If you choose to enroll in an MA plan, you need to pay the MA plan’s premium and your Part B premium. However, some MA plans are free and will even pay all or part of your Part B premium for you. You may be wondering how they can afford to do this and if it makes sense to enroll in a “free” Medicare Advantage plan.
Why Are Some Medicare Advantage Plans Free?
Some MA plans charge no premium, and may even pay for part or all of your Part B premium, also called the “Medicare Part B premium reduction.” The way plans can do this comes down to how much it costs them to provide services and, to a lesser extent, the plan’s star rating. But it’s not entirely up to the individual plan—the process is highly regulated. Every year, Medicare Advantage plans determine how much it will cost to provide care for their members. They submit this amount, or bid, to the Centers for Medicare and Medicaid Services (CMS), which then reviews the bid against a benchmark. This benchmark is calculated based on average Medicare spending per beneficiary for a specific region or area. If the plan’s bid falls below the benchmark, the plan is not allowed to charge a premium. These plans also receive a rebate from the CMS. Its value is determined by how much lower the plan’s bid is relative to the benchmark and by the star rating that plan has—MA plans with a higher star rating get a bigger rebate. MA plans can then use rebate dollars to further reduce member costs. In addition to providing premium-free MA plans, helping to pay for Part B premiums is one way to reduce member costs. Another way MA plans can reduce costs, and thereby their bid, is by contracting with in-network providers to provide discounted services to members. But even if you elect a premium-free Medicare Advantage plan, it doesn’t mean that your insurance is free. You may still have out-of-pocket costs for your Part B premium, coinsurance, and deductibles. Here’s more information about Medicare Advantage plans and their pricing so you can better weigh the true cost of premium-free plans.
Types of Medicare Advantage Plans
Here’s a quick look at the four most common types of Medicare Advantage Plans.
Health Maintenance Organization (HMO) Plans
Medicare Advantage HMO plans typically require you to pick a primary care doctor within a specific network of providers. If you need to see a specialist, you’ll need a referral from your primary provider. Medical care outside of the network isn’t usually fully covered. These plans don’t have a lot of flexibility, but they can help manage health care costs. Some HMO plans may offer some out-of-network benefits. These plans are known as HMO Point-of-Service (HMOPOS).
Preferred Provider Organization (PPO) Plans
PPO plans allow you to seek care outside the preferred provider network. However, out-of-network care costs more. Since you can get care from many different doctors, this plan is more flexible than an HMO.
Private Fee-for-Service (PFFS) Plans
With this type of Medicare Advantage Plan, you can visit any Medicare-approved medical provider that agrees to the plan’s payment terms. Some PFFS plans have a network of providers. If you use those doctors, it’ll cost you less.
Special Needs Plans (SNPs)
If you have special health care needs, you may be eligible for a Medicare Advantage Special Needs Plan. These plans are tailored to your specific health care needs. You must meet certain requirements to join these types of plans.
Medicare Advantage vs. Original Medicare
If you’re enrolled in Medicare Parts A and B and live within a plan’s coverage area, you may be eligible for a Medicare Advantage plan. These plans often provide services that Original Medicare doesn’t, such as fitness programs, transportation, and hearing, dental, and vision benefits. Here’s a quick look at the differences between Original Medicare and Medicare Advantage plans so you can decide which makes the most sense for you.
How Much Are Medicare Advantage Plans?
The answer to this depends on a few factors, including the type of plan you choose, where you live, whether you want prescription drug coverage, how often you expect to use the plan, and the plan’s out-of-pocket costs. That said, nearly 70% of Medicare Advantage enrollees with prescription drug coverage had a $0 premium in 2022, while most of the remaining third paid less than $100 per month. Including the participants that don’t pay a premium, the average monthly premium is $18 in 2022. No matter the monthly cost, there may be limitations to the services provided by your Medicare Advantage plan. For instance, nearly all Medicare Advantage plans need preauthorization for certain services, which can include preventive services, durable medical equipment, and Part B drugs.
How To Choose or Change Your Medicare Advantage Plan
Medicare Advantage Plans vary by location. To find out the details and availability of the ones near you, visit the Medicare website. As you compare plans, check out:
Plan type and rulesPremiumDeductibleCoinsuranceCopaysApproved drug listNetwork providers Additional benefits such as dental or vision
No matter which plan you choose, you can only enroll in Medicare Advantage Plans during:
Your initial enrollment period when you’re first eligible for MedicareSpecial enrollment periods following specific eventsOpen enrollment
During open enrollment and the Medicare Advantage open enrollment period, you can change your existing MA plan or switch back to Original Medicare. When you have Medicare Advantage, you may need to also purchase Medicare Part D if yours doesn’t cover prescription drugs. Also, though many people use Medigap plans to fill Original Medicare coverage gaps, you can’t buy these plans if you have Medicare Advantage.
