For many American seniors turning 65 years, Medicare offers a huge relief from the ever-rising healthcare costs and a new way of meeting their healthcare coverage requirements.

More than one-third of all Medicare beneficiaries switched to Medicare Advantage plans in 2020. With these plans becoming increasingly popular, Medicare Advantage enrollment has more than doubled in the past decade.

But why are so many people opting for Medicare Advantage instead of Original Medicare? Maybe the zero-premium Medicare Advantage plan is part of the appeal.  So the big question is; do we really have “zero-dollar monthly premium” Medicare Advantage plans? If so, what is the catch?

In this post, we discuss everything you need to know about zero-dollar monthly premium Medicare Advantage plans. Read on to find out everything you need to know.

What Is Medicare Advantage?

Medicare Advantage, also known as Medicare Part C, serves as an alternative to Original Medicare. These plans are usually provided by private health insurance companies contracted to Medicare.

To be eligible to join Medicare Advantage, you must first qualify for or be enrolled in Original Medicare.

Medicare Advantage policies are designed to offer the same basic healthcare coverage as traditional Medicare except for hospice services.

However, most of them offer additional services such as prescription drug coverage (Medicare Part D), routine dental care, routine vision care, and hearing aids.  All Medicare Advantage plans must also offer comprehensive coverage for outpatient department services.

Medicare usually pays a fixed amount of money to the private insurance companies for health care costs offered to enrollees. The insurer may or may not renew its contract with Medicare at the end of every year.

This is the primary reason why Medicare advantage costs, drug lists, and benefits tend to change from year to year.

What Is a Zero-Dollar Monthly Premium Medicare Advantage Plan?

As mentioned above, Medicare advantage policies are usually provided by private health insurance companies to replace traditional Medicare.

Typically, beneficiaries are expected to pay a monthly premium to help the insurance provider cater to their health costs. But zero-dollar monthly premium Medicare Advantage plans claim that there is no premium to pay.

Additionally, beneficiaries don’t pay an annual amount to enroll in these plans. However, the plan providers say they are still offering the same coverage as any other standard Medicare Advantage plan with a monthly premium.

So, how is it even possible to have zero-premium plans? It’s pretty simple and straightforward. Usually, Medicare pays the contracted insurance providers a specific amount of money to cover Medicare Parts A and B benefits.

When insurance providers use options such as in-network healthcare providers, they tend to save a lot of money. They can then pass some of the money saved onto their clients in the form of zero-premium Medicare Advantage plans.

So, Are These Plans 100% Free?

The simple answer is “no.” While zero-premium plans are highly appealing, you need to remember that premiums are not the only expense you incur when you sign up for Medicare.

Besides the premiums, you still have other costs such as copayments, deductibles, and coinsurance that you must pay to enjoy the coverage. Even though your financial burden is eased with an “out-of-pocket maximum,” the additional expenses can still add up pretty quickly.

Depending on your plan and the type of medical services you need, you may even end up paying much more than individuals on standard Medicare Advantage plans.

For instance, the copays on a zero-dollar monthly premium Medicare Advantage plan may be significantly higher than the copays on a plan with a monthly premium.

Furthermore, the annual out-of-pocket limit in a zero-premium plan may still be higher than the limit in a plan with a monthly premium. It means that you could end up paying more money for your medical services than someone on a standard plan with a monthly premium.

Here is a classic example explaining how this can happen.

Let us assume you had a $50,000 knee surgery and no other medical expenses in a year. Assuming you are on a zero-premium Medicare Advantage plan with an out-of-pocket maximum of $6,700, you will end up paying $6,700 before the plan kicks in and pays the rest.

Now, someone on a premium plan paying $50/month will contribute $600/year. Since Medicare Advantage plans with a premium tend to have a much lower out-of-pocket maximum, let us assume this person’s out-of-pocket maximum is $3,500.

For the same operation, the person on a plan with a premium will only pay $4,100 compared to the $6,700 paid out by someone on a zero-premium plan.

Maximum Out-of-pocket Amount

Before signing up for a zero-premium Medicare Advantage plan, you need to consider the maximum out-of-pocket amount. The figure quoted shows the maximum amount of money you will be expected to pay each year for Medicare-covered health services.

Once you reach the maximum out-of-pocket payment through coinsurance, deductibles, and copayments, you won’t pay further costs. However, your prescription drug costs and monthly premiums don’t usually count towards the maximum out-of-pocket amount.

All Medicare Advantage policies have a maximum out-of-pocket amount. In 2021, this amount is $7,550, although insurance providers can set the amount to a lower limit. The amount varies from plan to plan and often change every year.

But you need to keep in mind that Original Medicare doesn’t have a maximum out-of-pocket amount. If your preferred plan covers some medical services from out-of-network providers, there will be two maximum out-of-pocket.

The first limit will be for in-network costs, and the second one will be for both in-network and out-of-network costs.

Who Can Buy a Zero-Dollar Monthly Premium Medicare Advantage Plan?

Anyone can qualify for a zero-dollar monthly premium Medicare Advantage plan as long they meet the general Medicare program eligibility criteria. It means that you must be at least 65 years old, be enrolled in Medicare Part A, or live in an area of coverage for whatever plan you choose.

To sign up for zero-premium Medicare Advantage, go to the Medicare.gov site and use their plan finder tool to compare different plans in your area.

Keep in mind that Medicare Advantage plan offerings vary from state to state. The tool allows you to compare plans in your area by entering your ZIP code.

Summary

A Zero-premium Medicare Advantage plan can be an excellent option if you want to bundle or supplement your existing Medicare coverage. But before you choose between a premium-free plan and a plan with a monthly premium, take time to evaluate your personal healthcare needs and cost factors.

If you are still confused and don’t know what option is good for you, consider talking to an experienced and licensed Medicare Advantage agent who will assess your needs and advise you accordingly.

At Insurance Master, we care about you and want to help you make informed decisions when it comes to your healthcare coverage. Contact us today to speak to one of our Medicare Advantage agents.