Providing zero-dollar MA-PD premium plans is worthwhile

Medicare Advantage Prescription Drug (MA-PD) plans with a zero-dollar member premium are incredibly popular among Medicare beneficiaries. Many Medicare beneficiaries, especially healthier individuals with limited expected medical costs, are attracted to zero-dollar premium plans that require no monthly financial commitment. In return, the beneficiaries are willing to accept the higher member cost sharing that generally accompanies these plans. Because these plans offer benefits richer than traditional Medicare and include Part D pharmacy coverage for no premium, zero-dollar premium plans routinely perform well during the annual enrollment period as it relates to member retention and growth.

In the MA-PD market, beneficiaries are generally “sticky” in their purchasing practices—this means that they typically would prefer to avoid changing their coverage from one year to the next. Many Medicare beneficiaries value the benefits and level of customer service they receive for their existing health plans and may not want to switch plans or carriers. But is this stickiness strong enough to overcome the loss of zero-dollar premium healthcare, especially in geographic regions where another carrier continues to offer a zero-dollar premium option?

In this article, Milliman’s Brad Piper and Mary Gabe discuss what happens to membership when an organization adds a premium to the zero-dollar premium plan. They reviewed public enrollment data released by the Centers for Medicare and Medicaid Services for individual MA-PD plans from 2016 to 2019 and summarized the membership and premium for each of them. Then they identified the membership change associated with member premium changes.