Are $0-Premium Medicare Advantage Plans Really Free?
Some Medicare Advantage plans advertise a $0 premium. Is that too good to be true? There are $0 premium plans—in fact, nearly two-thirds of enrollees in Medicare Advantage plans pay no additional premium for the privilege.1 However, like many other “free” things in life, these plans are not exactly without cost.
Why choose a $0 premium Medicare Advantage plan?
If you sign up for a Medicare Advantage plan, you’ll pay any applicable Part A and Part B premiums—and possibly a separate Medicare Advantage premium. If you choose a $0 premium plan, you could get more benefits than Original Medicare (Parts A and B) provides, at no additional cost.
Medicare Advantage plans must cover everything Part A (hospital insurance) and Part B (medical insurance) cover, but most also include some extra benefits. These are the most common perks:
- Prescription drug coverage
- Dental work
- Vision care and eyeglasses
- Hearing aids
- A fitness plan
Other benefits could include transportation to and from doctor appointments and allowances to purchase over-the-counter items like compression socks and blood-pressure cuffs.
With any Medicare Advantage plan, you’ll still pay the Part B premium. And if you didn’t earn premium-free Part A through your or your spouse’s work record, you’ll need to pay that premium as well. But if you choose a $0 premium plan, you could receive these additional benefits, as well as others, for no extra cost.
It sounds like a dream, right? Let’s dive into how Medicare Advantage plans work to see how insurance companies can offer these perks without charging a premium.
How does $0 Medicare Advantage plans work?
If your Medicare Advantage plan has a premium, you’ll pay that premium directly to the insurer. But you’ll also pay the Social Security Administration (SSA) any Part A and Part B premiums you’re responsible for. If you’re receiving Social Security benefits, these premiums automatically come out of your monthly checks.
If you have Original Medicare, your premiums go directly to the Medicare program. However, if you enroll in Medicare Advantage, a portion of these funds are paid to your plan provider to pay for your care. Whether you pay an extra premium for Medicare Advantage or not, the insurer still earns income when you enroll.
If an insurer can provide all the required benefits (remember, that’s everything Parts A and B cover) using only funds from Medicare, it can choose to forego charging an additional premium. Many $0 premium plans squeeze in some of the extra benefits mentioned above without costing you a penny.
Do some Medicare Advantage plans pay the Part B premium?
Offering $0 premium plans helps insurers stay competitive. After all, "free" coverage is awfully appealing, isn't it? But some plans can look even more enticing. In a way, some plans pay you for enrolling by giving you a rebate on your Part B premium. Instead of sending your insurance company a check each month, the plan provider will send you one.
Incredible, right? Who wouldn’t want more cash in their wallet? But just as $0 premium Medicare Advantage plans aren’t actually free, those with a Part B rebate aren't either. You'll still pay other Medicare expenses such as copays, coinsurance, and deductibles.
The downsides of a $0 premiums plan
The downsides of a $0 premium plan usually come in the form of costs you'll pay down the line. Often, plans with lower premiums have higher deductibles, copayments, and other costs. You may also have fewer benefits than a higher-priced plan.
Medicare Advantage deductibles
A deductible is the cost you must pay out of pocket before your coverage fully kicks in.
Deductibles vary by plan, and you'll typically see a separate deductible for prescription drugs if your policy covers them. Generally, the lower your premium, the higher your deductible and the more health care costs you’ll pay out of pocket.
If you’re healthy and receive mostly preventative care, a high deductible might not matter as much. But if you use your coverage a lot, a high deductible could mean paying thousands of dollars more each year.
Preventative services, such as wellness visits and diabetes screenings, are usually fully covered before you meet your deductible.
Medicare Advantage copays and coinsurance
Copays and coinsurance are other cost-sharing mechanisms. For each service you receive, you might pay a copay (such as $25 for a doctor visit) or coinsurance (such as 20% of a medication). The insurer pays the remaining balance.
A $0 plan could come with higher copays and coinsurance. If you see the doctor more than a couple of times per year and take several medications (or just one expensive drug), these costs could eat into your budget.
Medicare Advantage max out-of-pocket amount
The maximum out-of-pocket amount (MOOP) may also be higher for $0 premium plans. By law, all Medicare Advantage MOOPs must be $6,700 or lower in 2020.2 Many plans offer low limits to help you keep your costs down, but you might not see low MOOPs among $0 premium plans. A high MOOP could quickly eat into what you save annually in premiums with a $0 premium plan.
Table examples are for illustration purposes only. Actual costs may vary. MOOP savings calculated by subtracting MOOP from the highest possible MOOP of $6,700.
If you anticipate spending several thousand dollars on health care throughout the year, you could save more money with a higher-deductible plan.
Medicare Advantage benefits
Most Medicare Advantage plans provide more benefits than Original Medicare (Parts A and B). But the less you pay in premiums, the fewer of these benefits you may be able to access. And the benefits you do receive could cover a smaller portion of your expenses.
For example, perhaps your $0 plan has a vision benefit, but it only pays 20% of the cost for a new pair of eyeglasses. Or maybe you'll have coverage for preventative dental care but not comprehensive coverage (which includes surgeries and deep cleanings). And you could miss out on popular fitness programs such as Silver&Fit or Silver Sneakers.
Is a $0 premium Medicare Advantage plan worth it?
Whether a $0 premium plan is right for you depends on your situation. With these plans, you could save money upfront only to pay more when you receive health services. Generally, the more you use your coverage, the more out-of-pocket costs you’ll have.
For people who use their coverage often, a $0 premium plan may not be worth it. But for those who mostly use their coverage for preventative services and the occasional doctor visit, the premium savings could be worth it.
Keep in mind that it’s not just about the money: some $0 premium Medicare Advantage plans have fewer benefits too. And if the cost of a service without insurance is prohibitively expensive, many people might try to make do without it. To weed out plans with poor health results, choose a plan with a high Medicare Star Rating. These ratings are primarily based on health outcomes. Plans that fail to improve your health may see a lower score.
Medicare Advantage plans with $0 premiums aren't for everyone. If they don't seem like the right fit for you, consider other options using our Medicare guide.
If a $0 plan does sound like the right fit, here’s how to enroll. But you may run into one hiccup: availability.
Are there $0 Medicare Advantage plans near me?
Not all insurers offer $0 plans, and those that do might not provide them in all areas. Typically, $0 premium plans are more common in urban areas than rural ones.
It’s usually easier for insurers to offer $0 premium plans in three situations:
- When there is stiff competition: When there are many plans offered in an area, insurers may try to lure more Medicare recipients into their plans with low or $0 premiums.
- When there are many providers: When insurers can pick and choose from a large pool of hospitals and doctors to include in their network, they have more leverage to secure low prices and cut costs.
- When there are plenty of beneficiaries: When there’s the potential to lure a lot of enrollees away from the completion, insurers are more likely to use this strategy.
All three of these circumstances are common in densely populated areas like large cities, whereas only one or none of these circumstances may occur in a rural area. But you never know until you ask.
To find out if there’s a $0 premium plan near you that fits your lifestyle, call a licensed Medicare agent or put your zip code in the box below.
1. Kaiser Family Foundation, “A Dozen Facts About Medicare Advantage in 2020”
2. The Centers for Medicare and Medicaid, “Announcement of Calendar Year (CY) 2020 Medicare Advantage Capitation Rates and Medicare Advantage and Part D Payment Policies and Final Call Letter”
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