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Fall 2020  Volume 13, Number 3        

Medicare printed on dollar bill

The Hidden Costs of $0 Premium Medicare Plans

State insurance departments are warning citizens to beware of so-called "zero premium" Medicare plans.

Getting ready to retire and looking for ways to cut costs to make your savings last longer? Many retirees are tempted to save money by opting for a zero-premium Medicare Advantage plan.

As the name suggests, you can get health care coverage without having to pay a monthly premium. Who could resist? But before you sign on the dotted line, make sure you understand the other costs associated with this type of health care coverage.

Medicare is a federal health insurance program for seniors age 65 and older (unless you qualify because of a disability). You're automatically enrolled at age 65 if you're already receiving Social Security or Railroad Retirement Board benefits.

Original Medicare has two parts — A and B. Part A provides health insurance for $0 premium for people who have worked at least 10 years and have paid Medicare taxes. Part B pays medical insurance for a monthly premium.

Medicare Advantage plans, also known as Medicare Part C, are an alternative way to get Part A and Part B benefits. The plans are offered by private insurance companies and must offer the same benefits as original Medicare. Insurance companies offering Medicare Advantage plans receive a fixed monthly amount for each Medicare beneficiary in their plans. The insurance companies must follow Medicare's regulations, although they do have some flexibility in setting their costs and they often offer additional benefits such as prescription drug coverage and routine vision or dental services.

$0 Premium Plans

Some areas of the country have Medicare Advantage plans with no monthly premiums. That doesn't mean that the plans are totally free. There typically are other costs associated with the plans, including co-payments, deductibles and the Medicare Part B premium. Here are the details:

  • Annual deductible: This is the amount you have to pay for certain medical services each year before the plan pays its share. Deductibles vary among plans.
  • Coinsurance: This is the percentage of a covered service that you'll pay, while the plan pays the rest. For example, some plans might require you to pay 20 percent of the costs of a service or procedure.
  • Co-payment: A co-payment is a set dollar amount you may have to pay for a covered service, such as a doctor visit.
  • Prescription drug costs: Each Medicare Advantage prescription drug plan has a list or a formulary of prescription drugs it will cover, as well as information about what you will be charged.
  • Out-of-pocket maximum: Unlike Original Medicare, Medicare Advantage has an out-of-pocket limit on your annual spending. Once you’ve spent a certain amount of your own money on medical services within a calendar year, the plan may pay all your covered costs for the rest of that year.
  • Out-of-network costs: Many plans require you to receive care from in-network providers. If you get care outside the network, your out-of-pocket costs could be more expensive.
  • Medicare Part B: You will still need to pay your Medicare Part B premium.

Here's the bottom line: do your research. Some Medicare Advantage plans may charge a monthly premium, although they may be cheaper in the long run because they offer a lower deductible, lower copayment amounts and more comprehensive drug coverage than a $0-premium plan.


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In this issue:

This Just In...

Your Options if You Lose Your Employer-Sponsored Health Care Coverage

The Hidden Costs of $0 Premium Medicare Plans

What You Need to Know About Getting Health Insurance for Yourself — and an Employee

How Your Credit Score Reveals Your Suitability for Life Insurance


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