- The Washington Times - Monday, July 7, 2003

Federal employees who “save” money by piggybacking on their nonfederal spouses’ health insurance plan are playing a risky game. Death, divorce, layoff or retirement could leave the fed without any kind of coverage at a time when he or she may need it most.

Unlike many private sector employer-backed health plans — where coverage ends with retirement — the Federal Employees Health Benefits Program (FEHBP) is for the life of the fed and his or her spouse. Retirees are eligible for the same plans, benefits and premiums as young healthy feds.

The vast majority of federal postal workers and retirees are covered under FEHBP. The government pays the lion’s share (about 73 percent) of the premium. Singles pay $500 to $1,300 per year for a wide range of coverage and plan choices. Family premiums (regardless of family size) run $1,000 to $3,100 per year.

In the past, many private companies offered better or less costly (or both) health insurance than Uncle Sam. But those days are mostly gone. Many no longer offer coverage, and most who do drop it at age 65 or retirement.



Feds can carry their health insurance into retirement — for life — provided they have been covered by any of the federal health plans for the five years prior to retirement. Many don’t know or think about the five-year rule. Some wind up working longer to qualify for insurance in retirement.

Now there’s a new wrinkle.

Many federal agencies will offer retirement-age workers buyouts in the coming months. Others will make it possible for some people (with 25 years of service) to retire at any age. But if you get a shot at a buyout or early out you may have to pass it up because of your inability to insure yourself and family under the federal program because of the five-year rule.

Many experts recommend that feds take out a low-premium FEHBP policy (even if they never use it) as insurance that they will be able to have health insurance should disaster strike the family, or if an early-out or buyout offer comes along.

‘Premium conversion’

Active and retired feds (and eligible spouses) in the same federal health plans pay the same premiums regardless of age, health or pre-existing medical conditions. But there is one distinct advantage workers have over retirees.

Active-duty feds can opt for “premium conversion.” It lets them pay premiums in pretax dollars, saving them $300 to $500 (and in some cases much more) each year in taxes. Retirees can’t do it because that would require a change in the tax code.

Extending the premium conversion perk will be the subject of a hearing tomorrow before a subcommittee of the House Government Reform Committee. It’s expected to OK a bill by committee Chairman Thomas M. Davis III, Virginia Republican, that would allow retirees to pay their premiums with pretax dollars.

Sen. Daniel K. Akaka, Hawaii Democrat, is pushing the bill in the Senate. It’s considered to have the best shot at passage of any pro-fed bill on the Hill.

Not if but when

Insiders say the question isn’t whether Congress will allow the Defense Department to transform itself but rather how dramatic that transformation will be.

The House-passed version (which includes most of the original Defense requests) changes the scope of union bargaining and gives the Pentagon greater authority (outside regular civil service rules) to hire, pay, promote and fire workers.

Layoffs, now done under a last-hired-first-fired system, could be changed to give greater job protection to workers based on their performance ratings rather than their time in government.

The Senate version gives Defense less work-life power over civilians and is preferred by most groups and unions representing feds, and House Democrats. The issue of how much, and how fast, the Defense Department can transform its civilian work force should be decided by the fall. Once it happens in Defense, other agencies (such as the National Aeronautics and Space Administration) will seek the same management freedoms.

• Mike Causey, senior editor at FederalNewsRadio.com, can be reached at 202/895-5132 or [email protected]federalnewsradio.com.

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