Key Takeaways

  • Coinsurance in PSHB plans can create unexpected costs in retirement, especially if you’re dealing with frequent or specialized care.

  • Even with Medicare and PSHB combined, your share of the bill can be significant if you overlook how coinsurance applies to services like hospital stays, specialist visits, and outpatient procedures.

What Coinsurance Actually Means in Retirement

Coinsurance is a form of cost-sharing between you and your health plan. Unlike copayments, which are flat fees, coinsurance is usually a percentage of the cost of a covered medical service. In the context of Postal Service Health Benefits (PSHB), coinsurance typically kicks in after you meet your deductible and continues until you reach your plan’s annual out-of-pocket maximum.

For example, if your PSHB plan has a 20% coinsurance for in-network outpatient surgery, and the procedure costs $5,000, you would owe $1,000 after meeting your deductible. That 20% can feel manageable when it’s on paper, but in practice, repeated or high-cost services can add up quickly.

Why It Hits Harder After You Retire

During your working years, you may not notice coinsurance costs as much because:

  • You’re healthier and use fewer medical services

  • You have steady income and possibly Health Savings Account (HSA) funds to draw from

  • You might delay or avoid costly care

In retirement, the dynamic shifts:

  • Medical needs tend to increase with age

  • Fixed incomes make unexpected costs more difficult to absorb

  • Specialized care and recurring therapies are more common

Even if you’ve saved diligently, coinsurance can still erode your financial plans if you haven’t factored in these ongoing percentages.

How PSHB Coordinates with Medicare

If you’re eligible for Medicare and keep your PSHB plan in retirement, Medicare typically becomes your primary payer. PSHB then acts as secondary coverage. For Medicare Part B-covered services, Medicare usually pays 80%, and the PSHB plan may cover most or all of the remaining 20% depending on plan specifics.

However, not all services are covered the same way:

  • Some outpatient services may still carry cost-sharing

  • Durable medical equipment and outpatient surgery may involve coinsurance under both Medicare and PSHB

  • If you see out-of-network providers, coinsurance percentages can be much higher, or services may not be covered at all

Understanding In-Network vs. Out-of-Network Costs

Coinsurance rates differ significantly between in-network and out-of-network providers. Under most PSHB plans:

  • In-network coinsurance typically ranges from 10% to 30%

  • Out-of-network coinsurance can range from 40% to 50% or more

Because PSHB contracts with specific provider networks, staying in-network helps limit your exposure. But in retirement, you may relocate or seek specialists that aren’t in your plan’s network, making out-of-network costs a growing risk.

Annual Out-of-Pocket Maximums: A Double-Edged Sword

While PSHB plans come with annual out-of-pocket maximums, those limits vary:

  • Self Only coverage caps in-network costs at around $7,500

  • Self Plus One and Self & Family coverage have caps near $15,000

These caps do offer protection, but they only apply to in-network services. If you accidentally or routinely go out-of-network, your financial exposure can be much higher. Additionally, the cap resets every calendar year, meaning you could hit it repeatedly if you have chronic health needs.

The Medicare Part B Factor

Medicare Part B covers outpatient care, doctor visits, preventive services, and some home health care. For Medicare-eligible PSHB annuitants, enrollment in Part B is generally required unless you qualify for an exemption.

Having both Medicare and PSHB can reduce coinsurance, especially for:

  • Office visits

  • Lab tests

  • Diagnostic imaging

However, skipping Part B (or delaying enrollment) can leave you with higher out-of-pocket coinsurance for services that Medicare would otherwise pay for. You may also face a late enrollment penalty that lasts the rest of your life.

Prescription Drugs and Hidden Coinsurance

Many PSHB plans integrate Medicare Part D drug coverage through an Employer Group Waiver Plan (EGWP). Even with that integration, coinsurance may still apply to:

  • Brand-name medications

  • Tier 3 and Tier 4 drugs

  • Specialty medications

While there is now a $2,000 annual out-of-pocket cap on prescription drugs under Part D as of 2025, you might still pay coinsurance on each refill until you reach that limit. The percentage depends on the drug tier and plan formulary, which are subject to change each year.

Medical Events That Trigger Coinsurance Surprises

Coinsurance tends to creep up during unexpected or high-usage situations, such as:

  • Emergency room visits followed by hospital stays

  • Physical therapy and rehabilitation sessions

  • Cancer treatments and infusion therapy

  • Imaging procedures like MRIs and CT scans

  • Multiple specialist visits over a short period

If you assume your plan “covers everything,” these events can create financial strain, especially when multiple services pile up in the same calendar year.

The Impact of High-Deductible Health Plans (HDHPs)

Some PSHB options include high-deductible health plans paired with Health Savings Accounts (HSAs). While these plans often have lower premiums, they involve higher out-of-pocket costs early in the year, including full cost exposure before the deductible and higher coinsurance afterward until the out-of-pocket max is hit.

If you choose an HDHP in retirement:

  • Make sure you have adequate HSA savings to offset upfront costs

  • Understand that coinsurance will apply more broadly until you reach the annual limit

  • Be aware that you can no longer contribute to an HSA after enrolling in Medicare

What You Can Do to Prepare

Preparation goes beyond knowing your plan booklet. Here are steps you can take:

  • Review your PSHB plan’s Summary of Benefits and Coverage (SBC) to understand where coinsurance applies

  • Stay in-network whenever possible to avoid elevated percentages

  • Enroll in Medicare Part B when required to reduce duplicate coinsurance exposure

  • Track your medical expenses early in the year to estimate if you’ll hit the out-of-pocket max

  • Use preventive services that may be covered in full to reduce downstream costs

  • Budget for medical costs annually as part of your retirement financial plan

When Coinsurance Goes Unnoticed—Until It Doesn’t

Coinsurance is one of the most commonly overlooked costs in retirement because it often hides in the fine print. Even prepared retirees can be caught off guard if they assume their only cost is the plan premium. Unlike predictable expenses, coinsurance can fluctuate wildly based on your health status and service use in any given year.

The psychological impact of a $2,000 or $4,000 medical bill—despite having good insurance—can lead some retirees to delay or avoid care, creating long-term health consequences. That’s why understanding coinsurance isn’t just about budgeting, but about protecting your quality of life.

Staying Ahead of the Curve

As PSHB evolves and adjusts benefits each year, especially with Medicare integration and cost containment efforts, coinsurance structures may shift. Keeping up to date during Open Season every November to December is crucial.

Make it a priority each year to:

  • Compare plan options

  • Look for changes in coinsurance percentages

  • Evaluate whether your health needs are increasing

  • Consider switching plans if your provider network or cost-sharing terms are no longer a good fit

These proactive steps can help you avoid being blindsided by the hidden costs of retirement healthcare.

Be Proactive with the Right Support

If you’re unsure whether your current PSHB plan exposes you to unnecessary coinsurance or you’re considering whether your Medicare coordination is adequate, speak with a licensed agent listed on this website. They can help walk you through coverage options and review how cost-sharing applies to your specific situation.