This content is sponsored by FEBA.

Federal retirees continue to face important decisions when managing their health insurance in retirement. With updates affecting the Federal Employees Health Benefits (FEHB) program and new requirements for certain retirees, it’s more important than ever to understand how FEHB and Medicare work together to maximize coverage while minimizing costs.

Here’s what federal employees and retirees need to know.

Continuing FEHB coverage in retirement

Under long-standing eligibility rules, federal employees may continue their FEHB coverage into retirement if they:

• Are entitled to retire on an immediate annuity, and
• Were enrolled in FEHB for at least five consecutive years immediately before retirement (or since their first opportunity to enroll).

Qualified spouses, dependent children, and eligible children with disabilities may continue coverage under the retiree’s enrollment without needing to meet the five-year requirement themselves.

Once you retire, you are classified as an annuitant. The federal government continues to pay, on average, about 70–75% of the total FEHB premium (up to the statutory cap). Premiums are deducted monthly from your annuity and are paid with after-tax dollars, unlike the pre-tax deductions taken while actively employed.

Special note for Postal Retirees

Under the Postal Service Reform Act of 2022, most Medicare-eligible postal retirees are now required to enroll in Medicare Part B to maintain FEHB coverage through the new Postal Service Health Benefits (PSHB) Program, which began in 2025. There are limited exceptions for certain retirees. Postal employees should review their specific eligibility rules carefully.

Medicare: What you need to know

Medicare eligibility generally begins at age 65. For most federal retirees, enrollment is optional—but strongly considered—except for most Medicare-eligible postal retirees, who are now required to enroll in Part B to maintain PSHB coverage.

Medicare has four parts:

Part A (Hospital insurance)
 Covers inpatient hospital care. It is premium-free for most retirees who have sufficient work history.

Part B (Medical insurance)
 Covers outpatient services, physician visits, and preventive care. The standard premium is adjusted annually and is higher for individuals with higher incomes due to Income-Related Monthly Adjustment Amounts (IRMAA).

Part C (Medicare advantage)
 Private plans that combine Parts A and B and often include additional benefits. Enrollment requires participation in both Parts A and B.

Part D (Prescription drug coverage)
 Provides prescription drug coverage. Many FEHB plans already include comprehensive drug coverage that is considered creditable.

Enrollment timing and penalties

If you delay enrolling in Part B when first eligible—and do not have qualifying employer coverage—you may face a permanent late enrollment penalty. While actively employed and covered under FEHB, that coverage is considered employer coverage. After retirement, Medicare generally becomes primary and FEHB becomes secondary once you enroll in Medicare.

FEHB: Cancel or suspend?

Retirees managing FEHB alongside Medicare, Medicaid or Tricare have two options: canceling or suspending.

Canceling FEHB

Cancellation is permanent. Once canceled, you generally cannot re-enroll in FEHB in the future. This is a significant, irreversible decision.

Suspending FEHB

Suspension allows you to temporarily stop FEHB coverage if you enroll in:

• A Medicare Advantage plan
• Medicaid
• TRICARE for Life

Suspension preserves your right to re-enroll in FEHB during a future Open Season or upon certain qualifying life events. For many retirees, suspension offers more flexibility than cancellation.

Strategies for maximizing coverage

There is no one-size-fits-all solution. Common strategies include:

1. Keep FEHB and enroll only in Medicare Part A

Because Part A is usually premium-free, many retirees enroll at 65 while keeping FEHB as their primary coverage. This approach maintains broad provider flexibility and can be especially useful for retirees who travel internationally, since Medicare generally does not cover care outside the United States. The potential issue with this plan is that FEHB does not cover some of the costs Medicare B will. If someone realizes this after years of retirement and then goes to add Medicare B, they will have the permanent 10% per year penalties for late enrollment.

2. Enroll in Medicare Parts A and B and keep FEHB

This combination offers near-comprehensive coverage. Medicare becomes primary, and FEHB acts as secondary, often covering most or all remaining out-of-pocket costs. Some retirees switch to a lower-cost FEHB plan to reduce premiums while maintaining strong supplemental protection. Most Basic FEHB plans also offer rebates to help offset the cost of Medicare B. This is the most expensive option monthly, but offers the best protection against large out of pocket costs.

3. Suspend FEHB and enroll in Medicare Advantage

Retirees who enroll in Parts A and B may choose a Medicare Advantage plan. Many of these plans offer low or even zero additional premiums beyond Part B. Suspending (not canceling) FEHB preserves the option to return to FEHB later if circumstances change. This is typically the lowest monthly cost option (depending on IRMAA), but does leave the potential for larger out of pocket costs due to the cost sharing with the Medicare Advantage plan.

Making the right decision

Choosing the right mix of FEHB and Medicare depends on:

• Your income (and potential IRMAA surcharges)
• Health status and anticipated medical needs
• Travel plans
• Prescription drug requirements
• Whether you are a postal or non-postal retiree

With recent structural changes affecting postal retirees and ongoing premium adjustments each year, reviewing your health coverage annually during Open Season is essential.

Carefully evaluating your options can help reduce premiums, limit out-of-pocket exposure, and ensure comprehensive coverage throughout retirement.

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