As January 1 nears, consider improving your health care coverage

There are some notable changes to health care for 2024. Retired or not, it would serve you well to understand those changes and your options. With some timely ...

There are some notable changes to health care for 2024. Retired or not, it would serve you well to understand those changes and your options. With some timely advice, the editor of the Checkbook Guide to Health Plans for Federal Employees, Kevin Moss, talked with the hosts of the podcast Fed Life, Tom Temin and Drew Friedman on  the Federal Drive with Tom Temin.

Interview Transcript:

Tom Temin Let’s talk about annuitants retirees. There’s lots of changes in the health benefits plans for them coming in 2024. And they equally to the working people have a lot of choices to make and now they have the opportunity to make them. Give us the rundown of the top line. They need to know.

Kevin Moss Two big things. One, higher premiums, 7.7% for [Federal Employees Health Benefits (FEHB)], but also you’re going to see a Part B premium increase, too. It’s only about 6%. So it’s about a $10 price hike per month. That’s now the Part B standard premium, one 170-470 a month. The other huge thing though, is Medicare Part D. Federal employees haven’t had to worry much about.

Tom Temin D is there debt.

Kevin Moss D is for drugs in this case, Tom. And the D for drugs is, federal employees really haven’t had to worry much about Part D in the past because prescription drug coverage in the FEHB plans has been as good as what you could get in a Medicare Part D plan, and didn’t require you to go out to Medicare Part D and pay an extra premium in order to receive it. But in 2022, the Inflation Reduction Act is passed. In it are really important reforms that improve Medicare Part D. This year, insulin capped at $35 a month, next year 2024, no enrollee cost share over the catastrophic phase, and Part D premiums can’t rise more than 6%. And then the big one that’s heading in 2025, $2,000 out-of-pocket spending cap. You no longer will be charged more than $2,000 for any out-of-pocket prescription drug costs out of a Part D plan. [Office of Personnel Management (OPM)] saw these changes and in the spring signaled to the plans that they would like to see the plans be able to provide more Medicare Part D options in their FEHB plans, and importantly, allow for the first time a new plan type, and that is called a PDP plan or a prescription drug plan. This has never been offered before in FEHB, next year there are 17 FEHB plans that will have a PDP plan. All of them will auto enroll you if you’re in that FEHB plan and you have Medicare Part A or parts A and B, there’s one difference, and that is the Blue Cross plans. You must have both A and B, they will not auto enroll you in Medicare Part A. The plans already, probably by the time you listen to this episode have sent out a notice to you if you’re impacted. Let’s run down the plans real quick. It’s all Blue Cross Plans. Standard Basic FEP Blue Focus. NALC High, MHBP Plans. APW High, Rural Carrier, Foreign Service, Samba Plans, Health Partners, Aetna Direct Consumer Option and Aetna Open access, High end Basic.

Tom Temin And just a basic question. This covers drugs that are out there that are approved by the FDA, that are in the Medicare system. Once in a while, you hear about some new drug that comes out for an exotic disease or it’s an exotic remedy, and it’s $50,000 for the year. Those generally aren’t covered, right?

Kevin Moss Sometimes they are. In fact, the last two Medicare Part B increases were actually covering those types of really expensive drugs. Those were actually the principal drivers of some of these Medicare Part B increases. But generally speaking, they may not cover those really expensive experimental clinical trial like type drugs. They’re going to be FDA approved. Do keep in mind that the formulary on these plans is managed by CMS, not OPM. So there could be some differences. Probably not if a drug is covered at all. The difference generally is in what tier it’s covered and the tier that it’s covered sometimes has impact on your out-of-pocket costs. So in order for these plans to be approved by OPM, they had to offer benefits that are as good or better. We’ve looked at the coverage. It’s true. Generally, the co-pays, the co-insurance is going to be at least the same from the FEHB plan. In some cases, it is lower. And importantly, in a handful of those plans that we mentioned, of the 17, they have added the $2,000 out-of-pocket max a year early. So Blue Cross standard MHBP plans, Aetna plans, foreign service and rural carrier in 2024 have that $2,000 out-of-pocket max protection. So if you have moderate to high prescription drug use, and you’re not in one of those plans, this could be a really amazing way for you to save some serious money next year by enrolling in one of those plans.

Drew Friedman And just going back to some of the changes, specifically from the Inflation Reduction Act, I’m also curious, Kevin, if there are sunset dates to some of those changes. Are these permanent things moving forward? Or is there going to be kind of an end date to some of those caps? For example.

