Most people sign up for traditional Medicare coverage when they turn 65. But there are two other common options to consider. The first is Medicare Advantage, an alternative Medicare program offered through private insurance companies. The other is private health insurance. You can buy private insurance on your own or through your employer.
When deciding whether to sign up for traditional Medicare or one of the alternatives, it’s a good idea to compare the costs. Look at the monthly premiums for the plans you are considering. Also try to estimate what you might pay in deductibles, coinsurance, and other out-of-pocket costs. Add up the premiums and out of pocket costs to determine what your costs might be overall.
Medicare Alternative Plans
Part C is a part of the government’s Medicare program. But while traditional Medicare Parts A and B are provided through the federal government, Medicare Advantage plans are sold and administered by private insurance companies.
By law, Medicare Advantage plans must provide the same benefits as traditional Medicare, but the insurance companies can set their own premiums, deductibles, and copays.
This means that the cost of a Medicare Advantage plan can vary, depending on the insurance company and plan you choose.
Medicare Advantage plans often initially have lower monthly premiums than traditional Medicare plus a Medigap plan, but there may be higher deductibles and copays.
Medicare Advantage plans are different than traditional Medicare in other ways:
Most Medicare Advantage plans have provider networks, and you save money by using doctors, hospitals and labs that are in the network. Traditional Medicare does not have networks.
Many Medicare Advantage plans include prescription drug coverage. Traditional Medicare does not include prescriptions, but you can buy a standalone Medicare Part D prescription drug plan.
Private insurance is an alternative to traditional Medicare. However, unless you have qualifying employer coverage, you will pay a penalty if you do not sign up for Medicare Part B when you first become eligible.
Once a beneficiary enrolls in Medicare, the penalty is added to your Medicare premium every month for the rest of your life.
If you have employer coverage available through your job or your spouse’s job, it’s important to understand the relationship between Medicare and your employer coverage.
Primary vs Secondary
If your employer has fewer than 20 employees, your employer coverage is treated as secondary insurance once you become eligible for Medicare — even if you don’t actually sign up. This means that your employer insurance pays only after Medicare has paid.
If you haven’t enrolled in Medicare, you may find that your employer insurance won’t pay your claims at all. Leaving you responsible for the full cost of your health care. And you may pay a penalty when you do enroll in Medicare.
If your employer has 20 or more employees, your employer insurance is considered your primary insurance, even if you also enroll in Medicare. In general, you can keep your employer insurance and wait to enroll in Medicare without paying any penalty.
Always check with your company’s human resources department to understand how Medicare might work with your employer insurance.
You also can buy your own private insurance instead of enrolling in Medicare. Depending on the state you live in, you can buy insurance on a state or federal insurance marketplace. Or you can purchase insurance directly from an insurance company.
However, once you become eligible for Medicare, you can’t qualify for insurance premium subsidies under the Affordable Care Act. Because of this, individual insurance will usually cost far more than Medicare or Medicare Advantage.
Medigap plans, also known as Medicare Supplement plans, are not an alternative to traditional Medicare. They are additional, secondary, insurance plans that are only available if you sign up for traditional Medicare Part B.
Medigap plans cover the same types of procedures and services as traditional Medicare. Their role is to reduce the amount you have to pay out of pocket for those services. For example, Medicare Part B only pays 80 percent of the cost of doctor visits and outpatient procedures. A Medigap plan might pay the other 20 percent. In most states, there are 10 Medigap plans to choose from, each with slightly different benefits.
At MedicareFAQ, we are committed to helping you understand Medicare and choose a plan that meets your needs. Give us a call or fill out our form to get started with a free quote.