Who Pays Medicare Advantage Premiums?

Medicare Advantage Plans play an increasingly important role in healthcare coverage for seniors, now accounting for over 48% of total Medicare enrollment. However, Medicare Advantage differs from Original Medicare in how premiums are paid. Understanding the various premium costs and who is responsible for payments is key to evaluating plan options.

Medicare Part B Monthly Premiums

All Medicare beneficiaries must pay their Medicare Part B premiums even if enrolled in a Medicare Advantage Plan. The standard Part B premium amount is $164.90 per month in 2023. Higher income individuals pay more based on adjusted gross income.

Part B covers outpatient and medical services for Original Medicare and MA plan enrollees alike. These premiums are typically deducted automatically from Social Security checks. If not receiving Social Security, Medicare bills beneficiaries quarterly for Part B premiums.

Medicare Advantage Plan Premiums

In additional to Part B premiums, many Medicare Advantage Plans charge an extra premium for coverage. According to the Kaiser Family Foundation, the average MA plan monthly premium is $19 in 2023. However, 47% of enrollees are in a $0 premium MA plan.

These Medicare Advantage premiums help pay for benefits covered above what Original Medicare includes. Plans use premium revenue to fund vision, dental, hearing, fitness, and other supplemental benefits. Plans with prescription drug coverage also put premium dollars toward medication costs.

On average, MA plans with prescription Medicare drug coverage charge a $21 monthly premium. HMO plans have lower premiums averaging $18 monthly while regional PPOs are higher at $48. Specific plan premium amounts vary significantly based on location, benefits offered, and market competition.

How Insurers Offer $0 Premium MA Plans

In spite of providing enhanced benefits beyond Original Medicare, many Medicare Advantage Plans are able to advertise $0 monthly premiums. These $0 premium options have become increasingly common, making up 47% of all MA plans in 2023.

This is primarily accomplished through two methods:

• Negotiating lower provider payment rates – MA plans reimburse healthcare providers at cheaper rates than Original Medicare, allowing them to reduce premium costs. Doctors, hospitals, and medical providers agree to these lower payments to access the large pool of MA enrollees.
• Medical loss ratio requirements – The Affordable Care Act requires insurers(Medicare spending) to spend at least 85% of MA plan revenue on medical costs and quality improvements. This limits the share of premium dollars that can go to administrative overhead and profits.

While attractive at first glance, $0 premium MA plans still have cost sharing such as copays and deductibles. And all MA enrollees must continue paying their Part B premiums. But the $0 premium helps makes MA enrollment more appealing for Medicare beneficiaries concerned about costs.

Special Case: Medicare Medical Savings Accounts

One unique type of Medicare Advantage Plan is the Medicare Medical Savings Account (MSA). MSAs combine a high deductible health plan with a special savings account.

With MSAs, Medicare deposits money into the account to help pay the high deductible. Any premiums associated with the MA plan are paid by Medicare directly. So the beneficiary has no monthly premium costs at all.

The enrollee can use the MSA account to pay for medical expenses below the deductible amount. This design aims to reduce premiums while allowing some flexibility in spending. However, MSAs have strict limits on enrollment. Only about 11,000 beneficiaries were enrolled in MSAs as of early 2023.

What Impacts Medicare Advantage Premiums?

Several factors influence the amount of premiums charged by individual Medicare Advantage Plans:

• Location – Premiums vary significantly based on region. MA plans in higher cost areas typically have higher premiums. Rural areas often have lower premium MA plans.
• Plan type – As mentioned previously, HMO and PPO plans have different average premium costs nationally. Local plan type options also impact rates.
• Benefits offered – Plans that offer extra benefits like dental and vision or lower copays and deductibles tend to charge higher monthly premiums.
• Age – MA plans can charge older enrollees higher premiums based on age bands approved by Medicare. Average costs are lower for those under 70 compared to those over 85.
• Tobacco use – MA plans can charge tobacco users up to 50% higher premiums compared to non-users. This must be disclosed during enrollment.
• Dual eligibility – Low income seniors who qualify for both Medicare and Medicaid enjoy special protections. Dual-eligibles have limits on Medicare Advantage premium costs and Medicaid often covers the premiums.

Understanding these factors provides helpful context around plan premium differences. But reviewing specific plan details remains essential to accurately estimate premium costs.

