2027 will be four years running for cubacks in MA
If Medicare Advantage plans thought 2027 would finally mark the end of the industry’s painful retrenchment, they may want to think again.
The early signs point toward another year of significant market exits, benefit changes, network adjustments and efforts to control enrollment.
And this isn’t exactly new.
Medicare Advantage has essentially been going through a multi-year reset since 2024. Rising utilization, inadequate rate trends, the new risk adjustment model, other worries on risk adjustment recoupment, deteriorating Star ratings, and other regulatory changes hit an industry that had expanded aggressively during the preceding years.
The result has been a painful process of getting the economics back in balance.
2027 looks increasingly like year four of the MA reset
The problems really emerged in 2024, when medical utilization increased far beyond what some insurers had anticipated.
Seniors returned for procedures and services at higher rates following the pandemic. Outpatient utilization, orthopedic procedures, supplemental benefits, behavioral health and prescription drug costs all created pressure. Humana and CVS were among the companies forced to reduce earnings expectations as medical costs accelerated.
Industrywide MA gross margins averaged $1,655 per enrollee in 2024, 17% below 2023, according to healthcare policy group KFF.
But 2024 was still relatively stable from a member-disruption standpoint. A recent JAMA analysis found that from 2018 through 2024, an average of only about 1% of MA HMO/PPO members annually were forced from their existing plans because of contract terminations or service-area reductions.
2025: Real retrenchment began
By 2025, plans began acting aggressively to restore profitability.
Humana ultimately shed roughly 550,000 MA members through plan and market changes. CVS/Aetna pursued its own “margins over membership” strategy and expected MA enrollment to decline by a high-single-digit percentage, contributing to an overall membership reduction exceeding one million. Centene lost approximately 200,000 Medicare members following the 2025 enrollment period.
The result was a major increase in disruption.
The JAMA analysis found that forced MA disenrollment jumped from the historical average of about 1% to 6.9% in 2025.
Then came 2026.
2026: retrenchment got even bigger
The 2026 contraction was extraordinary.
The same JAMA researchers estimate that approximately 10% of MA HMO/PPO beneficiaries — about 2.9 million people — were forced to change coverage for 2026 because their existing plan left their market. Among non-SNP members, the rate reached 12.4%.
KFF separately identified 2.6 million beneficiaries enrolled in plans that terminated at the end of 2025. Importantly, almost 99% still had another MA-PD option available, and 68.7% had another plan from their existing insurer available. So, contraction did not mean the disappearance of MA choice — but it did mean considerable disruption for beneficiaries.
CMS projected overall MA enrollment of 34 million for 2026, versus 34.9 million in 2025. But the enrollment actually still came in at 35.8M, a 2.5% growth. That was the slowest in years by far but it still showed the value of MA (even in tough times) compared with traditional Medicare.
Now we are heading into 2027.
And the retrenchment isn’t over.
More than 1 million members are already in the 2027 crosshairs
We don’t even have the final 2027 MA landscape yet, and the announcements are already substantial.
Humana says targeted plan exits will affect approximately 600,000 members, or about 8% of its roughly 7.2 million MA members. Humana expects to recapture a significant portion of them into other Humana products, similar to the roughly 40% it recaptured following its 2025 exits.
Humana is deliberately cutting what management describes as the lower tail of profitability and return rather than spreading benefit reductions uniformly across its portfolio. It wants to preserve stronger plans, including those with greater value-based-care penetration, as it works toward a sustainable pretax MA margin of at least 3% in 2028.
Centene/Wellcare is reportedly taking another major swing at its footprint. Current reporting indicates Centene will leave Oklahoma, Tennessee and Hawaii, eliminating 133 plans across 158 counties and affecting approximately 340,000 members.
Molina is going further strategically: it is discontinuing its traditional MA-PD business for 2027 and concentrating on the dual-eligible population. This isn’t an abandonment of MA. It is a decision about which part of MA Molina believes it can operate successfully.
