The FEGLI Basic insurance premium is a level rate per one thousand dollars of coverage. The level premium feature means the enrollee premium rates are equal for the duration of the coverage period. The rate for an individual enrollee does not change as the enrollee ages (although the rate structure for all enrollees is subject to periodic adjustments based on claims experience). This means a younger employee pays the same cost for Basic coverage as a 64-year-old retiree. For example:
AGE Same Basic Biweekly Cost(per $1000 of coverage) Same Basic Monthly Cost(per $1000 of coverage) 25-year-old active employee $0.1600 $0.3467 64-year-old retiree
This feature balances the premium over time, making the enrollee cost more predictable. The enrollee pays an average cost over the term of their coverage.
As required by law, Basic insurance coverage uses a composite premium structure. This means the Basic premium rate is the same for each enrollee in the group policy, regardless of age or health status. As such, younger employees may pay a comparatively higher premium than they would with coverage based, in part, on age (like Optional insurance) or with a commercial individually underwritten policy. Younger employees are covered by an additional Basic insurance provision called the Extra Benefit, however, which doubles the amount of Basic insurance payable at no extra cost for enrollees age 35 or younger. Beginning on an enrollee’s 36th birthday, the Extra Benefit decreases 10% each year until age 45, after which, there is no Extra Benefit. So, for a 40-year-old employee, (i.e., 5 years younger than age 45) the benefit increases 10% for each year under age 45. In this example, the Extra Benefit would increase the Basic Insurance Amount (BIA) of $48,000 by an additional 50%.
Enrollee Basic Insurance Amount Age Coverage Joe $48,000 40 $72,000 ($48,000 + $24,000) Sara 52 $48,000
Unlike many other employer-sponsored life insurance programs, FEGLI coverage can be continued into retirement. The FEGLI retirement benefit is prefunded by premium costs so that after age 65 (or at retirement, if later) some coverage can be continued by retirees at no cost. The cost of this post-65 benefit is included in the FEGLI Basic level premium. The net effect of the level premium and post-65 benefit is that younger enrollees’ premiums cover the cost of coverage they currently have, and also pre-funds a portion of the costs related to coverage they will have later in their careers and in retirement. Since the Government contributes a share of the Basic premium, the employee share remains relatively competitive with the cost of private term insurance.
