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How Does a Zero-Dollar Premium Medicare Advantage Plan Work?

Written by: MJ Gissas

A zero-dollar premium Medicare Advantage plan is tempting, and for many Americans it is absolutely the best choice when selecting a health insurance plan. But to know whether it’s the best choice for you requires thorough knowledge of the inner-workings of the plan and how they affect your coverage and costs.

In short, the zero-dollar premium Medicare Advantage plan balances up-front costs that you would ordinarily pay (your premium) with backend costs that you would bear after receiving medical care (your bill) in favor of your premium. You pay nothing for coverage, but should you encounter a medical problem, you’ll end up paying more after care.

Your choice is based on risk. You either bear a greater risk by choosing a zero-dollar premium or mitigate your risk by paying a premium. Here’s how it works:

Insurance Carriers Bet on Good Health

Medicare Advantage plans are health insurance plans offered by insurance carriers who contract with Medicare. Through their contract, their organization receives assistance in exchange for taking risks with men and women who qualify for Medicare.

In the case of a zero-dollar premium plan, insurance carriers bet that they will be able to keep most or all of their profit based on your health. They will, of course, offer coverage when you need it, but the exchange between you and your Medicare Advantage plan provider is an agreement: you agree to minimize sickness and injury, and your provider agrees to keep your premium nonexistent.


It is advantageous for both of you; you have a greater monetary incentive to take care of your health, and the insurance provider remains profitable. If you need coverage because of an unexpected incident, you’ll still be covered.

Low Premiums Are a Balancing Act

The lower your premium goes, the higher your out-of-pocket medical bills will be. For insurance companies to be able to offer benefits, they still have to be profitable at the end of the year.

In an ideal scenario, the people to which they provide benefits will have taken good care of their health, enjoyed peace of mind from having insurance, and the insurance company will have helped those in need while still making enough money to keep them in business.

woman medicare

But because the ideal scenario is rare, insurance companies have to balance their risk with their profits. For you, that means that even with a zero-dollar premium, these plans may not be the cheapest choice for you. Your coinsurance and copayments may be too high, and you may have to pay for additional benefits based on health problems you encounter, such as:

  • Dental
  • Vision
  • Hearing
  • Prescription drug therapy

You must also continue to pay your Part B premium even with a zero-dollar premium Medicare Advantage plan.

Decide what plan is right for you based on your personal knowledge of your medical history and your lifestyle. A zero-dollar premium may be right for you if you are in good shape, free of chronic conditions, drive rarely or carefully, and do not work or live in a hazardous area.

But zero-dollar premium Medicare Advantage plans aren’t right for everyone. Ask us for help if you’re unsure how such a plan might fit into your lifestyle.

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Americans for Life Financial Services offers retirement solutions for institutional investors and individuals. Knowledge and results help our clients make informed decisions to meet their financial goals. 

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