The Federal Employees Health Benefits (FEHB) is a health insurance program for federal employees and retirees in the US. This was established by the US Congress in 1959. The FEHB plan is a part of the Federal Employees Retirement System (FERS) plan. 

More than 9 million US citizens enjoy the benefits of this health insurance. This includes active employees and retirees. 

The Office of Personnel Management (OPM) in the US is responsible for regulating the rules and providing benefits to the participants. 

The OPM is the human resources office for all federal employees in the US. The organization offers valuable handbooks and resources to better understand the FEHB program.

The 13.5 percent FEHB premium increase is the highest in the 64-year history of the program. 

Some of the reasons behind the increase in the rates of the premium are – 

• Increase in utility costs and services. 
• Higher cost of prescription drugs. 
• A hike in outpatient services cost. 
• Escalation of inpatient service cost. 

There are 42 participating Carriers with 64 Plans and 130 plan options for the 2025 FEHB program. 

United States Postal Service (USPS) employees and retirees will be transferred from the FEHB program to the PSHB program in 2025. 

This will ensure the automatic transition of 90 percent of USPS members from FEHB to PSHB. 

Let us explore the top strategies and impacts of FEHB premium hikes in this blog. 

The FEHB is the world’s most comprehensive employer-sponsored health insurance program. It is designed for federal employees, retirees, and their families. Some of the noteworthy features of the FEHB program include – 

• The federal government contributes a matching portion of the premium for all participants. 
• Retirees contribute to this program through annuity deductions while active federal employees contribute to the FEHB through payroll deductions. 
• Apart from the cost-sharing feature of life insurance, the FEHB program enables federal employees and retirees to include their dependents in participation. 
• Enables federal retirees to continue FEHB contributions under certain terms and conditions. 
• The FEHB plan covers mental health services, vision and dental care, prescription drugs, preventative services, hospitalization, and doctor visits. 
• The Annual FEHB Open Season allows all participants to review their existing plans and coverage and make necessary modifications if required. 

Importance of FEHB

The FEHB program safeguards the health and well-being of federal employees, retirees, and their families through – 

• Ensuring access to providers of comprehensive healthcare and special care options. 
• Reduces the financial burden related to healthcare costs for major emergencies and old age. 
• Helps to avoid costly future treatments through preventative healthcare. 
• Offers continuous health coverage to and supports retirement security.

Read Also: All You Need To Know About Retiring in California

Get a glimpse into the comparison of the premium hikes for the FEHB program throughout the last few years and some of the top reasons behind the increase in the premium amounts. 

Analysis of Premium Increase Percentage

The increase in the amount of FEHB premiums by 13.5 percent is the highest ever recorded in the history of the program and directly impacts the income and budget of federal employees and retirees. 

There are two sides to the FEHB contributions. These are – 

• Employee contributions – Based on the health plans, employees and retirees will experience an average of 8 percent rise in their premium amounts from 2025. 

• Employer matching contributions – The federal government compensates with an equal amount of contribution in the particular health insurance program for active employees. Therefore, the cost from the government’s end is also increased for the FEHB program while the overall cost burden remains high for federal employees. 

Both federal employees and retirees will experience the financial impact of 2025 FEHB premium surges. However, each group of people needs different strategies to manage the premium hikes. 

Impact of Premium Hikes on Active Employees

Here is a glimpse into how current federal employees are affected – 

• An increase in the rates of the FEHB premiums directly translates to higher paycheck deductions on a bi-weekly basis. 
• Federal employees will experience a hike of $10-20 every pay period based on their selected insurance plans. 
• High-deductible and premium health insurance plans have a higher rate of increase for the premium amounts. 

Best Tips for Active Federal Employees to Adjust their Health Insurance Plans

Get a glimpse into the top strategies to help federal employees meet the new premium contribution requirements – 

• Review the existing insurance plan and compare it with other FEHB insurance plans. 
• Determine if the current health insurance coverage meets the future healthcare needs and budget. 
• Utilize the FEHB plan comparison tool online to predict the cost, benefits, and provider networks. 
• Keep an eye out for premiums with lower premium contributions but higher coverage. 
• Switching to a Health Savings Account (HSA) enables federal employees to take tax-free savings benefits from healthcare expenses. 
• Maximum utility of flexible spending accounts ensures a reduction of out-of-pocket medical expenses in the long run. 

