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A senior couple reviewing their Medicare vs. Employer Insurance options on a tablet

Benefits of Medicare vs. Employer Insurance

If you’re looking for health insurance, you can opt for Medicare or employer insurance, depending on your personal needs and finances. However, if you’re 65-plus and still working, you might find Medicare your best medical coverage option. We at The Medicare Family don’t want to decide for you – we take you through all the confusing details of Medicare until you understand them before enrolling.

This article compares Medicare vs. employer health insurance to help you make a more informed decision.

Medicare vs. Employer Insurance

Medicare is a federal health insurance program that pays the hospital and medical care for US citizens aged 65 and older. It also covers some people living with disabilities. Medicare consists of Part A and Part B for hospital and medical insurance and Part C and Part D for flexibility and prescription drugs.

Employer health insurance is an insurance type that helps cover your medical costs and expenses.

Medicare and employer health insurance differ because Medicare is mainly for individuals 65 and older and has more coverage choices and plans for you to choose from. Unlike Medicare, employer insurance covers dependents. It’s also less complicated choosing employer health insurance coverage.

Benefits of Medicare vs. Employer Insurance

While every coverage type has pros and cons, we want to look at the benefits of Medicare over employer health insurance and why it’s the best option for you.

Happy senior couple going through medical insurance paperwork with a doctor

Most Healthcare Providers Accept Medicare

Medicare gives you many options regarding access to doctors, hospitals, specialists, and healthcare providers since it’s a Federal government program. Original Medicare (Part A and Part B) allows you to get services from any provider who accepts the program. With a Medicare Supplement plan from an insurance company, you can choose the service that’s right for your needs. You’ll pay lower out-of-pocket costs like deductibles and copays.

Conversely, employer insurance plans have a limited number of hospitals and health providers they contract with, forming a network of individuals and locations. Outside this network, you get no or limited coverage from your health insurance provider, making it difficult to get an appointment, even though you have insurance. For instance, a study by The Commonwealth Fund shows that 9 percent of individuals with employer insurance struggled to get a referral to a specialist compared with 2 percent of 65-plus individuals with Medicare.

Better Controlled Costs

Numerous studies show that the Medicare costs are almost half those of employer insurance. For instance, according to Consumer Watchdog, Medicare costs have been up 400% since 1969. But employer health insurance premiums are up almost twice that, at 700%, within the same period.

According to the National Academy for Social Insurance, if the expenditure on Medicare rose at the same rate as employer health insurance premiums between 1997 and 2009, Medicare would have cost 31.7 percent more, an additional $114 billion.

The cost of employer health insurance keeps rising, outstripping Medicare. For instance, it would cost you almost 40 percent more for employer health insurance for an equivalent Medicare coverage.

Delivers Health Care Cheaper and More Efficiently

Medicare is the more cost-effective way to get healthcare coverage for several reasons:

  • Lower administrative costs (taxes, fraud, abuse controls, and building-related expenditures) are approximately 2 percent of operating expenses compared to employer insurers’ 17 percent. This lowers Medicare’s overhead, enabling the government to provide coverage cheaper and more effectively.
  • Medicare beats employer insurance when bargaining down provider costs due to monopoly, competition, and the intention to maximize profits.
  • Medicare’s public accountability and bargaining power allow it to drive system change and control high healthcare costs.

For these reasons, Medicare is 91 percent more likely to pay for your care than the 78 percent if you were dealing with employer insurance, as the study by The Commonwealth Fund shows.

Medicare Part A and Part B Don’t Vary With Age or Location

Employer health insurance premiums change depending on age and location. You are likely to pay three times more for employer insurance than a younger person. But this isn’t the case with Part A and Part B Medicare. While you don’t have to pay premiums for Part A Medicare, the amount you pay for Part B doesn’t fluctuate depending on your age.

Your place of residence largely affects the premiums you pay for employer insurance. However, the premiums you pay for Medicare Part A and Part B are the same regardless of where you live in the USA.

Word medicare written on a paper and stethoscope

Medicare Downsides

There are some downsides to Medicare. But these don’t outweigh the benefits compared to employer health insurance:

  • Employer insurance payment rates are 16-2.5 times higher than Medicare rates.
  • Late Original Medicare (Part A and Part B) enrollment after the Initial Enrollment Period (IEP) can result in penalties.
  • Medicare has higher deductibles, copays, and insurance costs than employer insurance.
  • Premiums for Medicare Part B tend to be higher than Affordable Care Act (ACA) or employer insurance plans.
  • You cannot include dependents in your Medicare plan.

Can I Have Both Medicare and Employer Insurance?

You can still retain your personal insurance policy even after enrolling for Medicare. However, you have to consider how much it will cost to maintain both plans and which plan healthcare providers will consider first for services. You must be aware of any complications regarding penalties for late Medicare enrollment if you have an ACA plan. You can learn more about the implications of having both ACA and Medicare here.

The Bottom Line

Medicare’s health insurance plan is better than employer insurance in all aspects. It’s even more favorable if you are 65 years and older. With Medicare, you’re sure to get quality care, thus satisfaction, better access to care, and lower costs.

Medicare is also excellent for those living with disabilities or with end-stage kidney failure. For this reason, enroll in Medicare early so you can receive proper care as needed throughout your life with the help of The Medicare Family.

Please don’t hesitate to contact us today to schedule an appointment and get answers to your questions.

Sylvia Gordon, aka Medicare Mama®, is an expert on all things Medicare and Social Security. She is the 2nd Generation here at The Medicare Family and has served on the advisory boards of major insurance companies like UnitedHealthcare®, Cigna, and Anthem. In her free time, she can be found taking care of her animals (dogs, goats, peacocks, chickens), and reading a good book. Learn More.
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