Key Takeaways

• If you are a Postal retiree or employee in 2025, understanding how PSHB, COBRA, and Medicare interact is essential to avoid losing coverage or overpaying for healthcare.

• Medicare-eligible annuitants and family members may face different rules depending on their retirement date and whether they enroll in COBRA or Medicare Part B, so the coordination timing is critical.

Understanding the PSHB Transition in 2025

As of January 1, 2025, the Postal Service Health Benefits (PSHB) Program replaces the Federal Employees Health Benefits (FEHB) Program for all USPS employees, retirees, and eligible family members. This major shift is part of the Postal Service Reform Act and is designed to create a separate health benefits marketplace tailored for postal workers.

If you are retired or planning to retire soon, the PSHB program significantly affects how you coordinate health benefits with Medicare and COBRA. Knowing when each form of coverage applies—and when to switch—is key to maintaining uninterrupted healthcare.

PSHB and Medicare: Who Must Enroll in What?

Not everyone must enroll in Medicare Part B in 2025, but many postal retirees will. Here’s what matters:

You must enroll in Medicare Part B if:

• You are a Medicare-eligible postal annuitant (or family member) as of January 1, 2025, unless you are exempt.

• You were not retired as of January 1, 2025, or you are age 64 or younger on that date.

You may be exempt from Part B enrollment if:

• You retired on or before January 1, 2025.

• You were already enrolled in FEHB and remain continuously covered.

• You reside outside the U.S., or you’re covered under the VA or Indian Health Services.

If you’re subject to the Part B requirement and don’t enroll, you risk losing your PSHB coverage or facing gaps in prescription drug benefits under the Medicare Part D Employer Group Waiver Plan (EGWP) that’s automatically included in PSHB plans for Medicare enrollees.

What Happens If You Elect COBRA in 2025?

You may consider COBRA if you’re retiring or separating from service, but COBRA rules work differently under the PSHB transition.

Here’s what COBRA gives you:

• Temporary continuation of your PSHB plan (or your old FEHB plan, if eligible) for up to 18 months.

• The same benefits you had before separating, but now you pay the full premium plus a 2% administrative fee.

But beware:

• COBRA is not a substitute for Medicare. Once you’re eligible for Medicare, COBRA becomes secondary.

• If you delay Medicare enrollment thinking COBRA is enough, you may face late enrollment penalties and coverage gaps.

• COBRA does not exempt you from the PSHB Part B requirement if you’re subject to it.

Medicare Enrollment Deadlines You Can’t Miss

You enter your Initial Enrollment Period (IEP) around your 65th birthday. It lasts for 7 months (3 months before, the month of, and 3 months after your birthday). This is the ideal time to enroll in Medicare Parts A and B to avoid penalties.

If you miss it and don’t qualify for a Special Enrollment Period (SEP)—for example, by delaying Medicare because you had employer coverage that no longer applies—you may only enroll during the General Enrollment Period (January 1 to March 31). But your coverage won’t begin until July 1, potentially leaving you uninsured.

COBRA does not count as creditable coverage for delaying Part B, so you won’t qualify for a SEP if COBRA is your only coverage.

Understanding How the Three Programs Interact

Here’s how PSHB, COBRA, and Medicare Part B play together in 2025:

• PSHB + Medicare Part B: If enrolled in both, Medicare is primary and PSHB is secondary. Many PSHB plans waive or reduce deductibles and cost-sharing when Medicare is primary.

• PSHB + COBRA: COBRA extends your existing PSHB coverage temporarily, but it’s expensive and not a long-term solution. You must still enroll in Medicare when eligible.

• Medicare Only: If you’re eligible but don’t enroll in PSHB, Medicare becomes your sole coverage, which may leave you without prescription drug coverage unless you enroll in a standalone Part D plan.

Timing Matters More Than Ever in 2025

As the PSHB transition takes full effect, timing your decisions about enrollment is everything. If you’re nearing retirement or already retired, consider the following timeline:

• Before age 64.5: Start planning your Medicare enrollment strategy.

• Age 65: Enroll in Medicare Parts A and B unless you are exempt.

• If retiring in 2025: Choose between enrolling in Medicare, electing COBRA, or relying on PSHB as a retiree—understanding that some paths may require Part B enrollment.

• 18 months post-retirement (if using COBRA): Prepare for the end of COBRA coverage and ensure Medicare and PSHB are in place by that time.

Prescription Drug Coverage and the EGWP Component

One of the key features of PSHB for Medicare enrollees is the automatic enrollment into an Employer Group Waiver Plan (EGWP) for Part D prescription drugs. Here’s what it means for you:

• EGWP offers enhanced drug coverage compared to standard Part D.

• It is built into your PSHB plan if you have Medicare Part A and B.

• If you opt out of Part B, you may lose access to the EGWP, and thus, lose your prescription drug benefits under PSHB.

PSHB Plans Can Offer Medicare Incentives

Some PSHB plans offer incentives for enrolling in Medicare Part B, such as:

• Premium reimbursements

• Waived deductibles

• Lower out-of-pocket costs

However, these incentives only apply if you are enrolled in both Medicare Parts A and B. Simply enrolling in PSHB isn’t enough to activate these Medicare-coordination benefits.

Special Cases You Should Know

If You’re Covered by a Spouse’s Plan

If you’re a PSHB-eligible dependent covered by a spouse who is a federal employee or annuitant under FEHB, you may remain on that plan. You’re not forced to switch to PSHB or enroll in Part B, but this can change if your spouse retires or their status changes.

If You Reside Overseas

You may be exempt from enrolling in Part B if you live abroad. But if you return to the U.S., you may need to enroll immediately—or face late penalties and a wait for coverage to start.

If You Have VA or IHS Coverage

Veterans and American Indian/Alaska Native beneficiaries may be exempt from the Part B mandate. However, these programs do not provide full healthcare coverage equivalent to Medicare + PSHB.

How to Prepare in Advance

• Review your retirement status: Know if your retirement date exempts you from Medicare Part B.

• Track key dates: Your 65th birthday, PSHB transition timelines, and COBRA deadlines all matter.

• Compare PSHB plan options: Choose one that aligns with your Medicare enrollment status.

• Avoid late enrollment penalties: Don’t assume COBRA gives you a SEP for Medicare.

Your Next Step Could Save You Thousands

The coordination puzzle between PSHB, COBRA, and Medicare in 2025 isn’t simple—but it’s solvable. By making timely decisions and understanding how these programs interact, you can avoid gaps in coverage, reduce your healthcare costs, and protect your retirement.

Get in touch with a licensed agent listed on this website for personalized advice on how to align your coverage with your age, retirement status, and healthcare needs.