What Are Zero-Premium Medicare Advantage Plans?

Learn all about zero-premium Medicare Advantage plans, costs, coverage and benefits.
By Mike Parker
Updated Aug 2, 2022
An elderly woman that is happy because she has a Zero-Premium Medicare Advantage Plan.
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In 2021, 65% of all Medicare Advantage plans didn’t charge their members a monthly premium for private Medicare coverage.

These zero-premium Medicare Advantage plans are a great way of getting added coverage and additional health benefits for some people.

This article will tell you everything you need to know about zero-premium Medicare Advantage plans, including how they work, their costs, the benefits of enrolling, and how you can join one.

What Is Medicare Advantage?

Medicare Advantage, also known as Medicare Part C, are private health plans that offer the same coverage as Original Medicare. 

What Is Medicare?

Medicare is a federal health scheme for over-65s, individuals who suffer ESRD or ALS, and people with disabilities.

Medicare classifies expenses into three categories or parts. Inpatient/hospital insurance (Part A), outpatient/out-of-hospital insurance (Part B), and prescription drugs (Part D).

These health insurance plans often provide extra coverage to their members for services, tests, and items not covered by the Medicare program. 

For example, many Medicare Advantage plans cover dental and vision expenses and some even provide fitness benefits. These kinds of benefits are not usually covered by Original Medicare.

The Types of Different Medicare Advantage Plans

There are two basic types of Medicare Advantage plans:

MA-PD (Medicare Advantage with Prescription Drug Coverage): These plans offer members coverage for inpatient and outpatient medical costs. They also help cover expenses for prescription drugs.

MA-only (Medicare Advantage without Prescription Drug Coverage): These plans only cover inpatient and outpatient medical expenses. These plans do not pay for prescription drug costs.

Depending on location, benefits, and coverage, Medicare Advantage plans can charge a monthly premium for Medicare-eligible people to join. 

In some cases, a private insurance company can even offer $0 premium plans.

What Are Zero-Premium Medicare Advantage Plans?

Zero-premium Medicare Advantage plans are private health insurance policies that don’t charge people a premium for membership. 

These plans offer members the same benefits and coverage as Original Medicare plus additional perks that private health plans provide. 

How Do Zero-Premium Medicare Advantage Plans Work?

There are a few factors that allow healthcare companies to offer zero-premium Medicare Advantage plans. Here are some of the reasons:

1. Medicare subsidizes private health insurance companies for the coverage they provide.

Health insurance companies are contracted into the Medicare program by the Centers for Medicare and Medicaid Services (CMS) in each state.

Once a Medicare-eligible person joins a Medicare Advantage plan, the health insurance company assumes responsibility and liability for medical care. 

This means that the Medicare Advantage plan pays for the medical bills rather than Medicare.

However, Medicare then compensates private health care providers for each person covered at a predetermined rate based on location and medical costs. 

The federal Medicare program pays a monthly lump sum for each person that a Medicare Advantage plan covers.

If Medicare Advantage members don’t use any of their health benefits for the month, Medicare still pays the health provider for each member.

2. Private insurance companies negotiate lower rates for their members.

Many Medicare Advantage plans are structured as Health Maintenance Organizations (HMOs). These plans have a network of doctors, medical professionals, and hospitals for their members to use.

Health insurance companies negotiate rates with health care practitioners and medical facilities to bring down the cost of treatment for their members. 

By doing this, they can spend less money on health care expenses and ensure their members get the necessary medical services.

Case Study - How do health insurance companies lower health care costs for their members?

Let’s look at one way private health insurance plans can get lower rates and fees for their members.

A doctor might charge $200 for a consultation and see 20 patients each week. Every four weeks, the doctor sees around 80 people and earns $16,000 before tax.

A health insurance provider with 500 members in the area can approach them and ask them to join their HMO network as a health care provider.

The plan will tell all their members to use the doctor in exchange for a reduced rate (let’s say $100 per consultation) that they negotiate.

If 160 members start to use the doctor for their consultations, they will earn the same amount ($16,000) as they did before. They will also still have other clients, who they charge their regular rates.

