Key Takeaways

• The term “contribution” in PSHB can be misleading—you’re often responsible for a larger share of costs than you realize, especially in retirement.

• Your actual out-of-pocket costs go beyond premiums and can include higher coinsurance, deductibles, and uncovered services depending on your plan and Medicare status.

Understanding the Language: Contribution vs. Actual Cost

When you read about Postal Service Health Benefits (PSHB), the word “contribution” comes up often. It sounds fair, maybe even generous. The government contributes, and you contribute. But in practice, your “contribution” under PSHB often feels more like a hefty financial responsibility than a shared investment.

In 2025, most annuitants are paying a consistent monthly premium, but this figure doesn’t tell the whole story. Contribution means the portion you pay toward your health insurance premium, but the term tends to understate your overall health care expenses.

Let’s unpack where the actual costs lie and how much you might really be paying.

The Base Premium Only Tells Half the Story

You might be aware of your biweekly or monthly premium. This is the most visible cost, and it’s often used to compare plans. However, this base premium is just one layer of your total contribution.

Other hidden or variable costs include:

• Annual deductibles

• Coinsurance percentages

• Copayments for each visit or service

• Prescription drug costs

• Out-of-network penalties

• Out-of-pocket maximums

In isolation, each of these may seem minor. But when combined over a year, they can significantly impact your budget—especially if you’re on a fixed retirement income.

How Medicare Affects Your PSHB Contributions

Many annuitants assume enrolling in Medicare will sharply reduce their costs under PSHB. In some plans, that might be true, but not universally.

In 2025, Medicare-eligible PSHB annuitants are required to enroll in Medicare Part B unless exempt. Once enrolled, the plan may offer enhanced coordination benefits such as:

• Reduced or waived deductibles

• Lower copayments

• Integrated prescription drug coverage via EGWP (Employer Group Waiver Plan)

However, enrolling in Medicare Part B also means you pay the standard Part B premium ($185 in 2025) out of pocket—a cost not covered by PSHB. This amount comes in addition to your PSHB contribution.

Some plans offer partial reimbursement for Medicare Part B premiums. But even when they do, the reimbursement often doesn’t cover the full amount. So your total contribution increases, even if some cost-sharing benefits improve.

The Real Impact of Coinsurance and Deductibles

Many PSHB plans operate on a coinsurance model rather than fixed copays. This means that instead of paying a flat amount, you pay a percentage of the total bill. For example:

• In-network coinsurance typically ranges from 10% to 30%.

• Out-of-network coinsurance can climb to 40% or 50%.

If you undergo a $2,000 procedure, even a 20% coinsurance means $400 out-of-pocket.

Deductibles vary significantly by plan, with high-deductible options often requiring you to spend $1,500 to $2,000 before coverage kicks in. And that’s per person, not per family.

These costs can quickly exceed your base premium, especially if you have a year with more than one specialist visit, imaging test, or hospital admission.

The Out-of-Pocket Maximum Isn’t Always Reassuring

You might find comfort in knowing your plan has an annual out-of-pocket maximum. In 2025, that maximum ranges:

• Self Only: $7,500

• Self Plus One or Family: $15,000

But don’t let that ceiling fool you. This number represents the upper limit of what you’re potentially responsible for in-network. It excludes services not covered, out-of-network expenses, and non-medical costs like long-term care.

Also, reaching this threshold means you’ve already paid thousands in coinsurance, deductibles, and copayments. It’s more of a financial safety net than a benefit you want to reach.

Prescription Drug Costs: Another Layer of Contribution

All PSHB plans include prescription drug coverage, and Medicare-eligible members are enrolled in a Part D EGWP. While this system is intended to reduce costs, especially for high-need medications, you still contribute through:

• Tiered copayments based on the drug type

• Annual drug deductibles (up to $590 in 2025)

• Brand vs. generic cost differences

• Annual $2,000 out-of-pocket drug cap under Medicare Part D

Even with the 2025 cap, some retirees face significant outlays early in the year, particularly if their plan front-loads the deductible or charges high cost-sharing for brand-name drugs.

Copayments Add Up More Than You Expect

You might think of copays as minor, flat-fee inconveniences—$20 here, $40 there. But consider the frequency:

• Primary care visits

• Specialist appointments

• Urgent care or ER visits

• Lab tests and imaging

In plans with $30–$60 specialist copays and $100+ ER copays, a few visits per month can outpace your premium within a short timeframe.

And keep in mind: these costs are per service, not per visit. One urgent care trip involving labs and imaging could lead to three separate copays.

Plan Choice Can Exacerbate or Reduce Costs

The PSHB program offers various plans—low-deductible, high-deductible, HMO-style, and fee-for-service. Each has a different structure of cost-sharing.

• High-deductible plans might have lower premiums but require more out-of-pocket spending before benefits apply.

• Low-deductible plans tend to have higher premiums but may offer better coverage for routine services.

• Plans with Medicare integration may reduce cost-sharing for those enrolled in Medicare Part B.

Understanding your usage patterns is critical. For example, if you see a specialist frequently or require maintenance medications, a plan with lower copays and comprehensive drug coverage could save you more than a low-premium plan with high coinsurance.

You Pay More If You Miss Key Enrollment Requirements

One subtle but crucial rule: if you’re Medicare-eligible and fail to enroll in Part B when required, you may lose eligibility for your PSHB plan’s full benefits. In some cases, this could even result in termination of coverage.

Also, opting out of integrated Medicare Part D coverage (EGWP) means forfeiting prescription drug benefits under PSHB, unless you qualify for a Special Enrollment Period later.

That’s why it’s important to stay informed about the evolving requirements in 2025 and beyond. Mistimed decisions can cost you far more than anticipated.

Budgeting for PSHB in Retirement Requires Looking Beyond the Surface

A common trap among PSHB annuitants is budgeting for the monthly premium and assuming that’s the extent of their costs. But as we’ve seen, your actual “contribution” to your healthcare is far broader.

You should build your retirement budget to reflect:

• PSHB premium contributions (monthly or biweekly)

• Medicare Part B premium (if enrolled)

• Expected copays and coinsurance based on past usage

• Annual deductible

• Prescription drug cost-sharing

• Uncovered services or exclusions

• Potential out-of-network fees

Only then will you have a realistic picture of what your Postal Service health benefits are truly costing you each year.

What You Should Focus on Next

PSHB participation in 2025 is no longer optional for eligible Postal Service retirees. But how you manage it is up to you. Understanding how much you’re actually contributing—in time, attention, and especially money—can help you:

• Choose a plan that fits your real needs

• Prepare for medical expenses year-round

• Avoid surprise costs during retirement

• Coordinate with Medicare properly

It’s also worth getting expert help. Many retirees benefit from reviewing their plan options with a licensed agent who understands both PSHB and Medicare coordination.

Reviewing the Full Financial Picture of PSHB

If you’ve been thinking of your PSHB contribution as just your premium, it’s time to shift that mindset. Your real contribution includes every dollar you pay toward care—and it often totals more than you expect.

To make a confident decision for 2025 and beyond, speak with a licensed agent listed on this website. They can help you evaluate your current costs and find a PSHB plan that aligns with both your health and your retirement income.