Key Takeaways

  • PSHB may offer better cost alignment and Medicare integration for retirees, but understanding its full impact requires a detailed comparison with FEHB.

  • Your retirement status, Medicare eligibility, and even your current plan can dramatically affect which option is more beneficial to you in 2025.

Understanding the Basics: FEHB vs. PSHB

The Federal Employees Health Benefits (FEHB) Program has long served as the standard healthcare option for federal and postal workers. But starting January 1, 2025, the Postal Service Health Benefits (PSHB) program officially replaces FEHB for USPS employees and annuitants.

On the surface, both systems might seem similar. They both offer nationwide plans, share a similar open enrollment structure, and follow the same foundational laws under the Office of Personnel Management (OPM). But if you’re nearing retirement, the nuances become far more significant.

Eligibility Differences That Matter

As of 2025, active USPS employees and USPS retirees must enroll in PSHB, not FEHB, unless you fall under one of the exemption categories. These include:

  • You retired on or before January 1, 2025.

  • You are a covered family member of someone who remains in FEHB.

  • You are age 64 or older as of January 1, 2025, and still actively employed.

If none of these apply, you are automatically moved to PSHB. This shift is more than administrative—it affects how your premiums, benefits, and even Medicare coordination will work.

Medicare Part B Is No Longer Optional in the Same Way

Under FEHB, enrolling in Medicare Part B has always been optional. Many retirees choose to enroll to reduce out-of-pocket costs and avoid late penalties, but it wasn’t mandatory.

PSHB changes this model. Starting in 2025, Medicare-eligible annuitants and family members must enroll in Medicare Part B to maintain their PSHB coverage—unless they fall under a specific exemption.

This rule doesn’t apply if:

  • You retired on or before January 1, 2025.

  • You’re not eligible for Medicare.

  • You live abroad.

  • You receive VA or Indian Health Services benefits.

If you’re approaching age 65 or nearing retirement, this requirement can significantly change your monthly healthcare costs and planning strategy.

Premium Contributions and the Government Share

One of the biggest perceived advantages of FEHB was that the government covered roughly 70% of the total premium. That hasn’t changed with PSHB. However, your actual out-of-pocket share can shift depending on how your plan integrates with Medicare.

In 2025:

  • PSHB monthly premiums range widely, and your share depends on your enrollment type (Self Only, Self Plus One, or Self and Family).

  • Some PSHB plans offer partial reimbursement of your Medicare Part B premium.

  • Enrolling in Medicare Part B can reduce your deductible or copay costs under certain PSHB plans.

So while the structure is similar, the integration with Medicare in PSHB creates more variability in actual costs. That means choosing a plan based only on premium amounts could be misleading if you don’t factor in Medicare coordination.

Prescription Drug Coverage: Built-In Part D in PSHB

FEHB plans never included formal Medicare Part D coverage. You could add a standalone Part D plan, but it wasn’t required or embedded in your FEHB plan.

PSHB plans automatically include a Medicare Part D Employer Group Waiver Plan (EGWP) for all Medicare-eligible members. This offers several advantages:

  • Coverage through a nationally recognized pharmacy network.

  • A $2,000 annual cap on out-of-pocket drug costs, newly introduced in 2025.

  • Automatic enrollment when you join PSHB with Medicare.

If you’re not aware of this integration, you might mistakenly add a standalone Part D plan—which could cause conflicts or unnecessary premiums.

PSHB Has an Annual Out-of-Pocket Maximum

Both FEHB and PSHB have out-of-pocket maximums, but the structure and coordination with Medicare differ.

In 2025, PSHB out-of-pocket maximums are:

  • $7,500 for Self Only.

  • $15,000 for Self Plus One or Self and Family.

But if you’re enrolled in Medicare Parts A and B, many PSHB plans waive deductibles and significantly reduce cost-sharing. This can make PSHB far more cost-effective than it first appears—especially for retirees with frequent or expensive healthcare needs.

What Happens If You Decline Medicare Part B?

If you’re required to enroll in Medicare Part B but fail to do so, your PSHB plan can remove your coverage. This is a major shift from FEHB, which never penalized you for skipping Part B.

The bottom line: In PSHB, Medicare Part B is essentially a core requirement for retirees. If you’re nearing retirement or age 65, failing to plan for this can jeopardize your entire healthcare setup.

Copayments and Coinsurance May Catch You Off Guard

PSHB plans often present costs differently than FEHB. Instead of flat copayments, some services now involve coinsurance—a percentage of the total service cost.

For example:

  • A specialist visit might be a $40 copay in one plan, but 20% coinsurance in another.

  • An ER visit could cost $150 upfront, or be subject to 30% coinsurance, depending on the plan.

While some retirees might benefit from lower coinsurance due to Medicare’s involvement, others could find themselves paying more than expected for the same services if they haven’t reviewed the plan details.

Open Season Is Your Only Opportunity—Unless You Have a QLE

Since 2025 marks the first full year under PSHB, Open Season becomes more important than ever. From November to December each year, you can:

  • Switch between PSHB plans.

  • Add or remove eligible family members.

  • Make adjustments based on your Medicare enrollment.

Outside of Open Season, you’ll need a Qualifying Life Event (QLE) to make changes—such as marriage, divorce, birth, or loss of other coverage.

If you’re retiring mid-year or turning 65 outside of Open Season, it’s crucial to understand how to align Medicare enrollment with PSHB timelines.

FEDVIP and Other Benefits Stay the Same

One aspect that hasn’t changed is access to supplemental benefits like FEDVIP for dental and vision. Whether you’re under FEHB or PSHB, these remain separate and voluntary.

Keep in mind:

  • You must actively enroll during Open Season.

  • Former spouses are not eligible.

  • Your eligibility continues into retirement.

So, while PSHB changes your main health plan, it doesn’t affect your access to vision and dental benefits.

PSHB Might Actually Be More Tailored to Retirees

Despite the complexity, many aspects of PSHB are designed with retirees in mind:

  • Mandatory Medicare enrollment helps reduce overall cost-sharing.

  • Part D drug integration means fewer coverage gaps.

  • Out-of-pocket caps and waived deductibles under Medicare coordination improve affordability.

But these benefits only work if you understand them. Many retirees simply stay with a plan out of habit. In 2025, that could be an expensive mistake.

Don’t Let the Transition Surprise You—Review Before You Retire

With the automatic transition to PSHB, it’s tempting to assume your plan still works the same. But if you’re planning to retire soon, turning 65, or unsure about Medicare Part B, now is the time to take action.

  • Review your plan’s Medicare coordination.

  • Check if your providers are still in-network.

  • Estimate your total annual costs—not just premiums.

  • Look at how your medications are covered under the EGWP.

Let Your Retirement Benefits Work for You

PSHB isn’t just a new name for FEHB—it’s a new structure. And if you’re near retirement, that structure could either help or hurt your finances depending on your awareness and preparation.

Get ahead of the transition by reviewing your Medicare options, calculating your costs under PSHB, and comparing multiple plan documents.

For personalized help, reach out to a licensed agent listed on this website who can walk you through your choices.