The U.S. Office of Personnel Management (OPM) announced on Tuesday that rates for Federal Employee Health Benefits will rise 6.4 percent for 2016, which is double last year’s rate increase and the highest increase in six years. Federal retirees are expected to take the hardest hit, and will see an average 7.4 percent jump in their premiums.
The Hardest Hit: Federal Retirees
According to the OPM, Federal Employees Health Benefits (FEHB) enrollees with self-only coverage will contribute an average of $5.50 more per paycheck, while those with family coverage will pay about $19.61 more. The OPM also introduced a new self-plus-one enrollment type, which will provide coverage for an enrollee and one eligible family member. Those enrollees will see an average increase of $8.92 per paycheck — or 4.9 percent of what they paid in 2015, assuming they were enrolled in the self-and-family category.
Rising Premiums and New Enrollment Types
Federal employees and retirees’ share of their health care premiums will go up by a higher percentage than the government contribution, which will rise 6 percent. According to an article posted on GovExec, OPM’s director of healthcare and insurance attributed the increase to a rise in prescription drug costs, which disproportionately affects FEHB due to its inclusion of retirees in its risk pool.
This ample hike in health care costs has caused alarm among federal retirees, who are not expected to receive cost-of-living adjustments (COLA) to their annuities. Many federal retirees are also facing a more than 50 percent increase in their Medicare premiums, further hindering their ability to make ends meet.
“Federal employees have endured five years of frozen or minuscule pay raises, while retirees aren’t getting a dime of additional support next year. How are they supposed to maintain their standard of living when costs for essential things like health care keep going up?” American Federation of Government Employees National President J. David Cox Sr. said in a press release.
The Need for Retirement Planning
President Cox’s point serves as an indirect reminder to the importance of preparing for the worst when it comes to retirement planning. The rising costs attached to retirement are substantial, and having a concrete, long-term plan is integral to avoiding financial uncertainty. To learn more about retirement planning, check out our past blog post.
FEHB is the nation’s largest group plan with 8.2 million participants. Enrollees will be able to make changes to their healthcare plan from November 9th through December 14th. Insurance changes will take effect on January 1st.
Getting Legal Help to Maximize Your Financial Future
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