Premium Payment Arrangements

If faced with a Medicare Advantage premium in addition to the standard Part B amount, beneficiaries have a few options for handling payment:

• Social Security deduction – Many enrollees opt to have their MA plan premium automatically deducted from Social Security payments along with Part B. This simplifies the billing process.
• Automatic bank withdrawal – Insurers typically allow setting up monthly withdrawals directly from a bank account to pay MA premiums. This occurs separately from Social Security.
• Quarterly invoices – Medicare Advantage members who don’t arrange an automatic payment option will receive a bill from their insurer each quarter. This has potential for missed payments if not carefully managed.

Selecting the right payment approach minimizes the administration burden of Medicare Advantage premiums for beneficiaries. Financial advisors generally recommend leveraging Social Security deductions when possible for convenience.

Help Paying Medicare Advantage Premiums

Some Medicare beneficiaries qualify for assistance programs that help cover MA premiums and other out-of-pocket costs. These include:

• Medicare Savings Programs – Medicaid funds programs in many states that pay Part B and often Part C premiums for qualifying lower income seniors.
• Extra Help – Low income Medicare enrollees can receive subsidies that lower prescription drug costs for Part D and MA drug coverage.
• Medicaid – Dual eligible seniors may have Medicaid cover all or part of their MA premium expenses and cost sharing based on the state.
• Employer plans – Some Medicare Advantage Plans may or are sponsored by employers who subsidize premium costs for retirees. This benefit helps reduce retiree healthcare expenses.

Understanding eligibility for financial assistance can make a significant difference in the affordability of Medicare Advantage for older adults on fixed incomes.

The Bottom Line on Medicare Advantage Premiums

While most Medicare Advantage Plans charge an additional premium, the costs are frequently affordable for enrollees especially with $0 premium options now widely available. This makes average Medicare Advantage an attractive alternative to Original Medicare which has no limits on maximum out-of-pocket expenses.

However, beneficiaries do need a solid handle on the total costs including premiums and cost sharing to accurately compare MA plan options. Finding an MA plan that fits within budget constraints requires careful evaluation of all anticipated healthcare expenses.

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FAQS

Who pays Medicare Advantage premiums in 2023?

In 2023, the premiums for Medicare Advantage Plans receive or are paid by the individuals who enroll in these plans. Medicare Advantage is a type of plan offered by private insurance companies as an alternative to the Original Medicare program.

What are Medicare Advantage Plans?

Medicare Advantage Plans, also known as Medicare Part C, are private insurance plans that offer Medicare Part A and Part B benefits. These plans may also include additional benefits such as Part D prescription drug coverage , dental, vision, and hearing services.

Do Medicare Advantage Plans charge a premium?

Yes, most Medicare Advantage Plans charge a monthly premium in addition to the Medicare Part B services premium. The amount of the premium may vary depending on the plan and the coverage it offers.

Are Medicare Advantage Plans a type of supplemental benefits?

Yes, Medicare Advantage Plans offer supplemental benefits beyond what is covered by traditional Medicare (Parts A and B). These plans may include coverage for services such as dental, vision, hearing, and fitness programs.

Does Medicare pay for Medicare Advantage costs?

Medicare pays a fixed amount to private insurance companies to provide Medicare Advantage coverage to individuals who enroll in these plans. The private insurance companies then administer the plans and may charge additional costs or copayments for the services provided.

Do I still have to pay my Part B premium if I enroll in Medicare Advantage?

Yes, if you enroll in a Medicare Advantage Plan, you must continue to pay your Medicare Part B premium. This premium is separate from any premium charged by the Medicare Advantage Plan.

Are all Medicare Advantage Plans the same?

No, there are different types of Medicare Advantage Plans available, including Health Maintenance Organization (HMO), Preferred Provider Organization (PPO), and Private Fee-for-Service (PFFS) plans. Each type of plan has its own network of providers and may have different rules and cost-sharing requirements.

Can I choose any Medicare Advantage Plan?

You can choose any Medicare Advantage Plan that is available in your area and accepts new enrollees. However, some plans may require prior authorization for certain services, and it’s important to review the plan’s provider network and coverage options before enrolling.

Who is eligible for Medicare Advantage?

Individuals who are eligible for Medicare (age 65 and older or certain disabled individuals) and enrolled in both Medicare Part A and Part B are eligible to enroll in a Medicare Advantage Plan. You must also live in the plan’s service area.

What is the role of private insurers in providing Medicare Advantage?

Private insurance companies partner with the Centers for Medicare and Medicaid Services (CMS) to provide Medicare Advantage Plans. These insurers are responsible for administering the plans, including managing networks of healthcare providers and coordinating care for enrollees.