Here’s how the doctor benefits:

  • They see more patients by joining the HMO network.

  • They still can charge non-HMO members their regular rates.

Here’s how the health insurance plan benefits:

  • Their members get a reduced rate for health care services.

  • All of their members are covered by the doctor in their area.

3. Private insurance companies spend a lot of money on health benefits for their members. 

Treating a severe health condition in a hospital is more expensive than stopping it from developing. Health insurance companies provide their members with health benefits and perks to prevent chronic illnesses and lifestyle diseases.

These benefits help members lead healthier lives, reducing the long-term risk of them developing severe health conditions.

Some examples include fitness perks, annual screenings for specific conditions, nutrition planning, and rewards programs for healthy living.

For example, someone at risk of developing a heart condition or diabetes can use their Medicare Advantage benefits to:

A person on Original Medicare with the same risk could develop a serious health condition because they don’t have the same benefits. 

An older man who is staying active and fit.

(Source: Pexels)

Are Zero-Premium Medicare Advantage Plans Free?

If you join a zero-premium plan, you’ll still have to pay your Part B monthly premium.  The average monthly premium is $170.10 in 2022. 

Similarly, if you don’t qualify for premium-free Medicare Part A you will have to pay your monthly fee to get Part A coverage. 

The amount you will pay each month for Part A coverage will depend on how much you’ve contributed towards Medicare through your payroll taxes.

Terms you should know:

Monthly Premium: This is the amount you will need to pay to be covered by a health insurance plan or Medicare.

Copayment or copay: These are fixed fees that health insurance companies charge members for services, tests, and items. For example, if you go for a consultation with a doctor you might have a copay of $15.

Coinsurance: This is the share of costs you will have to pay for medical services, tests, and items.

Deductible: This is an amount that you must pay before your insurance begins to cover medical expenses. For example, you’d have to pay the Medicare Part B deductible ($233) for your Part B insurance to kick in.

Out-of-pocket costs: These are health care expenses that your health insurance doesn’t cover and which you must pay for.

Out-of-pocket maximum limit: This is the maximum amount you will have to pay for out of pocket costs in a year. After you reach your plan’s out-of-pocket maximum limit, Medicare will cover your medical costs and you will not have to pay anything more for that year.

You’ll also have to cover certain other expenses such as deductibles and copayments depending on the terms and covered services of your Medicare plan.

For example, if you need to get outpatient Part B care you will have to cover the standard $233 Part B deductible before your health insurance plan begins to cover you.

Example 1 - Here’s what someone might pay each month for a zero-premium plan if they don’t have premium-free Medicare Part A.

Medicare Advantage premium: $0

Medicare Part A premium: $274

Medicare Part B premium: $170.10

Total Monthly Premiums: $444.10

Example 2 - Here’s what you would pay if you have premium-free Medicare Part A and purchase a $0-premium Medicare Advantage plan.

Medicare Advantage premium: $0

Medicare Part A premium: $0

Medicare Part B premium: $170.10

Total Monthly Premiums: $170.10

Many people also don’t consider the other potential costs that they will have to pay if they need medical services or treatment that aren’t covered by their Medicare Advantage plan.

One type of cost you should keep in mind is your plan’s out-of-pocket maximum limit. Here are some important points to keep in mind:

  • This is the maximum amount that your plan doesn’t cover and which you must pay.

  • After a person has reached their plan’s out-of-pocket maximum limit, their health insurance (Medicare Advantage and Medicare) will cover the remaining medical costs for the year.

  • Private Medicare plans can set their own out-of-pocket maximum limits (up to $8,550 in 2021).

  • Many Medicare Advantage plans offer low out-of-pocket maximum limits to members.

  • A zero-premium Medicare Advantage plan might have a high out-of-pocket maximum limit, which will cost you more if you need expensive treatment or medical care. Here’s an example of how this happens.

Let's say you have to go for knee replacement surgery. Here's a comparison of what you might pay with a zero-premium Medicare Advantage plan and a standard MA plan.

