Key Takeaways

  • The PSHB program offers broad health coverage, but not all Medicare-related out-of-pocket costs are absorbed. This opens the door for considering a Medigap (Medicare Supplement) plan.

  • Adding a Medigap plan may help reduce financial risk, especially for those frequently using healthcare services or facing high deductibles and coinsurance.

Understanding the Limits of PSHB Alone

As a USPS retiree or annuitant enrolled in the Postal Service Health Benefits (PSHB) program, you likely value the comprehensive coverage it provides. For 2025, PSHB represents a significant evolution from the former FEHB system, especially with its closer integration with Medicare Part B for eligible retirees.

However, the perception that PSHB plus Medicare Part B equals “full coverage” often creates a false sense of financial security. There are still uncovered costs that can accumulate—some expected, others not. Here’s where a Medigap policy could serve as a financial cushion.

Where Coverage Gaps Still Exist

Despite PSHB’s enhancements, some of your healthcare costs remain your responsibility. Understanding these gaps helps you evaluate whether a Medigap plan could make a difference.

Deductibles and Coinsurance

Even with Medicare and PSHB working together, you may face:

  • Medicare Part A deductible: In 2025, this is $1,676 per benefit period for hospital stays.

  • Medicare Part B deductible: Set at $257 annually.

  • Coinsurance amounts: Such as $419 per day for inpatient hospital days 61–90 and $209.50 per day for skilled nursing care after day 20.

Some PSHB plans reduce or waive these costs—but not all. Review your 2025 plan brochure closely.

Foreign Travel Emergency Coverage

Neither PSHB nor Original Medicare routinely cover medical expenses outside the U.S. unless it’s a specific emergency under limited conditions. Some Medigap plans offer foreign emergency benefits—something to consider if international travel is part of your retirement.

Out-of-Pocket Maximums

Medicare Parts A and B don’t set a cap on your total out-of-pocket spending. While many PSHB plans do offer caps (ranging around $7,500 for Self Only and $15,000 for family), reaching these thresholds during a medical crisis is not impossible. A Medigap plan could reduce your share of these costs.

Why Timing Matters

You can’t enroll in Medigap at any time. Your guaranteed right to buy a plan is tied to specific windows:

  • Medigap Open Enrollment Period: Lasts for six months, starting the first month you are both 65 or older and enrolled in Medicare Part B.

  • Guaranteed Issue Rights: May apply under certain conditions, such as losing employer coverage.

If you miss these windows, insurers may deny coverage or charge higher premiums based on your health history. This is why planning ahead is crucial.

How PSHB and Medigap Can Work Together

PSHB plans for Medicare-enrolled retirees coordinate benefits with Medicare Parts A and B. In most cases, Medicare pays first, then PSHB acts as a secondary payer. Adding a Medigap plan means inserting a third layer that can pay some or all of what’s left—depending on the plan type.

For example:

  • Medicare pays 80% of approved outpatient services.

  • Your PSHB plan may cover part or all of the remaining 20%, minus any copays or deductibles.

  • If gaps remain, a Medigap plan may cover those—potentially leaving you with little or no out-of-pocket liability.

This stacking of coverage could reduce your risk of high medical bills, particularly if you have chronic conditions, need frequent care, or anticipate hospital stays.

When PSHB Might Be Enough on Its Own

Not every retiree needs Medigap. If you’re enrolled in a PSHB plan that fully coordinates with Medicare and includes reduced cost-sharing, your out-of-pocket liability may already be low enough that an additional policy doesn’t add meaningful value.

Consider these factors:

  • Your current health status: Few prescriptions and doctor visits? You may not see enough benefit from Medigap.

  • The specifics of your PSHB plan: Some plans offer premium reimbursements or waived deductibles with Medicare Part B.

  • Travel habits: If you stay within the U.S., foreign emergency coverage may not matter to you.

What Medigap Plans Typically Cover

There are several standardized Medigap plans, labeled A through N. While you won’t see specific plan names here, most offer combinations of the following benefits:

  • Part A coinsurance and hospital costs after Medicare benefits are used up

  • Part B coinsurance or copayments

  • First three pints of blood

  • Part A hospice care coinsurance or copayment

  • Skilled nursing facility coinsurance

  • Foreign travel emergency coverage (up to plan limits)

What you choose depends on how much additional financial protection you want, and what your PSHB plan already includes.

Medigap Won’t Duplicate Prescription Drug Coverage

Keep in mind that Medigap doesn’t cover outpatient prescription drugs. In 2025, your PSHB plan automatically includes a Medicare Part D EGWP (Employer Group Waiver Plan) if you’re Medicare-eligible. This provides drug coverage that generally meets or exceeds standard Part D plans, with a new $2,000 out-of-pocket cap in place for 2025.

So while Medigap can extend your medical benefits, it does not serve as a drug plan substitute—and shouldn’t be expected to.

Other Considerations Before You Enroll

Before purchasing a Medigap plan, consider:

  • Monthly premium obligations: Medigap is an additional cost. Make sure the benefits justify the expense.

  • Provider access: Medigap works only with providers who accept Medicare.

  • Coordination concerns: PSHB already coordinates with Medicare. Adding Medigap might add complexity if you don’t regularly review your claims.

  • State regulations: Some states may offer additional Medigap protections or restrictions.

Should You Replace PSHB With Medigap?

In most cases, no. PSHB is your primary health benefit, and it integrates directly with your retirement and federal benefits framework. Medigap isn’t a replacement—it’s a supplement.

If you drop PSHB to rely solely on Medicare and Medigap, you may lose:

  • Access to PSHB-specific benefits like dental, vision, or wellness programs

  • Your eligibility to return to PSHB in the future, unless you qualify under a special rule

  • Protection from high drug costs included under PSHB Part D coverage

This trade-off is usually not worth it. Think of Medigap as a complement, not an alternative.

Reviewing Your 2025 Coverage Decisions

Now that the PSHB system is active in 2025, you should annually reassess how your health coverage layers interact:

  • Are your cost-sharing amounts higher than expected?

  • Did you reach your PSHB plan’s out-of-pocket maximum?

  • Are you seeing gaps in services, like skilled nursing or foreign travel?

Each fall, Open Season gives you the chance to update your PSHB selection. If you’re also considering Medigap, review your timing—especially if you’re newly eligible for Medicare Part B.

Medigap Still Has a Purpose—Even in the PSHB Era

PSHB with Medicare provides strong protection, but it doesn’t guarantee full financial coverage. A Medigap plan may be worth considering if you want to further reduce your out-of-pocket risk and protect against unexpected expenses that PSHB or Medicare may not fully absorb.

If you’re unsure whether Medigap fits your situation, get in touch with a licensed agent listed on this website. They can walk you through your specific options without pressure—and help ensure you’re not overlooking benefits or protections you may be entitled to.