How Postal Employees Balance FEHB, PSHB, and Medicare Without Losing Critical Coverage in Retirement

Key Takeaways

• You have to carefully align your FEHB, PSHB, and Medicare benefits to avoid gaps or duplications in retirement coverage.

• Understanding timelines, enrollment rules, and cost-sharing structures ensures you keep the strongest protection while controlling expenses.

The Shift From FEHB to PSHB in Retirement

As a postal employee, you have long relied on the Federal Employees Health Benefits (FEHB) Program. But beginning in 2025, the Postal Service Health Benefits (PSHB) Program replaces FEHB for most postal workers and retirees. This transition changes the way you balance your coverage, especially as you move toward Medicare eligibility.

The PSHB program requires Medicare Part B enrollment for many retirees and family members once you reach 65. This mandate affects how your benefits coordinate, and it also influences whether you keep continuous access to prescription drug coverage through the Medicare Part D integration.

Why Medicare Eligibility Alters the Equation

Once you turn 65, Medicare eligibility becomes a critical factor in your coverage. Your PSHB plan is designed to integrate with Medicare Parts A and B. If you do not enroll in Part B when required, you risk losing your PSHB coverage altogether. This requirement did not exist under FEHB, so it represents a major shift.

Medicare Part A generally comes at no additional monthly cost if you worked and paid Medicare taxes for at least 40 quarters. Part B, on the other hand, requires a monthly premium that changes annually. In 2025, the standard Part B premium is $185. Once you enroll in Part B, your PSHB coverage coordinates to reduce cost-sharing, making doctor visits and outpatient services more affordable.

How Prescription Coverage Fits In

PSHB plans automatically provide prescription coverage through a Medicare Part D Employer Group Waiver Plan (EGWP) for Medicare-eligible annuitants and family members. This ensures you maintain continuous access to medications. Without Part B enrollment, you lose this drug coverage, which would leave you responsible for higher out-of-pocket medication costs.

The Part D integration also adds a significant benefit in 2025: the $2,000 out-of-pocket cap on prescription drugs. This limit protects you from the spiraling costs of ongoing medications, something retirees under FEHB never had guaranteed before.

Timeline of Key Enrollment Decisions

To keep your coverage aligned, you must pay close attention to enrollment periods:

• Initial Enrollment Period (IEP): Begins three months before your 65th birthday, includes your birthday month, and extends three months after. Enrolling in Medicare during this time prevents penalties.

• General Enrollment Period (GEP): Runs from January 1 to March 31 each year if you missed IEP. Coverage begins July 1 but may come with late penalties.

• Open Season: Occurs each year from November to December, allowing you to review and adjust your PSHB plan options.

• Special Enrollment Period (SEP): Applies if you delayed Part B due to employer coverage. For postal employees, the transition to PSHB in 2025 created a one-time SEP in 2024 to align benefits.

By following these timelines, you protect yourself against gaps and late penalties that could last throughout retirement.

Balancing FEHB Legacy and PSHB Reality

Although you cannot stay in FEHB if you are a postal employee or annuitant after 2025, your prior enrollment in FEHB matters. Continuous FEHB coverage into retirement is what qualifies you for PSHB coverage as a retiree. If you had at least five years of FEHB coverage before retirement, that record ensures your eligibility for PSHB.

This linkage means your earlier decisions during your career directly shape what you qualify for now. Without FEHB continuity, you may not have full access to PSHB in retirement.

How Medicare Parts A and B Coordinate With PSHB

When you are covered by both Medicare and PSHB, Medicare pays first and your PSHB plan pays second. This dual coverage lowers your out-of-pocket costs significantly. Here is how it generally works:

• Hospital Stays (Part A): Medicare pays primary, PSHB covers additional costs like coinsurance or extended days.

• Doctor Visits (Part B): Medicare covers 80% after deductible, PSHB covers most of the remainder.

• Preventive Care: Medicare typically pays in full, with PSHB stepping in if anything is left unpaid.

This coordination eliminates many cost-sharing burdens, which is why the Part B requirement is so important for PSHB.

Out-of-Pocket Costs in 2025

Understanding cost responsibilities helps you budget. In 2025:

• Medicare Part A has a $1,676 deductible per benefit period.

• Medicare Part B has a $257 annual deductible and then covers 80% of services.

• Medicare Part D through PSHB plans caps annual out-of-pocket prescription costs at $2,000.

• PSHB in-network out-of-pocket maximums for medical care are $7,500 for Self Only and $15,000 for Self Plus One or Self and Family.

When Medicare is paired with PSHB, many retirees see their costs fall below these maximums because the two programs absorb most of the expenses.

Comparing PSHB With FEHB Rules

FEHB did not require Medicare Part B enrollment, and many retirees skipped it to avoid the extra premium. Under PSHB, skipping Part B may end your coverage entirely. This marks a significant difference in how you plan for retirement.

FEHB also did not guarantee integrated prescription coverage under Medicare Part D. You had to purchase it separately if you wanted it. Now, with PSHB, the EGWP ensures drug coverage is built in, along with the $2,000 annual cap.

Avoiding Common Pitfalls

Retirees often run into problems when they:

• Delay enrolling in Medicare Part B and face lifetime penalties.

• Assume FEHB rules still apply after 2025 and overlook new PSHB requirements.

• Fail to review PSHB plan options during Open Season each year.

• Forget that dropping Part B means losing prescription coverage under PSHB.

By being proactive, you can sidestep these mistakes and protect your retirement security.

The Role of FEDVIP and Other Benefits

Your dental and vision benefits under the Federal Employees Dental and Vision Insurance Program (FEDVIP) remain separate from PSHB. Retirement eligibility does not change these options, and you can continue coverage as long as you enroll during Open Season or maintain continuous coverage.

Additionally, your life insurance under FEGLI and long-term care insurance under FLTCIP are unaffected by the transition to PSHB. This stability helps you focus on medical and prescription coverage decisions without worrying about losing other benefits.

Planning Ahead for a Smooth Transition

If you are approaching retirement or Medicare eligibility, here are steps to prepare:

• Track your Medicare enrollment dates carefully to avoid penalties.

• Confirm your FEHB coverage history to ensure PSHB eligibility.

• Understand how PSHB coordinates with Medicare Parts A, B, and D.

• Budget for premiums and out-of-pocket costs under both systems.

• Review PSHB plan options each year during Open Season to keep coverage that matches your needs.

Bringing All Coverage Together in Retirement

Balancing FEHB history, PSHB requirements, and Medicare enrollment creates a complex but manageable system of protection in retirement. By aligning these programs, you ensure you do not lose critical coverage and that your costs remain predictable.

If you want to avoid missteps that could reduce your healthcare security, you should take time now to review your options. Speak with a licensed agent listed on this website for guidance tailored to your specific retirement path.