Confused about $0 premium Medicare Advantage plans? Read on to find out more about these plans.
$0 Premium Medicare Advantage Plans: How Are No Premiums Possible?
As a Medicare beneficiary, you’ve probably heard of Medicare Advantage plans and the benefits they may offer beyond Original Medicare coverage. Even if you haven’t purposely looked for these plans, you may have seen direct mail or online advertisements referring to Medicare Advantage plans with premiums as low as $0.
In 2015, the Centers for Medicare and Medicaid Services reported that the average monthly cost of all available Medicare Advantage plans was $32.26, with the most expensive Medicare Advantage plan available topping $340 a month.
So, you may be asking yourself: How can that be? How can you pay no monthly premium (not including other out-of-pocket costs) and be enrolled in a plan that pays your claims and offers additional benefits?
The reason is simple once you understand how Medicare Advantage plans work.
Video on $0 Premium Medicare Advantage Plans:
Medicare Advantage plans contract with the government
Medicare Advantage plans contract with the Centers for Medicare & Medicaid Services (CMS) to take the financial responsibility for Medicare beneficiaries who enroll in their plans. In other words, you show your Medicare Advantage card when you get services as opposed to your red, white, and blue Medicare card.
Since Medicare is no longer paying for your claims, the federal government pays a monthly amount (flat fee) to the insurance company to cover the costs of providing your health-care coverage. That monthly fee varies based on a member’s risk factors. Risk factors include basic demographics like age and sex, as well as health conditions or illnesses.
Extra benefits available through Medicare Advantage Prescription Drug Plans
|Extra Benefits||Original Medicare||Medicare AdvantagePrescription Drug Plans|
|Limits what you’ll spend out of your own pocket for covered medical services in one year||No||Yes – $6,700 or less|
|Part D prescription Drug Coverage||No||Yes*|
|Dental Care||No||Some plans|
|Vision Care||No||Some plans|
|Hearing Care||No||Some plans|
|Senior fitness programs like Silver Sneakers||No||Some plans|
How insurance companies can offer $0 premium plans
Private insurance companies take the monthly payment they receive from CMS and use that to provide Original Medicare coverage to members. Often, insurance companies will have contracts with hospitals, doctors, and other health-care providers, which can help them keep their expenses low. These managed care contracts – Health Maintenance Organization (HMO), Preferred Provider Organization (PPO), Exclusive Provider Organization (EPO), and Point of Service (POS) – work with in-network providers at a reduced fee schedule or discount.
If an insurance company is able to save on the cost of providing health care, they can then pass on the savings to members. This can come in the form of a $0 premium Medicare Advantage plan. Additionally, they could provide richer benefits at little to no cost through these savings and offer benefits beyond Original Medicare. These extra benefits could include foreign travel emergency care, preventive dental services, routine vision care, and fitness benefits.
Many Medicare Advantage plans also offer a full range of yearly preventive services, as well as strong care management and disease management programs. This, in turn, also helps to control costs by keeping members out of the hospital and healthy.
Other costs associated with $0 premium plans
It’s important to note that $0 premium Medicare Advantage plans may still have other out-of-pocket costs, such as annual deductibles, copayments, and coinsurance. For example, most Medicare Advantage plans have primary and specialist fee copayments for services received.
However, Medicare Advantage plans include an important feature to control costs, also known as a maximum out-of-pocket limit. This is a cap on the amount you pay for covered medical expenses in a calendar year.
Please note that you must continue to pay your monthly Part B premium when enrolled in a Medicare Advantage plan.
Key points about $0 premium Medicare Advantage plans
- Original Medicare contracts with Medicare Advantage plans to have insurance companies cover a member’s Medicare bills. The beneficiary becomes a member of the insurance plan and no longer receives benefits through Original Medicare.
- Medicare Advantage plans get a monthly fee from the government to cover the health-care costs of members. This amount can vary based on age, sex, and health.
- Medicare Advantage insurance companies typically work with a network of doctors, hospitals, and other health providers at a reduced fee schedule or rate. This can result in savings, which can, in turn, be passed onto the beneficiary through cost savings or additional benefits not covered by Original Medicare.
- Medicare Advantage members must continue to pay their Part B premium.
Medicare has neither reviewed nor endorsed this information.