Jane Dotson
The US Postal Service is introducing a new health insurance program for its employees, annuitants, and their families, called the Postal Service Health Benefits (PSHB) program. This will replace the Federal Employees Health Benefits (FEHB) program, which is currently available to federal retirees. The PSHB program will take effect from January 1, 2025, and will require Medicare-eligible enrollees to be automatically enrolled in a prescription drug plan (PDP) through the program, including Medicare Part D. This means that postal retirees with insurance will need to have Medicare to keep their health benefits. However, there are some exceptions to this requirement, such as for those who retired on or before January 1, 2025, and those with VA eligibility.
| Characteristics | Values |
|---|---|
| Postal Service Health Benefits (PSHB) Program | Postal Service employees, annuitants, and their eligible family members will be covered under the PSHB plan starting January 1, 2025. |
| Medicare Part B Enrollment | Postal Service annuitants who retired on or before January 1, 2025, and their family members are not required to enroll in Medicare Part B to be covered by PSHB. |
| Medicare Part D Coverage | PSHB plans offer prescription drug coverage, including Medicare Part D. Annuitants and their family members may opt out of this coverage but may lose underlying prescription drug benefits. |
| Medicare Advantage Prescription Drug (MAPD) | Some PSHB plans offer MAPD coverage, which provides comprehensive benefits beyond the regular PSHB plan. |
| Cost Implications | Enrolling in both PSHB and Medicare Part B may result in cost savings for annuitants. However, at age 65, postal employees may face higher costs due to enrollment in Medicare Part B and potential costs for their spouse and children. |
| FEHB Transition | Current FEHB plans for employees and retirees will end on December 31, 2024. Retirees can choose to enroll in Medicare during a special period without late enrollment penalties or continue with FEHB coverage. |
| Enrollment Periods | Over-65 postal employees retiring between April 1 and September 30, 2024, can enroll in Medicare during a six-month Special Enrollment Period (SEP). Active employees under 64 who want PSHB health insurance in retirement must enroll when eligible for Medicare. |
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What You'll Learn
Postal Service Health Benefits (PSHB) program
The Postal Service Health Benefits (PSHB) program is a new health insurance program for the Postal Service. It will provide health insurance to eligible Postal Service employees, Postal Service annuitants, and their eligible family members. The PSHB program officially takes effect from January 1, 2025, and will replace the Federal Employees Health Benefits (FEHB) program for these groups.
The PSHB program will be administered by the Office of Personnel Management (OPM). There will be an Open Season for enrollment, running from November 11 to December 9, 2024. During this period, USPS employees and annuitants will be able to select from 32 different carrier options. If they don't make a positive election during Open Season, they will be automatically enrolled in the lowest-cost nationwide plan.
PSHB plans offer a Prescription Drug Plan (PDP) EGWP, and some also offer a Medicare Advantage Prescription Drug (MAPD) EGWP, which provides more comprehensive coverage. Medicare Part D-eligible annuitants and their families may choose to opt out of the PSHB plan's prescription drug coverage, but they will still pay the same premium and will lose all prescription drug coverage.
PSHB is supposed to be cheaper than the current FEHB plans, and it has been suggested that combining PSHB with Medicare Part B may save annuitants money. However, there are concerns that the loss of underlying prescription drug coverage for anyone who opts out of Medicare Part D could result in postal employees paying more in retirement. This is because they will have to pay for Medicare Part B, and their spouse may also have to pay for Part B, as well as potentially paying for PSHB and SSB.
There are some exceptions to the requirement to enroll in Medicare Part B at age 65 to keep PSHB coverage. These include:
- Postal Service annuitants who retired on or before January 1, 2025, and their family members.
- Postal Service employees who are age 64 or older on January 1, 2025, and their families. These employees are not required to enroll in Medicare Part B after they retire to enroll in PSHB.
- Postal Service annuitants or family members who live outside the United States and its territories.
