Key Takeaways

• Even with the Postal Service Health Benefits (PSHB) program in full effect as of 2025, Medigap premiums can still influence your overall healthcare costs if you’re Medicare-eligible.

• Understanding how PSHB integrates with Medicare Parts A and B will help you determine if paying Medigap premiums is still necessary or just an extra cost you can avoid.

Why Medigap Still Comes Up in a PSHB World

With the transition to the PSHB program now complete in 2025, many Postal retirees assumed that Medigap (Medicare Supplement Insurance) would no longer be relevant. After all, PSHB plans are structured to work in tandem with Medicare once you’re eligible. However, the role of Medigap hasn’t disappeared—it’s simply shifted.

You may still be paying a Medigap premium or considering enrolling in one because of:

• Gaps in Medicare Parts A and B that PSHB doesn’t fully cover

• Historical habit or previous advice under the old FEHB model

• Fear of high out-of-pocket costs for certain services

Understanding when a Medigap plan might still be affecting you—and when it no longer serves your needs—is essential to making smart, cost-effective decisions in retirement.

How PSHB Plans Interact with Medicare

As of January 1, 2025, PSHB replaced FEHB for Postal employees, annuitants, and eligible family members. For Medicare-eligible enrollees, PSHB plans are designed to coordinate with:

• Medicare Part A (Hospital Insurance)

• Medicare Part B (Medical Insurance)

Here’s how the integration works in general terms:

• Primary and secondary payer rules apply: Medicare typically pays first, and the PSHB plan pays second.

• Cost-sharing is reduced or waived: Some PSHB plans reduce or even eliminate deductibles and copayments when you have both Parts A and B.

• Drug coverage is built in: Medicare-eligible enrollees are automatically enrolled in a Part D Employer Group Waiver Plan (EGWP) through their PSHB coverage.

All of this makes the idea of a third layer—Medigap—feel redundant. But that’s not always the case.

When You Might Still Be Paying for Medigap

There are scenarios where you may still be carrying a Medigap policy, even if it’s no longer necessary:

1. You Transitioned Without Reassessing

Many retirees transitioned from FEHB to PSHB in 2025 without taking the time to evaluate how their existing Medigap coverage fit into the new system. If you haven’t re-evaluated your coverage since the switch, you may be paying for something you don’t need.

2. You’re Worried About Out-of-Pocket Maximums

PSHB plans have their own out-of-pocket maximums. But not all are the same, and depending on the plan you selected, you might be facing higher limits than you’re comfortable with. Medigap can provide peace of mind by covering certain gaps that still remain.

3. Your Healthcare Needs Are High or Unpredictable

If you’re managing multiple chronic conditions or need frequent care, you may feel safer keeping Medigap to fill any financial holes, even if it overlaps with what PSHB already provides.

4. You Didn’t Realize PSHB Covers Prescription Drugs Differently

Under PSHB, your prescription coverage is handled through an integrated Part D EGWP. If your Medigap plan included a standalone Part D plan (which is common), this could result in unnecessary duplication—and extra premiums.

How Medigap and PSHB Differ in Coverage

Understanding where Medigap and PSHB plans differ can help you assess whether maintaining both is worth it.

Medigap Typically Covers:

• Part A coinsurance and hospital costs beyond Medicare limits

• Part B coinsurance and copayments

• First three pints of blood

• Part A hospice care coinsurance

• Skilled nursing facility care coinsurance

• Foreign travel emergency care (in limited amounts)

PSHB Covers (When Coordinated With Medicare):

• Many coinsurance amounts waived or reduced when you have Parts A and B

• Prescription drugs included in integrated coverage

• Caps on total annual out-of-pocket spending

The big takeaway? PSHB already wraps in many of the features that people used to rely on Medigap for. If your current plan offers reduced copays and coinsurance when combined with Medicare, your need for a Medigap policy diminishes.

