Key Takeaways

• One of the most widely promoted PSHB benefits may not deliver the level of support you expect, especially in retirement.

• Understanding the limitations of this benefit now could save you from unexpected out-of-pocket costs later.

The Benefit That Gets the Spotlight

Postal Service Health Benefits (PSHB) plans come with a range of coverage features designed to support you as a career employee and as a retiree. Among them, one of the most highlighted features is catastrophic out-of-pocket protection—the promise that your healthcare spending will be capped once you hit a certain limit.

On paper, this is reassuring. It sounds like a safety net that will protect you financially if you face a serious illness or an unexpected hospital stay. But the reality can differ significantly depending on your plan, your Medicare status, and the type of care you need.

What Catastrophic Protection Actually Means

The concept of catastrophic protection refers to the annual limit on the amount you have to pay out of pocket for covered services. Once you hit this limit, your plan generally covers 100% of further in-network costs for the rest of the calendar year.

But here’s what you need to know:

• In 2025, many PSHB plans set the in-network out-of-pocket maximum at $7,500 for Self Only and $15,000 for Self Plus One or Self and Family.

• These caps typically apply only to in-network services. If you go out-of-network, your expenses might not count toward your out-of-pocket maximum.

• Prescription drug costs might have a separate cap or be excluded entirely from the medical out-of-pocket maximum.

• These limits do not include monthly premiums or services the plan doesn’t cover.

Medicare Changes the Equation—But Not Always in Your Favor

If you’re retired and enrolled in Medicare, your PSHB plan coordinates benefits differently. Some plans reduce your out-of-pocket burden if you also have Medicare Part B. You may find that:

• Deductibles and copayments are lower.

• Certain plans waive cost-sharing when Medicare is the primary payer.

• Prescription drugs fall under a Medicare Part D Employer Group Waiver Plan (EGWP) with a separate $2,000 annual cap as of 2025.

However, this assumes you’re enrolled in Medicare Parts A and B—and that your plan integrates benefits well. If you’re not enrolled in Part B, you may be responsible for full cost-sharing under your PSHB plan. That means:

• Higher out-of-pocket costs.

• Less predictable financial protection.

It’s also worth noting that retirees who were Medicare-eligible before 2025 but didn’t enroll in Part B could be subject to penalties if they sign up later.

Out-of-Network? You’re on Your Own

Most PSHB plans strongly encourage in-network care. Out-of-network services can carry:

• Much higher coinsurance (40% to 50% is typical).

• Separate and higher deductibles, sometimes reaching $3,000.

• Exclusion from the plan’s out-of-pocket maximum.

This is especially problematic in retirement if you travel or relocate. Unlike some private plans that offer broader networks or national portability, certain PSHB networks remain localized—even for retirees.

If your doctor isn’t in-network and you receive care, the protection you assumed you had under your catastrophic cap might not apply at all.

The Prescription Drug Reality

A common misconception is that your PSHB out-of-pocket maximum includes drug costs. It doesn’t. While 2025 rules under the Medicare Part D EGWP introduce a separate $2,000 cap on out-of-pocket drug expenses, that limit is not combined with your plan’s regular medical cap.

What this means for you:

• You could reach your $7,500 in-network medical maximum and still owe up to $2,000 more in drug costs.

• If your PSHB plan doesn’t cover a specific medication, and it’s not on the Part D formulary either, you may pay full cost.

• Specialty medications can still pose a significant cost burden, even after reaching the cap.

This dual-cap setup may come as a surprise if you expect a single ceiling on your expenses.

Travel, Emergencies, and Misunderstood Gaps

It’s easy to assume you’ll be protected anywhere you go, but PSHB catastrophic coverage often does not travel well without Medicare as a partner.

Here’s why:

• Emergency care outside your network might be covered, but follow-up care could fall under out-of-network rules.

• If you’re outside the U.S., your PSHB plan likely offers limited to no coverage unless you have a plan with international benefits.

• Medicare does not generally cover overseas care either.

You might think the catastrophic cap will kick in—but many foreign claims won’t count toward your total.

Limited Annual Protection

The catastrophic out-of-pocket maximum resets every January. So, if you experience a major health event in December and another in February, you could hit your out-of-pocket maximum twice in a short span.

Unlike lifetime caps (which no longer apply under most federal health plans), annual maximums can leave you vulnerable to repeated high-cost years—especially if you are managing chronic or recurring conditions.

Planning around the calendar year isn’t always realistic, but understanding how these resets work can help you prepare.

Comparing Plan Materials Isn’t Always Clear-Cut

Plan brochures and benefits summaries often highlight the catastrophic maximum in bold figures, but they may not fully clarify:

• What’s included in the total (e.g., only in-network services).

• What’s excluded (e.g., out-of-network, non-formulary drugs, services not covered).

• What requires Medicare enrollment to unlock full value.

Unless you read the fine print or speak with a knowledgeable representative, you might assume this benefit works more broadly than it actually does.

The Role of Medicare Part B Enrollment

For Medicare-eligible annuitants, PSHB plans function best when coordinated with Part B. In 2025, certain retirees must enroll in Part B to maintain drug and cost-sharing benefits.

However, if you delay Part B enrollment:

• You lose out on lower copays and waived deductibles.

• Your cost-sharing resembles that of an active employee rather than a retiree.

• You risk late enrollment penalties that are permanent.

Given that catastrophic protection works best when Medicare pays first, skipping Part B compromises the very benefit you may be relying on.

What You Can Do Now

To protect yourself against unpleasant surprises related to catastrophic protection:

• Review your PSHB plan brochure carefully. Look at what’s covered, what counts toward the out-of-pocket max, and what doesn’t.

• Check network limitations. If your preferred providers are out-of-network, expect higher costs and fewer protections.

• Enroll in Medicare Parts A and B if you’re eligible and retired—or plan for higher out-of-pocket costs if you opt out.

• Speak with a licensed agent listed on this website before Open Season to verify whether the plan you’re counting on will truly meet your needs.

Your Healthcare Safety Net Might Have More Holes Than You Realize

The catastrophic out-of-pocket maximum sounds like a reliable backstop—but only when you understand how it works, what it covers, and what it excludes. In 2025, with multiple coverage layers between PSHB and Medicare, it’s easy to assume more protection than you actually have.

Before you rely on this feature to protect your retirement budget, take a second look—and don’t make assumptions based on headlines. Ask questions, compare details, and seek personalized advice. A licensed agent listed on this website can help you make sense of what your PSHB plan truly offers.