Why Medicare Advantage Plans Often Come With Lower Premiums But Higher Surprise Costs

Key Takeaways

• Medicare Advantage plans may advertise lower monthly premiums, but that initial savings can come with higher out-of-pocket expenses during the year—especially when unexpected healthcare needs arise.

• As a Postal Service Health Benefits (PSHB) enrollee, understanding how Medicare Advantage interacts with your coverage is essential to avoid costly surprises and ensure your access to needed care remains predictable.

Lower Premiums Aren’t the Whole Story

When you see Medicare Advantage plans being promoted with appealingly low premiums, it can be tempting to consider them as cost-saving options. But what appears as a financial benefit upfront often shifts the cost burden into other areas, such as copayments, deductibles, and coinsurance. This becomes particularly relevant for PSHB enrollees as they transition into Medicare eligibility at age 65.

While your PSHB coverage offers consistent access to care, choosing a Medicare Advantage plan instead of Original Medicare paired with your PSHB plan may leave you with:

• Limited provider networks

• Prior authorization hurdles

• Variable cost-sharing amounts

• Plan restrictions that reset or change each year

These realities often come to light only when you actually need care.

What You Really Pay Out-of-Pocket

Unlike the predictability of PSHB plans coordinated with Medicare Part B, Medicare Advantage plans use a pay-as-you-go model. That means each doctor’s visit, lab test, or procedure may come with a copayment or coinsurance. You may not realize how quickly these costs add up until you’re actively using the plan.

General cost categories where Medicare Advantage plans may shift expenses include:

• Deductibles: Higher upfront costs before coverage begins

• Coinsurance: A percentage of service costs rather than a fixed fee

• Copayments: Amounts that vary depending on the service category

• Out-of-network charges: Significant bills if you see a provider outside the plan’s network

PSHB plans generally offer more predictable cost-sharing, especially when Medicare is involved. Many PSHB plans reduce or eliminate deductibles and copayments for members who enroll in Medicare Part B. In contrast, Medicare Advantage plans typically include caps on annual out-of-pocket spending, but those caps can still be several thousand dollars—and you may hit them if you experience a serious illness or hospitalization.

Prior Authorization: A Barrier You Might Not Expect

One of the more hidden costs of Medicare Advantage is the time, effort, and sometimes delay involved in getting medical services approved. Prior authorization is a requirement imposed by many Medicare Advantage plans before you can receive specific tests, treatments, or procedures.

While it may seem like a procedural formality, it often translates into:

• Delayed care

• Denied coverage

• Administrative frustration

This is especially burdensome if you need specialist care or urgent intervention. By comparison, PSHB plans integrated with Original Medicare typically don’t require prior authorization for as many services. That means faster access and fewer bureaucratic obstacles.

The Annual Surprise: Plans Can Change Every Year

Another source of surprise costs comes from the fact that Medicare Advantage plans are not static. Each year, plans adjust their:

• Covered services

• Copayment structures

• Network providers

• Deductibles and out-of-pocket maximums

What was affordable in one year may become costly the next. If you’re not carefully reviewing the Annual Notice of Change sent each fall, you could find yourself locked into a plan that no longer meets your needs—or facing costs you didn’t anticipate.

PSHB enrollees coordinating with Medicare generally experience fewer such disruptions. While PSHB plans also undergo annual updates, they are subject to federal standards that keep changes within more predictable boundaries.

Access to Specialists May Be Limited

Medicare Advantage plans tend to operate within managed care models like HMOs or PPOs. While these models control costs by limiting access to certain providers, they also restrict your freedom to see specialists without referrals or outside the plan’s network.

This can be especially challenging if you develop a health condition that requires:

• A second opinion

• Ongoing specialist care

• Treatment at a specialty hospital

With a PSHB plan paired with Original Medicare, you often have broader access to specialists across the country—without worrying about network restrictions or referral requirements. This flexibility can make a critical difference when it comes to receiving timely and appropriate care.

