You’ve probably heard your parents say it many times: Nothing in this life is free. If something’s sold at no cost, it might be too good to be true.
While that’s not always the case with $0-premium Medicare Advantage (MA) plans, agents and consumers need to know there’s a lot more to them. Premiums are the most visible and easy-to-compare factor, but they don’t define a plan’s value.
Consumers can get caught up in “$0” — it’s your job as an agent not to let them.
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Starting at Zero
Let’s take a look at some enrollment figures. According to the Centers for Medicare and Medicaid Services (CMS), MA enrollment continued to grow in 2017. Of the 57 million people on Medicare, one in three were enrolled in an MA plan. Additionally, eight firms or affiliates account for 77 percent of today’s MA enrollees.
In this competitive market, how can an insurer afford to offer $0-premium plans? In simplest terms, the government pays private insurance companies to take care of the bills instead of the Medicare program itself, saving the government resources and money. Private insurers can then save costs by establishing networks for their MA plans to keep expenses low. Those savings are put back into making the plan cheaper, which is how we get $0-premium plans.
For 2017, 81 percent of beneficiaries had at least one $0-premium plan available in their area. This year, about half of Medicare enrollees (52 percent) are in a $0-premium MA plan.
Not including the monthly Part B premium that beneficiaries must continue paying ($134 or higher depending on income in 2017), the average premium of all available Medicare Advantage plans was about $36 a month in 2017, according to CMS. Some quick math tells us that’s about $432 a client could save each year being in a $0-premium plan. But is it worth it?
Remember, there’s much more to a plan than its premium. Out-of-pocket exposure, such as annual deductibles and copayments, is perhaps the most risky aspect of these super-affordable premiums.
Beware the MOOP
No, the MOOP isn’t that horrendous monster who lived under your childhood bed, but it can be just as frightening. The maximum-out-of-pocket limit, or MOOP, is the point where beneficiary spending is capped and the insurer begins covering all medical expenses in full.
In 2011, CMS began requiring all MA plans to have an out-of-pocket limit no higher than $6,700 annually, and a recommended limit of $3,400 or lower for in-network services. But insurers like to play it closer to the edge. The average MOOP for those enrolled in MAPDs in 2017 is $5,219, up $906 from 2011. More than one-third of all enrollees in MAPDs in 2017 (36 percent) were in plans with limits at the maximum.
Keep in mind, these limits don’t include expenses for prescription drugs covered under Part D, which have a separate catastrophic cap ($4,950 in 2017). They also won’t cover over-the-counter medications or services that aren’t part of the plan, such as dental or vision care.
The rise in MOOP makes it critical for consumers to receive good information so they can understand the range of choices they have. Low premium but high exposure can be ideal for some, but a nightmare for others.
Face the Other Factors
We know there’s a lot more to a plan than its premium, but how can an agent determine what plans are valuable to what clients? You must know your client and your client’s needs.
The first thing an agent should do is find out what doctors their clients will use. Ask them, “If there were something really wrong, what hospital would you go to?” If their hospital of choice isn’t in a plan’s network, that plan shouldn’t be considered an option.
In the case of most senior clients, they want to stay with their doctors. Put simply, their relationship with a doctor means more to them than saving a few bucks.
Additionally, agents should clearly present all benefits of a plan. Some plans may offer specific values to your client that make a higher premium completely worth it. Rather than shell out a copay each month, it might be cheaper for your clients to pay the premium of a plan that covers a particular cost.
Finally, are you ready for the super combo that could benefit both you and your client? Consider pairing a $0-premium MA with a hospital indemnity plan to ease the burden of expensive hospital copays.
A low-premium plan will yield a high MOOP, but clients can spend a part of those savings on an affordable hospital indemnity plan that helps them cover pricey copays on hospital stays.
You know from your Medicare training materials that you must be sure your clients understand the exposure of high MOOP. Don’t burn a bridge with a client because they feel you misled them on the true cost of a plan.
No- or low-premium plans are a great way to get your foot in the door, but they don’t work for everyone. Savvy agents stick to selling the network and benefits in addition to the premium. They guide their clients to consider copays and deductibles as part of the larger picture. Most importantly, they are open and honest with their clients, putting in the work that nets them referrals and business in the long-term.
Just remember, like your parents always told you, nothing in this life is free.
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A modified version of this article was previously published in the May and August 2016 issues of California Broker Magazine.