What should I know?
There’s a lot to take in, but we’re not trying to confuse you. So, we’ve narrowed it down to what’s most important for understanding your plan. By the end of this, you should feel like a health insurance expert!
- Premium – The total amount the insured pays each month for health coverage.
- Co-Payment – A fixed amount the insured pays out-of-pocket for covered medical services, with the remaining balance covered by the insurance company.
- Deductible – A fixed amount the insured pays before the insurance company will pay for any covered services.
- Out-of-Pocket Maximum / Limit – The total amount the insured pays out-of-pocket for covered services in a plan year. When the limit is met, the health plan pays 100% of the costs for the remainder of the plan year.
- Co-Pay – The fixed rate that the insured pays after the deductible has been met.
- Coinsurance – The percentage the insured pays after the deductible has been met.
- For example, If the insured has 80/20 coinsurance, the insured pays 20% for covered services while the insurance company pays the remaining 80%.
- In-Network – A provider or health care facility that is part of a health plan’s network in which covered services are provided at discounted rates.
- Subsidy – Financial assistance from the government that helps pay for health insurance. Eligibility depends on household income, family size, and zip code.
- Tax Credit – A credit that helps reduce a family or individuals’ monthly payment and are only available to those who are enrolled in a plan through the federal insurance marketplace.
- Health Insurance Marketplace – Also known as the “Marketplace” or “exchange”, is a service that helps people find an affordable health plan and is run by the federal government, for most states. Every health plan available covers a set of essential health benefits.
- Essential Health Benefits – Every health insurance plan available on the Marketplace must cover a set of 10 categories of services.
- Doctor’s services
- Preventative and wellness services
- Inpatient and outpatient hospital care
- Prescription drug coverage
- Pregnancy and childbirth
- Pediatric services, including oral and vision care
- Laboratory services
- Emergency services
- Mental health services
- Rehabilitative and habilitative services and devices
- Short-Term Health Plan – A health plan with a limited duration, typically a few months to a year, used to bridge the gap between coverage.
- Schedule of Benefits – A document that outlines the various services covered under a health plan, along with the fees associated with each service and treatment.
- Covered Services – These are services that your health insurance plan has agreed to pay, also known as your plan benefits.
- Excluded Services – These are services that your health insurance plan does not pay for or cover.
How does it Work Part D?
Part D plans are a bit complicated. They work in several phases, each having different costs associated with your prescriptions. Whether you have a standalone Part D plan or have one built into your Medicare Advantage plan, your drug coverage works the same way.
Up until 2025, prescription plans have had four phases of coverage. In 2025, you will see lower prescription drug costs and an improved prescription drug program.
Phase 1: The Deductible Phase
Each year, the Centers for Medicare and Medicaid Services (CMS) sets a standard deductible for Part D plans. For 2025, the Part D deductible is capped at $590. Insurance companies can choose to use this standard amount or set a lower amount. You will remain in the first phase of coverage until your deductible has been met.
The good news is that most plans waive the deductible for the first tier or two of their drug formularies. A drug formulary is the list of prescriptions covered by the plan. The formulary is divided into tiers. Drugs in lower tiers cost less than those in higher tiers. If you are filling a prescription that falls into the first tier of the formulary, it’s likely you won’t have to pay the deductible.
Phase 2: Initial Coverage
Once you’ve met your deductible, you’ll enter the initial coverage phase. During this time, you pay 25 % for each prescription. You’ll remain in the initial phase of coverage until you and your plan have spent a certain amount. That amount changes each year, but in 2025, it’s set at $2,000.
Phase 3: The Donut Hole
The infamous Donut Hole—once a significant challenge for those with high prescription drug needs—has undergone meaningful improvements. As of 2025, this phase is far more straightforward and equitable, providing relief to individuals who rely on costly medications.
What’s Changed?
In the past, the Donut Hole led to skyrocketing costs during this coverage gap, creating financial strain for many.
Now, everyone pays a consistent 25% of the drug’s cost, whether it’s a brand-name or generic medication.
Why It Matters:
Simplified Costs: The new structure eliminates the complicated calculations and confusing steps previously associated with this phase.
Better Financial Protection: You pay only 25% of drug costs until reaching your out-of-pocket maximum, after which catastrophic coverage kicks in.
This change is a game-changer, especially for individuals who depend on high-cost prescriptions. By making costs predictable and manageable, the updated Donut Hole provides much-needed financial relief and simplifies navigating prescription drug expenses.
Phase 4: Catastrophic Coverage
Starting in 2025, Catastrophic Coverage introduces groundbreaking changes to provide much-needed financial protection for individuals with high prescription drug costs.
Key Updates
Out-of-Pocket Cap: A new hard cap of $2,000 has been implemented for out-of-pocket prescription costs.
Once you hit this limit, you won’t pay another cent for covered medications for the remainder of the year.
Improved Plan Contributions:
Part D plans will now cover 20% of total drug costs, an increase from the previous 15%, providing additional support during this phase.
Why This Matters:
- Budget-Friendly: Makes it easier to plan and manage healthcare costs without sudden financial strain.
