Healthcare Affordability Part 4: How Annuitants Can Use Expected Healthcare Costs To Help Choose the Right Health Plan
If choosing a health plan while you were working felt complicated, retirement takes that complexity to another level. Once you become eligible for Medicare, you're not just picking an FEHB plan, you're also deciding which parts of Medicare to enroll in.
Part A (inpatient care) will be an easy yes for most retirees. There’s no premium if you have 10 or more years of work history because you've already paid into it through payroll taxes.
Part B (doctor visits and outpatient care) is a trickier call. It comes with a $202.90/month premium, and if your income exceeds certain thresholds, you'll pay more. Individual filers with modified adjusted gross income above $109,000, and joint filers above $218,000 are subject to an Income-Related Monthly Adjustment Amount (IRMAA), which adds at least $81.20/month on top of the standard premium.
So why enroll in Part B? Three reasons:
- Lower out-of-pocket costs. Many FEHB plans waive member cost-sharing for Part B covered services.
- Broader provider access. If your FEHB plan doesn't cover out-of-network providers, Part B lets you see any provider that accepts Medicare, though the Part B deductible ($283) and 20% coinsurance may apply.
- More plan options. Part B allows you to enroll in Medicare Advantage (MA) plans.
Federal annuitants have had access to MA plans through certain FEHB carriers, where you keep your FEHB enrollment and premium. But there's a third option: suspending your FEHB coverage to enroll in a commercial MA plan. This eliminates your FEHB premium entirely.
Checkbook's Guide to Health Plans models FEHB plans based on estimated total yearly costs, or your premium plus projected out-of-pocket costs, and includes MA plans offered through FEHB carriers. In this article, we’ve also looked at commercial MA plans with FEHB suspended.
This research was first published in the May 2026 issue of NARFE magazine. For those annuitants with Part B, your expected healthcare usage can help you decide which of the three options may work best for you.
Methodology
We used the same user profile to calculate yearly cost estimates for all three plan options: a 65-year-old federal annuitant living in Fairfax County, VA (ZIP code 22035), who is enrolled in Medicare Parts A & B, has an income below $109,000 and is not subject to Part B or Part D IRMAA. The three lowest cost plans for average expected healthcare costs from each plan type (FEHB, MA from FEHB carrier, and Commercial MA) were used to compare low and high-cost years. To see a ranking on estimated yearly costs for all FEHB plans and MA plans from FEHB carriers, visit the Checkbook Guide.
Low expected healthcare usage
Federal annuitants with low healthcare costs can save money by enrolling in an MA plan. Those from FEHB carriers deliver savings from the cheapest FEHB plans by offering more generous Part B premium reimbursement. Commercial MA plans offer even greater savings mostly through the elimination of a plan premium.
Average expected healthcare usage
If you expect more healthcare costs but not anything major, MA plans can still offer value compared to the cheapest FEHB plans with average expected healthcare expenses throughout the year.
High expected healthcare usage
If you’re managing a chronic condition or expect other major healthcare procedures like an inpatient hospitalization, commercial MA plans will be the most expensive option compared to lower cost FEHB and MA plans from FEHB carriers. That’s because commercial MA plans don’t eliminate out-of-pocket costs, and the more services you use, the more you’ll be on the hook to pay.
What Else to Know About Medicare Advantage
If you’re thinking about enrolling in an MA plan, you’ll want to consider the following:
Access to Providers: You’ll likely have a different provider network in an MA plan compared to your current FEHB plan, and it could have fewer doctors. Go to the carrier website and use the provider directory lookup tool to see if your current doctors and any providers you may want to see in the future will be covered.
Prior Authorization: Medicare Advantage plans typically require more prior authorization than FEHB plans, meaning your insurer must approve certain services before you receive them. That extra step could delay care and, in some cases, result in claim denials.
Prior authorization varies significantly depending on where you live. According to the Commonwealth Fund's State Scorecard on Medicare Performance, the share of MA plans requiring prior authorization for specialist and preventive care visits ranges from just 8.3% in South Dakota to 73.1% in Washington.
Review the official plan documents and the carrier website for the MA plan you’re considering to learn about these requirements.
IRMAA: Federal annuitants subject to IRMAA must decide if the savings from enrolling in an MA plan are worth the extra surcharge from Parts B & D. Those in the first or second IRMAA income tierwho enroll in Part B will find that an MA plan will be the most cost-effective choice, as only those plans offer higher Part B premium reimbursement, which helps offset the surcharges.
No Family Coverage: Commercial MA plans come with an important limitation: You can only suspend your FEHB coverage to enroll if you don't need to cover a spouse or a dependent.
By contrast, both FEHB plans and MA plans from FEHB carriers allow family coverage. When you're enrolled as self-plus-one or self & family, Medicare-eligible family members receive the enhanced Medicare benefit (where applicable) in those plan types, while non-Medicare members receive standard plan benefits, all under the same enrollment.
If family coverage is a factor, suspending FEHB for a commercial MA plan is not an option.
Higher Out-of-Pocket Costs: Unlike certain FEHB plans and most MA plans from FEHB carriers that eliminate out-of-pocket costs for Part A & B services, commercial MA plans still have out-of-pocket costs. In low or average healthcare years, the premium savings help to insulate the costs of those out-of-pocket expenses. However, nobody can perfectly predict their healthcare costs, and if you have an unexpected hospitalization while enrolled in a commercial MA plan, your out-of-pocket costs will be much higher compared to other plan types.
Higher Catastrophic Limit: In a worst-case year, commercial MA plans can leave you exposed to higher out-of-pocket costs. The catastrophic limit, or the most you'll pay before the plan covers 100%, tends to run higher in commercial MA plans than in FEHB plans or MA plans from FEHB carriers. For example, the Humana Direct Choice Giveback plan caps in-network costs at $9,250, compared to $6,000 for Aetna Direct CDHP.
In Summary
For federal annuitants enrolled in Part B, the plan landscape extends well beyond FEHB. MA plans, whether through an FEHB carrier or a commercial plan with FEHB suspended, can offer meaningful savings.
Commercial MA plans will not be the right fit for everyone, particularly those who anticipate high healthcare use. While these plans may offer financial savings, there will be tradeoffs like access to providers, prior authorization, and higher out-of-pocket costs that will need to be factored into your plan decision.
What makes FEHB coverage in retirement so valuable is the safety net it provides. FEHB is guaranteed issue, meaning you can suspend coverage, try a commercial MA plan, and return to FEHB during any future Open Season, no questions asked. That flexibility simply doesn't exist for most Americans. Those without retiree health benefits who stay in a MA plan for more than 12 months lose guaranteed issue rights to Medigap supplemental plans in 46 states. That opens the door to medical underwriting, where insurers can charge higher premiums or deny coverage altogether, effectively trapping people in MA because the cost of leaving is too high.
Federal annuitants will never face that trap, but they should still choose carefully. The right plan in retirement comes down to your expected healthcare usage and the total yearly costs across all available options, a calculation worth making before every Open Season.
