are well below those used by other plans. Unfortunately, there is no way to adjust for this in our tables, though you can protect yourself in the real world by using preferred providers or by getting your provider to promise to stay within your plan’s payment level before getting any expensive service.

Third, we assume that you take advantage of the best cost-sharing rate in each plan. Specifically, we assume that you get network rates by using network providers rather than providers who are not preferred with that plan. For drugs, we assume you use those in the plan formulary.

Fourth, we make assumptions about how many family members incur expenses at each total cost level in a year to calculate deductibles. For example, we assume that in a year with $1,000 in expenses, a family of five will have expenses for three members, and in a year with $130,000 in expenses, for all family members. In the real world, no one’s actual set of yearly expenses will exactly match our assumptions. For plans whose coinsurance rates and deductibles are low or the same for most services, a different mix of expenses would have little or no effect on the cost estimates we present. For other plans, such as those with 100 percent coverage of hospitalization and limited coverage of prescription drugs, a different mix of expenses could change the estimates considerably. However, a different mix would not likely change any cost entry at $3,000 by more than two or three hundred dollars, or any entry for the $30,000 column by more than one or two thousand dollars. (Highly expensive specialty prescription drugs, such as some AIDS, hemophilia, growth hormone, chemotherapy drugs, and osteo-arthritis drugs are the most important potential exceptions.)

We apply our methodology consistently across plans, so that any estimating problem is likely to be small in its effects on the comparative information in the tables.

Profile of Expenses Used for Cost Tables (approximate)
Level of expense $0 $1,000 $3,000 $6,000 $12,000 $30,000 $60,000 $130,000
Components of total expense:
Hospital $0 $0 $0 $0 $5,000 $10,000 $29,000 $86,000
Surgical & Outpatient Facility 0 0 0 0 0 3,000 8,000 8,000
Primary & Specialist Physician 0 500 1,500 3,000 3,000 8,000 10,000 20,000
Prescription Drugs & Other 0 500 1,000 2,500 3,000 7,000 11,000 14,000
Dental 0 0 500 500 1,000 2,000 2,000 2,000
 
Risk of Expense of Each Level:
Self under age 55 12% 49% 15% 11% 8% 5% 1% 0.3%
Family of two under age 55 1% 35% 18% 16% 16% 12% 1% 1%
Self age 55 to 64 5% 33% 20% 19% 12% 9% 1% 1%
Family of two age 55 to 64 0.3% 12% 14% 17% 27% 24% 3% 3%
Self age 65 and older 4% 24% 20% 21% 16% 13% 2% 1%
Family of two age 65 and older 0.1% 6% 9% 14% 28% 34% 5% 3%