24k Cadillac Stethescope

Happy January 13th!  It’s a New Year for your Federal Employee Health Benefit (FEHB) Plan. Have you put your new insurance card in your wallet yet?

The Patient Protection and Affordable Care Act (referred to by the short-hand ‘ObamaCare‘ moniker in this post) puts a lot of changes on the middle class and most Federal Employees starting this year.  Here’s a summary of how it will impact you (h/t to Paul Sisson of San Diego U-T for the summary).

 2013 Effects (High impact on Feds):

  • FSA HC Deduction reduced from $5000 to $2500.
  • Medical expense deduction threshold rises from 7.5% of AGI to 10% of AGI.  Translation: Federal Employees (and the rest of the middle class) have NO CHANCE to deduct medical expenses unless they migrate over to a High Deductible Health Plan(HDHP) with Health Savings Account (HSA).

 2014 Effects (Minimal impact on Feds who are Full-Time employees):

  • Employer Mandate – Employers with 50 or more employees must provide Health Insurance or pay a fine.  I thought the folks in DC rooted for the Redskins, not the 49ers?
  • Individual Mandate – If you make enough to file a tax return you must purchase health insurance, IF the cost does not exceed 8% of your income.  Penalties grow from $95/adult in 2014 to $695/adult in 2018.

 2018 Effects (Potential High Impact on Feds):

2018 is when the ‘Cadiallac’ Tax kicks in.

If the annual health care benefit provided (that’s the combination of what YOU pay in premiums, plus what your employer (FEHB) contributes in premiums) totals more than $10,200 per year for individuals or $27,500 for families, then the insurer (employer) pays a 40% tax.  Translation: FEHB benefits exceeding this level will not be provided in 2018, as the 40% tax will be charged to the taxpayer.

Is the Health Care vehicle you are presently driving destined to become a shiny new Cadillac someday? It’s possible for some FEHB plans and very likely for others depending on the rate of Health Care Inflation between now and 2018.  Note that since 1999 Health Care inflation has averaged 8.83% per year.

At a 5% Health Care inflation rate, the following FEHB plan is classified as High-Risk of becoming a Cadillac in 2018 (2018 Total Monthly premium of $850/mo. Self,  $2292/mo. Family):

  • SAMBA High Self – (Currently $661/month)

2018 Cadillacs at 8% Health Care Inflation:

  • SAMBA High Family (Currently $1558/mo.)
  • BCBS Standard Self ($599/mo.)
  • GEHA High Self ($611/mo.)
  • MHBP – Std ($622/mo.)

2018 Cadillacs at 11% Health Care Inflation:

  • BCBS Standard Family (Currently $1354/mo.)
  • Almost ALL FEHB Fee-For-Service Self Plans

As mentioned here, I’ve switched the GubMints family to a HDHP/HSA for 2013. Can a Federal Employee with a family of four save money switching to an HSA?  Stay tuned!


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It’s Wabbit Open Season for Federal Employees.  Each year I look at my Federal Employee Health Benefit (FEHB) choice, my Health Care Flex Spending Account (FSA) election, and my Dependent Care FSA election.  Sock away too much FSA money and you’ll never get it back.  Sock away too little FSA money and you’re leaving a free discount- as much as 35% in tax savings- on the table for Dependent Care and Medical expenses.

Dependent Care FSA is easy- Figure out how much in allowable tuition and fees you will spend next calendar year on your young child, then make the election.   As Drew Rosenhaus would say, “Next Question”!

Next up is a much more complex choice- your FEHB plan and its associated Medical FSA.  In order to figure out how much (or if) you will elect for your 2013 Health Care FSA, you first have to figure out what health plan you will use. I’ve been using the (free) PlanSmartChoice analysis tool provided to Federal Employees to compare health care plans and their associated costs.  The first step is to gather the necessary data for entry.

