Medicare Advantage Premiums Rise, Zero-Dollar Premium Plan Uptake Declines

Medicare Advantage premiums rose to $7 per month on average for 2023 open enrollment season, an eHealth survey uncovered.

For the past four years, Medicare Advantage plan premium costs have been stable or falling. In 2019, the cost was $10 and by 2022 it had dropped to $4 per month. But now that trend is reversing and seniors will face, on average, a $3 premium hike.

"This is the first increase in average premiums we've tracked in four years," Fran Soistman, chief executive officer of eHealth, said in the press release.

“It 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. In our July survey, for example, 95% of Medicare respondents told us they worried about inflation's impact on their health care costs.”

During the 2022 open enrollment season, zero-dollar premium plans were responsible for keeping premium costs low. Zero-dollar premium health plans continue to be a significant share of Medicare Advantage plans. In fact, the number of Medicare Advantage plans with zero-dollar premiums has swelled from 59 percent in 2022 to 66 percent in 2023. So why are premiums increasing?

The study revealed that consumer interest in zero-dollar premium plans may not be keeping pace with insurers’ enthusiasm. Even though the number of plans with zero-dollar premiums grew in the past year, the percentage of beneficiaries who selected zero-dollar premium plans fell after four consecutive years of growth.

In 2019, three-quarters of Medicare Advantage beneficiaries selected zero-dollar premium health plans. In 2022, that share peaked at 88 percent of beneficiaries before tumbling down to 84 percent—nearly 2020 levels. The eHealth experts speculated that factors such as out-of-pocket healthcare spending and provider networks could contribute to consumers’ waning interest in these plans.

Standalone Medicare Part D plans are not protected from the premium increases. After mostly stable rates for the past three years, 2023 premiums jumped $10 in one year. The standalone Medicare Part D plans that beneficiaries selected in the first half of the annual enrollment period will have an average monthly premium of $31.

Nearly half of all Medicare Advantage beneficiary respondents said that they could not afford coverage if they did not have access to Medicare Advantage (48 percent).

A quarter of beneficiaries said that $50 per month was the maximum premium that they could afford without Medicare Advantage as an option. The remaining share—less than 30 percent of Medicare Advantage beneficiary respondents—said that they could afford monthly premiums of $50 or more without Medicare Advantage.

Despite the price increases, beneficiaries expressed high levels of satisfaction with their Medicare Advantage plans in response to eHealth’s May 2022 survey. More than eight out of ten respondents said that they would recommend their Medicare Advantage plan to friends or family (86 percent).

Out of a range of five levels from “very dissatisfied” to “very satisfied,” 63 percent of Medicare Advantage beneficiaries reported that they were “very satisfied” with their Medicare Advantage plans. Another 25 percent said that they were only somewhat satisfied. Altogether, 13 percent stated they were neutral or dissatisfied.

Most Medicare Advantage beneficiaries who had been enrolled in Medicare Supplement plans reported that they preferred their Medicare Advantage plan to their Medicare Supplement coverage. Nearly six out of ten Medicare Advantage beneficiaries were more satisfied with their Medicare Advantage plans (59 percent), while almost a quarter were “equally satisfied” (23 percent).

Not only were average premiums of selected plans higher for the 2023 plan year, but Medicare Advantage and Medicare Part D plans also saw a decrease in Medicare Advantage Star Ratings for 2023. Experts attributed the decline to methodology changes and the lingering effects of the coronavirus pandemic.

A separate report found that Medicare Advantage plans saw lower spending, higher enrollment, and stronger diversity in 2022 compared to 2021. Plans will have to get through the second half of the open enrollment season to see if those trends continue into 2023.