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Understanding Medicare Advantage Premiums

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Summary: Medicare Advantage premiums may be different from plan to plan. Take note that the plan with the lowest premium is not always the lowest-cost plan.

Since Medicare Advantage plans are offered by private insurance companies that have contracts with Medicare, they have some freedom in how they set their monthly costs, or premiums. Medicare Advantage premiums may vary from plan to plan depending on the insurance company offering the plan, the location of the plan, and the benefits the plan offers. Sometimes the plan with the lowest premium is not always the lowest-cost plan.

What is a Medicare Advantage premium?

A premium is an amount you pay monthly to have the plan, regardless if you use covered services or not. For example, if you pay $55 a month for a Medicare Advantage plan, you will pay $660 yearly to be covered by that plan, even if you don’t see one doctor that year.

How much will I pay for a Medicare Advantage premium?

According to the Centers for Medicare & Medicaid Services in 2018, the average Medicare Advantage premium was $30 monthly. Some Medicare Advantage premiums may be as low as $0 for certain plans and other plans may have premiums over $100 a month.

Medicare Advantage plans that have more comprehensive dental coverage or coverage for other services may have higher monthly Medicare Advantage premiums.

Does the average Medicare Advantage premium ever go down from year to year?

You might be surprised to learn that the average Medicare Advantage premium in an eHealth study* went down by 33% between first quarter 2018 and first quarter 2019. The average premium went from $12 to $8.

MA Average Premium

Source: Medicare 2019 Open Enrollment: Costs and Sentiments, May 2019

The average Medicare Advantage premium in the chart above includes plans with $0 premiums. eHealth ran another calculation, not counting plans with $0 premiums. Plan premiums still went down between 2018 and 2019. The average premium was $39 in 2018, and dropped to $34 in 2019. Please note that this study didn’t include all Medicare Advantage plans, but those that people signed up for through eHealth during a certain time period.*

Medicare Advantage Average Monthly Premium

Source: Medicare 2019 Open Enrollment: Costs and Sentiments, May 2019

Can I really pay a $0 Medicare Advantage premium?

Medicare Advantage plans with $0 monthly premiums do exist, but may not be available in all areas. Even if you have a $0 Medicare Advantage premium you still have to pay your monthly Medicare Part B premium.

What are other Medicare Advantage costs?

Keep in mind that a Medicare Advantage premium is just one cost of a Medicare Advantage plan. Other costs include copayments/coinsurance, and deductibles.

A copayment is a dollar amount you pay when you receive a service, for example $10 to see a primary care physician. A copayment is a percentage, for example 20% for a certain prescription drug.

A deductible is an amount you pay out of pocket before your plan begins to pay. Some Medicare Advantage plans have $0 deductibles, meaning the plan will cover you from the first dollar you have to spend. Some plans might have $1,000 deductibles, meaning you have to spend $1,000 on copayments and coinsurance before the plan begins to pay.

All Medicare Advantage plans also have out-of-pocket maximums. This is a cap on your out-of-pocket spending for covered medical benefits, which can vary from plan to plan within limits set by the federal government.

Is a plan with a low Medicare Advantage premium my best option?

The Medicare Advantage premium is just one cost of the plan. Keep in mind that plans with lower premiums may also have more basic coverage and plans with higher premiums may have more extensive coverage.

When eHealth asked Medicare beneficiaries about their top health-care concerns, 42% said it was Medicare premiums. Copayments and deductibles were the top concern for 51% of those surveyed. eHealth’s survey respondents included over 1000 Medicare beneficiaries.

Healthcare Concerns

Source: Concerns about Coverage and Costs in Medicare: A Survey of Medicare Beneficiaries

The premium isn’t always the only factor affecting your Medicare costs. For example, suppose Medicare Advantage plan 1 has a $0 monthly premium and $0 coverage for routine dental services. If you get $2,000 of dental work, you could pay $2,000.

Suppose Medicare Advantage plan 2 has a $50 monthly premium and $1,000 coverage for routine dental services. You pay $600 in premiums for the year, but with the $1,000 dental coverage, your total spending is only $1,600 compared to $2,000.

*This report reviews costs and trends among people who purchased Medicare insurance products through eHealth from January 1 through March 31, 2018 and the same period in 2019.

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