A reader asks:

I will be retiring from the Reserves later this year and reaching age 60 a month after that. Which Tricare will I be under? Will it cost me anything? I am still employed in a civilian job with a city that offers Blue Cross insurance. I also have an HSA– will this work with Tricare when I retire?

Congratulations on your retirement!

When you retire you’ll be ready to sign up for Tricare. If you’re within 40 miles of a military base you’re entitled to Tricare Prime, and between 40-100 miles from a base you might have to get a waiver to receive Tricare Prime. Outside 100 miles you’ll be offered Tricare Standard, which has more flexibility for a little more paperwork and a bigger insurance co-payment. If you’re close to a base then you may also find it convenient to use the base medical clinic or the nearest VA clinic as your primary care physician, but they’ll let you know the rules.

Tricare Prime enrollment fees are going to rise in October 2013 to $274/year for individuals and $548/year for families. (Note that those are annual premiums, not monthly.) For most military retirees, these fees will rise each year with the military pension cost-of-living allowance.

Tricare Standard has an annual $300 deductible and a copay of 20-25% above the deductible. Tricare Standard is usually selected only when you’re not able to sign up with a Tricare Prime primary care physician. However, if you’re extraordinarily healthy then Tricare Standard may be a cheaper plan than Tricare Prime.

You may also prefer Tricare’s prescription costs. These can be a matter of convenience: wait at the military clinic for a free prescription, or stop by your local pharmacy on the way home for a small fee. For long-term prescriptions you may want to use mail-order home delivery.

At age 65, of course, you’ll sign up for Medicare A&B (unless you keep working at your civilian career). When you do that you’ll also transfer from Tricare to Tricare For Life, which will become the second payer to Medicare. There is currently no charge for TFL, although DoD is perpetually asking Congress to pass a law allowing DoD to charge annual fees.

In general, military retirees seem to prefer Tricare to civilian health insurance. I don’t know the details of Blue Cross but both Tricare and Blue Cross offer ombudsmen who can explain the different benefits and help you choose what’s best for your health situation. Contact your nearest military base’s medical clinic or check this Tricare For Life cost table.

I’m clueless not familiar with HSAs, but I sought the advice of Eddie at GubMints.com. He says:

Yes, an HSA can be used for any ‘qualified’ medical expenses (copays, contact lenses, etc). See IRS Pub 969. Once you put $$ in to an HSA, the funds are yours forever. There is no use/lose provision every year like there is for the medical FSA. At age 65, if the HSA is not exhausted then it can convert to a quasi-IRA that can be used for anything. Also see Pub 969.

There are a few ‘Bear Traps’ regarding exiting an HSA part-way through the year (due to retirement, separation, job switch etc). I will cover these shortly on my blog. Bottom line is you must carefully watch how much- and WHEN- you make your final contribution to your HSA.

Eddie is also a drilling Reservist, so I recommend that you subscribe to GubMints.com and watch for his upcoming HSA post.

Finally, there’s Tricare dental insurance. It’s expensive and the annual premiums may be more than the expense of your annual exams and cleanings. However, if you’re prone to root canals or periodontal issues then the insurance may be cost-effective. This depends on both your dental genes and your daily brushing/flossing practices, so it’s a highly individual decision.

Two other questions are bound to pop up in the comments, so let me answer them now.

First, the Patient Protection and Affordable Care Act (“Obamacare”) does not affect Tricare. Tricare and VA care are considered “qualifying coverage” under the ACA, so Tricare beneficiaries do not need to sign up for other programs or worry about penalties. More Q&A is discussed at this healthcare summary on The Military Officers Association of America website and at Military.com’s summary of health care reform.

Second, there’s a new zinger in Tricare For Life coverage if you’re using a VA clinic. For several years, Tricare has been reimbursing the VA at the 80% rate for TFL care that is not related to a service-connected disability. However, there has never been any requirement to do so, and Tricare is stopping the practice next month. Beginning 1 October 2013, Tricare will only reimburse the VA at the 20% rate for TFL care that is not related to a service-connected disability. The retiree would be required to pay the remaining 80%. This only applies to retirees using TFL benefits, and only when they’re rated less than 50% disabled, and only when the care is not related to a service-connected disability. This does not apply to those with a VA rating of 50% or more, or veterans using their VA benefits (other than TFL), or anyone using Tricare Prime/Standard. The VA clinics are starting to inform TFL beneficiaries when they use a VA clinic, and will make sure that the 80% payment requirement is explained.

Let us know how your transition goes– both your new retired lifestyle and your healthcare!

Related articles:
40 miles for Tricare Prime — or maybe Tricare Standard
Tricare fee increases coming in October
Medicare, Tricare For Life, Medigap insurance, and Congress
Book review: The Complete Idiot’s Guide to Social Security and Medicare