With a zero-premium plan, you won’t have monthly premiums to pay. However, your plan might have a high maximum limit for out-of-pocket expenses.

A standard MA plan will charge you a premium every month but might have a lower maximum limit for out-of-pocket costs.

Zero-Premium MA PlanStandard MA plan
Monthly Premium$0$49
Out-of-pocket maximum limit$7,000$4,500
Knee Replacement Costs$25,000$25,000
Total Yearly Costs$7,000$5,088

Our advice is always to read the terms of your Medicare contract before you sign it. If you need assistance with finding a plan or understanding your coverage, PolicyScout can help

A older man going over his coverage options with his wife.

(Source: Pexels)

Who Can Buy a Zero-Premium Plan?

If you are eligible for Medicare and enrolled in Part A and B, you can buy a zero-premium Medicare Advantage plan.

To be eligible for Medicare, you must be:

  • A U.S. citizen OR a legal resident of the U.S. (for at least five years).

  • Live in a state or US territory that has Medicare.

  • Be at least 65 years old.

  • Or you must be turning 65 in the next three months.

  • Have ESRD or ALS.

  • Receive Social Security Disability insurance.

  • Railroad Retirement Board Disability Benefits.

If you’d like to learn more about Medicare Advantage in your area, reach out to one of our Medicare consultants at 1-888-912-2132. We’ll happily assist you with your questions.

Zero Premium Medicare Advantage Plans Available in 2021

Here are some of the private insurance companies that offer Medicare Advantage plans with no monthly premium:

  • Aetna

  • Humana

  • Cigna

  • UnitedHealthcare

  • Mutual of Omaha

  • Wellcare

  • Kaiser Permanente

  • SCAN Health Plans

  • Alignment Health Plan

  • Blue Shield

You can find out whether a specific provider offers zero-premium plans in your area by entering your ZIP code below.

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Should I Get a Zero Premium Medicare Advantage Plan?

Medicare Advantage plans offer excellent benefits and medical insurance. However, depending on your health care needs and circumstances, a zero-premium plan might not provide you with the coverage you need.

Here are a couple of questions to help you decide if a Medicare Advantage plan is right for you:

  • Do you need regular hospitalization, specific prescription drugs, or ongoing medical treatment?

If so, you might need to purchase a Medicare Advantage plan that has more comprehensive coverage options. 

These Medicare Advantage plans usually have a monthly premium and offer additional benefits. Alternatively, you can look into a Medicare Advantage Special Needs Plan (SNP).

  • Are there zero-premium plans in your county or state?

While most Americans can buy zero-premium Medicare Advantage coverage in their county, some areas still do not offer these plans. Check with a licensed Medicare agent to see if there are health coverage options in your area.

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  • Are you currently enrolled in a Medicare Supplement plan?

People with Medicare Supplement Insurance plans or Medicare Part D coverage cannot join a Medicare Advantage plan. Speak with a Medicare consultant to see how you can end your supplemental coverage and get Medicare Advantage.

  • Do you have a long-term doctor that accepts Medicare but doesn’t participate in health insurance networks?

Because most Medicare Advantage plans are HMOs, you’ll only be able to go to doctors who are part of your plan’s network. If your longtime doctor isn’t a member, you’ll have to pay full rates to see them.

These are just some of the questions you should consider before buying a Medicare Advantage plan.

You should also think about how much your medical expenses might cost you in the future and if you’d be better off with a plan that charges monthly premiums but offers more coverage.

If you need one-on-one assistance with making a decision or finding a health insurance company in your county, PolicyScout’s team of licensed Medicare agents can help. Send us an email to get started.

How Can I Learn More about My Health Coverage?

If you’re interested in finding out about your different health coverage options, our Medicare Hub is a great place to get information on Medicare costs, coverage, and benefits.

We cover topics such as Medicare Supplement Insurance, the basics of Medicare, enrolling in Medicare, and more.

If you have a specific question or want to speak to a Medicare consultant, feel free to send an email to Help@PolicyScout.com or call 1-888-912-2132

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