Impact of Premium Hikes on Federal Retirees

Find out how retirees will be impacted in 2025 due to the hike in the FEHB premium amounts – 

• The healthcare premium hike is very challenging for retirees with low retirement income and less financial flexibility. 
• The FEHB premium deductions are done from the annuity payments for federal retirees. This could significantly affect their quality of living due to budget restraints. 

Top Tips for Federal Retirees to Adjust their Healthcare Insurance Plans

Some of the best strategies for retirees to adjust their FEHB premium expenses are – 

• Retirees can select both the Medicare and FEHB programs to cover their healthcare expenses. Medicare option reduces out-of-pocket healthcare costs. 
• Certain FEHB health insurance plans give extra discounts to retirees with Medicare. 
• The out-of-pocket costs of drug expenses are reduced under the Part D of the Medicare coverage for retirees. 

Read Also: All New TSP Rules in 2025 for Federal Employees

The Open Season for the FEHB program is an ideal time for federal employees and retirees to review their health insurance options, compare them with better options, and make necessary adjustments. Evaluating the existing FEHB scenario can help employees and retirees with – 

• Managing the cost of premiums and out-of-pocket expenses. 
• Find an appropriate plan with lower premium alternatives but significant healthcare coverage. 
• Changing and unprecedented life events such as death, family additions, or healthcare requirements may need changes in coverage plans. 
• Chances of overspending increase if the federal employee does not compare their existing plan with other options. 

Here are the best tips to examine the FEHB options for federal employees and retirees in 2025 – 

• Review the healthcare needs for yourself and your loved ones over the last year. This includes doctor’s visits, surgeries, and prescription drugs. 
• Determine the recurring healthcare needs with high expenses and select coverage accordingly. 
• Compare the bi-weekly and monthly premiums for all three FEHB options. 
• Find out if the preferred doctors, hospitals, and specialists are included in the coverage details. 
• Identify the out-of-pocket expenses for different types of insurance plans within the FEHB program. 
• Keep track of your prescribed drugs that are included in the FEHB drug coverage. 
• Examine if your FEHB health insurance plan is offering any incentives, reimbursements, or other value-added features. 

Best Resources to Plan For Your Needs

Navigate through the best resources for federal employees and retirees to evaluate the FEHB premiums and coverage options based on their retirement and healthcare requirements – 

• FEHB Comparison Tool – An official tool by the OPM found on the website to compare the cost of premiums, coverage, and cost-sharing options by the government. 
• Brochures – Get an elaborate brochure to understand the benefits and drawbacks of the elected plan. 
• Open Season Health Fairs – An event coordinated by federal agencies to help employees gain detailed insights and clarify their doubts from insurance plan representatives. 
• Customer Support – Federal employees and retirees can get in touch with the OPM or the customer support division of a particular FEHB-oriented health insurance plan for specific queries or complaints. 
• Federal Advisors – Talk to the best federal retirement consultants in Puerto Rico and unlock the benefits of FEHB programs. 

Here are the best tips for federal employees and retirees to make ideal strategies to accommodate the increased premium costs – 

• Review the overall monthly expenses to make necessary adjustments for the premium coverage. 
• Retirees can review their annuity statements to reallocate funds from other sources to meet the premium coverage hikes. 
• Create a separate emergency healthcare fund to prepare for unexpected costs and inflation. 
• In-network insurance providers can reduce the high out-of-pocket fees. 
• The FEHB comparison tool offers insights related to the best premium options to reduce insurance premiums without compromising the coverage features. 
• The self + one insurance plan option within the FEHB offers more savings compared to family insurance plans or single insurance plans. 
• Switch to an appropriate plan during the FEHB open season to align your healthcare needs with your budget. 
• Make use of flexible spending accounts and health savings accounts to maximize your contributions and reduce taxable income from these types of accounts.

Read Also: How To Maximize Retirement Tax Benefits in Florida?

Proactive planning is the only way to meet the challenges of FEHB premium hikes. 

The annual increase in the FEHB insurance program requires many federal employees and retirees to reassess their healthcare plans. 

The Open Season allows all participants to adjust their healthcare insurance plans based on individual needs. 

The FEHB insurance program should be an integral part of the retirement planning for federal employees. 

Staying informed can help balance the rising costs while maintaining healthcare expenses without any additional pressure. 

PSR Assurance offers exclusive financial planning services to help you manage your premiums, achieve your retirement goals, and secure your financial savings in old age.