If you are turning 65 but not ready to retire, you aren’t alone. Around 20% of Americans over 65 are still working.1 And since you aren’t ready to leave the workforce just yet, you may have a new option to consider for your medical coverage: Medicare. This article compares Medicare vs. private health insurance and provides a few extra bits of information to consider when selecting coverage.

What Is the Difference Between Health Insurance and Medicare?

The difference between private health insurance and Medicare is that Medicare is mostly for individual Americans 65 and older and surpasses private health insurance in the number of coverage choices, while private health insurance allows coverage for dependents. Not only does Medicare provide many coverage combinations to choose from, but there are also plans within those combinations that offer varying levels of coverage.

When shopping for private health insurance, choosing coverage isn’t too complicated. If it is an employer plan, you choose between a limited number of options provided by your company. If it is an Affordable Care Act (ACA) plan, you can shop for plans based on premiums, out-of-pocket costs, and differences in coverage. These things are often listed in plan’s the Summary of Benefits.

HealthMarkets can help you review your options. If you choose a Medicare combination, you can compare those types of plans to find the best premium and coverage for your needs. Select a plan combination that matches your needs, and then view in-depth information about what each plan will cover. Start comparing plans now.

 

Medicare Coverage Combinations
Original Medicare Original Medicare (Parts A and B) provides hospital and medical insurance. This is the base level of Medicare coverage, and it includes deductibles and coverage gaps. For example, Original Medicare won’t cover dental, vision, or prescription drug coverage.
Original Medicare + Medicare Supplement This combination adds Medicare Supplement to the basic Medicare coverage. Medicare Supplement plans are designed to cover the out-of-pocket costs left over from Original Medicare. For example, these plans can cover coinsurance amounts, copays, or deductibles.
Original Medicare + Medicare Supplement + Prescription Drug In addition to Medicare Supplement, this combination includes coverage for prescription drugs. This can lower the cost of covered medications.
Medicare Advantage (with prescription drug coverage included) Medicare Advantage (Part C) plans are sometimes called all-in-one plans. In addition to Part A and Part B coverage, many Medicare Advantage plans include prescription drug plan coverage. These plans also often include dental, vision, and hearing coverage. Because these plans have differing networks and familiar coverage, they may be the most similar to private health insurance plans.

Medicare vs. Private Health Insurance: Networks

Medicare is the front-runner when it comes to networks. If you don’t want to stick to a limited number of doctors or hospitals, Original Medicare is likely your best option. With Original Medicare, you can go to any provider who accepts the national program. You can keep this flexibility if you add a Medicare Supplement plan, with the additional benefit of lower out-of-pocket costs.

Private health insurance plans have a limited number of offices, hospitals, and healthcare providers that they contract with. These locations and individuals make up a network. If you make a visit outside of your network, unless it is an emergency, you will either have limited or no coverage from your health insurance plan. This can get costly, especially since it isn’t always easy for people to know which providers and locations are covered. For example, an in-network hospital may have hired a doctor that is out-of-network for you.

Medicare vs. Private Health Insurance: Premiums

This is an area where your private Affordable Care Act (ACA) or employer plan may beat Medicare. The average monthly employer premium is $104.2 The average monthly ACA premium for someone making $30,000 annually and receiving a subsidy is only $76.3

While most people will pay $0 for Medicare Part A premiums, the standard premium for Medicare Part B is $148.50.4 Parts A and B (Original Medicare) are the basic building blocks for coverage, and delaying your enrollment in either can lead to financial penalties.

The Medicare Part B premium may be high for basic coverage, but there are some Medicare Advantage plans that can have a $0 premium. These plans won’t erase your Part B premiums, but they can provide extra coverage at little to no cost.

How Much Does Medicare Pay Compared to Private Insurance?

The rate that Medicare pays compared to private insurance depends on the services rendered, and rates can vary. However, according to a 2020 KFF study, private insurance payment rates were 1.6-2.5 times higher than Medicare rates for inpatient hospital services.5

Medicare vs. Private Health Insurance: Out-of-Pocket Costs

The next thing you may consider are your annual out-of-pocket costs. These include copays, coinsurance, and deductible amounts. Medicare has leverage to negotiate with healthcare providers as a national program, while private health insurance plans negotiate as individual companies. This negotiation lowers the amount that a healthcare provider can charge you. You’ll see these negotiated prices reflected in lower copays and coinsurance charges.

You should also consider deductibles when looking at Medicare vs. private health insurance. One benefit that Medicare has over private health insurance in this area are Medicare Supplement plans.

Medicare Deductibles Private Employer Deductibles Private Health Insurance Deductibles
The Medicare Part A deductible is $1,484. The Medicare Part B deductible is $203.4 On average, an employer insurance plan will have an annual deductible of $1,400.6

This is a national average and may not reflect what you actually pay in premiums. It is best to use your plan information to make comparisons.

On average, a bronze-level health insurance plan will have an annual medical deductible of $1,730.7

This is a national average and may not reflect what you actually pay in premiums. It is best to use your plan information to make comparisons.

Can You Have Medicare and Private Health Insurance?

Yes, you can keep your private health insurance plan even if you enroll in Medicare. However, it is important to review the costs you will incur by having two active plans (like paying two separate premiums). Additionally, you may need to find out which plan will get billed first for services.

In the case of ACA plans, your coverage would be considered duplicate. Medicare and ACA plans are not designed to coordinate benefits. So, medical costs would go to one plan or the other. Keeping your ACA plan may also mean dealing with late enrollment penalties for Medicare in the future.

