What is a Social Security Medicare premium refund?

How can MA plans afford to give premium refunds?

Participating Medicare Advantage plans can afford partial premium refunds because the Centers for Medicare & Medicaid Services (CMS) gives them money back in rebates. When a plan’s estimated costs for providing Part A and Part B services is below the maximum that CMS will pay in a plan’s county, the plan gets a portion of that money back from CMS as a rebate, Fuglesten Biniek says.

The average rebate for Medicare Advantage plans was $2,352 a year per enrollee in 2023, according to the Medicare Payment Advisory Commission (MedPAC). Reducing Part B premiums is one of three ways that Medicare Advantage plans can choose to apply that rebate money.

“The rebate must be used to lower cost sharing, pay for extra benefits like dental, vision or hearing, or provide a rebate against Part B and/or Part D premiums,” Fuglesten Biniek says. Typically, Medicare Advantage plans tend to use the largest portion of their rebate money to reduce cost sharing or provide supplemental coverage, such as dental, hearing or vision benefits, rather than reducing premiums. 

Plans that refund some Part B premiums may have higher costs in other parts of the plan. For example, one company offers three plans in the Philadelphia area: 

• One plan has a premium giveback of $95 a month, but it charges higher copayments for specialist visits, hospital stays and outpatient surgery. It also has a higher out-of-pocket spending limit. And it’s an HMO, which doesn’t cover out-of-network providers except in emergencies. 

• Another plan charges the full amount for Part B and has no additional premiums, but it’s a PPO, which lets you use out-of-network doctors for higher copays.

• The third plan charges the full amount for Part B and has no additional premiums. It’s also an HMO, but it has a lower out-of-pocket spending limit and lower copayments than the other two plans.

When choosing a Medicare Advantage plan, consider overall costs and coverage in addition to premiums, including copays for doctor visits and hospital stays, the cost of your medications, whether the doctors you want to use are in the plan’s provider network and if the plan has prior authorization or referral requirements, Fuglesten Biniek says.  

You can compare premiums and other costs for plans available in your area by using the Medicare Plan Finder. To find out if the plan has a premium giveback, click on Plan Details | Part B premium reduction in the premiums overview section. You’ll need to contact each plan with a Yes in that area for more details about the giveback and for more information.

Also important to consider: whether you want your coverage from a private Medicare Advantage plan or original Medicare instead.

Keep in mind

If you have trouble affording your Medicare premiums or out-of-pocket costs, you may qualify for help from two programs:

Medicare Savings Programs can help pay Medicare Part A and Part B premiums, deductibles and copayments. Eligibility is based on income and assets and varies by state. Contact your State Health Insurance Assistance Program (SHIP) for details.

The Extra Help program can assist with Part D premiums and out-of-pocket costs for your prescription drugs. Eligibility income criteria expanded in 2024. You can apply for Extra Help through the Social Security Administration.

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