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Why Are Some Medicare Advantage Plans Free?


Article originally featured on MarketWatch


You may be surprised to find some Medicare Advantage plans are offered for a $0 premium. Why is this? How can they be free? What’s the catch? We’ll explain more in this article.


Key takeaways

  • Private insurers offer $0 premium Medicare Advantage plans. This means they provide monthly premiums for free.

  • Medicare Advantage plans cover your Medicare Part A and Part B. Most include drug coverage.

  • Medicare Part A (hospital insurance) is free if you or your spouse paid Medicare taxes for a certain amount of time while working.

  • Medicare Advantage plans aren’t totally free. You still need to pay for your Medicare Part B coverage (medical insurance) and any deductibles the plan specifies.

Why Consider a Medicare Advantage Plan?

Medicare Advantage plans may offer lower out-of-pocket expenses than Original Medicare. This is because they set a limit on what you must pay out of pocket each year for covered prescription medications.


Most Medicare Advantage plans also include drug coverage (Medicare Part D). They may also cover dental, vision and hearing services.


5 different types of Medicare Advantage plans

These are the various types of Medicare Advantage plans available today:

  1. HMOs (Health Maintenance Organizations): Get your care and services from providers in the plan’s network.

  2. PPOs (Preferred Provider Organizations): Pay less if you use the hospitals, doctors and other health care providers in the plan’s network.

  3. PFFS (Private Fee-for-Service plans): Obtain your health care from providers or hospitals in PFFS plans.

  4. SNPs (Special Needs Plans): Get health services from doctors or hospitals in the Medicare SNP network.

  5. MSAs (Medical savings accounts): High-deductible insurance plans combined with a medical savings account you can use to pay for your health care costs.


How Can Some Medicare Advantage Plans be Free?

If you or your spouse paid Medicare taxes for a specific amount of time while working, you can obtain a $0 premium Medicare Advantage plan that covers your Medicare Part A (hospital insurance). This is known as premium-free Part A.


$0 Medicare Advantage plans aren’t totally free

Only your Part A Medicare is free. You will still need to pay for your Medicare Part B coverage, deductibles, copays and coinsurance.

  • Medicare Advantage plans are provided by private insurance companies. These companies are in business to make a profit. To offer $0 premium plans, they must make up their costs in other ways. They do this through the deductibles, copays and coinsurance.

  • Deductibles: Some deductibles can be high, depending on the plan you choose. If the plan quotes a $2,500 deductible, this means you must pay $2,500 out of pocket before Medicare Advantage pays your medical costs outside the hospital.

  • Copays: Keep in mind you must also pay copays for some medical services like X-rays, lab work and doctor visits. The copay may be as low as $10 to visit your primary care physician and $40 for specialty care.

  • Coinsurance: Your Medicare Advantage plan will often include coinsurance. Coinsurance usually kicks in for things like durable medical equipment, chemotherapy, radiation, dialysis and diagnostic imaging.


Out-of-Pocket Limits

Based on the Medicare Advantage plan you select, you will have an out-of-pocket limit for these costs. Keep this in mind when choosing your Medicare Advantage plan, as some limits can be quite high.


Medicare Advantage plan out-of-pocket limits can be as little as $0 and up to the Medicare-set annual maximum of $6,700. (The Medicare-set annual maximum for 2021 will be $7,550.)


Some Medicare Advantage plans have both $0 premiums and $0 deductibles. But these plans will likely cost you more each month.


According to the CMS, if you’re covered by a Medicare Advantage plan (or any other Medicare plan), the plan must provide at least the same coverage as Original Medicare. However, keep in mind some medical services may only be covered in specific settings or for patients with certain conditions.


Changing Your Medicare Advantage Plan

Can you change your Medicare Supplement insurance plan anytime? What if you aren’t happy with the Medicare Advantage plan you chose?


You can make changes to your plan during the Medicare Advantage Open Enrollment Period, which is from January 1 through March 31 of each year.


You can switch to a different Medicare Advantage plan, (with drug coverage or without), or you can drop your Medicare Advantage plan coverage and sign up for Original Medicare.


You’ll also be able to sign up for a Medicare prescription drug plan during this period of time if you don’t have one.


However, you can’t:

  • Change from Original Medicare to a Medicare Advantage plan.

  • Sign up for a Medicare prescription drug plan if you’re covered by Original Medicare.

  • Change from one Medicare prescription drug plan to another if you’re on Original Medicare.

You can only make one change during the Medicare Advantage Open Enrollment Period. The changes you make will be effective on the first day of the month after the insurance company gets your change.


If you decide to drop your Medicare Advantage plan coverage and return to Original Medicare with a separate drug plan, you don’t have to contact your Advantage plan company to disenroll. You’ll automatically be disenrolled when you join a new Medicare Part D plan.


One exception: If you enrolled in your Medicare Advantage plan during your Initial Enrollment Period, you can switch to another Medicare Advantage plan or go back to Original Medicare within the first three months that you receive Medicare.


What Else Should You Know About Free Medicare Advantage Plans?

When signing up for a Medicare Advantage plan that’s free (or isn’t), it’s important to calculate your out-of-pocket costs.


You should consider the following:

  • The type of medical services you think you’ll need and how often you will need them.

  • Whether the doctors or medical suppliers you use will accept Assignment. Assignment requires that they accept the Medicare-approved amount as full payment for covered services.

  • Whether or not the Medicare Advantage plan provides additional benefits that may require you to pay an extra premium.

  • Whether you are eligible for or getting Medicaid or assistance from your state for health care costs.

How to Join a Medicare Advantage Plan

Go to the Medicare Plan Finder and enter your zip code to find and compare plans in your area. You can speak to a licensed Medicare professional at 844-259-6504 to help you determine which Medicare Advantage plan would be best for your health care needs.

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