Something for Nothing?

  • Originally published August 17, 2010 , last updated December 30, 2015
Something for Nothing?

You may have wondered how a Medicare Advantage insurer can charge $0 premium for a plan and make money. Intuitively, something for nothing creates doubt in the mind of an agent and consumer.

Here’s how it works. Medicare Advantage plans are health options that are part of the Medicare program. By joining one of these plans, a person receives all Medicare-covered health care through an insurance carrier. Insurers are reimbursed generally in a range of nearly $10,000 per enrollee based on a complicated formula based upon a member’s gender, geographic location, the cost of care the person is likely to receive, etc.

Any premium the carrier charges the customer, even if it is $0, is in addition to the income it received from the federal government. Remember, it is against federal law to describe the plan as “free” or “no cost.” It is acceptable to describe it as a zero dollar premium plan.To the extent that co-pays and consumer education help control utilization, it is conceivable that a carrier can offer better benefits than Original Medicare at little or $0 monthly premium and turn a profit.

The carrier must offer a benefit program that is as good as or better than Original Medicare. Prescription drug programs, preventative care and other discounts programs are commonly offered to make Medicare Advantage plans more attractive. In addition, caps on maximum out-of-pocket costs to seniors can make the plans more appealing.

Just like the Prescription Drug program, the availability of Medicare Advantage plans (also called Medicare Part C) appears to be working with roughly 50,000 new enrollees in these plans each month.‡

Truly, there is no “free lunch” although many plans are marketed using seminars at a local restaurant. The reality is that Medicare Advantage plans receive a significant portion of their funding not in the form of monthly premiums but in federal government reimbursements. The level of reimbursement to the Medicare Advantage plan is determined annually.

Senior Market Sales, Inc. believes that having a solid Medicare Advantage plan in an agent’s portfolio is just good business. The privatization of Medicare has roughly doubled the available market for health products to seniors. These plans aren’t for everybody but combined with a solid Medicare Supplement portfolio, agents have more products that meet the needs of more seniors than ever before.

The market has changed and opportunity awaits the agent who understands the changes in Medicare and masters Medicare Parts C and D.

At Senior Market Sales, we are experts in Medicare Solutions. We can help you make more money, save time and place your business in a position of distinction.

To get certified to sell Medicare Advantage or contracted with one of our carriers call the SMS Medicare Solutions department at 1-877-645-0147.