CHICAGO (Reuters)—Seniors have received some unpleasant news in their mailboxes in recent weeks: premiums for many Medicare prescription drug insurance plans will rise at double-digit rates next year.
Premiums for the ten most popular Medicare Part D prescription drug plans (PDPs) will rise an average of 8 percent next year—the fastest clip in five years, according to Avalere Health, a consulting and research firm. And five of the top plans will boost their average premiums anywhere from 16% to 26%.
Seniors got the bad news in the annual notices that plan providers must send to enrollees by Sept. 30 each year ahead of the annual fall enrollment period. Enrollment runs from Oct. 15 to Dec. 7—and it is the time when seniors can shop for new drug plans, which are optional add-ons to Medicare.
Medicare officials said in July that the average premium for a basic Part D plan would hold steady next year at $32.50 per month. Avalere looked at the 10 most popular plans, which cover more than 80% of all enrollees.
The big premium increases should motivate enrollees to shop for new coverage during the fall enrollment. A key question for shoppers this year will be whether to buy a basic or enhanced plan.
Basic plans come with a gap in coverage, often called the “donut hole,” where the beneficiary must pay out of pocket after reaching a cap. In 2016, the gap starts when you and your insurance company have spent a combined $3,310, and coverage resumes when total spending reaches $4,850.
The largest basic plan, SilverScript Choice, will charge an average of $22.56 per month next year. Humana Walmart RX will charge $18.49 per month.
Most enhanced plans offer some coverage in the so-called donut hole, but also come with higher premiums. For example, AARP MedicareRX Preferred, which is the largest of the top 10 plans, will see its average premium jump 21% next year to $60.79, according to Avalere.
Humana Enhanced will boost its average premium 25% to $66.25. Higher premiums for enhanced plans stem, in part, from higher plan costs for sophisticated drugs used to battle catastrophic illnesses, according to Avalere.
The Part D outlook marks a major change from recent years—average premiums for the top 10 have been flat or down a bit in each of the past four years. Now the rising cost of specialty drugs is putting upward pressure on premiums.