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Medicare Part B enrollment
Postal Service annuitants who retired on or before January 1, 2025, and their family members are not required to enroll in Medicare Part B to be enrolled in a Postal Service Health Benefits (PSHB) plan. They are also eligible for prescription drug coverage through a Medicare Part D Employer Group Waiver Plan (EGWP) provided by their PSHB plan.
However, if a postal employee retires after January 1, 2025, they will be required to enroll in Medicare Part B at age 65 to keep their PSHB plan. This is because the USPS is requiring retirees/annuitants to enroll in Medicare Part B at age 65 to keep Federal Employee Health Benefits (FEHB), which will become PSHB.
If you are already enrolled in Medicare Part A, you can add Part B during specific enrollment periods. If you have been covered by an active employer group health plan since turning 65, you can enroll in Part B without any penalty during a Special Enrollment Period. This period allows you to sign up at any time of the year.
To sign up for Part B, you will need to contact the SSA, who can help you find the easiest way to sign up based on your situation. You will receive a welcome package with your Medicare card, which has your Medicare Number. You will need this number to create your secure Medicare account, join a plan, or buy supplemental insurance.
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Medicare Part D prescription drug coverage
Postal Service annuitants and their family members who are eligible for Medicare Part D will automatically receive prescription drug coverage through a Medicare Part D Employer Group Waiver Plan (EGWP) provided by their PSHB plan. This is a Medicare Part D Plan that is only available to certain individuals. The Part D EGWP doesn't cost any extra in premiums and doesn't require any action to get this coverage.
However, it is important to note that Medicare Part D-eligible annuitants and their Part D-eligible family members may choose to opt out of the PSHB plan's Part D EGWP prescription drug coverage. If they do so, they will not receive any prescription drug coverage through PSHB, despite paying the same premium for the plan. USPS annuitants who opt out of Medicare Part D will lose underlying prescription drug coverage.
There are two ways to get Part D prescription drug coverage:
- Enroll in a separate, or standalone, Medicare Part D prescription drug plan when you turn 65 or during open enrollment.
- Choose to join a Medicare Advantage plan (Part C) that includes drug coverage. However, not all Medicare Advantage plans include drug coverage, so it is important to review the details of any plan before enrolling.
Part D plans are part of the government's Medicare program but are offered and managed through approved private insurers. They help protect against high-cost prescription drugs by offering various levels of cost coverage for different "tiers" of drugs. Part D plans differ in the types of drugs they cover, with each plan having its own drug list (formulary), level of cost coverage, and monthly premium. It is important to select a plan that covers the prescription drugs you expect to need.
Additionally, it is important to be mindful of the Late Enrollment Penalty (LEP) associated with Part D plans. Failing to enroll in a Part D plan when eligible may result in a late enrollment penalty, with Medicare charging a small fee for each month of delay, added to the monthly premium.
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Federal Employees Health Benefits (FEHB)
The Federal Employees Health Benefits (FEHB) Program provides health care benefits for over eight million federal civilian employees, retirees, and their families. It is the most diverse employer-sponsored health benefits program in the United States, with 276 plan options in 2021. The actual number of plans available to each employee depends on their geographic location.
The plan options include Fee-For-Service, Health Maintenance Organization, High Deductible, and Consumer-Driven Health Plans. There are three enrollment types available with each plan option: Self Only, Self Plus One, and Self and Family. As of December 2020, there were over 492,000 DOD employees enrolled in the FEHB Program, with 36% in Self Only, 14% in Self Plus One, and 50% in Self and Family.
The Defense Civilian Personnel Advisory Service (DCPAS) develops and oversees civilian human resource plans, policies, and programs for more than 900,000 Department of Defense employees worldwide. DCPAS provides guidance to HR Practitioners on program policies, FEHB Congressional inquiries, and CLER reconciliation corrections and reports.
The FEHB Program can help enrollees and their families meet their healthcare needs. Federal employees, retirees, and their survivors can choose from a wide range of health plans. These include Consumer-Driven and High Deductible plans that offer catastrophic risk protection with higher deductibles, health savings/reimbursable accounts, and lower premiums. There are also Fee-for-Service (FFS) plans and their Preferred Provider Organizations (PPO), or Health Maintenance Organizations (HMO) if the enrollee lives (or sometimes works) within the area serviced by the plan.
