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Private Insurance vs. Medicare

December 2, 2021

Private Insurance vs. Medicare

Medicare is a health insurance plan for Americans 65 and older, and those under 65 with specific health conditions. Those who don’t meet these criteria often have a private plan, either a group health plan through their employer, or an individual plan they obtain directly through a health insurance exchange, agency, or carrier. As you get older, you might wonder if it’s a good idea to stay with your private insurance plan instead of switching to Medicare. How does private insurance compare to Medicare? Can you delay your enrollment?

This guide will help you understand the differences between private insurance and Medicare coverage and when you should enroll in Medicare.

Medicare vs Private Insurance After 65

As you approach age 65, you’ll qualify for Medicare. If you qualify for premium-free Medicare Part A, you’ll get that automatically.

If you have a group insurance plan, you can delay enrolling in Medicare Part B until your group coverage ends. You won’t have to pay a late enrollment fee as long as your group coverage qualifies.

However, if you have individual private insurance, you should enroll in Medicare Part B as soon as you are eligible. An individual private insurance plan does not allow you to delay your Part B enrollment — you will end up paying a late enrollment penalty when you do get your Part B coverage.

Private Insurance Benefits

Individual private insurance offers a variety of benefits, depending on the plan you choose. If you have an Affordable Care Act compliant plan, then you will be covered for the ten minimum essential benefits, which includes maternity and mental health services. There are a variety of types of insurance. You might have a Health Maintenance Organization (HMO) plan, where you need a primary care doctor to authorize specialty care. You also need to get your medical care within the provider network to have coverage.

A usually more expensive private insurance option is a Preferred Provider Organization (PPO), where you don’t need a primary care doctor and can see specialists if you’d like. You pay less if you go to an in-network provider, but you can receive coverage outside the network as well.

Learn more about how HMOs and PPOs work with Medicare.

Private Insurance Deductibles

A deductible is the amount that you pay for medical care before your insurance plan kicks in. For example, if you had a $1,000 deductible and a medical bill of $3,000, you’d pay the first $1,000 and the plan would generally pay the rest.

After the deductible is paid for the year, you may only have to pay copayments or coinsurance for covered medical care.

The deductibles for private insurance vary widely. Some plans have a deductible as low as $500 for an individual and $1,000 for a family, but usually deductibles are closer to $2,000 or even more. For ACA compliant private insurance, the highest your out-of-pocket costs can be for a private insurance plan is $8,700, and $1700 for a family in 2022.

Generally, a lower deductible plan has a higher monthly payment, and a higher deductible plan costs less per month.

Medicare Benefits

Medicare is a national program that covers health care needs for those that qualify. One of the biggest benefits of Original Medicare is that you can see any Medicare-approved provider, and the vast majority of doctors accept the coverage.

That means if you live in New York and are traveling to Florida, you can get care from a Medicare-approved provider in Florida even though it’s not your home state. Most private insurance plans have limited provider networks that are in one geographic area.

Another benefit is that Medicare Part A, for inpatient hospitalization, is premium-free for most Americans. Medicare Part B is also affordable, with a low monthly premium compared to most private insurance plans. The 2022 monthly Part B premium is $170.10

Medicare Advantage , also known as Medicare Part C, is an alternative to Original Medicare. When you enroll in a Medicare Part C plan, your benefits are offered and administered by a private insurance company and these private insurance companies must comply with many rules and regulations set by the Medicare program. If you are already in a Medicare Advantage plan, curious about them, or you’ve never heard of them, our in depth guide is for you.

Medicare Deductibles

The Medicare deductibles depend on which part you’re using. For Medicare Part A, hospital insurance, you have a $1,484 deductible for the year in 2021; the deductible is increasing to $1,556 in 2022. After that, you pay a copayment per day depending on the length of your hospital stay.

For Medicare Part B, which is used for doctor’s appointments and medical equipment, the deductible is $203 in 2021; this is increasing to $233 in 2022. After the deductible, you pay 20% of the Medicare-approved amount for any medical services you receive, and Medicare pays the rest.

If you have a Medicare Advantage Plan (Medicare Part C), your deductible will depend on the plan you choose. Be sure to compare the monthly premiums and deductibles so that you choose the Advantage Plan that makes the most sense for you.

Private Insurance Reimbursement Rate vs Medicare

All health insurance plans set their own reimbursement rates for various medical services. In order to be in the insurance plan’s network, the provider has to agree to accept these payments.

In general, a private insurer will pay significantly more for a covered service than Medicare does. A 2020 study found private insurers pay almost 200% of Medicare rates on average. That means that private insurance is more attractive to medical providers. However, that doesn’t stop doctors from accepting Medicare — in fact, 93% of primary care physicians accept Medicare.

Start Comparing Medicare Plans Today

If you’re eligible for Medicare, it often doesn’t make sense for you to continue using private insurance unless you’re in a qualifying group plan. Instead, you should consider switching to Original Medicare or choose a Medicare Advantage plan.

Making the right choice can be difficult because you have so many options. Talking to a licensed insurance agent can help. Contact us today if you have further questions or want to compare Medicare plans!

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