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More Medicare beneficiaries choosing private health insurance plans Posted: June 19th, 2012

By Maryalene LaPonsie

Maryalene LaPonsie has been writing professionally for more than a decade on topics including education, insurance and personal finance. She holds a Bachelor's Degree in Political Science from Western Michigan University.

In 2012, more than 13 million Medicare beneficiaries -- 27 percent of all those enrolled in the program -- have elected to receive their benefits from private health insurance plans rather than the government. That number represents a 10 percent increase from the previous year.

In addition, such plans experienced a modest decrease in premiums for the current year.

The statistics were included in a recent Kaiser Family Foundation report on private Medicare Advantage plans.

Medicare Advantage plans grow in popularity

For seniors and certain disabled individuals, Medicare is a government health insurance program. While original Medicare offers benefits directly from the government, Medicare Advantage provides the opportunity for the beneficiaries to receive their medical insurance from a private company instead.

The number of beneficiaries selecting Medicare Advantage plans has been steadily increasing since 2004, when enrollment was 5.3 million. Most of the 13.1 million who enrolled in the plans for 2012 have individual policies, although 18 percent are signed up under group plans.

Health maintenance organizations (HMO) are the most popular option for Medicare Advantage, with 65 percent of enrollees opting for an HMO. Local preferred provider organizations (PPO) and regional PPOs make up another 28 percent of enrollment. Private fee-for-service plans were one of the least popular options, with only 4 percent selecting this type of health insurance coverage.

Health insurance rates dip for Medicare Advantage

Medicare Advantage plans may charge not only the Part B premium, but also an additional amount to cover other benefits offered by the policy. The average monthly premium for a Medicare Advantage plan including a prescription drug benefit is $35. That is a decline from $39 in 2011 and $44 in 2010. Overall, all types of Medicare Advantage plans saw a decline in premiums in 2012 except regional PPOs, which had a $3 increase.

However, that average monthly premium amount is impacted by the number of beneficiaries who pay nothing for their coverage. According to the Kaiser Family Foundation, 56 percent of Medicare Advantage enrollees participate in zero-premium plans.

For Medicare beneficiaries who pay a monthly premium, the average cost is $79.83 for all plans. Average costs were cheapest for private fee-for-service plans and most expensive for cost plans, a specialized form of HMO:

  • Cost plans: $138.97
  • HMOs: $82.75
  • Local PPOs: $76
  • Regional PPOs: $64.72
  • Private fee-for-service plans: $59.33

In its discussion of the data, the Kaiser Family Foundation notes the future of Medicare Advantage remains uncertain given planned payment cuts that are being phased in under the Patient Protection and Affordable Care Act.