Key Takeaways

• Although the Postal Service contributes significantly toward healthcare premiums, retirees in 2025 are still paying more out of pocket due to how the cost-sharing formulas work.

• The transition from FEHB to PSHB has shifted some financial burdens, particularly affecting annuitants without Medicare Part B.

The Basics of Cost Sharing Under PSHB

If you’re enrolled in the Postal Service Health Benefits (PSHB) program, you might assume the cost-sharing between you and the Postal Service is equal. In theory, it’s close—but not quite. In 2025, the federal government covers approximately 72% of the total premium cost, leaving you responsible for the remaining 28%. However, when you factor in plan design, Medicare enrollment status, and your retirement classification, that split starts to feel a lot less even.

Here’s where the numbers begin to diverge.

• Active postal employees often get the benefit of the standard government contribution, which is calculated based on the weighted average of all plans.

• Retirees (annuitants), especially those not enrolled in Medicare Part B, may end up paying significantly more in premiums, coinsurance, and other out-of-pocket expenses.

Why the 72/28 Split Isn’t Always What It Seems

While the 72% contribution may sound generous, it’s not a flat subsidy. That 72% applies to a “benchmark” plan average. If your selected plan costs more than that average, you pay the difference. If it costs less, you still pay your share of the premium.

But there’s another layer: the way Medicare interacts with PSHB coverage in 2025. You’re now expected to enroll in Medicare Part B if you’re Medicare-eligible and want full PSHB benefits. If you don’t, your PSHB plan may reduce your benefits or charge you more in cost-sharing.

Key differences for retirees:

• Without Medicare Part B: You may face higher deductibles and coinsurance.

• With Medicare Part B: Many PSHB plans coordinate with Medicare to reduce or eliminate out-of-pocket costs. Some even reimburse part of the Part B premium.

So while it seems like the cost is split fairly, the true out-of-pocket burden heavily depends on your Medicare enrollment and plan selection.

Premiums in 2025: What You’re Really Paying

For retirees, premiums in 2025 are a significant concern. The weighted average monthly premium share for annuitants is around:

• Self Only: over $240

• Self Plus One: over $520

• Self and Family: over $565

These figures are the annuitant’s share only and do not include the government contribution. They are deducted from your monthly retirement annuity and can add up to thousands annually. And remember, these are just premiums. They don’t include deductibles, copays, or coinsurance.

Cost Shifts After Retirement

When you retire, your relationship to your health plan changes significantly. As a federal annuitant, you remain eligible for PSHB, but your cost-sharing structure may shift in the following ways:

• You no longer receive Postal Service contributions toward Medicare Part B premiums.

• Prescription drug coverage becomes tied to Medicare Part D via an EGWP (Employer Group Waiver Plan) for Medicare-eligible retirees.

• Cost-sharing for medical services may increase if you don’t enroll in Medicare Part B.

If you opted out of Medicare Part B and remained in your PSHB plan alone, you’re likely paying more in the form of:

• Higher coinsurance (up to 40-50% for out-of-network services)

• Larger deductibles ($1,000 to $3,000 for some services)

• Higher copayments for specialist visits and hospital admissions

This isn’t just a financial issue. It’s also a planning issue. Failing to enroll in Medicare Part B can significantly increase your annual health costs.

How Medicare Changes the Equation

Starting January 1, 2025, Medicare-eligible annuitants and family members are required to enroll in Part B to retain full PSHB benefits. Exceptions apply, but most retirees will need to sign up. This change is intended to align healthcare costs more efficiently across the system.

The integration of PSHB with Medicare Part B brings a few cost benefits:

• Reduced or waived deductibles

• Lower copayments for many services

• Automatic enrollment in Medicare Part D EGWP with a $2,000 cap on annual out-of-pocket drug costs

However, you must now juggle two premiums: one for PSHB and one for Medicare Part B. This dual-premium structure can feel like a financial burden, even if your combined costs are lower in the long run.

Government Contribution Limits Aren’t Keeping Pace

The federal government’s contribution toward PSHB premiums is tied to a formula that may not reflect the actual cost increases in healthcare. Premiums for 2025 have increased by over 11% on average compared to 2024. Yet, the government’s 72% contribution is based on the average plan cost, not your specific plan.

If your chosen plan increased more than the average, you’re paying a larger portion of the bill. Retirees are particularly vulnerable because:

• Their incomes are fixed

• They don’t have access to premium conversion programs like active employees

• They must cover the full Part B premium without any contribution from USPS

Out-of-Pocket Maximums and Cost Exposure

While most PSHB plans include an annual out-of-pocket maximum, these limits vary:

• $7,500 for Self Only

• $15,000 for Self Plus One and Self & Family

These caps apply only to in-network services. For out-of-network care, your exposure may be significantly higher. Medicare enrollees usually reach their out-of-pocket max sooner, since most costs are shared or waived when Medicare is primary.

For retirees not enrolled in Medicare, hitting the maximum means you’re likely facing:

• Multiple specialist visits

• Hospitalizations

• Expensive outpatient procedures

And once you reach the cap, it resets the following year.

The Prescription Drug Equation

Prescription drug coverage in 2025 is a mixed bag for retirees. PSHB plans now include Medicare Part D EGWP coverage for Medicare-eligible enrollees. This means:

• A $2,000 annual out-of-pocket cap

• Expanded pharmacy networks

• Automatic enrollment unless you opt out (which can limit re-enrollment)

For those not enrolled in Medicare, you’re still covered under your PSHB plan’s pharmacy benefit. However, you might pay more for high-cost medications without the protection of the Medicare Part D cap.

The Uneven Cost of Family Coverage

If you’ve opted for Self Plus One or Self & Family coverage, you may notice a sharp increase in your share of premiums. That’s because the government contribution does not scale linearly with family size. The percentage remains the same, but the total cost rises substantially.

This affects retirees who are covering:

• A spouse not eligible for Medicare

• Adult dependents with chronic conditions

In these cases, you might be better off comparing coverage types or reconsidering Medicare enrollment strategies for the entire family.

Planning Strategies to Consider

Understanding how healthcare costs are shared in 2025 allows you to make smarter decisions. Here are some practical steps:

• Review your PSHB plan during Open Season (November to December) and compare cost-sharing details.

• Evaluate whether enrolling in Medicare Part B is beneficial for your specific health needs and financial situation.

• Reassess your plan tier (Self Only, Plus One, or Family) based on current dependents and expected costs.

• Track your annual spending to understand when you might hit your out-of-pocket maximum.

A licensed agent listed on this website can also help you break down the details of your current coverage and suggest ways to better align with your budget and health needs.

What This Means for Your Retirement Budget

Your health coverage costs in retirement are not just premiums. When you add in copayments, coinsurance, deductibles, and the Part B premium, your actual spending could far exceed the assumed 28% share.

The average retiree is likely contributing:

• A substantial portion of their monthly annuity to premiums

• Additional income to cover the full Medicare Part B premium

• Out-of-pocket funds for deductibles and medication

That’s not even when you’ve had a high-usage year. In such cases, the cost burden could be even more significant.

Final Thoughts on the PSHB Cost Split in 2025

Although the PSHB program aims for a roughly 72/28 cost-sharing model between the Postal Service and you, the reality in 2025 is more nuanced. Your total financial responsibility can be much higher depending on your Medicare enrollment status, family coverage tier, and plan selection.

Planning isn’t optional; it’s essential. Use the annual Open Season to review your plan, assess your Medicare options, and determine whether your current setup truly meets your needs. If you’re unsure where to start, speak with a licensed agent listed on this website to explore strategies that protect your health without overextending your retirement income.