Brian Swerdlow: Improvements to Medicare Part D have some FEHB participants considering changing their health care.

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by Brian Swerdlow

If you participate in the (FEHB), you may want to consider making changes to your healthcare enrollment.  That’s because there have been significant improvements to the Medicare Part D prescription drug coverages under the Inflation Reduction Act (IRA).

The Act potentially makes enrolling in Part D more valuable for FEHB participants. Several of the Inflation Reduction Act’s improvements to Medicare Part D are already in effect, and other provisions are scheduled to roll in over the next few years.

You may have already heard about the Inflation Reduction Act’s $35-per-month cap on the price of insulin, which started in January of 2024.  However, before deciding to switch to a plan offering Medicare Part D based on the new insulin pricing, you should first check your current FEHB plan. Your current plan may provide insulin for less than $35 per month. 

Another feature of the IRA is that the legislation drops costs to FEHB enrollees after they reach what’s known as “catastrophic coverage.  ” Under Medicare Part D, an annuitant hits this phase of coverage when their total prescription spending reaches $7,400 in one year. Currently, if you are covered by catastrophic insurance, you still have to pay a 5% share. Starting in 2024, however, the 5% cost to enrollees is eliminated for Medicare Part D plans.

The Inflation Reduction Act also prevents Part D premiums from increasing by more than 6% per year. This premium cap begins in 2024 and is scheduled to last through 2030. The cap is a critical safeguard for FEHB enrollees, especially since Part D premiums increased by 10% last year. The idea of the cap is to prevent burdensome premium spikes due to the enhanced benefits.

According to many experts, the most crucial change generated by the Inflation Reduction Act is a $2,000 maximum on out-of-pocket costs for Medicare Part D participants.  Annuitants can spread this amount throughout an entire year. This provision essentially means that no enrollee will have to pay more than $170 dollars in a month for out-of-pocket prescription drug costs. I you have average-to-high prescription drug costs, this provision could impact you dramatically.  The out-of-pocket spending cap takes effect in 2025.

So, how do FEHB participants participate in Medicare Part D?

If you are an FEHB participant aged 65 and older and want to enroll in Medicare Part D, there are two ways to do so.

You could either enroll in a Medicare Advantage Plan or sign up for a supplemental prescription drug plan.

The option that you choose, or whether you even want to enroll in Part D at all, depends primarily on your current prescription drug usage.   If you are an annuitant with higher prescription drug usage, you may want to think about which of the two Part D enrollment options works best for you for 2024.  If you are someone with lower prescription drug usage, you can always wait to join Part D.  Fortunately, there is no penalty if you change your mind and enroll later.

FEHB participants can obtain Part D by selecting a plan that offers Medicare Advantage, also known as Medicare Part C. To qualify for a Medicare Advantage Plan, you must be enrolled in Medicare Parts A and B.

Medicare Advantage plans within FEHB can result in cost savings for enrollees. These plans may reduce or sometimes entirely eliminate the premium for Medicare Part B.  Typically, an FEHB Medicare Advantage plan is the lowest-cost option for federal annuitants.

The second way for FEHB participants to get Medicare Part D is to sign up for a supplemental prescription drug plan. In another change for FEHB, the Office of Personnel Management now allows carriers to offer these supplemental prescription drug plans for Part D, along with their other plan offerings.  The catch is that all such prescription drug plans provided must be as good as, or better than, existing prescription drug coverage.

The OPM says auto-enrollment is also being considered for these plans.  Auto-enrollment would be for FEHB participants who have Medicare. Under the proposal, you would still be able to opt out of the plans if you wanted to.

However, you’ll want to carefully consider the implications of opting out.  It would help if you examined some of the FEHB Medicare Advantage plans that are out there already to understand how they work.  Review available networks to ensure the preferred providers that you would like to use are offered by these plans. Decide whether one of these plans might save you money. FEHB Medicare Advantage plans are not always the best choice for everyone.

Summary:

Federal employees with FEHB coverage could potentially benefit from lower prescription drug costs due to changes in the Inflation Reduction Act. These changes include the option to pay out-of-pocket drug costs via capped monthly installments instead of all at once at the pharmacy.

Another crucial change caps annual out-of-pocket costs at $2,000.

Starting in 2023,   The Act reduced insulin costs to no more than $35/month per covered insulin product.  Under the Inflation Reduction Act, recommended vaccines are now available at no cost for Medicare Part D enrollees.

In the past, federal annuitants were usually better off not getting Medicare Part D since FEHB prescription drug coverage tended to be as good, or better, than what Part D offered. Also, there was zero additional premium.  However, a lot has changed in just a few short years, and more changes are likely in the future.  The Office of Personnel Management now actively encourages FEHB providers to give annuitants more Medicare Advantage plan choices.

Inflation Reduction Act improvements to Medicare drug benefits mean it is now more favorable for Medicare-eligible FEHB enrollees to benefit from Part D.  Some FEHB plans already offer Medicare Advantage. 

Annuitants will see even more insurance carriers offering Part D bundle options in the future.  Medicare Advantage plans are now especially appealing and include an upcoming limit on out-of-pocket costs for prescription drugs.  The savings can be significant. In some instances, annuitants will save nearly $8,000 simply by switching to a Medicare Advantage Plan.

I have made it my mission to simplify and streamline the process of optimizing your federal benefits.  Contact my office today if you would like me to review your benefits at no cost and offer suggestions that could save you time, frustration, and money.