UnitedHealthcare has a preliminary 2027 exit list covering 34 counties in 12 states and more than 20,000 members. That number could change as the final footprint becomes clear.
Add Humana, Centene, Molina and the preliminary UnitedHealthcare exits together, and more than 1 million existing MA members are already associated with announced or reported 2027 contraction.
And we aren’t finished yet.
My prediction is that well over 1 million MA beneficiaries will ultimately experience forced plan disruption for 2027, although I don’t expect a repeat of the extraordinary 2.9 million estimated for 2026.
Why does this continue to occur?
I am asked this question all the time.
Didn’t the plans already fix their books? Didn’t they cut benefits? Didn’t they exit counties? Didn’t CMS increase rates? Yes, but MA plans are still digging themselves out of a very deep hole.
Medical cost trends remain high. Humana, for example, recently discussed medical and pharmacy trends in the 7% to 8% range. This remains the fundamental problem. While plans have begun to better anticipate such costs and build them into projections, that doesn’t mean cuts now disappear. It likely means plans will be hyper-conservative and cut more to keep margin recovery in place. Plans cannot sustainably operate when revenue trends fail to keep pace with underlying medical costs.
Rates, too, still aren’t where they need to be. CMS finalized an average 2.48% MA payment increase for 2027, after more than 100 organizations pushed the agency for a larger increase. That is an improvement, but it doesn’t magically solve the problem.
The important comparison isn’t whether MA rates are technically increasing. It is revenue growth versus the underlying growth in medical and pharmacy costs, combined with changes in risk adjustment, Stars and other payment policies.
A 2.5% payment increase doesn’t go very far if a plan’s underlying costs are increasing considerably faster.
The industry is still grappling with overexpansion. This issue receives too little attention.For years, MA was an extraordinary growth business. Plans expanded into counties, launched PPOs, enriched supplemental benefits and competed aggressively for membership.Sometimes that growth got well ahead of the economics.
A market that looked attractive at one utilization level, Star rating and CMS benchmark can look very different when utilization jumps several percentage points, Stars deteriorate and reimbursement changes.
That is why some plans are still pruning counties after several consecutive years of pruning counties.
The reset takes time.
Poor Star ratings continue to hurt. Stars can dramatically change the economics of an MA market. A plan receiving a quality bonus and higher rebate percentage has significantly more revenue available to fund benefits than a lower-rated competitor.
Humana’s 2027 decisions provide an interesting example. The majority of members affected by its planned exits are reportedly in plans rated 3.5 Stars or below for the 2027 bonus year, although Humana says Stars were not the primary reason for the decisions.
Poor Stars therefore compound every other problem: inadequate rates, high utilization and excessive benefit structures become harder to solve when quality bonus revenue disappears.
And there is risk adjustment and audits. The v28 risk model phase-in from 2024 to 2026 took well over 7% out of base rates. CMS has moved forward with extrapolated RADV audits. CMS previously estimated approximately $425 million annually in recoveries once extrapolated audits begin with payment year 2018 audits.
Whatever one thinks about the policy, the reality for plans is another layer of financial and regulatory risk around a revenue source that is fundamental to the MA business model.
Putting it all together — medical trend, inadequate rates, risk adjustment changes, poor Stars performance, and previous overexpansion — and you can understand why management teams remain cautious and further reductions in terms of footprint, benefits, and products will occur.
How does an MA plan actually decide where to contract?
This is the other question I hear frequently. A national health plan doesn’t simply sit in a boardroom and announce, “We’re shrinking Medicare Advantage.” The decisions are much more granular. MA economics ultimately come down to the contract, PBP benefit, county and sometimes network level.
Plans pull various levers:
1. Get Out Completely
This is the most dramatic option.
If a county’s expected medical costs, CMS revenue, risk profile, Stars economics, provider contracting environment and competitive dynamics simply don’t add up, the carrier exits.
This is what we are seeing with portions of the Humana and Centene footprints.
There is little reason to preserve market share for market share’s sake when every additional member makes the financial problem worse.
