How the Transition from FEHB to PSHB Affects Retirees Differently

Key Takeaways

• Retirees under the new PSHB program face different requirements and choices compared to current employees, especially concerning Medicare Part B.

• While much of the structure appears similar to FEHB, retirees should prepare for new eligibility conditions, drug coverage changes, and cost-sharing nuances.

What Sets PSHB Apart for Retirees

As of January 1, 2025, the Postal Service Health Benefits (PSHB) Program has officially replaced the Federal Employees Health Benefits (FEHB) Program for all USPS workers and annuitants. While many of the core features seem familiar, the shift affects retirees in distinct ways. If you are already retired—or preparing to retire soon—you may notice that your path through this new system feels markedly different from your time under FEHB.

Medicare Part B Enrollment: Now More Than a Recommendation

One of the most significant changes impacting retirees under PSHB is the requirement to enroll in Medicare Part B. While FEHB never mandated this step, PSHB takes a firmer approach.

Who Must Enroll

You are required to enroll in Medicare Part B if:

• You are a USPS annuitant entitled to Medicare Part A.

• You retired after January 1, 2025, or were under age 64 as of that date.

• You are not otherwise exempt (e.g., residing overseas, eligible for VA or IHS care).

Why It Matters

Without Medicare Part B enrollment, you risk losing your PSHB coverage entirely if you’re in the required group. This represents a stark contrast to the FEHB era, where many chose to skip Part B due to the added premium. Under PSHB, opting out is no longer a passive choice—it can lead to a complete loss of health insurance.

Prescription Coverage Has a New Framework

FEHB allowed retirees to continue using standard prescription benefits through their health plan. Under PSHB, the system now integrates with Medicare Part D via a special Employer Group Waiver Plan (EGWP). This change is particularly relevant for Medicare-eligible retirees.

What You’ll Experience

• You’ll automatically be enrolled in a Medicare Part D plan connected to your PSHB plan.

• The new structure includes a $2,000 annual cap on out-of-pocket prescription drug costs in 2025.

• If you decline this EGWP coverage, you won’t have another prescription option through PSHB unless you qualify to re-enroll under strict conditions.

Retirees who were used to unlimited prescription coverage under FEHB may need to adjust to the new framework, even if the annual cost cap seems like an improvement.

Cost-Sharing Structures Are Less Forgiving

While PSHB plans resemble FEHB offerings, their cost-sharing formulas can feel different, especially when you’re on a fixed income.

Examples of Changes in Cost Structure

• Deductibles may be higher, particularly for high-deductible plans.

• Copayments for specialist visits, urgent care, and ER services tend to fall in the upper range compared to past plans.

• Coinsurance for out-of-network care can range up to 50% in some PSHB plans.

Retirees who had long settled into predictable costs with FEHB may find the variability in PSHB plans a bit jarring.

Government Contributions Still Apply—but Expect Adjustments

The federal government still pays about 70% of your total premium under PSHB, just like under FEHB. But retirees may notice shifts in how that support plays out month to month.

• Biweekly premiums for annuitants range depending on your enrollment tier (Self Only, Self Plus One, or Self and Family).

• Your monthly share may look different even if the plan appears similar.

This is especially true if you were used to one of the more stable FEHB plans that carried moderate increases over time. The transition to PSHB brings newer cost-sharing arrangements that reflect the actuarial differences in the USPS population.

Survivors Must Be Accounted For in Your Plan

If you’re retired and want your spouse or dependents to maintain PSHB coverage after your death, it’s essential that you:

• Elect a survivor annuity.

• Be enrolled in Self Plus One or Self and Family coverage at the time of death.

These are not new rules, but under PSHB, failing to meet these criteria could result in your surviving family members being left without any continuation of coverage. This was a pain point in FEHB as well, but the clarity and communication under PSHB are more urgent.

Special Enrollment Periods Are No Longer Optional Opportunities

In 2024, retirees had a Special Enrollment Period (SEP) from April 1 to September 30 to sign up for Medicare Part B without a penalty if they were previously under FEHB. That window is closed now.

Going forward in 2025:

• New retirees must enroll in Part B when first eligible.

• Delaying enrollment can result in late penalties and denial of PSHB coverage.

If you miss your Initial Enrollment Period (IEP) for Medicare, your only fallback is the General Enrollment Period (January 1 to March 31), and PSHB may not be willing to wait.

What If You Were Already Enrolled in FEHB?

If you were an annuitant covered under FEHB as of December 31, 2024, you were automatically transitioned to a corresponding PSHB plan. But even here, the experience isn’t seamless.

Key Considerations

• Your plan may not be identical—even if it looks similar in name.

• Formularies, provider networks, and prior authorizations could change.

• Automatic transition doesn’t mean automatic satisfaction. You still need to review your Annual Notice of Change (ANOC) letter and make plan changes during Open Season if needed.

Annual Open Season Is More Important Than Ever

Each year from November to December, you’ll get the chance to reassess your PSHB coverage. But unlike FEHB, where you may have gone years without making changes, PSHB’s evolving nature demands closer attention.

What You Should Do Annually

• Compare plan options, especially if your health or finances have changed.

• Evaluate whether your providers are still in-network.

• Check how the plan treats Medicare coordination.

Even if you’re satisfied this year, next year could bring premium hikes or benefit cuts that make a different plan more favorable.

Traveling or Living Abroad? PSHB Handles It Differently

FEHB historically provided solid global coverage. Under PSHB, retirees who live overseas or travel extensively should take extra care.

Points to Note

• Some PSHB plans offer limited or no overseas provider networks.

• If you are exempt from Medicare Part B due to residency, you must keep documentation current.

• Prescription access abroad may be more complex under the integrated Part D structure.

If you live outside the U.S. or plan extended travel, be sure your PSHB plan supports that lifestyle—or consider secondary insurance if it doesn’t.

Don’t Forget About FEDVIP and Other Benefits

While PSHB changes health coverage, it does not affect your access to:

• Federal Dental and Vision Insurance Program (FEDVIP)

• Federal Long Term Care Insurance Program (FLTCIP) (still frozen to new applicants)

• Flexible Spending Accounts (FSAFEDS) (not available to retirees)

You can continue FEDVIP enrollment without disruption, and it remains a separate enrollment process. Make sure you manage those elections during Open Season as well.

Staying Ahead in 2025 and Beyond

The transition to PSHB may not have been dramatic for active employees, but retirees are facing the more complex end of this shift. From Medicare requirements to drug coverage restrictions and enrollment windows, your decisions now carry more weight than before.

Review your mail, especially Open Season notices and Medicare communications. Recheck your plan annually. And most importantly, don’t assume that what worked under FEHB will work now. Your circumstances may call for a new strategy.

Make Sure Your Coverage Reflects Your Retirement Priorities

If you’re unsure whether your current PSHB plan meets your long-term needs—or if you’re unclear about Medicare Part B coordination—this is the time to act. Talk through your options with a licensed insurance agent listed on this website. They can help you understand where your current plan stands, what other choices may work better, and what you need to do to stay covered.