Greetings! As we approach another annual enrollment period (AEP), we want to express our gratitude for the thousands of wonderful clients we have. YOU are the reason for our existence. As we celebrate our 20th anniversary, one of the most consistent aspects of this business is that change is constant. We have been preparing for this new enrollment period since the last one ended, and our preparation continues with just a few weeks left before AEP officially begins. We are still receiving clarifications and updates on plan changes for 2025.
The most significant change coming in 2025 is the enhancement to Medicare Part D, resulting from the Inflation Reduction Act. Starting next year, Medicare Part D plans will no longer have a coverage gap or “donut hole.” Additionally, the maximum out-of-pocket cost for outpatient prescriptions will be capped at $2,000. These improvements will be welcomed by those with very high drug costs and will provide much-needed relief. However, those with low or no drug costs may feel frustrated by the increasing premiums, deductibles, and prescription costs. According to government data, less than 15% of the Medicare population experiences the current coverage gap and will benefit from the 2025 changes. The remaining 85% of Medicare enrollees will face increased costs. This is the nature of insurance, where risk is spread across all members.
If you are among the 85% not benefiting from the Part D enhancements in 2025, you might be wondering if you really have to pay significantly more for coverage next year. Is there a way to avoid the significant increases in Part D drug plan costs? The quick answer is that if you’re concerned or irritated by the new high premiums, you should consider the possibility of enrolling in a Medicare Advantage plan. Generally, the Part D drug coverage included in Medicare Advantage plans has lower deductibles, and lower prescription costs compared to standalone Part D plans. Many Medicare Advantage plans include drug coverage with a $0 monthly premium. Additionally, as Medicare supplement premiums continue to rise, if you have been on a Medicare supplement for six or more years, your premium might be in the low $200s or higher. Switching to a Medicare Advantage plan would eliminate the need to pay for both a Medicare supplement and a Part D plan. Plus, you would benefit from additional perks offered by Medicare Advantage plans, such as dental, vision, hearing, over-the-counter items, and more.
You might be wondering why you need a Part D plan with your Medicare supplement. While it is an option to drop your Part D plan, we do not recommend it. The government requires you to have a Part D plan to avoid a penalty if you later decide to join one. Going without drug coverage for a year could be risky, as your prescription needs could change unexpectedly. You cannot enroll in a Part D plan mid-year; you would have to wait until the next annual enrollment period and would face a monthly penalty of about 35 cents for every month you lacked coverage. This penalty would apply every month for the rest of your life.
My best advice is to keep an eye out for your Part D plan change notice in the mail. Don’t be surprised if your Part D plan is terminated at the end of the year. We anticipate that several Part D plans may not renew their contracts for 2025. Be prepared for significant cost increases! The government is trying to mitigate the impact by subsidizing Part D plan sponsors and limiting premium increases to no more than $35 per month. It will be up to the insurance companies to decide if they want to participate in this program and cap their premium increases. We believe most insurance companies will choose to participate.
The goal at OHB is to help remove the confusion from this very confusing subject for each of you. Please call us soon at 330-633-7713 to discuss your options if you are considering a change.
