Key Takeaways

  • The contribution tiers under the Postal Service Health Benefits (PSHB) Program in 2025 are not income-based, yet they lead to unequal financial impacts across different categories of employees and annuitants.

  • Understanding how your tier is determined—and what it does and does not account for—can help you better plan for healthcare expenses throughout the year.

Understanding the Tier System in PSHB

When you enroll in the Postal Service Health Benefits (PSHB) Program, your premium contributions are not based on your salary or your household income. Instead, they’re determined by the type of coverage you choose—Self Only, Self Plus One, or Self and Family—and whether you are an active employee or a retiree.

At first glance, this sounds straightforward. But these tiers can affect your total health costs in ways that aren’t immediately obvious. By taking a closer look, you’ll see how these groupings—though not income-adjusted—impact your financial responsibilities year after year.

The Three Coverage Types: Why Size Matters

The PSHB tiers revolve around three primary categories of enrollment:

  • Self Only: Coverage for the enrollee only.

  • Self Plus One: Coverage for the enrollee and one eligible family member.

  • Self and Family: Coverage for the enrollee and all eligible family members.

While these categories make administrative sense, they don’t account for actual usage, age differences within families, or the medical needs of dependents. You may end up paying significantly more in premiums under a larger tier, even if the second or third covered person doesn’t use services as heavily.

Employees vs. Retirees: Different Contribution Structures

In 2025, active Postal Service employees typically pay a lower share of the total premium cost compared to annuitants. This is because the government continues to subsidize a larger portion of active employee premiums.

For annuitants, the contribution share increases considerably. Even though the total premium amount might be the same across both groups for a given plan and tier, the retiree’s out-of-pocket monthly payment is higher. This hits especially hard if you’re on a fixed income in retirement.

How Medicare Eligibility Alters the Math

For retirees aged 65 and over, the situation becomes more layered. PSHB is structured to coordinate with Medicare, particularly Part B. In many cases, plans reduce or waive cost-sharing (like deductibles or copayments) when you enroll in Medicare Part B.

However, that doesn’t reduce your PSHB premium. So, you may find yourself paying both a full PSHB premium and the Medicare Part B premium—regardless of income. For many retirees, this combination results in a higher monthly outlay than during active employment.

Contribution Tiers Aren’t Sliding Scales

Unlike income-based health programs, such as those available through the ACA or Medicaid, PSHB contribution rates don’t follow a sliding scale. That means a carrier working 25 hours a week pays the same contribution for a Self and Family plan as someone working full time, as long as they both qualify under the same employment category.

Similarly, high-income and low-income retirees within the same tier pay the same premium. There’s no adjustment based on need or ability to pay, which can be especially difficult for those with limited retirement income or growing medical expenses.

Annual Premium Changes Affect Everyone in a Tier Equally

Each year, PSHB plans release updated premiums, typically during the November to December Open Season. In 2025, average premium increases are affecting all enrollees, but the actual dollar change depends on which tier you’re in.

Here’s why that matters:

  • A 10% increase on a Self Only plan might mean $15–$20 more per month.

  • The same 10% increase on a Self and Family plan might be closer to $50–$70 more monthly.

So even though the percentage increase is identical, the financial impact grows significantly with the size of your tier.

You Can’t Always Downgrade to Save Money

The PSHB system allows you to change tiers during Open Season or after qualifying life events. But not every family has flexibility to move to a lower-cost tier. For example:

  • A couple with two kids can’t opt for Self Plus One.

  • A retiree who cares for a disabled adult child still needs to enroll in Self and Family.

This means many enrollees are locked into higher-cost tiers not by choice, but by circumstance.

Tiering Doesn’t Reflect Health Needs or Risk Pooling

The current PSHB contribution tiers are based only on how many people are being covered—not their expected healthcare needs. That’s different from models that group members into risk pools based on age, health status, or chronic conditions.

In PSHB, a healthy 30-year-old and a chronically ill 70-year-old might both fall into the same tier and pay identical premiums. Likewise, a family with one child may pay the same Self and Family rate as one with four children or an adult dependent with complex health conditions.

Geographic Cost Differences Aren’t Built Into the Tier

PSHB premiums are uniform across wide regions, and don’t adjust for regional differences in healthcare cost. That means someone living in a high-cost area (like Washington, D.C.) pays the same as someone in a lower-cost region (like rural areas), assuming they choose the same plan and tier.

While provider availability and network access vary, the tiered premiums themselves remain fixed regardless of your location. This creates hidden disparities in value received versus price paid.

The Government Contribution Is Flat by Percentage, Not Person

In 2025, the government continues to cover approximately 70% of the total PSHB premium for active employees and a smaller share for annuitants. This contribution is applied as a flat percentage across all tiers.

That means:

  • Higher tiers get a larger dollar contribution—but you also pay more out of pocket.

  • There’s no added assistance if you’re covering more dependents with greater medical needs.

You carry the full responsibility for your share, even if your plan’s cost jumps or your household income doesn’t rise with it.

Evaluating Total Costs Beyond Premiums

When you’re comparing tiers, you need to consider more than just the monthly premium. Total cost includes:

  • Annual deductibles (which can vary by tier)

  • Copayments and coinsurance

  • Prescription drug costs

  • Out-of-pocket maximums

Even if you’re in the same tier, your total expenses can differ significantly depending on the medical needs of your covered dependents. That’s why it’s important to think of tiers as just one part of the overall affordability equation.

What You Can Do During Open Season

The Open Season period (from November to December) allows you to:

  • Reevaluate your tier and whether it still fits your current life situation

  • Compare total costs across plans—not just premiums

  • Consider whether enrolling in Medicare Part B (if eligible) could offset other costs

This window is your best chance each year to adapt to any changes in health status, household size, or financial situation.

Why This System Isn’t Going Away Soon

The tier-based structure is entrenched in the PSHB model and has roots in its predecessor, the Federal Employees Health Benefits (FEHB) Program. While it brings predictability for plan administrators, it doesn’t always result in equitable outcomes for enrollees.

Still, given the scale of the PSHB program and the complexity of altering how premiums are calculated or subsidized, it’s unlikely we’ll see income-based tiers introduced anytime soon. That makes it all the more important to understand how the current tiers operate and how to navigate them strategically.

Look Beyond the Label When Choosing a Tier

You may see the label “Self and Family” and assume you’re getting maximum value because it covers more people. But that doesn’t mean it’s the right financial move unless every covered individual is actively using care. Likewise, a Self Plus One tier might look more efficient, but could be restrictive if health needs increase unexpectedly.

Think in terms of flexibility, long-term needs, and overall cost predictability rather than just tier size. A slightly higher premium might be more manageable than unpredictable copays or an out-of-network surprise bill later on.

Rethink the Impact of PSHB Tiers on Your Budget

Contribution tiers may not reflect your income, but they absolutely influence your spending. The lack of income adjustment means careful planning is essential—especially for retirees, families with medical complexity, or those living in high-cost areas.

If you haven’t revisited your PSHB coverage tier in the past year, make sure you do so during the next Open Season. It’s not just about the size of your family—it’s about how that size intersects with real healthcare usage, retirement status, and your overall financial strategy.

Get Strategic About Your Tier Selection

Understanding the PSHB tier system in 2025 can help you anticipate costs and avoid surprises later. You can’t control how the tiers are set up—but you can control how informed your decisions are within the system. If you’re unsure which PSHB tier best fits your needs, get in touch with a licensed agent listed on this website for personalized guidance.