The cost of healthcare coverage for federal employees

Shared Cost

Generally, if you are a Federal employee or annuitant, you share the cost of your health benefits coverage with the government as your employer. Temporary employees, former spouses enrolled under spouse equity provisions, and most persons covered under temporary continuation of coverage (TCC) do not receive a government contribution towards the cost of their health benefits.

The government’s share of premiums paid is set by law. Amendments to the FEHB law under the Balanced Budget Act of 1997 (Public Law 105-33, approved August 5, 1997) authorized a new formula for calculating the government contribution effective with the contract year that began in January 1999. This formula is known as the Fair Share formula because it maintains a consistent level of Government contributions, as a percentage of total program costs, regardless of which health plan enrollees elect.

For most employees and annuitants, the government contribution equals the lesser of: (1) 72 percent of amounts OPM determines are the program-wide weighted average of premiums in effect each year, for self only and for self and family enrollments, respectively, or (2) 75 percent of the total premium for the particular plan an enrollee selects.

Government Contribution for Part-Time Employees

If you are a part-time career employee, the government contribution toward your health benefits is prorated in proportion to the percentage of full-time service you are regularly scheduled to perform.

Employee Contribution

During each pay period in which your FEHB enrollment is in effect, you are responsible for paying all premiums in excess of the government contribution, usually 25% of the total premium. If your pay (after retirement, FICA tax, Medicare and Federal income tax deductions) will cover the full employee share of your health benefits premiums, the withholding is taken from your salary.

Premium Conversion

Premium conversion is a tax benefit. It allows you to allot a portion of your pay to your employer, who will in turn use that amount to pay your contribution for FEHB coverage. This allotment is made on a pre-tax basis, which means that the money is not subject to Federal income, Medicare, or Social Security taxes, and in most cases, state and local taxes. The allotment reduces your taxable income, so less tax is withheld, and your paycheck is larger.

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