Participants in the Federal Employees Health Benefits (FEHB) Program have new reasons to consider making changes to their health care enrollments.

The Inflation Reduction Act (IRA), enacted last August, included significant changes to Medicare Part D, the section of Medicare that involves prescription drug coverages.

For FEHB participants, the changes from the IRA improve the value of enrolling in Part D, according to Kevin Moss, editor of Consumers’ Checkbook Guide to Health Plans for Federal Employees.

Some of the IRA’s changes to Medicare Part D have already taken effect, while others will roll in over the next several years.

The law has already placed a $35-per-month cap on the price of insulin, which started in January this year. But before participants make the switch into a plan that has Medicare Part D, they should first check their current FEHB plan, to see if it already offers insulin for less than $35 per month.

“For folks who take insulin, this is welcome news,” Moss said in a Fed Life interview. “This particular provision may help you, or it may not. Our advice is always make sure you’re comparing your existing FEHB plan with what’s available in a Part D plan.”

In another provision of the IRA, the legislation dropped costs to FEHB enrollees after they hit what’s called “catastrophic coverage” under Medicare Part D. Annuitants hit this phase of coverage once their total spending has reached $7,400 in a year. Currently, during catastrophic coverage, enrollees still have to pay a 5% share.

But starting in 2024, that 5% cost to enrollees will be eliminated under Medicare Part D plans.

The legislation will also prevent Part D premiums from increasing by more than 6% in a year. The premium cap will start in 2024 and last through 2030.

Moss said the cap is a significant safeguard for FEHB enrollees, since premiums for Part D increased by 10% last year.

“If you’re thinking with these enhanced benefits that the Part D plans may be jacking premiums, no – there are protections that will protect people in those plans,” he said.

But the real “game-changer” from the IRA, Moss said, is a $2,000 cap on out-of-pocket spending for enrollees in Medicare Part D — that spending can also be spread throughout a full year.

“[That] basically means no one will ever be paying more than $170 in a month on out-of-pocket prescription drugs,” Moss said. “For any annuitants that have average-to-high prescription drug costs … this will be a really big deal.”

The out-of-pocket spending cap will take effect in 2025.

How to sign up for Medicare Part D

There are two ways FEHB participants ages 65 and older can enroll in Medicare Part D – either by enrolling in a Medicare Advantage plan, or signing up for a supplemental prescription drug plan.

The option that participants choose, or whether or not they enroll in the first place, largely depends on their current use of prescription drugs, Moss said.

Annuitants who have higher prescription drug usage should consider which of the two Part D enrollment options work best for them for 2024. But annuitants with lower prescription drug usage can wait to join Part D — there will not be a late enrollment penalty if they change their mind and enroll in the future.

For the first enrollment option, FEHB participants can get Part D by selecting a plan that has Medicare Advantage, also known as Medicare Part C. Annuitants must be enrolled in Medicare Parts A and B to qualify for this type of plan.

Medicare Advantage plans within FEHB can result in significant cost savings for enrollees, because these types of plans reduce or sometimes entirely eliminate the premium for Medicare Part B.

“For almost every federal annuitant, an FEHB Medicare Advantage plan will be the lowest cost option for you,” Moss said.

In the past, federal annuitants were usually better off not getting Medicare Part D, since previous FEHB prescription drug coverage was just as good, or better, than what Part D offers, and with no extra premium.

But that has changed in just the past several years, and the trend will likely continue in the future.

Stepping away from its usual recommendations, the Office of Personnel Management is now encouraging FEHB carriers to offer more Medicare Advantage plans for federal annuitants ages 65 and older.

“Recent changes to laws concerning Medicare drug benefits have made the environment more favorable for FEHB enrollees who are Medicare eligible to benefit from their Part D eligibility,” OPM Associate Director of Healthcare and Insurance Laurie Bodenheimer said in a Jan. 25 letter to FEHB carriers.

Some FEHB plans already offer Medicare Advantage, and annuitants can expect to see more carriers offer Part D bundle options in the future.

The IRA provisions make Medicare Advantage plans especially appealing, Moss said, because of the upcoming limit on out-of-pocket costs for prescription drugs; this area of medical spending can be very costly to enrollees.

The savings, though, can be significant. In some instances, annuitants can save close to $8,000 by switching into a Medicare Advantage plan, according to Moss.

The second option for FEHB participants to get Medicare Part D is by signing up for a supplemental prescription drug plan.

OPM, in another recent change for FEHB, is now letting carriers offer these supplemental prescription drug plans for Part D, along with their other plan offerings. Those prescription drug plans must be as good as, or better than, existing prescription drug coverage, OPM said.

“That language is very important,” Moss said. “In order for that language to be true, it means that there will be no extra premium for you to get that supplemental Part D coverage, because it wouldn’t be as good or better if you had to pay an extra premium for it.”

OPM said it’s also considering auto-enrollment for these plans, for FEHB participants who have Medicare. Participants would still be able to opt out of the plans, but Moss said it’s still important for participants to look carefully at that.

“I think a little bit of homework right now that might be helpful is to take a look at some of the FEHB Medicare Advantage plans that are out there already,” Moss said. “Take a look at how they work, take a look at their provider networks to make sure the providers that you would use are offered by these plans. And really consider whether one of these plans could save you quite a bit of money. The FEHB Medicare Advantage plans aren’t going to be right for everyone.”

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