Open season: healthy deals

The Federal Employees Group Life Insurance program's open season began April 24 and will last through June 30. This is a unique opportunity for federal employees to change their government life insurance coverage.

The open season is the result of a recently enacted law that changed the program in ways that will significantly benefit federal workers. The law eliminates the maximum coverage amount on basic and Option B insurance coverage.

An employee's basic insurance amount (BIA) is equal to which-ever is greater: $10,000 or the employee's annual basic pay rounded up to the next multiple of $1,000, plus $2,000. One-third of the cost of basic coverage, which provides term life insurance at low group rates, is paid for by the federal government.

Option B provides additional life insurance equal to one to five times the employee's annual basic pay rounded to the next multiple of $1,000. The cost of Option B coverage is paid by the insured.

Generally, the rates aren't that attractive until you're over 50. If you're in good health, you often can do better purchasing insurance from a private insurance company. However, if you are not in tip-top shape, FEGLI is a good deal because your health is not considered during open season.

Until now, an employee's BIA could not exceed the annual rate of basic pay for positions at Level II of the Executive Schedule rounded to the next higher multiple of $1,000, plus $2,000; the maximum for 1998 was $139,000. Each multiple of

Option B also was capped, based on salaries at the same level; the maximum for 1998 was $134,000. The new law eliminates these maximums, a change that will interest only those in the loftiest echelons of federal service.

The new law also allows employees to opt for unreduced Option B coverage at retirement, with the cost borne by the insured. Before the change,

Option B coverage declined after age 65 but was free to the retiree. Allowing coverage to continue unreduced past age 65 could be a good deal, but it depends on what it will cost to maintain this coverage. The Office of Personnel Management hasn't made that known yet.

A third change allows for the portability of Option B coverage upon separation or when coverage runs out while in nonpay status. Coverage reduces to 50 percent after age 70 and will stop at the beginning of the second calendar month after the insured reaches age 80. This change is subject to a provision for temporary extension of life insurance coverage and for conversion to an individual life insurance policy. The benefits of this are unclear. When you leave government, your decision on whether to take advantage of this should depend on what you would pay a private insurer for similar coverage. That will depend on your health when you apply.

Other changes affect Option C coverage. Currently, Option C provides $5,000 in life insurance for spouses and $2,500 for each eligible child. The new law allows employees to elect coverage for up to five times that amount. It also allows retiring employees to elect unreduced

Option C coverage by continuing to pay premiums after age 65. New terms for Option C also cover foster children. The increased coverage for dependents under Option C offers federal employees an opportunity to obtain more insurance for an ailing spouse or child who would otherwise be uninsurable or insurable only at an increased premium.

Open enrollment does not occur often, and when it does occur, feds can have little prior notice to undergo the physical exams usually required for life insurance. As a result, during open enrollment there are no physical exams to take or health questions to answer. OPM assumes that any feds who would take advantage of open enrollment would already be enrolled in some insurance program anyway, so the financial risk of waiving the physical exam is negligible.

This is a stellar opportunity for anyone with a health problem to obtain additional insurance coverage at bargain-basement rates.

Should healthy feds be concerned about the free ride that their not-so-healthy colleagues are enjoying? Probably. This will ultimately increase everyone's insurance costs, but that's somewhere down the road. For now, take the money and run.

-- Bureaucratus is a retired federal employee who contributes regularly to FCW.

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