Kevin Moss The one that I know of is that premium protection. I think that it’s only for the first six years. So I think that sunsets, I think in 2030. That may not actually impact FEHB enrollees that much, because there is no additional premium for this Part D coverage. If you are below Irma which is the income related extra amount you have to pay, if your income is over a certain amount, those amounts have risen for 2024. Social Security put it up to 103,000 for individuals, up to 206,000 for couples. That’s your adjusted gross income. It’s a two year lookback. If you are Irma, if you’re an Irma person, realized for Part D, it’s only about $13 a month in the first tier. You may be getting a lot more value than $13 a month with this extra Part D coverage. But Irma is one of those things where it may be something that you don’t want. The plans will give you an opportunity to disenroll if that’s what you want. You have basically a 30 day window from when you get that letter to contact the plan and say, I don’t want this Part D coverage. So it’s Irma. The only other case to consider is if you receive pharmaceutical support for purchasing a drug like a discount coupon, you will no longer receive that discount coupon if you have Medicare Part D coverage. So if you’re getting that type of support, that could be another reason why you may not want this Part D coverage, but check with the new Part D plan and see how they will cover the drug that you’re getting support for. You may find out that the part D plan does just as good a job as that pharmaceutical support.

Tom Temin Yeah, so the same kind of gestalt applies then. You really need to do some homework even if you are an annuitants. And just like federal employees still working, don’t presume anything and just don’t automatically roll over even though most people do. This is a really good year to examine it carefully. Bringing your own kitchen drawer full of pills with you when you do it.

Kevin Moss Yeah, there’s a little bit of friction to that. You’re going to have to go to the plan website, search on the plan formulary on the website to see how that plan is going to cover a drug. You should see that it will still be covered if it was covered by your FEHB plan, but you will want to know how they classified it on the tier system and then know what that out-of-pocket obligation will be. You should find that it’s as good or better, but make sure you’re double checking that.

Drew Friedman And are there other resources that retirees should be looking at right now? At least from my perspective, a lot of this could be very complicated to look at and to understand where should retirees start when they’re trying to think about all of this?

Kevin Moss Well, I’ve got a We publish our Guide to Health Plans, where we take all of these factors into consideration to rank the plans on estimated yearly costs. And we find big time savings for annuitants, who actually look at our guide and consider their options. There’s one other way, Drew, for people to take advantage of Part D, and it’s Medicare Advantage. And Medicare Advantage plans have been around for a few years now. They package original Medicare and B with a Part D plan. There’s even more options available in 2024, GEHA high and standard two national plans are now offering a Medicare Advantage plan. The way these work is, there’s some type of Part B reimbursement anywhere from 75 to 150 or more. In fact, Kaiser plans out in the Pacific Northwest and California, they’ll go all the way up to 250. And that helps people who have to pay a part B late enrollment penalty or perhaps they have to pay Irma. So you get some part B money back. And then importantly, some of them have zero out of pocket health care costs. You go to the doctor, zero hospital, zero chiropractor, zero, acupuncture, zero. The only thing that you pay out of pocket is prescription drugs. And then some of these Medicare Advantage plans are giving you the $2,000 out-of-pocket max a year early. Aetna advantage next year, $2,000 out of pocket for prescription drugs. And that’s really your only out of pocket health care costs.

Kevin Moss These have amazing savings to federal employees. When we did the numbers for 2024, if you’re in Blue Cross Standard and switch to United Choice Primary, it’s not available everywhere, but it’s available in about half the states. You’ll save over $8,000. And most of that is for sure savings because of how high the premiums are in Blue Cross standard, both Part B and in the FEHB premium. Now that’s for a seven year old primary insured self, plus one who lives in the D.C. area with average health care expenses. So your savings may be different than that, but the Medicare Advantage plans have tremendous value. They’re probably going to be one of the lowest cost health plans for most people, but they may not be the right plan for everyone. If you’re one of those high income folks that’s income above 103,000 for individuals or 206,000 for a couple. You have to pay to Irma’s. You’ve got to pay part B, Irma and Part D, Irma. So that’s an extra. Even in the first tier, it’s an extra about $70 on part B, it’s an extra 13 or so dollars on Part D. The financial value’s now eroded, hasn’t it? And the other thing to keep in mind is provider choice. Sometimes the providers that you have access to may be less than the plan that you’re coming from. The Medicare Advantage plan say that you can see any provider that accepts Medicare and the plan. So definitely check to see how your current providers will be covered if they are covered, and also any future providers that you may want to see, things like Mayo Clinic down the road, or M.D. Anderson or some of the other Cleveland Clinic, some of the other really famous health care systems. If those are important to you, maybe not now, but sometime in the future, check that Medicare Advantage provider directory to see how they’ll be covered.

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