Important Questions to Ask Before Dropping Medigap

Before you decide to cancel your Medigap policy, consider the following questions:

• Do I have both Medicare Parts A and B?

• Does my PSHB plan waive or reduce cost-sharing when paired with Medicare?

• What is my annual out-of-pocket maximum under PSHB?

• Are there specific services or costs Medigap covers that PSHB doesn’t?

• How much am I paying in monthly Medigap premiums, and is it justifiable?

• Will I be able to re-enroll in Medigap later if I drop it now?

This last question is especially important. In many states, you’re only guaranteed the right to buy a Medigap policy without medical underwriting during specific enrollment windows, such as your initial Medicare eligibility or during a Special Enrollment Period triggered by losing other coverage. If you cancel and want to return later, you may be denied based on your health.

The Cost Layer You Can’t Ignore

Even though PSHB aims to simplify coverage and reduce costs, Medigap premiums still show up as a line item for many retirees—sometimes unnecessarily. These premiums can range from moderate to high, depending on the plan and state.

In a year like 2025, where retirees are already facing higher premiums for both Medicare Part B and PSHB plans, any extra premium for Medigap becomes a bigger burden. Reducing or eliminating that burden starts with understanding what your PSHB plan already provides and whether that renders Medigap obsolete.

Why It Matters More in 2025

Here’s why this issue takes on more urgency now than in prior years:

• PSHB is new and different: You can’t rely on assumptions from your FEHB experience. Many of the old strategies around Medigap no longer apply.

• Medicare Part B premiums are higher in 2025: This alone makes any additional coverage decisions financially heavier.

• You may have new enrollment restrictions: Dropping Medigap could lock you out of coverage later if you change your mind.

• PSHB’s design works best when paired with Parts A and B: It’s worth examining if your plan already fills in most of the coverage gaps.

Making a Clean Break From Medigap—Or Not

If your analysis shows that your PSHB plan covers nearly everything that your Medigap plan used to, and you’re comfortable with the out-of-pocket maximum, you may be ready to drop Medigap. But do it smartly:

• Review your PSHB plan brochure carefully

• Check how your plan coordinates benefits with Medicare

• Call your plan administrator if needed to clarify

• Keep written documentation if you decide to disenroll from Medigap

On the other hand, if your needs are complex or your PSHB plan’s cost-sharing is higher than you’d like, Medigap may still serve a purpose. You don’t need to drop it just because the PSHB transition occurred.

The Real Cost of Paying for Something You Don’t Use

In 2025, every dollar counts. With premiums for Medicare Part B rising, and PSHB costs factored in, continuing to pay for Medigap without actually using its benefits can quietly chip away at your budget. Worse, it may give you a false sense of security for coverage that your PSHB plan already handles.

You owe it to yourself to do a detailed review. Look at your Explanation of Benefits (EOBs), compare them against your Medigap policy, and assess how often the Medigap plan is actually stepping in. If you find you’re rarely getting value, it might be time to shift those funds elsewhere.

What to Consider Before the Next Open Season

The annual Open Season from November to December is your key window to make changes to your PSHB plan. Use this time wisely:

• Compare your PSHB plan’s cost-sharing against what you pay for Medigap

• Make sure you understand your plan’s integration with Medicare Parts A and B

• Seek help from a licensed agent listed on this website to evaluate your options

• Review your Medicare enrollment status to ensure coordination benefits are active

Preparation now ensures you’re not locked into unnecessary costs for another year.

Let Your PSHB Plan Do the Heavy Lifting

You have access to a PSHB plan that’s structured to support you in retirement. But unless you take the time to understand what it really offers—especially alongside Medicare—you may end up layering unnecessary coverage on top. That’s what makes evaluating Medigap premiums so critical.

Review your current policies, understand what each one covers, and use this opportunity to streamline your healthcare spending. If you’re unsure whether Medigap still serves a purpose in your specific case, get in touch with a licensed agent listed on this website for personal advice.