2026 FEHB changes and the PSHB transition: what federal and postal retirees need to know
Two things are reshaping federal health coverage at once. FEHB enrollee premiums jumped another 12.3% for 2026 — a second straight double-digit year — and several plans vanished entirely. Meanwhile, the new Postal Service Health Benefits program has pulled every postal worker and retiree out of FEHB and into a separate system with a Medicare Part B requirement that’s catching people off guard. Here’s exactly who’s affected, who’s exempt, and what to do about it.
1. Two big changes hitting your 2026 coverage
If you’re a federal or postal retiree, two separate forces are pushing on your health coverage this year, and it’s easy to confuse them. The first affects everyone: FEHB premiums rose sharply again, with the enrollee share up an average of 12.3% for 2026, and a wave of plans changing or disappearing. The second affects only postal workers and retirees: the PSHB transition, which moved them out of FEHB into a new program with a Medicare Part B requirement.
This guide covers both. If you’re non-postal, the FEHB premium and plan section is your priority — the PSHB rules don’t apply to you. If you’re a postal employee or retiree, the Part B requirement is the single most important thing to understand, because getting it wrong can mean losing your health coverage. We’ll start with PSHB, then cover the FEHB changes that hit everyone.
2. What PSHB is and why it exists
The Postal Service Health Benefits (PSHB) Program was created by the Postal Service Reform Act of 2022 and took effect January 1, 2025. On that date, every U.S. Postal Service employee, postal annuitant, and their eligible family members were moved out of FEHB and into PSHB. It’s administered by the same agency as FEHB — the Office of Personnel Management — and the plans look similar, with familiar carriers and the same Self Only, Self Plus One, and Self and Family options.
The purpose was financial: the Postal Service faced enormous long-term health liabilities, and Congress designed PSHB to lean more heavily on Medicare for postal retirees, shifting costs and stabilizing the system. That’s why the defining feature of PSHB — the one real departure from FEHB — is its Medicare Part B enrollment requirement. Understanding who that requirement applies to is the whole ballgame.
PSHB is FEHB for the Postal Service — same agency, similar plans — with one big catch: many postal retirees must enroll in Medicare Part B to keep their coverage.
3. The Medicare Part B requirement
Here’s the rule that’s causing the most confusion. Under PSHB, postal annuitants who are entitled to premium-free Medicare Part A (which most people get at 65) and their Medicare-eligible family members generally must enroll in Medicare Part B to stay covered by a PSHB plan. This is a sharp break from regular FEHB, where Part B has always been optional.
But the law carved out important exceptions, mostly to protect people who were already retired or near retirement when the program launched. You are not required to enroll in Part B if any of these apply:
| Exempt group | Detail |
|---|---|
| Retired on or before Jan 1, 2025 | Postal annuitants who retired by that date and weren’t already enrolled in Part B — plus their covered family members. |
| Age 64+ on Jan 1, 2025 | Postal employees who were at least 64 on that date stay exempt permanently — even if they keep working and retire years later. |
| Living outside the U.S. | Annuitants and family members residing abroad are excepted, though the exception can end if they move back to the United States. |
| VA or Indian Health Service | Those enrolled in or eligible for VA health benefits, or eligible for Indian Health Service care, are excepted. |
So the requirement really bites for one group: postal employees who were younger than 64 on January 1, 2025, when they eventually retire and become Medicare-eligible. For them, Part B enrollment becomes a condition of keeping health coverage. The decision tool below walks you through exactly where you land.
4. Do you have to enroll in Part B?
Answer a few questions to see whether the PSHB Part B requirement applies to you. This follows the OPM exception rules, but always confirm your specific situation with OPM or your plan before acting.
Question 1
Educational tool based on OPM’s PSHB exception rules — not a determination of your eligibility. Confirm with OPM (opm.gov/pshb) or your PSHB plan before making any Medicare decision.
5. What the requirement costs — and its upsides
If you do have to enroll in Part B, the obvious downside is the premium: the standard 2026 Part B premium is $202.90 a month per person, and higher-income retirees pay more through IRMAA surcharges. That’s a real new cost, and missing your enrollment window can trigger a permanent late-enrollment penalty that raises that premium for life.
But PSHB was designed so that pairing it with Part B often comes out ahead, and the upsides are genuine:
| Upside | What it means |
|---|---|
| Part B premium reimbursement | Some PSHB plans give Medicare-enrolled annuitants an annual reimbursement (for example, $800/year) that offsets part of the Part B premium. |
| Lower PSHB premiums | PSHB plans are often priced lower than comparable FEHB plans, especially the Medicare-integrated options. |
| Richer coverage together | With Medicare primary and PSHB secondary, many retirees see lower out-of-pocket costs, reduced or waived deductibles, and fewer coverage gaps. |
| Integrated drug coverage | Prescriptions move into a Medicare Part D plan built into PSHB, often lowering drug costs (see section 7). |
The honest takeaway: for those required to enroll, the math frequently works out, but “supposed to save money” isn’t a guarantee. Run your own numbers against your specific plan’s Medicare-integrated benefits before assuming it’s a win.
6. The 2026 FEHB premium increase and plan shake-up
Now the change that hits everyone in FEHB and PSHB. For 2026, the enrollee share of FEHB premiums rose 12.3% on average — the second consecutive double-digit increase after 13.5% in 2025. PSHB enrollees saw about an 11.3% average increase. The government still pays roughly 70–75% of the total premium, but your slice is climbing fast, driven by rising provider costs and heavy use of expensive drugs like GLP-1 medications.
