We often hear adages like “you pay for what you get” and “nothing good comes free” that lead us to believe that in order to get something high-quality and worthwhile, we have to pay for it. While these adages may be true for many products and services, they are not necessarily true when it comes to Medicare Advantage plans.
Consumers who qualify for Medicare have many options when it comes to selecting the right Medicare plans for their needs. This means that in addition to a wide range of Medicare Part options that come included with the Original Medicare menu, there are also Medicare-compatible healthcare coverage opportunities through private companies and insurers. A Medicare Advantage plan is an example of such an opportunity.
Medicare Advantage plans are popular amongst Medicare participants because these plans allow Medicare participants to receive healthcare coverage through a private insurer. A major advantage of Medicare Advantage plans is that they often come with a $0 premium, which makes these plans free for Medicare beneficiaries.
So how can something “free” actually be useful – and of value – to participants?
Well, in order to understand how Medicare Advantage plans work, it’s important to take a look at the funding sources for the plans. In general, insurers who offer Medicare Advantage plans are reimbursed about $10,000 per enrollee. The actual amount of the reimbursement is based on each member’s specific profile.
Therefore, while Medicare Advantage plans may not require participants to pay premiums, insurance companies are still receiving income for each enrollee. Because insurers do receive income for each enrollee, Medicare Advantage plans cannot be legally described as “free” or “no cost” plans. Instead, they are often referred to as “zero dollar premium” plans when there is no premium fee.