Federal employees consistently make costly errors when managing their Federal Employees Health Benefits (FEHB) premiums that result in thousands of dollars in unnecessary expenses over time. Understanding these common pitfalls and implementing corrective measures can significantly reduce your healthcare costs while optimizing your benefits coverage.

IMPORTANT DISCLAIMER: The information provided in this article is for educational purposes only and does not constitute financial, legal, or investment advice. It is very important to do your own analysis and research before making any decisions regarding your federal benefits. Individual circumstances vary, and you should consult with qualified professionals regarding your specific situation.

Mistake #1: Defaulting to Last Year’s Health Plan Without Comprehensive Review

The most significant and costly error federal employees make is automatically renewing their current FEHB plan without conducting a thorough evaluation during Open Season. FEHB premiums increased by an average of 13.5% in 2025, with premiums, deductibles, provider networks, and prescription coverage undergoing substantial modifications annually that directly impact your financial obligations and healthcare access.

By failing to review updated plan brochures or compare alternative options, you risk:

• Overpaying for coverage that no longer meets your needs
• Missing superior coverage options with lower costs
• Maintaining enrollment in plans with reduced provider networks
• Continuing with outdated prescription drug formularies

Corrective Action Required: During each Open Season, conduct a comprehensive review of your current plan’s cost-sharing structure, including monthly premiums, annual deductibles, out-of-pocket maximums, and copayments for routine care, specialist visits, and hospital services. Compare these elements across different plans based on your projected healthcare utilization for the upcoming year.

It is essential to analyze actual plan brochures rather than relying on summary information or previous year assumptions.

Mistake #2: Assuming Certain Enrollment Types Are Always More Cost-Effective

Many federal employees erroneously believe that “self plus one” coverage represents the most cost-effective choice for married couples. However, “self plus family” plans sometimes feature lower premiums, particularly as employees age and premium structures shift. Similarly, when both spouses are federal employees, selecting two “self only” plans may appear logical but frequently results in higher combined costs than shared family enrollment.

These pricing anomalies vary significantly by carrier and plan type, making assumptions based solely on household composition financially detrimental.

Corrective Action Required: Compare actual premium costs across all enrollment types during Open Season rather than making assumptions based on your household size. Calculate total annual costs including premiums, deductibles, and anticipated out-of-pocket expenses for each enrollment option before making your selection.

Mistake #3: Missing Premium Conversion Tax Benefits Due to Administrative Errors

Federal employees can achieve substantial savings by having their FEHB premiums deducted on a pre-tax basis through premium conversion. However, administrative processing errors can occur that affect the tax treatment of your premiums, resulting in significant financial losses.

If your agency fails to correctly process your premium conversion participation, your FEHB deductions will not receive pre-tax treatment, increasing your taxable income and overall tax liability.

Corrective Action Required: Verify that your premium conversion status is accurately designated as “participant” by reviewing your leave and earnings statements. If you determine that your premiums are being deducted after taxes rather than before taxes, contact your Human Resources office immediately to correct the administrative error.

IMPORTANT: Do your own research regarding tax implications and consult with qualified tax professionals regarding your specific circumstances.

Mistake #4: Failing to Coordinate FEHB with Medicare Appropriately

Federal retirees frequently make expensive coordination errors when transitioning to Medicare eligibility. Your FEHB plan functions as a Medicare Supplement plan, with the federal government contributing an average of 72 to 75 percent of your FEHB program health plan premium costs.

Despite this substantial government contribution, many federal retirees purchase unnecessary private Medicare Supplement or Medigap plans in addition to their FEHB coverage. These additional plans are expensive and increase in cost as you age, creating unnecessary financial burden.

Corrective Action Required: When you become Medicare-eligible, coordinate your FEHB coverage with Medicare rather than purchasing additional private supplement plans. Federal retirees enrolled in the FEHB program and Original Medicare do not require private insurance company-issued Medicare Supplement or Medigap plans.

WARNING: Medicare coordination rules are complex and subject to change. It is very important to do your own analysis and consult with qualified professionals before making Medicare-related decisions.

