How Can Medicare Advantage Plans Have No Premium Cost?

If you're close to starting Medicare or even have been enrolled for some time, you've likely heard of $0 premium Medicare plans and wondered how that can be. It must be too good to be true, right? Well, it's not! $0 premium Medicare Advantage plans do exist and can be a good fit for many individuals. However, it is important to understand how these plans work, as well as the advantages and potential disadvantages, so you can determine if this type of plan will work for you or if another type of plan would be a better fit. We'll be covering all of this and more so you can make an informed decision on your Medicare coverage selection.

What Is a $0 Premium Medicare Advantage Plan?

First, let's highlight what a Medicare Advantage plan is. A Medicare Advantage (MA/MAPD) plan, commonly known as Medicare Part C, is an alternative to Original Medicare (Parts A and B).

These plans are offered by private insurance companies approved by Medicare and must cover everything Original Medicare does but often include extra benefits like prescriptions, vision and dental. They can also help limit your medical costs by limiting your out-of-pocket costs annually and covering some or all of the deductibles associated with Original Medicare. Some of these plans are available for $0 a month, but the premium ranges anywhere from $0 - $200 a month, and below, we'll be explaining just how that works. 

How Can Insurance Companies Offer $0 Premiums?

So, how can a Medicare Advantage plan that often covers more than Original Medicare be $0 a month?

It’s a fair question, and the answer is all in how these plans are funded. When you enroll in a Medicare Advantage plan, Medicare pays the private insurance company a fixed amount each month to manage your care. That insurer is your primary payor for covered healthcare services, taking on the responsibility of managing costs and negotiating rates with providers. Even if the plan advertises a $0 monthly premium, the insurance company still receives funding, just not from you directly.

What You Still Pay For

In order to enroll in a Medicare Advantage plan, you must have Medicare Parts A and B. If you are enrolled in a Medicare Advantage plan, you are required to continue paying your Medicare Part B premium each month. This is one of the reasons why a Medicare Advantage plan cannot be referred to as free. 

With any Medicare Advantage plan, including a $0 plan, you will still be responsible for several costs including:

• Copays, coinsurance, and deductibles
• Out-of-network costs
• Prescription drug costs (if included in the plan)

The Trade-Offs to Consider

There are some things to consider for a $0 premium Medicare Advantage plan. Medicare Advantage plans differ from Original Medicare in several ways, and some of the potential concerns for individuals could be a limited provider network, prior authorization requirements or the fact that they are on annual contracts and the plan can change each year which may result in you needing to shop each fall for a plan that still works for you for the following year of coverage.

Aside from these factors, a $0 premium Medicare Advantage plan will typically have higher cost sharing in the form of copays and coinsurance than a Medicare plan with a higher monthly premium. Additionally, the annual maximum out-of-pocket (or the most you will pay for covered healthcare services) is typically a higher threshold for lower premium plans.

In a sense, it’s a trade-off: you may pay less upfront with a $0 premium plan but more when you use services. On the other hand, plans with higher monthly premiums might offer lower copays or out-of-pocket costs when you need care.

When a $0 Premium Plan Might Be a Good Fit

It can be a good option for many individuals, but those who may be most drawn to this type of plan are typically in good health, don’t need frequent medical care, and are comfortable with higher out-of-pocket costs when services are used. These plans may also appeal to those who like the coverage provided by Original Medicare but want to cap their potential costs and gain access to added benefits like dental, vision, hearing, or gym memberships.

Questions to Ask Before Enrolling

Making decisions about Medicare coverage can feel overwhelming, and it’s important to look beyond just a low premium. Consider how a plan fits your overall health needs, budget, and preferences. Here are a few questions to ask before enrolling:

• How often do I visit the doctor or need ongoing care?
• What are the copays, deductibles, and out-of-pocket maximums?
• Are my preferred doctors and hospitals in-network?
• Does the plan include coverage for prescriptions I take regularly?
• Am I comfortable with potential costs if I experience a health issue?

Personalized Medicare Support, at No Extra Cost

Now you know that $0 premium plans aren’t a scam, instead, they are structured differently than plans that cost a monthly premium. It’s important to understand the full cost picture, including how and when you might pay more out of pocket.

Working with a licensed Medicare broker, like our team at Twin City Underwriters, can help you compare plans and find the right fit for your needs. We’ll take the time to walk you through all your Medicare options and, because we represent many insurance companies, we’re able to offer unbiased recommendations tailored to your unique situation.

Reach out to us today to get started. 

Choosing a Medicare plan can be difficult. Twin City Underwriters helps Medicare recipients in Minnesota, Wisconsin, North Dakota, South Dakota, Iowa and Florida find the Medicare plan that meets their unique needs. Schedule a one-on-one meeting with one of our Medicare insurance brokers to get your questions answered!

Do you need help with Medicare, insurance and health plans? Explore your options with Allina Health Aetna, BlueCross BlueShield of Minnesota, Medica, UCare, United HealthCare and more. We work with you to find the best plan for your needs and budget. Contact us today to get started.