This is an AArete Healthcare Payer Insight
Medicare Advantage is a popular alternative to traditional Medicare for seniors. In fact, 47% of Medicare Eligible individuals choose Medicare Advantage vs. traditional Medicare, which has doubled since 2010. It offers a more comprehensive coverage option and is designed to require private insurers to help manage healthcare costs. According to our most recent MA landscape analysis:
- 73% of Medicare Advantage members choose plans with $0 monthly premiums, a 4% increase from 2022
- $0 premium plans are receiving lower Star Ratings than plans with premiums, and the gap widened in 2023
So, why is this the case, and what can we learn from it?
First and foremost, it is important to understand that a $0 premium does not mean that a plan does not cost anything – co-pays, deductibles, and more still exist.
Medicare Advantage plans cover:
- Traditional Medicare Services
- Benefits like dental, vision, prescription drug coverage
- Supplemental benefits like transportation, meal services, in-home care, and fitness programs
The cost of these extra benefits can be incorporated into the plan’s overall monthly premium or provide discounts to like-services. For many Medicare Advantage members, especially low utilizers, the appeal of a $0 premium is simply that they will not have to pay anything upfront or monthly recurring fees.
However, for the 27% of MA enrollees who do choose plans with a premium:
- The average monthly cost ranges from <$20 to $300+ per month, and an average of $62
- The average monthly premium is down -2% YoY
- Nearly 50% of the members that pay a premium, pay between $20-$50 per month
For these members, the extra benefits, specific services, or health needs offered by the plan may be worth the monthly premium. In fact, when a premium exists, the higher the monthly amount, the higher the average Star Rating of the plan, indicating members are willing to pay for a higher quality, more comprehensive experience, and plans are more engaging when charging a premium.
To summarize, it seems that for many Medicare Advantage members, the choice between a $0 premium and a premium comes down to personal preference, budgeting, and health needs. Some prefer the peace of mind that comes with a $0 premium, while others are willing to pay a bit more for a better overall experience or specific benefits to their health conditions or environment.
In the end, it is clear that Medicare Advantage offers a variety of options to meet the needs and preferences of its members. Plans continue to move towards $0 premium plans, becoming table stakes for MA carriers, but the plans that can offer rich benefits, smooth and simple experiences, engage members health, while remaining profitable will ultimately come out on top.
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