- Access to Medications: Ensures individuals can afford expensive prescriptions without delays or skipped doses due to cost concerns.
- Greater Flexibility: Provides a more predictable and consistent approach to handling medication expenses
- This enhancement is a game-changer for Medicare Part D enrollees, making prescription drug costs more accessible and less burdensome, particularly for those managing chronic or serious health conditions.
How to Enroll in Part D?
You should enroll in a Medicare Part D plan as soon as you are eligible – either when you turn 65 or when you lose creditable coverage, whichever comes last. It’s important to enroll in Part D right away to avoid any late-enrollment penalties.
To enroll in a Part D or Medicare Advantage Prescription Drug plan, you must first enroll in both Part A and Part B of Original Medicare. The earliest you can do so is during your Initial Enrollment Period, which is a 7-month window around your 65th birthday.
Choosing a Part D plan might be the hardest part of your Medicare enrollment. You’ll need to compare your current prescription list against all the plans offered in your zip code to find the one that’s right for you. The experts at Bobby Brock Insurance make this process easy.
First, we’ll get a list of your current medications and ask you which pharmacies you like to use. Then, we’ll determine which plan offers you the least costs throughout the year. You may find that many plans cover all your prescriptions, but some will have higher copayments than others. Kantuta Insurance Agency will help you choose the plan that saves you the most money on your prescriptions.
Don’t Ignore Medicare’s Annual Election Period
Once you enroll in a Part D or Medicare Advantage plan, you’ll have to keep that plan for the rest of the calendar year. (Unless you qualify for a Special Enrollment Period.) However, you can change your plan during Medicare’s Annual Election Period (AEP).
AEP begins on October 15 and ends on December 7. During this time, you can change your Part D or Medicare Advantage plan. Even if you’re happy with your current plan, it’s important to review your options for the upcoming year.
Since Part C and Part D plans run on annual contracts, there are usually changes to the plan’s premiums, cost-sharing amounts, and even benefits. You may love your plan now, but it might make changes that negatively impact your coverage in the future. Plus, if you have changes in your prescriptions, you should shop around for plans that cover your new prescriptions in the most cost-effective way.
If you’d like to get help paying for your prescription drugs, talk to a licensed Medicare specialist at Kantuta Insurance Agency today!
Don’t Ignore Medicare’s Annual Election Period
Part D Late Enrollment Penalties
Another thing that could increase your Part D premium is late enrollment penalties. Medicare has several penalties, but by far, the most common is the Part D penalty.
If you do not enroll in Part D as soon as you are eligible, you’ll incur the late enrollment penalty. And yes, unfortunately, you’re penalized even if you don’t take any prescriptions! The Part D penalty is calculated by multiplying 1% of the national base beneficiary premium ($34.70 in 2024) by the number of months you were eligible for Part D but did not enroll. Round to the nearest $0.10 and tack that number onto your premium.
For example, if you waited 24 months to enroll, your monthly penalty would be $8.10. You pay this penalty for the rest of your life or as long as you have a Part D plan
How to save money on Prescription Drugs
While Medicare Part D helps alleviate the cost of prescription drugs, it’s wise to explore additional strategies to manage your medication costs effectively. We’ve got a few tips to help you save on prescription medications.
Use Generic Drugs: Whenever possible, opt for generic versions of your medications. They’re usually placed on lower tiers of the formulary, which means lower coinsurance costs for you. Discuss this option with your doctor or healthcare provider and find out if there are any generic alternatives to your current medications.
Review Your Plans Annually: Every year, you should review your Medicare plans during the Annual Election Period (October 15 – December 7). It’s important to utilize this time, even if you’re happy with your current plan. Formularies and plan details can (and often do) change from year to year.
Apply for Extra Help: If you have limited income and resources, you might qualify for Extra Help. This is a federal program run through individual states, so reach out to your state’s Medicaid department to find out if you qualify for either full or partial Extra Help.
Manufacturer’s Patient Assistance Programs: Many pharmaceutical companies offer assistance programs to people who can’t afford their medications. Check the manufacturer’s website or ask your healthcare provider for information on available assistance programs.
State Pharmaceutical Assistance Programs (SPAPs): Some states offer help with paying drug plan premiums and other drug costs. Check to see if your state has a program that could assist you.
Mail-Order Pharmacies: Many Part D plans offer a mail-order pharmacy option. Not only is this convenient, but using your plan’s mail-order services often saves you money.
Prescription Discount Programs: There are various prescription discount programs or clubs. Some examples include Cost Plus Drugs, GoodRx, SingleCare, and Blink Health. Many local pharmacies also have their own savings programs, like Kroger Rx or Walmart’s $4 Prescription Program. These are great options and are sometimes even cheaper than using your Part D plan.
Open Enrollment Period
The yearly period when people can enroll in a new health plan or switch to a different plan. Typically, Open Enrollment runs from November 1 to December 15, and plans are effective January 1.
Special Enrollment Period
The time outside of open enrollment is when people can enroll in a health plan if they have a qualifying life event. If a person qualifies for a SEP, they typically have up to 60 days following the event to enroll.
