Medicare Advantage Premiums: All You Need to Know
“Premium” is another word for payment. And your Medicare Advantage (Medicare Part C) premiums are the monthly payments you make for your health insurance plan. By learning how premium payments work, you can better decide if getting Medicare Advantage insurance is right for you, and if so, which type of plan you can afford.
A Medicare Advantage plan is health insurance offered by Medicare-approved private insurance companies. It’s a single plan that includes all Original Medicare (Part A and Part B) benefits. Most plans also include drug coverage, and many plans offer dental, vision, and/or other supplemental coverage.
Who Pays the Premium for Medicare Advantage Plans?
You continue to pay premiums for your Medicare Part B (medical insurance) benefits when you enroll in a Medicare Advantage plan (Medicare Part C). Medicare decides the Part B premium rate. The standard 2022 Part B premium is estimated to be $158.50, but it can be higher depending on your income.1 On average, those who received Social Security benefits will pay a lesser premium rate.
Usually, you pay a separate monthly premium for a Medicare Part C plan. But not all Part C plans have monthly premiums. In addition to covering medically necessary procedures, Part C plans typically provide prescription drug coverage (Medicare Part D) and other types of benefits such as dental and vision. The premium you may pay is used to cover the wider range of services available with Medicare Part C.
The Medicare-approved private insurance companies that offer Medicare Part C coverage decide what services the plans will cover, so monthly premiums vary from plan to plan and state to state. Insurance companies are only allowed to make changes to the premium rate once a year.
How to Make Premium Payments
Your Part B Medicare premiums are billed directly through Medicare, while your Part C premiums are billed through the private insurance company associated with your Medicare Advantage plan. Here’s how you pay Medicare and your private insurance company.
- Premium Payments to Medicare: If you receive Social Security, Office of Personnel Management, or Railroad Retirement Board benefits, Medicare will automatically deduct your Part B premiums from your benefits check. If you don’t receive these benefits, you will receive a bill called “Notice of Medicare Premium Payment Due.” You can then pay by mailing a check, using online banking services, or signing up for Medicare’s bill pay, which will automatically draft the premium from your bank account each month.
- Part C Premium Payments to Private Insurance Companies: If your insurance company charges a premium for your Medicare Part C plan, you can set your payments to come from your Social Security benefits. But this is not an automatic action. You must submit a request to Social Security, and they have to approve your request before your Part C premium payments will be deducted. If you don’t get Social Security, you can mail in a check or have your premium automatically drafted from your bank account.
Tips on How to Pay Medicare Premiums
- Make sure to pay both your Part B and Part C premiums on time so you won’t lose coverage. Automatic deductions are the best way to avoid missing a payment.
- Make sure both Medicare and your Part C provider have your current mailing address for bill delivery (especially if your premium is not automatically deducted from Social Security).
- Don’t miss more than three months of Medicare Part B payments. Premiums are due the 25th of every month and coverage will end in the fourth month if past due payments are not made.
- Contact your Medicare Part C provider if you think you will miss a payment. Private insurance companies have their own rules on plan cancellation for nonpayment.
What Is the Premium for Medicare Advantage?
The average monthly premium for 2022 Medicare Advantage plans is $19, according to the Centers for Medicare and Medicaid Services (CMS).2 Medicare Advantage premiums vary depending on the type of plan and where you live, and can range from $0 to more than $100.3 Overall, premiums are usually lower than Medicare Part B premiums,* which you must also continue to pay. The Medicare Part B premium for 2022 is estimated to be $158.50.1
Premiums for Medicare Advantage Plans With Prescription Drug Coverage
In 2021, the average monthly premium for plans that include Medicare Part D prescription drug (MA-PD) benefits is $21 according to the Kaiser Family Foundation.3 The average monthly premium is weighted by enrollment. That means most people are selecting the lower-priced plans on an overall basis.