Just as important, the plan menu changed. Eight FEHB plan options were discontinued for 2026 and roughly two dozen others changed service areas or benefits. Here’s the trap: if your plan was discontinued and you didn’t actively choose a new one during open season, you were automatically enrolled into GEHA High — and for some enrollees that meant a brutal premium jump. One reported case saw a Self and Family premium rise roughly 260% overnight after an auto-enrollment.
If you didn’t actively re-elect a plan for 2026, confirm what you’re actually enrolled in. If you were auto-moved into a far more expensive plan, you’re generally locked in until the next open season unless you have a qualifying life event — so catch it early.
7. Prescription drugs: Part D through PSHB
One PSHB feature trips people up because it works differently from anything in old FEHB: prescription drug coverage runs through Medicare Part D. PSHB plans integrate a Medicare Part D Employer Group Waiver Plan (EGWP), and Medicare-eligible PSHB members are generally automatically enrolled into their plan’s Part D drug benefit. That EGWP becomes your prescription coverage, and it’s designed to lower drug costs by tapping Medicare’s subsidies and the Part D out-of-pocket cap.
The critical warning: do not sign up for a separate standalone Part D plan on your own. Enrolling in an outside Part D plan can disenroll you from your PSHB coverage entirely. If you’re Medicare-eligible under PSHB, your drug coverage is the one built into your plan — review that EGWP’s formulary during open season rather than shopping the open Part D market.
8. Your open-season action checklist
Whether you’re in FEHB or PSHB, a short annual routine keeps these changes from blindsiding you:
| Step | Why |
|---|---|
| Confirm your current plan still exists | Plans get discontinued; auto-enrollment can dump you into something far pricier. |
| Compare your plan’s 2026 premium | The 12.3% average hides big variation — some plans rose far more, a few less. |
| If postal: check your Part B status | Use the tool above; if required, plan your Part B enrollment to avoid the late penalty. |
| If Medicare-eligible under PSHB: review the EGWP | Your drug coverage is the built-in Part D plan — don’t buy a separate one. |
| Look for the 75% plans | Plans where the government pays 75% of the total premium stretch your dollar furthest. |
Open season for the 2026 plan year ran November 10 through December 8, 2025. Mark the same window each year — outside it, you generally can’t change plans without a qualifying life event.
9. Frequently asked questions
What is PSHB and who does it affect?
The Postal Service Health Benefits (PSHB) Program is a new health insurance program created by the Postal Service Reform Act of 2022. It took effect January 1, 2025, and replaced FEHB coverage for U.S. Postal Service employees, postal annuitants, and their eligible family members. PSHB is administered by the same agency as FEHB (the Office of Personnel Management) and offers similar plans, but with key differences — most notably a Medicare Part B enrollment requirement for many postal retirees. It affects only postal workers and retirees; non-postal federal employees and retirees remain in regular FEHB and are not subject to the PSHB rules.
Do postal retirees have to enroll in Medicare Part B?
Many do, but not all. Under PSHB, postal annuitants who are entitled to premium-free Medicare Part A and their Medicare-eligible family members generally must enroll in Medicare Part B to keep PSHB coverage. However, there are significant exceptions. Postal employees who retired on or before January 1, 2025, and were not already enrolled in Part B are exempt, as are postal employees who were age 64 or older on January 1, 2025 — even if they keep working and retire later. Additional exceptions apply to those living outside the United States, those with VA health care, and those eligible for the Indian Health Service.
Who is exempt from the PSHB Part B requirement?
Four main groups are exempt. First, postal annuitants who retired on or before January 1, 2025, and were not already enrolled in Part B — and their family members. Second, postal employees who were age 64 or older on January 1, 2025, which keeps them permanently exempt even if they continue working and retire later. Third, postal annuitants and family members who reside outside the United States, though this exception can end if they move back. Fourth, those enrolled in or eligible for VA health benefits, or eligible for Indian Health Service care. Everyone else who is a Medicare-eligible postal annuitant generally must enroll in Part B to keep PSHB coverage.
How much are 2026 FEHB premiums going up?
For 2026, the enrollee share of FEHB premiums is rising by an average of 12.3%, following a 13.5% increase in 2025 — the second straight year of double-digit hikes. The overall average premium increase (including the government’s share) is 10.2%. PSHB premiums are rising about 11.3% for the enrollee share. These are averages, so your specific plan may rise more or less. The increases are driven largely by rising provider costs and heavy use of expensive prescription drugs such as GLP-1 medications. Eight FEHB plan options were also discontinued for 2026, and several others changed substantially.
What happens to my prescription drug coverage under PSHB?
PSHB plans integrate Medicare Part D prescription drug coverage through an Employer Group Waiver Plan, or EGWP. Medicare-eligible PSHB members are generally automatically enrolled into their plan’s Medicare Part D drug benefit, which becomes their access to prescription coverage. This integration is designed to lower costs by tapping Medicare drug subsidies. You should not enroll in a separate standalone Part D plan on your own, because doing so can disenroll you from your PSHB coverage. If you’re Medicare-eligible under PSHB, review your plan’s EGWP drug benefit carefully during open season.
- OPM, “Postal Service Health Benefits (PSHB) Program”
- OPM, “Federal Benefits Open Season Highlights for Plan Year 2026”
- OPM, “Medicare and PSHB: For the PSHB Annuitant”
- NARFE, “PSHB Questions and Answers” (2025)
- FedSmith, “Federal Employees Face 12% Jump in 2026 FEHB Premiums”
- Federal Register, “PSHB Program: Additional Requirements and Clarifications”