Medicare Advantage consumers are willing to pay more

Consumers who buy individual health care plans through the ehealth.com site faced increases in Medicare Advantage plan premiums for the first time in four years. It may be that premiums are no longer the concern to plan purchasers that they once were; a review of its customer choices by eHealth also found that fewer selected zero premium Medicare Advantage plans this year than last.

eHealth based its report on the Medicare health insurance plans selected by Medicare beneficiaries at eHealth during the first half of Medicare’s Annual Enrollment Period for 2023 coverage (Oct. 15-Nov. 8). In an earlier survey, eHealth found that more than 9 in 10 respondents who had some type of Medicare coverage were concerned about being able to predict their health care costs due to inflation. That concern may be driving more individuals to select plans with higher premiums in an attempt to reduce their overall cost of care.

Among the other major findings of eHealth’s customer review:

• Average Medicare Advantage premiums rose to $7 this year. Average premiums in the previous three years were in the $4-$5 range.
• 84% of those selecting Medicare Advantage plans in the first half of the enrollment period chose $0 premium plans, compared to 88% in the same period last year.
• Average premiums for stand-alone Medicare Part D Prescription Drug plans increased to $31 compared to $21 last year.
• 88% of Medicare Advantage enrollees say they were satisfied with their coverage.
• A majority of those who switched from Medicare Supplement coverage to a Medicare Advantage plan say they preferred the latter.
• Most say they could not afford more costly alternatives to Advantage plans such as Medicare Supplement.

Consumers’ willingness to pay more for a plan may indicate they understand that a higher premium payment may get them into a plan that costs them less over time.

The average premium increase “may be driven by a number of factors, including carrier premium increases related to drug costs, a leveling out of demand for $0 premium Medicare Advantage plans, or consumers opting for higher premium plans to hedge against out-of-pocket costs during a period of inflation,” says eHealth CEO Fran Soistman.

Medicare consultant Michael Friedman, of Combs & Company, agrees with the “hedging” scenario.

“Generally speaking, individuals who choose to buy up a plan with a premium when there are $0 options, is that one will get more enhanced benefits such as lower copayments at providers, lower hospital per day copays, lower Rx deductibles as well as additional dental, vision and hearing benefits,” Friedman says.

The increase in average premium price demonstrated the ongoing fluctuations in what consumers choose to pay for an Advantage plan on the eHealth site. In 2019, the average was $10. That fell to $4 by last year. eHealth notes that the increase this year came despite availability of more zero-premium plan options in the marketplace.

The drug plan increase – $10 greater this year than last – may indicate a growing awareness by consumers that paying more upfront for a drug plan is the more cost effective way to go. In the four prior years, the average premium was in the low $20s.

Friedman says Medicare age consumers tend to like the added benefits of a Medicare Advantage plan, even if they do have to pay a nominal premium.

“The plans are attractive in nature just based on little or no monthly pricing. The carriers/plans offer additional benefits such as a gym benefit, dental, OTC cards, vision and hearing etc. These benefits are offered to make the Medicare Advantage plan more appealing as these additional benefits are concerns of many of the Medicare eligible population. It is hard for one to focus on the overall picture and future financial costs as individuals are drawn to, and tend to focus on, the low monthly cost plus the additional benefits that the plan has to offer,” he says.

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That said, Friedman suggests that a certain percentage of first-time Medicare plan purchasers often fail to choose the best plan for themselves. They may be swayed by a low premium without realizing the implications in terms of copays, in-network v. out-of-network plans, and which providers accept the plan.

“When people enroll into Medicare for the first time or during the Annual Enrollment Period, it is important to analyze all the options so they can make a mindful Medicare decision,” he says.