FEBRUARY 12, 2015, FORT WORTH, Texas – America’s career servicemembers are increasingly worried that the era of low-cost healthcare for military families may be coming to an end.
The latest results of the First Command Financial Behaviors Index® reveal that 63 percent of middle-class military families (commissioned officers and senior NCOs in pay grades E-6 and above with household incomes of at least $50,000) are concerned that the military’s TRICARE healthcare system may start charging fees for services that they currently receive at no cost. This concern comes on the heels of the passage in December of the National Defense Authorization Act, which includes changes to TRICARE pharmacy fees and policies as a way to cut personnel costs as part of sequestration and defense downsizing.
During the past year servicemembers have grown increasingly concerned over sequestration-driven changes to their healthcare benefits. The Index reveals that 35 percent of December survey respondents expect to shoulder increased responsibility for healthcare costs. That’s up from just 19 percent at the end of 2013, and it represents the highest monthly total since May 2013.
Increased responsibility for healthcare costs is one of the biggest sequestration-related concerns expressed by military families, exceeded only by concerns over a reduction in retirement benefits (37 percent) and reductions in annual pay increases (39 percent).
Healthcare is a significant form of compensation for many military families. When December survey respondents were asked to rate the importance various benefits, three of their top six were related to healthcare:
* Basic pay (ranked No. 1 by 34 percent of respondents)
* Retirement pay (22 percent)
* Dependent healthcare benefits (13 percent)
* Healthcare benefits for retirees under 65 years of age (11 percent)
* Allowances for housing and subsistence (11 percent)
* Healthcare benefits for Medicare-eligible retirees (9 percent)
“Our men and women in uniform strongly value their healthcare benefits, so it’s no surprise to see that a growing number of them fear that sequestration will mean shouldering more of these costs,” said Scott Spiker, CEO of First Command Financial Services, Inc. “These are real concerns. The modest change in pharmacy fees we saw in the National Defense Authorization Act is yet another indication that seemingly everything is on the table. Servicemembers are dealing with a second year of reduced pay raises. Their housing allowances are being reduced. Force reductions, reduced promotion rates, possible cuts to retirement benefits — military budget cuts are a reality. Four out of five military families say they expect to be financially impacted by these cuts.”
Active-duty families have been responding to budget cuts through a variety of belt-tightening behaviors. The Index reveals they are:
* Saving more (47 percent)
* Cutting back on everyday spending (40 percent)
* Decreasing the aggressiveness of investments (26 percent)
* Moving investments to cash (20 percent)
* Starting to work with a financial planner (14 percent)
“Working with a financial planner can be a particularly effective strategy for getting squared away in your finances,” Spiker said. “Families who work with a financial coach save more than their do-it-yourself colleagues, and they also report feeling better about their finances. We anticipate increasing demand for financial planning assistance from military families as they strive to deal with the uncertainties of sequestration and long-term defense downsizing.”