Provider Networks Can Shift Without Notice

Even if your preferred doctor or hospital is in your Medicare Advantage plan’s network now, there’s no guarantee that will remain true. Providers can exit the network at any time, sometimes with little or no notice. If that happens, you may have to:

• Switch providers

• Pay higher out-of-network rates

• Postpone care while seeking alternatives

For PSHB enrollees using Original Medicare, this is rarely an issue. You can generally see any provider that accepts Medicare, which gives you more continuity of care and reduces the chances of being caught off guard.

Emergency and Urgent Care Coverage May Be Inconsistent

Medicare Advantage plans are required to cover emergency care regardless of location, but how they define “emergency” or “urgent” can vary. In non-life-threatening situations, you may be expected to return to in-network providers or face high out-of-pocket costs.

In contrast, PSHB plans coordinated with Original Medicare generally treat emergency and urgent care coverage more consistently, both in and out of network. That means you’re less likely to face disputes over coverage or receive unexpected bills after seeking care during travel or sudden illness.

Plan Switching Isn’t Always Easy

Medicare Advantage enrollees can switch plans during the Annual Enrollment Period from October 15 to December 7. But if you discover a major flaw in your plan outside that window, you may have to wait months to make a change.

For PSHB enrollees, you maintain your health plan through the federal system, and if you coordinate with Medicare Part B, the coordination generally remains stable year to year. You aren’t subject to the same limited window for changes.

Medicare Part B Still Applies—But Coverage Works Differently

Whether you choose a Medicare Advantage plan or stay with Original Medicare, you must still enroll in and pay for Medicare Part B to keep your PSHB coverage active. However, the way your care is delivered depends on the type of plan you choose.

• With Original Medicare + PSHB, your PSHB plan supplements your Medicare coverage. Many plans waive cost-sharing and enhance benefits for Medicare enrollees.

• With Medicare Advantage, Medicare essentially pays a private plan to manage your care. PSHB benefits do not coordinate with Medicare Advantage the same way and may be suspended or lost if you make this switch.

In short, Medicare Advantage is not a “replacement” for Medicare—it’s a different model entirely. If you’re not careful, you could give up valuable PSHB coordination benefits that have long served as a reliable foundation of your healthcare.

How This Affects Your Budget in Retirement

Postal retirees on fixed incomes may be drawn to the low monthly premiums of some Medicare Advantage plans. But these plans often shift the financial burden onto variable costs, making budgeting unpredictable.

Key financial pitfalls include:

• Surprise copayments for common services

• Specialist referrals that incur higher charges

• Hospital stays that quickly approach out-of-pocket limits

• Prescription drug tiers with steep coinsurance

By contrast, when you pair PSHB with Original Medicare, you can better anticipate your total healthcare costs. Even if the premiums are higher, many retirees find that the overall financial picture is more stable and less stressful.

What You Can Do to Protect Yourself

Before enrolling in any Medicare Advantage plan, make sure you:

• Understand how it affects your PSHB coordination

• Read the Evidence of Coverage and Summary of Benefits documents carefully

• Compare total out-of-pocket exposure, not just premiums

• Verify that your providers are in-network and will remain so

• Plan for how to handle costs during a serious illness or extended care need

Annual Medicare Open Enrollment runs from October 15 to December 7. This is your primary window to make a change, so review your options early and consider your long-term needs—not just this year’s premiums.

Why This Matters to Every Postal Retiree

If you’re eligible for Medicare and enrolled in PSHB, your decisions at age 65 and beyond have lasting consequences. Choosing Medicare Advantage may look like a shortcut to savings, but often it’s just shifting costs around—with far less flexibility, more paperwork, and limited access to care.

Your PSHB plan was built to coordinate smoothly with Original Medicare, and that pairing continues to offer one of the most stable paths to predictable, nationwide care.

If you’re unsure whether a Medicare Advantage plan is right for you—or whether you may lose valuable PSHB coordination benefits—it’s time to speak with someone who understands the full picture.

Get in touch with a licensed agent listed on this website for personalized advice that reflects your retirement goals, income considerations, and medical needs.