FEHB members are allowed to participate in pharmacy-sponsored incentive or pharmaceutical company co-pay reimbursement programs. However, enrollees in other Federal Programs such as Medicare and Medicaid are prohibited from doing so under the Anti-Kickback Act.
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Enrollment exceptions
The following groups of Postal Service annuitants and their family members are not required to enroll in Medicare Part B to be enrolled in a PSHB plan:
- Postal Service annuitants who retired on or before January 1, 2025, and are not already enrolled in Medicare Part B.
- Family members of these Postal annuitants.
- Postal Service employees who are aged 64 or older on January 1, 2025.
- Family members of these employees.
- Postal Service annuitants or family members who live outside the United States and its territories, including the States, the District of Columbia, the Commonwealth of Puerto Rico, the Virgin Islands, Guam, American Samoa, and the Northern Mariana Islands.
In addition, if an employee is aged 64 on January 1, 2025, and keeps working until age 70, they are still not required to enroll in Medicare Part B once they have retired.
Other exceptions to the enrollment requirement include:
- The employee is not required to enroll in Medicare Part B because of VA eligibility; therefore, they can keep PSHB. Since the employee is not required to enroll in Medicare Part B, neither is the spouse.
- The employee is required to enroll in Medicare Part B; however, their spouse is not required to enroll in Medicare Part B due to VA eligibility. The employee and their spouse can keep PSHB, but the employee must select an SSB of 50% or 25% for the spouse to stay on PSHB if the employee passes away first.
If you think you have an exceptional circumstance that isn’t listed, you can call 1-800-MEDICARE (1-800-633-4227).
Late enrollment penalties
It's important to sign up for Medicare coverage during your Initial Enrollment Period unless you have other coverage that's similar in value to Medicare (like from an employer). If you don't, you may have to pay an extra amount, called a late enrollment penalty. This penalty is usually charged for as long as you have that type of coverage.
If you enroll in Medicare Part B outside of your Initial Enrollment Period, you'll have to pay a late enrollment penalty for as long as you have Part B. The standard Part B monthly premium in 2025 is $185. If you waited 2 full years (24 months) to sign up for Part B and didn’t qualify for a Special Enrollment Period, you’ll have to pay a 20% late enrollment penalty (10% for each full 12-month period that you could have signed up), plus the standard Part B monthly premium ($185 in 2025). So your Part B monthly premium for 2025 will be $222.
You won't usually have to pay a Part B penalty if you qualify for a Special Enrollment Period. Special Enrollment Periods are available if you don't enroll in Part B or premium Part A when first eligible due to exceptional situations, such as natural disasters or emergencies, or conditions beyond your control.
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Frequently asked questions
Postal retirees with insurance do not have to have Medicare. They can choose to keep Federal Employee Health Benefits (FEHB) coverage instead. However, if they want to continue with a Postal Service Health Benefits (PSHB) plan, they will need to be enrolled in Medicare Part B.
FEHB plans can be either Health Maintenance Organizations (HMOs) or Fee-for-service (FFS) plans. HMOs usually require you to see in-network providers, while FFS plans allow you to see any medical provider. FEHB plans also offer prescription drug coverage that is creditable for Medicare-eligible retirees, meaning it is as good as or better than Medicare Part D. PSHB plans also offer prescription drug coverage, but only some offer a Medicare Advantage Prescription Drug (MAPD) plan, which provides more comprehensive coverage.
If you opt out of Medicare Part D with a PSHB plan, you will lose underlying prescription drug coverage. You will not be able to receive prescription drug coverage through PSHB, even though you will still pay the same premium for the plan.
If you are a postal retiree with a PSHB plan, you will need to enroll in Medicare Part B at age 65. However, there are some exceptions. If you retired on or before January 1, 2025, or are at least 64 years old on that date and continue working until age 70, you are not required to enroll in Medicare Part B.
