How to Save Money on FEHB Coverage and Healthcare Costs
With the average enrollee share of FEHB premium increasing 7.7% next year, most federal employees will pay more for health insurance in 2024. We’ll analyze this premium hike and walk you through money-saving strategies on FEHB plan selection, enrollment, health savings accounts, and flexible spending accounts.
Premiums
When OPM announced the 2024 FEHB Open Season, they cited increased cost and use of prescription drugs, emergency room care, and outpatient care as reasons for the premium increase. The KFF employer health benefits survey finds employer-sponsored health insurance premiums climbing 7% on average in 2023. In a period of high inflation, both private employers and the federal government are seeing healthcare costs rise.
Keep in mind that the average enrollee increase doesn’t mean all FEHB plans raised premiums. Of the 154 plans that were available in both 2023 and 2024, premiums decreased for 31, stayed the same for 8, increased below the average for 68, and increased above the average for 47.
How did your plan change? You’ll want to check how this important for-sure expense will impact your budget next year.
Estimated Total Cost
While premium is an important factor, a better way to compare plans is on estimated yearly cost—the combination of for-sure expense(premium) plus likely out-of-pocket costs. For 45 years Checkbook’s Guide to Health Plans for Federal Employees has ranked plans on estimated total cost based on user information—age, family size, and expected healthcare usage. The benchmark ranking shows big cost differences among plans.
For example, a family of four in the Washington, D.C., area with age 50 primary insured and average healthcare expenses could save $4,740 in estimated costs switching from BCBS Standard to NALC CDHP.
Two Person Family Enrollment
A married couple or a parent and child have the option to enroll as either self-plus-one or self-&-family. Most of the time self-plus-one is less expensive, but next year there are 49 plans where self-&-family enrollment is cheaper.
There is a sizable amount of money at stake that you could save, or waste, based on your enrollment decision. For example, a two-person family considering the D.C.-area Kaiser High (E3) plan can save $59.68 bi-weekly enrolling as self-&-family compared to self-plus-one. That adds up to $1,552 annually.
You can find premiums by enrollment type on the last page of any FEHB brochure (found on the OPM plan comparison tool and Checkbook’s Guide to Health Plans). Look for the enrollee share of premium and choose the enrollment option that is lower. You receive the same plan benefits regardless of enrollment type.
Health Savings Accounts
High Deductible Health Plans (HDHP) that offer a Health Savings Account (HSA) allow federal employees to save for current and future healthcare expenses, with the flexibility of an additional stream of income in retirement. Most federal employees will find HDHPs to be one of the cheapest health plan types because they generally have lower premiums than many popular PPOs. The HDHP contributes between $900 to $1,200 to the HSA as a premium passthrough for self-only enrollees and $1,800 to $2,400 for self-plus-one and self-&-family enrollees.
Additional voluntary HSA contributions are allowed, and they’re triple tax-advantaged—they go in tax-free as a payroll deduction, they grow tax-free, and can be withdrawn tax-free for qualified healthcare expenses. Once you turn 65, you can make non-medical distributions which would be subject to normal taxes. In many ways the HSA converts to an IRA when you turn 65 with the added flexibility of tax-free distributions for healthcare expenses.
HSA contributions are on the rise for 2024. Between the plan and the enrollee, up to $4,150 can be contributed for self-only enrollment, and $8,300 for self-plus-one or self-&-family enrollment.
Flexible Spending Accounts
Only one in five federal employees has a flexible spending account (FSA). That number is way too low as every federal employee will have some qualified out-of-pocket costs that they could save 30% on by paying through the FSA. Doctor visits, urgent care visits, prescription drug costs, dental care, vision care, and many over-the-counter pharmacy items are all FSA-qualified healthcare expenses and have some predictability. You’ll need to budget wisely using an FSA as there is a use-it-or-lose-it component. If you set aside the full amount, $3,200 in 2024, you can only roll over $640 of unused money into the next plan year if you stay enrolled in an FSA.
Even federal employees enrolled in an HDHP can benefit from the FSA. IRS rules prevent having an HSA and healthcare FSA, but you can enroll in a Limited Expense HealthCare FSA (LEXHCFSA) for dental and vision expenses. HDHP enrollees should strongly consider doing so as you’ll be able to increase the likelihood of keeping your HSA funds invested by paying dental and vision expenses through the LEXHCFSA.
FSAFeds manages the federal FSA program. For 2024, FSA Open Season runs during the same Open Season window of November 13th through December 11th.
The Final Word
Only about 5% of federal employees switch health plans every year. Maybe your current plan is still the right one for you, but if you haven’t looked at your options recently, you’ll likely find other plans that cost less and still provide as good or maybe even better coverage.
Make sure to take advantage of tax-preferred savings vehicles that are only available to you as an active employee. The FSA and HSA go away when you retire and are on Medicare. They represent a guaranteed way to save money on healthcare costs in 2024.