Key Takeaways

• If you’re a Medicare-eligible Postal retiree, having both Medicare and PSHB in 2025 can reduce your out-of-pocket costs—but only if you’re enrolled in both correctly.

• When Medicare and PSHB coverage don’t overlap, you may face higher deductibles, coinsurance, and limited drug benefits depending on your plan structure.

Understanding the Relationship Between Medicare and PSHB

With the launch of the Postal Service Health Benefits (PSHB) Program in 2025, your coverage choices now interact differently with Medicare. Unlike the old FEHB structure, the PSHB program introduces new expectations for Medicare enrollment and creates distinct financial consequences depending on whether or not you enroll in Medicare Part B.

To make the best decision, you need to understand how the two programs interact—and what it means when they don’t.

When PSHB and Medicare Work Together

In most cases, the strongest coverage option comes from combining your PSHB plan with Medicare Parts A and B. Here’s how that collaboration typically works:

Coordination of Benefits

• Medicare pays first for covered services.

• PSHB pays second, covering many of the leftover costs.

This coordination limits your out-of-pocket expenses. Medicare Part A usually covers inpatient hospital care, while Part B covers outpatient and physician services. Your PSHB plan then picks up additional expenses like copayments, coinsurance, and services Medicare doesn’t fully reimburse.

Lower Cost-Sharing

If you’re enrolled in both Medicare Parts A and B:

• Your deductibles are often waived.

• Coinsurance and copayments may be significantly reduced or eliminated.

• Many plans reimburse part of your Part B premium (though the amount varies).

This results in a more predictable and often lower monthly healthcare expense compared to relying on PSHB alone.

Prescription Drug Integration

PSHB plans for Medicare-eligible retirees come bundled with a Medicare Part D Employer Group Waiver Plan (EGWP). This ensures:

• Lower drug costs with the $2,000 out-of-pocket cap now in place for 2025.

• Expanded pharmacy networks.

• Coverage for common chronic-condition prescriptions.

When PSHB Stands Alone Without Medicare

If you don’t enroll in Medicare when eligible—particularly Part B—your PSHB plan will still cover you. But you should know what you’re missing out on.

PSHB Becomes Primary

Without Medicare, your PSHB plan becomes the sole payer for your health services. That means:

• Higher out-of-pocket costs due to coinsurance.

• Deductibles apply and can range from $350 to $2,000 depending on your plan type.

• You’re responsible for the full cost of services Medicare would have paid.

For example, outpatient visits, lab work, and surgeries that Medicare Part B would normally cover now fall entirely under PSHB—and they may cost more without the layered coverage.

No Part B = Limited Reimbursement Features

You won’t receive premium reimbursement or cost-sharing reductions. That’s because most PSHB plans only offer those perks when you’re enrolled in both systems. In 2025, many plans have made those cost-saving features contingent on Medicare enrollment.

Prescription Drug Coverage Without Medicare

If you opt out of Medicare, you lose access to the embedded Medicare Part D EGWP. Instead, your prescription drug coverage may revert to standard PSHB provisions, which:

• May lack the new $2,000 out-of-pocket drug cap.

• Could come with narrower formularies.

• Might not include cost-smoothing options available through Medicare’s payment plan.

Who Must Enroll in Medicare Part B for PSHB?

Starting in 2025, some retirees and family members are required to enroll in Medicare Part B to maintain full PSHB benefits:

Required Enrollment Applies If:

• You are Medicare-eligible,

• AND you retire after January 1, 2025,

• AND you are not exempt due to age (64 or older as of January 1, 2025), foreign residence, or VA/Indian Health Service eligibility.

If you fall into this group and don’t enroll in Medicare Part B, you will lose drug coverage and may face significant gaps in overall coverage.

Exemptions from Required Enrollment

You are not required to enroll in Medicare Part B for PSHB benefits if:

• You retired on or before January 1, 2025.

• You were already 64 years old or older on January 1, 2025.

• You reside abroad.

• You are eligible for VA or Indian Health Service benefits.

Still, even if you’re exempt, it’s worth considering enrollment to reduce out-of-pocket costs.

Medicare Enrollment Windows That Matter

Timing is essential when deciding to enroll in Medicare. Missing key windows can lead to penalties or delayed coverage.

Initial Enrollment Period (IEP)

• Begins 3 months before your 65th birthday

• Ends 3 months after your birthday month

Enroll during this window to avoid lifetime penalties on Part B premiums.

General Enrollment Period (GEP)

• Runs January 1 to March 31 each year

• Coverage begins July 1 of the same year

If you miss your IEP, this is your next chance—but late penalties may apply.

Special Enrollment Period (SEP) for PSHB-Related Transition

In 2024, a one-time SEP allowed some retirees to enroll in Part B penalty-free due to the shift to PSHB. That window closed September 30, 2024.

If you missed it and didn’t enroll, you may face late enrollment penalties in 2025.

What If You Delay Medicare Enrollment?

Delaying Part B without credible coverage could result in:

• A 10% penalty for each 12-month period you were eligible but not enrolled.

• Permanent increase in premiums for as long as you keep Part B.

PSHB alone is not considered creditable coverage for Medicare Part B, so postponing enrollment can carry real financial consequences.

Financial and Coverage Scenarios Based on Your Enrollment

Here’s what changes based on your decision to enroll—or not:

If You Enroll in Both Medicare and PSHB:

• Lower or waived deductibles

• Reduced coinsurance and copayments

• Drug costs capped at $2,000 annually

• Access to broader provider networks

• Option for drug cost smoothing through Medicare’s new monthly plan

If You Only Keep PSHB Without Medicare:

• Deductibles apply and may be higher

• Higher coinsurance and copayments

• No premium reimbursement

• No access to Medicare EGWP drug plan

• May lack access to some providers who accept only Medicare

What About Coordination with Medicare Advantage?

PSHB plans do not coordinate with Medicare Advantage (Part C) plans. If you enroll in a Medicare Advantage plan, it effectively replaces Original Medicare (Parts A and B) and disrupts coordination with PSHB.

This means:

• PSHB becomes secondary to a private Medicare plan (if allowed).

• Some benefits may duplicate or conflict.

• You may lose out on PSHB’s embedded prescription benefits.

It’s recommended to avoid combining PSHB with Medicare Advantage.

Best Practices for Getting the Most From Your Coverage

To optimize both Medicare and PSHB:

• Enroll in Medicare Parts A and B when eligible—unless you are exempt and truly don’t benefit.

• Keep your PSHB plan to enjoy secondary coverage and drug benefits.

• Review your plan details annually during Open Season.

• Watch for provider network updates, especially for Medicare-only providers.

• Understand your prescription coverage tier and verify whether the $2,000 cap applies to you.

How to Protect Your Health and Wallet Going Forward

When Medicare and PSHB work together, you often receive better care at a lower cost. But when they don’t overlap, gaps emerge—and they’re usually expensive.

Whether you’re newly retired or planning ahead, your choices in 2025 matter more than ever. Take time to understand the interaction between these programs before skipping Medicare enrollment or switching PSHB plans.

If you’re unsure about how to proceed, speak with a licensed insurance agent listed on this website who can guide you based on your age, retirement status, and expected healthcare needs.