Are Zero $0 Premium Advantage Plans A Scam?


When looking for Medicare advantage plans, you will recognize that some insurance companies offer plans that are labeled as zero premium, $0, or no monthly premium plans. Is it a scam? How can they offer Medicare insurance for ‘free’?

Created by the Medicare Modernization Act in 2003, Medicare advantage plans were established allowing private insurance carriers to offer health care insurance policies for individuals on Medicare. Advantage plans are standardized to cover the same benefits as original Medicare, but most offer additional benefits. Here is how it works: Basically, the federal government pays private insurance companies, so they take care of your Medicare bills instead of original Medicare itself. This helps the government save resources that would be needed to coordinate these Medicare benefits. If the insurer is able to save costs, for example by contracting with health care providers and facilities in order to provide a network that the enrollee must use, they can afford to keep their expenses low, and even offer a ‘zero premium plan’.

However, the word ‘zero’ can be misleading. If you enroll in such a plan, you are still required to pay your monthly premium for Medicare Part B. A correct description for those plans would therefore be “zero premium above your monthly Medicare Part B premium”.

When you shop for a $0 plan, keep in mind the saying that there is not such a thing as a ‘free lunch’. Thoroughly check any co-payments, deductibles or out-of-pocket spending limits the plan may have, as some of these plans do pass their costs onto you with higher co-pays or additional fees you may have to pay to receive care. Of course, not all zero premium advantage plans are bad. In fact, they may be perfect for many seniors on a tight budget, even when you have health issues. With the exception of End Stage Renal Disease, Medicare Advantage Plans are not allowed to turn anybody down based upon their health conditions.

So zero premium advantage plans really may be a great choice, as many plans come with extra benefits over original Medicare such as fitness center memberships, prescription eyeglasses, hearing aids or prescription drug coverage. Many seniors are drawn to this kind of plans when they are still healthy, because premiums for full-coverage Medigap policies are substantially higher.

If you select such a plan, just be prepared that – depending on the policy – you may have to pay fees for each doctor’s visit on top of co-payments as high as 20 % of your medical bills. Also, your plan might be one of the first to see benefit cuts when the insurer has to tighten the financial belt. However, you are never stuck with any Medicare advantage plan, as you don’t give up your rights to switch back to original Medicare, and are allowed to switch to another advantage plan at certain times of the year.

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By: Joseph Rosario