The Medicare Extra Help program, also known as Low-Income Subsidy (LIS), assists low-income people with Medicare out-of-pocket costs associated with Part D prescription drug coverage. We cover the specifics of this program in our previous blog, The Ins and Outs of Extra Help, but do you know what Extra Help means for the premium amount on various Medicare Advantage plans? Here is a quick overview of the Extra Help premium subsidy and how it affects Medicare Advantage Prescription Drug Premiums.
Extra Help Premium Subsidy
Part of the assistance received under the Extra Help program is a subsidy of the monthly premium for prescription drugs. Low-income beneficiaries pay no (or reduced) prescription drug premiums because Medicare makes premium payments on their behalf to the Prescription Drug Plans (PDP) and Medicare Advantage Prescription Drug Plan (MAPD) providers. Depending on the beneficiary’s income level, this amount can be a full premium subsidy at 100% of the benchmark premium, or partial premium subsidy of 75%, 50%, or 25% of the benchmark premium.
What is the LIS Benchmark Premium?
Since premiums can vary from one PDP plan to another, Medicare sets what is called a benchmark premium for the service area. The benchmark premium amount is based on the state. For instance, the benchmark premium in Arizona for 2023 is $42.60 but in California it is $38.86. So, if the beneficiary has full premium subsidy at 100%, then the plan premium is reduced by the full amount of the state’s benchmark premium. Here is an example of how full premium subsidy in Arizona is applied to the prescription drug plan’s premium. As you can see, if the premium is at or below the benchmark, then the beneficiary does not pay a monthly premium. Your goal as an agent is to maximize their coverage while limiting their monthly premium. It might not make sense to put them on the $8 plan if they have $42.60 available in monthly premium subsidy. We will get into more on maximizing this premium subsidy in the next section on MAPD plans.
|Estimated Monthly Plan Premium||Monthly premium after 100% premium subsidy (Arizona)|
|$100/ mo plan||$57.40|
|$50/ Mo plan||$7.40|
|$8/ Mo Plan||$0|
If they receive partial subsidy, then the premium amount would be reduced by a % of the benchmark premium. So, in Arizona, if you get 75% subsidy then the premium would be as follows:
AZ Benchmark Premium $42.60 X 75% = $31.95 premium reduction
How does the LIS Premium Subsidy affect Medicare Advantage Prescription Drug Plans (MAPD)?
Beneficiaries have two options to get their drug coverage: a Prescription Drug Plan or a Medicare Advantage Prescription Drug Plan (MAPD). Beneficiaries enrolling in an MAPD plan receive all health care services, not just prescription drugs, through the plan. So if they receive LIS, which part of the MAPD premium can be reduced by the benchmark premium? The answer is the same as the PDP premiums. If a beneficiary should choose to get their PDP coverage through an MAPD plan, then the benchmark will still apply to the MAPD premium. You can reduce all the MAPD premiums up to the benchmark premium for the state. This is because the MAPD premiums are based on the PDP portion of the plan for this specific reason. This is an important point to remember when helping your LIS eligible beneficiaries find the lowest cost MAPD plan. In Arizona, there are many MAPD plans with $0 premiums, so the instinct is to automatically search the $0 plans for low-income individuals. But if they receive Extra Help, you can consider looking at MAPD plans that have higher premiums and offer more benefits since the low-income subsidy will reduce the MAPD plan premium the same way it lowers the PDP plan premium.
You can download the grid showing the LIS benchmark premium for each state HERE.
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