Affordable Care Act Subsidies & Medicare

If you have an Affordable Care Act (ACA) plan, you can keep your coverage once you turn 65. However, you cannot keep any premium tax credits (or subsidies) once your Medicare Part A coverage begins. If you decide to keep your ACA plan, you must notify your insurance company to stop any subsidy payments. Otherwise, you may be required to pay them back when filing your taxes.

Small Business Health Insurance Options Plans (SHOP)

If you work for a company with 1-50 employees, you may be able to keep your employer coverage through SHOP.8 Keeping this plan will allow you to delay Medicare enrollment. You will not be subject to late enrollment penalties until after this coverage ends.

If you work at a company with a different level of employment, you should ask your employer if your current employer-based coverage will remain your primary coverage. If it will become a secondary coverage option, it may be in your best interest to sign up for Medicare when you are first eligible. Otherwise, your employer coverage may refuse making payments until Medicare has been billed first. This may put you in an expensive, and frustrating, coverage hole.

The Downside of Delaying Medicare

There are several parts of Medicare that will penalize you for enrolling after your Initial Enrollment Period (IEP) is over. Also, you may face additional costs if you delay enrolling in a Medicare Supplement plan. It’s important to note that only certain plans allow you to delay enrolling in Medicare without facing penalties.

Late-Enrollment Penalties
Medicare Part A Most people receive premium-free Part A because they have worked for at least 10 years in America. But for those who have to buy this coverage, there is a penalty for delaying your enrollment. Your monthly premium could increase by 10% for each year you didn’t enroll. This penalty lasts for twice as many years as you delayed coverage.9

For example, if you delayed enrolling in Medicare for four years, you’ll have to pay a higher premium for eight years.

Medicare Part B The Part B penalty is a lifelong consequence to delaying your Medicare coverage. This late-enrollment penalty can increase your premiums by 10% for each year you delayed coverage.10

For example, if your IEP ended in December 2017, and you waited until March 2020 to sign up for Part B, you would encounter a 20% premium penalty (two full 12-month periods without coverage).

Medicare Part D The Part D penalty is also lifelong and begins once you have had no prescription drug coverage for more than 63 days. The penalty can increase your premium by 1% (of the national base beneficiary premium, $33.06 in 2021) for each month you were not covered.11

For example, if you went without prescription drug coverage from December 2019 through February 2021 (14 months), that’s a 14% penalty, or $4.60 per month.

Increased Premiums
Medicare Supplement (Medigap) Plans There are no penalties for applying for a Medigap plan after your enrollment period. However, you won’t get your best price possible. That’s because you qualify to enroll in a Medigap plan without any medical underwriting during your IEP. After this time has ended, your medical history, age, and other factors can be used to increase your premium. You could also be denied coverage based on your health.

Is Medicare Better than Private Insurance?

Deciding between Medicare vs. private health insurance is an important choice that only you can make. HealthMarkets can help you get Medicare quotes online and compare them to your current coverage, at no cost to you.

Compare premiums, out-of-pocket costs, and health coverage. Plus, HealthMarkets can even help you figure out which plan best suits your needs. Answer a few questions, and we’ll rank plans that best fit your needs.

Review your options with HealthMarkets today.

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References

1. “More Older Americans Stay on the Job. Working From Home Helps.” Bloomberg. January 2021. Retrieved from https://www.bloomberg.com/news/articles/2021-01-30/more-older-americans-stay-on-the-job-working-from-home-helps
2. “2020 Employer Health Benefits Survey.” KFF. October 2020. Retrieved from https://www.kff.org/report-section/ehbs-2020-section-6-worker-and-employer-contributions-for-premiums/
3. “How ACA Marketplace Premiums Are Changing by County in 2021.” KFF. November 2020. Retrieved from https://www.kff.org/private-insurance/issue-brief/how-aca-marketplace-premiums-are-changing-by-county-in-2021/
4. “Medicare costs at a glance.” Medicare.gov. Retrieved from https://www.medicare.gov/your-medicare-costs/medicare-costs-at-a-glance. Accessed May 6, 2021.
5. “Comparing Private Payer and Medicare Payment Rates for Select Inpatient Hospital Services.” KFF. July 2020. Retrieved from https://www.kff.org/medicare/issue-brief/comparing-private-payer-and-medicare-payment-rates-for-select-inpatient-hospital-services/
6. “High Deductible Health Plan (HDHP).” Healthcare.gov. Retrieved from https://www.healthcare.gov/glossary/high-deductible-health-plan/. Accessed May 6, 2021.
7. “Cost-Sharing for Plans Offered in the Federal Marketplace, 2014-2021.” KFF. January 2021. Retrieved from https://www.kff.org/slideshow/cost-sharing-for-plans-offered-in-the-federal-marketplace/
8. “How to enroll in SHOP insurance.” Healthcare.gov. Retrieved from https://www.healthcare.gov/small-businesses/choose-and-enroll/qualify-for-shop-marketplace/. Accessed May 6, 2021.
9. “Part A late enrollment penalty.” Medicare.gov. Retrieved from https://www.medicare.gov/your-medicare-costs/part-a-costs/part-a-late-enrollment-penalty. Accessed May 6, 2021.
10. “Part B late enrollment penalty.” Medicare.gov. Retrieved from https://www.medicare.gov/your-medicare-costs/part-b-costs/part-b-late-enrollment-penalty. Accessed May 6, 2021.
11. “Part D late enrollment penalty.” Medicare.gov. Retrieved from https://www.medicare.gov/drug-coverage-part-d/costs-for-medicare-drug-coverage/part-d-late-enrollment-penalty. Accessed May 6, 2021.

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