FEHB Cost Comparisons

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 26 who are not covered by a parental FEHB 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 FEHB plan 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 considers 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 considering 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 the employee share of 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 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 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 medical bills now or in old age.

If you join a Consumer-Driven plan with a "personal account" or 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 these savings accounts if they join one of these plans.

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 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. If 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 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 as well as the "for sure" premium expense.

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. Again, this is because you have to pay the premium whether your medical expenses are high or low.