Private Health Insurance vs Medicare: Which is Better?

Shopping for health insurance can be incredibly overwhelming. If you are over age 65 or have a qualifying chronic health condition, you may be eligible for Medicare. Medicare is a federal health insurance plan available to select individuals. If you qualify for Medicare, you may be wondering if private health insurance companies can offer you better coverage. You don’t necessarily need to choose exclusively between Medicare and private health insurance. Private health insurance options can help fill the coverage gaps left by your Medicare plan. In order to get the right health insurance for your situation, it is best to speak with a professional and compare quotes from top health insurance companies.

What is Medicare?

Medicare is a federal health insurance option available to individuals 65 and over. Some citizens may be eligible for Medicare if they have a qualifying chronic health condition or disability. Medicare offers unique benefits over private health insurance, but some limitations exist.

Medicare allows the insured to select combinations to get the coverage they need. Medicare is also much less limited in the network of available providers compared to private health insurance companies. Physicians and hospitals negotiate with the federal government, so you are less constrained in your ability to work with physicians. (For more information, read our “Types of Health Insurance Coverage“).

Medicare is also significantly less expensive than most private health insurance options. The trade-off for this affordability might be a lack of covered services. Thankfully, Medicare comes with the ability to combine different supplemental coverage plans to fill any gaps.

Another limitation that comes with Medicare is the inability to insure dependents. While most private health insurance options allow dependent individuals to be covered by the insurance plan, with Medicare, the insurance is limited to the subscriber only.

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What is private health insurance?

Private health insurance is more common in the broader population than Medicare. Private health insurance can come in the form of employer-based coverage, ACA marketplace plans, or private health insurance plans purchased off-exchange.

Private health insurance can have some benefits in that more procedures can be covered. Individuals also have more diverse coverage options when seeking private health insurance.

One of the most significant drawbacks to private health insurance is the cost. Private health insurance companies charge higher monthly premiums, and out-of-pocket expenses tend to be higher as well. Therefore, you might get higher private health insurance quotes.

Private health insurance companies that sell health plans on the Affordable Care Act Health Insurance Marketplace must provide the legally required essential coverage. These plans come in three tiers: Bronze, Silver, and Gold, and some companies also offer Platinum, but this is not available to everyone.

Read more: Cheap Private Health Insurance for Pre-Existing Conditions

Bronze

Bronze is the most basic comprehensive health insurance tier available through the health insurance exchange. Bronze plans tend to have the lowest monthly rates but higher deductibles and out-of-pocket costs. Even though Bronze plans look tempting, these are usually only suitable for individuals who rarely visit the doctor and are generally in good health. Because the deductible and out-of-pocket costs are very high, these plans are only ideal for covering significant one-time expenses, like emergency room visits.

Silver

Silver health insurance plans are well-balanced plans suitable for most individuals. The monthly rates and out-of-pocket costs are reasonable compromises between Bronze and Gold plans. Silver plans are great for individuals with average health care needs.

Gold

Gold tier plans are the highest coverage available on the ACA marketplace. If you enroll in a Gold plan, your monthly rates will be high, but deductibles and out-of-pocket costs are much lower. Gold plans are ideal for individuals who anticipate spending a lot on health care throughout the year.

Platinum

Platinum Health Insurance is not as widely available as Bronze, Silver, and Gold. Platinum tends to have extremely high monthly rates, but deductibles and out-of-pocket costs are next to nothing. Platinum plans are ideal for individuals who spend a lot of time and money on health care throughout the year. The monthly rates can be prohibitively expensive for most individuals, so going with a Platinum plan is typically only suitable for a small subset of the population.

Private health insurance also comes with limitations to the network of providers. Private health insurance companies must negotiate with physicians and hospitals directly. Because it is a private company, there is typically less negotiating power when working with physicians and hospitals.

Read more: Out-of-Pocket Maximum

Which is better, Medicare or private health insurance?

If you wonder whether Medicare or private health insurance is better, the answer depends on your specific situation. The good news is you do not have to choose exclusively one or the other. Many Americans opt to have a combination of private health insurance to supplement their Medicare.

There are unique considerations if you want to combine coverage. The most apparent downside to combining Medicare and private health insurance is paying for two different premiums. This doubling of rates will increase your monthly health insurance expenses.

On the other hand, your deductibles and out-of-pocket costs will be lower. This lower cost is due to each plan covering different aspects of your hospital bills.

One thing to be aware of is the order in which insurance will pay claims. Depending on the procedure, either Medicare or your private insurance will pay first. After this first payment, the other insurance will make up the difference when applicable.

What are the different parts of Medicare?

Medicare provides options for combining different supplemental coverages. You may have heard Medicare’s Part A, Part B, and Part C advertised, but what do these terms mean? Additionally, what is Medigap insurance?

Original Medicare

When you enroll in Medicare, two primary parts make up your coverage: Medicare Part A and Medicare Part B. When combined, these two parts make up the basic Medicare coverage.

Medicare Part A

Medicare Part A is also called Medicare hospital insurance. Medicare part A covers inpatient and long-term home health care. This coverage includes hospital stays, skilled nursing facility care, hospice, and other home health care services.

Medicare Part B

Medicare Part B exists to fulfill additional coverage needs that are not inpatient services like Medicare Part A covers. Medicare Part B pays for outpatient services such as doctor’s visits and specialist physicians. Medicare Part B also covers preventative care and annual wellness checkups.

Medicare Part C

Medicare Part C, also known as Medicare Advantage, is supplemental coverage sold by private health insurance companies. Medicare Part C includes original Medicare coverage Parts A and B, plus additional health benefits. Medicare Advantage Part C covers prescription drug costs, dental, vision, hearing, and more.

Medicare Part D and Medigap

Individuals wishing to stick with original Medicare who also needs prescription drug coverage benefits can supplement their Medicare with Part D and Medigap insurance.

As you can see, Medicare health insurance has many options to flesh out your coverage entirely. By combining the parts, you need with any additional supplemental insurance, you can be sure you are fully covered.

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Medicare vs. Private Health Insurance

If you just turned 65 and wonder whether Medicare or private health insurance is best for you, you have come to the right place. After reading this article, you should better understand the differences between Medicare and private health insurance companies. The good news is that you are not limited to choosing one or the other, and many combinations of Medicare and private health insurance can suit your needs. To get the right coverage for your situation at affordable rates, you should speak with an expert and compare quotes from top health insurance companies.

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