Key Takeaways

• Even with robust coverage through the Postal Service Health Benefits (PSHB) Program, you may still face out-of-pocket expenses that Medigap plans are designed to help with.

• Understanding the financial protections that Medicare Supplement Insurance (Medigap) offers can be critical, especially as healthcare costs rise and PSHB plans come with deductibles, copayments, and coinsurance.

What PSHB Covers—and What It Doesn’t

As a Postal Service employee or retiree, you’re likely enrolled in the Postal Service Health Benefits (PSHB) Program starting January 1, 2025. This program replaces your prior FEHB coverage and aligns more closely with Medicare for eligible retirees.

While PSHB plans generally provide strong benefits, especially when combined with Medicare Part A and Part B, they aren’t designed to eliminate every cost. Many PSHB plans include:

• In-network deductibles ranging from $350 to $2,000

• Copayments for primary, specialist, and urgent care visits

• Coinsurance for services like hospitalization and outpatient care

• Out-of-pocket maximums as high as $7,500 (Self Only) or $15,000 (Self Plus One/Family)

These amounts can leave you with significant expenses if you need frequent or specialized care—especially out-of-network or during emergencies.

How Medicare Fits into Your PSHB Plan

If you’re Medicare-eligible, the PSHB system assumes you’ll be enrolled in Medicare Part A (hospital insurance) and Part B (medical insurance). Many PSHB plans coordinate with Medicare by reducing or waiving deductibles and copays. Some even offer partial reimbursements for Medicare Part B premiums.

Still, even with Medicare, certain expenses may not be fully covered, such as:

• Medicare Part B coinsurance (typically 20%)

• Extended hospital stays

• Emergency care outside the U.S.

• Costs associated with excess charges from providers who don’t accept Medicare assignment

And although Medicare has added a $2,000 cap for Part D prescription drugs in 2025, this only applies to covered medications. Many high-cost specialty drugs or excluded medications may still create financial exposure.

Where Medigap Comes In

Medigap, also known as Medicare Supplement Insurance, is specifically designed to cover the “gaps” in Original Medicare. These gaps are the very areas where PSHB and Medicare coordination can still leave you exposed.

If you are enrolled in Original Medicare and a PSHB plan, a Medigap policy could help with:

• Part A coinsurance and hospital costs

• Part B coinsurance and copays

• Blood transfusions (first three pints)

• Skilled nursing facility care coinsurance

• Foreign travel emergency costs (up to plan limits)

The monthly premiums for Medigap plans can vary based on your location, age, and plan type, but the tradeoff is reduced unpredictability in your medical costs. You pay the premium, and in return, your exposure to unplanned bills is minimized.

Timing Matters: When You’re Eligible for Medigap

Timing your enrollment is crucial. The best time to buy a Medigap plan is during your Medigap Open Enrollment Period:

• Begins the month you’re 65 and enrolled in Medicare Part B

• Lasts for six months

During this window, you have guaranteed issue rights—meaning you can’t be denied a policy or charged more due to preexisting conditions.

If you delay and apply later, you may be subject to underwriting, potentially higher premiums, or denial altogether. This is especially important for PSHB annuitants who initially choose not to enroll in Part B or delay supplement coverage.

Comparing the Coverage: PSHB + Medicare vs. PSHB + Medicare + Medigap

Let’s look at how your coverage picture evolves:

• PSHB + Medicare: Strong core protection, particularly when you choose a plan that integrates well with Medicare. However, you may still pay deductibles, coinsurance, and service copays.

• PSHB + Medicare + Medigap: Adds another layer of security, potentially eliminating nearly all out-of-pocket medical expenses outside of premiums. Medigap helps especially when services fall outside PSHB network boundaries or in situations where providers bill above Medicare-approved amounts.

This comparison highlights why Medigap can be worthwhile—even if you already feel covered.

What About the PSHB Prescription Drug Coverage?

Starting in 2025, PSHB includes prescription drug coverage integrated with Medicare Part D through a special employer-sponsored plan. This drug benefit offers:

• A $2,000 out-of-pocket maximum for the year

• Caps on insulin and vaccine costs

• A wider pharmacy network than many standalone Part D plans

Still, gaps can exist:

• Some high-tier drugs may have substantial cost-sharing

• Drugs not covered by the PSHB formulary will need full out-of-pocket payment

• If you opt out of the Part D integration, you risk losing drug coverage entirely

Medigap policies don’t cover prescriptions, so understanding your PSHB drug coverage is essential. You may wish to assess your prescription needs each year during Open Season to ensure your plan still fits.

Medigap Doesn’t Replace PSHB—But It Complements It

Some retirees mistakenly believe they must choose between PSHB and Medigap. That’s not the case. While Medigap only works with Original Medicare—not Medicare Advantage—it can coexist with your PSHB plan as long as you coordinate your care carefully.

In fact, for many annuitants, Medigap is a financial planning tool. It stabilizes health expenses long-term, especially if you anticipate frequent hospital or specialist care. Since PSHB plans continue to evolve each year with potential cost increases, Medigap can offer a layer of predictability.

Things to Watch For Before Enrolling

Before adding Medigap to your healthcare setup, consider the following:

• Your Medicare Part B enrollment: Without Part B, you’re not eligible for Medigap

• Your Open Enrollment timing: Delaying may cost you more or limit availability

• Your state laws: Some states offer additional protections or community-rated pricing

• Current and projected health status: Consider your usage of care—not just your current needs but your outlook for the next 5–10 years

Also, weigh how much of your income is going to monthly premiums. While Medigap adds another cost, the potential for avoiding unexpected medical bills may justify it—particularly in retirement when budgets are fixed.

Why 2025 Is a Pivotal Year to Reassess Your Setup

This year brings major shifts:

• The full transition to PSHB is now in effect

• The $2,000 Part D cap changes your prescription landscape

• New Medicare premium levels apply (Part B standard premium is $185)

• Out-of-pocket costs under PSHB are becoming more visible to retirees

All of this makes 2025 an ideal time to reassess how your benefits coordinate and whether adding Medigap is the right step forward. Even if you’ve never considered it before, reviewing your options now could shield you from larger costs later.

Medigap Can Offer Peace of Mind for the Long Haul

Healthcare in retirement isn’t just about getting treatment—it’s about managing risk. Medigap can be an essential piece of your retirement strategy, not because it’s flashy or new, but because it closes gaps that can drain your savings unexpectedly.

As a PSHB enrollee, you already have solid coverage. But if you want the kind of stability that keeps your budget predictable and protects against rising care costs, it may be time to consider whether a Medigap plan deserves a spot in your overall strategy.

Speak with a licensed agent listed on this website to understand how Medigap could work alongside your PSHB and Medicare benefits.