Rising Premiums Create New Financial Pressures
Federal annuitants will face two major cost increases next year. FEHB premiums will rise an average of 12.3 percent for the enrollee share, and Medicare Part B premiums will increase by 9.67 percent. Unlike active federal employees, annuitants cannot offset these expenses with pre tax payments, Flexible Spending Accounts, or new Health Savings Account contributions once enrolled in Medicare.
Despite these constraints, several strategies can help reduce overall medical costs. Understanding next year’s Medicare changes, reviewing FEHB options, and maximizing available benefits can make a meaningful difference for retirees.
Medicare Part B Costs Increase in 2026
The Centers for Medicare and Medicaid Services has confirmed higher Medicare expenses for the coming year. The standard Part B premium will rise from 185 dollars per month to 202.90 dollars. The annual Part B deductible will also increase by 26 dollars, reaching 283 dollars.
Premium levels for 2026 depend on Modified Adjusted Gross Income from 2024 taxes. Individuals with MAGI up to 109,000 dollars and joint filers up to 218,000 dollars will pay the standard premium. Higher incomes trigger the IRMAA surcharge. In the first tier, monthly costs for Part B increase by an additional 81.20 dollars. Medicare Part D is also subject to IRMAA, though the first tier adds only 14.50 dollars per month.
Switching to an FEHB Plan That Waives Costs with Medicare
For annuitants who have Medicare Parts A and B, choosing an FEHB plan that waives out of pocket costs when Medicare is primary remains one of the strongest ways to save money. Section 9 of each FEHB brochure explains how plans coordinate with Medicare.
Several plans waive most or all cost sharing when Medicare is primary, including Aetna Direct CDHP, BCBS Basic, BCBS Standard, GEHA High, and GEHA Standard. Other plans, such as APWU CDHP, Compass Rose Standard, and GEHA Elevate, do not waive these costs. Annuitants enrolled in such plans may benefit from switching during open season.
Considering Medicare Advantage Options Through FEHB
Many FEHB carriers now offer Medicare Advantage plans that can produce substantial savings. These plans often eliminate nearly all out of pocket medical costs for covered services as long as providers accept both Medicare and the plan. Prescription drugs remain the primary expense.
MA plans frequently offer partial Medicare Part B premium reimbursement. Combined with lower FEHB premiums and reduced cost sharing, these plans can be less expensive than standard FEHB choices. Cost comparisons show that many married couples with Medicare Parts A and B and MAGI below 218,000 dollars could save thousands annually by switching to an MA option.
However, networks may differ from regular FEHB plans, and some MA plans have more prior authorization requirements. Annuitants should verify provider participation and review coverage rules before making a change.
The Role of Medicare Part D in Reducing Drug Costs
Twenty FEHB plans will offer Medicare Part D prescription coverage next year. These Part D benefits must be at least equal to the FEHB plan’s drug coverage to receive approval. Many annuitants will find lower out of pocket costs when using Part D, and all Part D plans will include a 2,100 dollar cap on annual spending for covered prescriptions.
Auto enrollment applies to Medicare beneficiaries who choose one of the FEHB plans with Part D, unless they previously disenrolled. Beneficiaries can still opt out if Part D is not the right fit. Reasons to avoid Part D include living overseas, relying on manufacturer discounts that are not allowed under Part D, or having income high enough to trigger IRMAA without needing prescription coverage.
Key Takeaways for the Year Ahead
Higher FEHB and Medicare Part B premiums will push health costs upward for many federal annuitants. Even so, meaningful savings are possible. Selecting an FEHB plan that eliminates cost sharing under Medicare, evaluating Medicare Advantage options, and comparing FEHB drug coverage with Part D can help reduce expenses. Annuitants with prescription needs in particular may benefit from the new Part D spending cap. Careful plan review during open season remains essential for keeping costs under control.