Below are the average 2021 monthly premiums for some of the different types of plans (weighted by enrollment).3
|Plan Type||Average Monthly Premium
Weighted by Enrollment
|Medicare Advantage HMO (Health Maintenance Organization)||$18|
|Medicare Advantage Regional PPO (Preferred Provider Organization)||$48|
|Medicare Advantage Local PPO||$25|
How Can My Medicare Part C Plan Have a $0 Premium?
Medicare Advantage plans with $0 premiums are not uncommon. In fact, it was predicted that 96% of Medicare enrollees would have at least one choice for a zero-premium plan in 2021, according to the Kaiser Family Foundation.4 You may be wondering, “how can an insurance company have $0 premiums?” That’s a great question. And it’s easy to explain. This is how the process works:
- Medicare approves a private insurance company to provide members with Original Medicare (Part A and Part B).
- The insurance company becomes responsible for paying members’ claims.
- Medicare pays the insurance company a flat fee for the cost of paying claims.
- The insurance company uses this payment to provide members with healthcare coverage.
- The insurance company usually saves more money through contracts with healthcare providers (e.g. hospitals, doctors’ offices, etc.).
- The insurance company passes on these savings to members, which results in a $0 premium.
It’s important to remember that, although you may pay $0 in premiums for Medicare Advantage, this does not mean that the plan is free. You still have to pay your Part B premium, annual deductible, copayments, and coinsurance for your Part C plan.
Medicare Advantage MSA: A Special Type of $0 Premium Plan
Another type of Medicare Advantage plan that’s available is the Medical Savings Account (MSA) plan. This plan is different because it’s designed to not include Medicare Advantage premiums at all. This $0 premium is not because the insurance company is passing on savings to plan members. As with all Medicare Advantage plans, you still pay your Part B premiums when you enroll in a MSA plan.
The trade off with not having a monthly premium is that MSA plans have a high deductible. The deductible is the amount of Medicare-covered services you must pay for out-of-pocket before the plan starts paying for covered services. The money that goes into your MSA can be used to pay your deductible and other healthcare costs.
How Does the Affordable Care Act Affect Medicare Advantage Costs?
The Affordable Care Act (ACA) made several changes to Medicare Advantage plans. Most of these changes had to do with the health insurance industry in general, including provisions for preventive care. In 2020, the ACA closed the Medicare donut hole; however, that doesn’t mean prescription drug coverage is free. Beneficiaries are still responsible for various costs.
But one of the major changes specific to Medicare Part C plans is that insurers are not allowed to charge plan members more than what Original Medicare would charge for certain services, such as chemotherapy. This could affect costs, depending on your plan. Only five factors can determine your monthly premium rates: age, location, tobacco use, individual vs. family enrollment, and plan category.
Can I Get Help Paying for Medicare Advantage?
Yes, you can get help paying for your Medicare Advantage (Medicare Part C) plan through Medicare Savings Programs (MSPs) made available by the Centers for Medicare and Medicaid Services (CMS). If you meet the requirements for low-income, disability, or certain chronic health conditions, MSPs can help pay for some of your plan costs, which may include premiums.
Paying for a Medicare Advantage Special Needs Plan (SNP)Along with having a qualifying medical condition, you must have Original Medicare (Part A and Part B) to be eligible for a Special Needs Plan (SNP). Some people who meet these requirements also have Medicaid. For those who have both Medicare and Medicaid, Medicaid helps pay for most of the costs in joining a plan. These costs include premiums, coinsurance, and copayments.
CMS requires that Medicaid pay for copayments and coinsurance for certain people enrolled in MSPs. However, Medicaid is not required to help pay for Medicare Part C insurance premiums. Federal Medicaid laws allow each state Medicaid agency to decide if they will pay Medicare Part C premiums for those enrolled in a MSP as a qualified Medicare beneficiary.
An insurance company can also decide to charge a premium for Part C SNP enrollees who have both Medicare and Medicaid as well as those who don’t have both. In this case, you would pay the full Part C premium (if there is one). SNPs typically have the same basic costs as other Part C plans. This means you could pay around the same average monthly premiums as shown in the table above or maybe even $0 in premiums.