Log in to your mint.com account and look at your spending on Health Care costs for the last 12 months:

As you can see, my family is using a 3rd party discount plan for  Dental Insurance.  We’re happy with all the choices it provides, but we’ve been paying a lot out of pocket for dental!  Click on the ‘Transactons’ link to get a listing of how many Dentist, Doctor, and Pharmacist visits you’ve had in the last 12 months… In our case it is ~$900 in Dental Visits plus Dental Insurance Premiums (plus ~$700 in non-covered Orthodontic Devices).  We’ll plug the medical and dental visits and $$ in to the PlanSmartChoice engine.

Next is to log in to the PlanSmartChoice website.  Enter your personal data (don’t worry- they only email you once per year to let you know the site is ‘live’ for the next Open Season)  here:

Don’t forget to enter the info (number of Doctor visits and Prescriptions) for your dependents as well.

Next up, Choose the types of plans you are interested in (HMO, HDHP, PPO etc), or leave it set to the default value (‘Any’).  You’ll get the full listing of available Health Plans and what their Estimated Total Costs (Premiums Plus Out-of-Pocket) for the year are.  You can sort by Total Cost, Plan Type, etc:


In my case, I scrolled down the page to compare my existing plan- Blue Cross Blue Shield Basic (Code 112) to Aetna HealthFund HDHP/HSA (Code 225), because I’m considering switching to an HSA next year:

(*** IMPORTANT SIDEBAR ***  You’re a Sucka if you consider any health care insurer who is not a household name.  Why? If you choose the ‘Midwestern Radiological Workers Union Plan’ or ‘Health Insurance for Rural Postal Clerks’, the receptionists and billing clerks at your doctor’s office have NO CLUE how to enter the medical coding and billing info in to their database- you’re going to get hosed and spend half your waking hours fighting billing discrepancies.   My family found this out the hard way- don’t be distracted by the ‘quality awards’ or ‘consumer awards’!)

On the surface, it looks like the plans are pretty equal- $4854 in Total Cost for the Aetna HDHP/HSA vs $5031 to stay with BCBS.   If your choice is a  ‘conventional’ Health Plan (non-HDHP/HSA), you could plug this number (the Out-of-Pocket Costs) in as your Health Care FSA election.

But there are two flaws with the PlanSmartChoice comparison tool in my family’s case.

First, the comparison tool does not account for the employer’s $1500 annual HSA ‘kickback’ contribution (shown in red circle, upper right).  This reduces the Total Cost of the HDHP/HSA by $1500 to $3354.

Halftime Score:

BCBS Estimated Total Cost: $5031
Aetna Healthfund Estimated Total Cost: $3354
Aetna HDHP Savings: $1677

Second, Dental.  The PlanSmartChoice Health Plan Comparison tool does not let you do an apples-to-apples comparison of dental benefits within health plans (it directs you to a separate tab to compare the purchase of separate FEHB dental plans).  Well, some Health Plans (like Aetna HDHP) provide 100% preventative dental (exam, cleaning, xray) coverage, while some plans (like my current BCBS ‘Basic’ Health Plan) provide virtually nothing.  Note that in the last year I paid about $900 in 3rd party Dental Insurance premiums and preventative dental treatments.  If next year is anything like this year and I keep BCBS ‘Basic’ Health coverage, I’ll have to add $900 to the Estimated Total Cost of BCBS.

Final Score:

BCBS Estimated Total Cost: $5931
Aetna Healthfund Estimated Total Cost: $3354
Aetna HDHP Savings: $2577

Wow.  The savings in the Aetna HDHP/HSA will almost pay for Junior GubMints’ braces next year.  Plus, I can do a one-time ‘Qualified Funding Distribution‘ (tax-free transfer of funds) from my existing IRA to an HSA in order to ‘pad’ the 2013 HSA account balance (up to $6450 for the year).  Assuming all of our favorite doctors and providers are on the Aetna list, it looks like we’re making the switch to an HDHP/HSA next year!

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