Mistake #5: Not Utilizing Flexible Spending Accounts or Health Savings Accounts

Federal employees frequently overlook Flexible Spending Accounts (FSAs) or Health Savings Accounts (HSAs) as tools to manage rising healthcare costs with pre-tax dollars. These accounts allow you to allocate funds before taxes for qualified medical expenses, effectively reducing your overall healthcare expenditures and taxable income.

Failure to utilize these accounts results in paying higher taxes and missing opportunities to reduce out-of-pocket medical expenses.

Corrective Action Required: If you are enrolled in a high-deductible health plan, determine your HSA eligibility and contribution limits for the current tax year. For traditional plans, consider enrolling in an FSA during Open Season and calculate your expected out-of-pocket medical expenses to maximize your tax savings on healthcare costs.

COMPLIANCE NOTICE: HSA and FSA rules are subject to IRS regulations and annual changes. Consult with qualified tax professionals regarding your specific eligibility and contribution limits.

Mistake #6: Selecting Medicare Advantage Plans Based on Supplemental Benefits Without Comprehensive Analysis

Federal retirees often focus on attractive supplemental benefits offered through FEHB Medicare Advantage plans, such as dental, vision, gym memberships, and home meal delivery, without conducting thorough analysis of the complete coverage structure. These supplemental benefits frequently include additional premiums, larger cost-sharing requirements, and restrictive provider networks that can change without notice.

Corrective Action Required: Do not select Medicare Advantage Plans based solely on supplemental benefits. Request detailed information regarding network restrictions, additional costs, and provider stability before enrollment. Carefully review complete plan brochures to understand all conditions and limitations associated with supplemental benefits.

Analyze total annual costs including premiums, deductibles, copayments, and network restrictions rather than focusing exclusively on advertised benefits.

Mistake #7: Not Adjusting Coverage for Life Changes and Evolving Health Requirements

Federal employees often fail to reassess their FEHB coverage when health circumstances change or when approaching retirement. Prescription drug costs have increased significantly, and medical utilization patterns shift over time based on age, health conditions, and life circumstances.

Maintaining the same plan year after year without reassessment may result in suboptimal coverage that does not align with your current health needs or financial situation.

Corrective Action Required: Evaluate your actual healthcare utilization from the previous year, including prescription medications, specialist visits, and anticipated medical procedures. Use this analysis to select a plan with the most favorable coverage for your current health requirements rather than maintaining coverage based on outdated assumptions.

Document your medical expenses, prescription costs, and provider visits to make informed decisions during Open Season.

Professional Consultation Recommendation

Given the complexity of FEHB options and the significant financial implications of these decisions, it is very important to do your own analysis and seek professional guidance. The mistakes outlined above can result in thousands of dollars in unnecessary expenses over time.

Set a meeting in Benefits Review by visiting https://federalbenefitservice.com/benefits-review/ to schedule a consultation with a licensed specialist who can assist with understanding your specific benefits situation and provide personalized guidance based on your individual circumstances.

Important Legal Disclaimers and Warnings

NO INVESTMENT ADVICE: This content does not constitute investment, financial, legal, or tax advice. The information presented is for educational purposes only.

DO YOUR OWN RESEARCH: It is essential that you conduct your own analysis and research before making any decisions regarding your federal benefits. Individual circumstances vary significantly, and what may be appropriate for one person may not be suitable for another.

PROFESSIONAL CONSULTATION REQUIRED: Given the complexity of federal benefits and the potential for significant financial impact, you should consult with qualified professionals regarding your specific situation before making any changes to your coverage.

LIABILITY LIMITATION: This information is provided for informational purposes only. We do not assume responsibility for any decisions made based on this content.

COMPLIANCE NOTICE: Federal benefits rules and regulations are subject to change. Verify current requirements and limitations with official sources before making coverage decisions.

The financial implications of FEHB premium mistakes can be substantial over time. Taking corrective action and seeking professional guidance when necessary can help you optimize your benefits while minimizing unnecessary costs.