The MA industry’s mantra has shifted from growth at almost any cost to margin before membership.
2. Stay in the County — But Reduce Benefits
A market can be fixable without being abandoned.
The carrier can reduce dental, vision, hearing, transportation, over-the-counter allowances, flex cards or other supplemental benefits. It can increase premiums or member cost sharing.
The objective is simple: realign the product’s benefit expense with the revenue available in that county.
The member keeps an MA option. The carrier keeps its presence. But the product becomes less generous.
3. Change the Product Mix
Plans can also migrate membership toward products they believe they can manage more effectively.
That could mean emphasizing HMOs instead of PPOs, reducing expensive PPO exposure, focusing on D-SNPs or other SNP products, or eliminating particular PBPs while retaining others.
Molina is perhaps the clearest 2027 example: abandon traditional MA-PD while preserving a Medicare strategy centered on dual eligibles.
4. Tighten the Network
Another lever is network configuration.
A broad PPO can be extraordinarily difficult to manage when provider costs and out-of-network exposure increase.
Plans can therefore narrow networks, renegotiate provider contracts or shift toward network structures that give them greater control over utilization and unit costs.
This can be financially effective.
It can also be enormously disruptive to members who discover that a favored physician or hospital is no longer participating.
5. Don’t Exit — Just Stop Paying Brokers to Sell It!
This is one of the most fascinating strategies.
Continuing a trend of big plans over the past several years, Aetna has already designated 123 MA plans across 33 states as non-commissionable for new enrollment, covering nearly 780 counties.
Think about what that means strategically. Aetna isn’t necessarily saying: We never want to operate here again. It may instead be saying: We don’t want additional membership here right now.
That can make tremendous sense.
Perhaps the product is marginally profitable. Perhaps management thinks the economics can improve in another year or two. Perhaps abandoning the county would make rebuilding distribution, networks and membership too expensive later.
So instead of withdrawing, the plan turns down or off the enrollment faucet.
It preserves the franchise while discouraging incremental growth.
6. Combine Several of These Strategies
This is probably the most common answer.
Exit the worst counties.
Eliminate the worst products.
Reduce benefits elsewhere.
Move PPO members toward HMOs.
Renegotiate networks.
Stop commissions on products where additional enrollment isn’t desirable.
Protect the best-performing counties and PBPs.
And continue investing in markets where the long-term economics remain attractive.
This is the precision assessment and portfolio management MA plans are now practicing, after bungling their finances over the past several years.
And last, grow where you have an advantage
This is important because the story isn’t simply that MA is collapsing. It isn’t. Plans can simultaneously exit one market and invest heavily in another. Plans increasingly want membership where they have strong provider relationships, favorable Stars economics, mature value-based-care arrangements, Medicaid overlap for duals, strong brand recognition or other structural advantages.
That is why I view what is happening as rationalization rather than abandonment of Medicare Advantage. The displacement of members is unfortunate, but until more reasonable rates are announced and CMS cleans up Stars and risk adjustment approaches, this is the new reality.
2027 may be another tough year, but that doesn’t mean MA is failing
There is a tendency among critics of Medicare Advantage to point to these exits as evidence that the program itself doesn’t work. I draw a very different conclusion. The MA industry overexpanded. Medical trends changed dramatically. Government reimbursement and risk adjustment changed. Star Ratings deteriorated. Some carriers mispriced their products.
Now the industry is adjusting. That adjustment is painful, particularly for beneficiaries forced to choose another plan. Policymakers should not minimize that disruption.
But despite the contraction and some gloomy news from JD Power on member satisfaction in light of the benefit reductions, MA remains extraordinarily popular. CMS says more than 99% of Medicare beneficiaries had access to an MA plan in 2026 and 97% had access to at least 10 MA choices. Even among the 2.6 million beneficiaries whose plans terminated going into 2026, 98.9% had another MA-PD option available.
So, we are not debating whether MA is disappearing, but what MA will look like after this multi-year financial reset is finally completed. I suspect the answer is a somewhat leaner and more disciplined industry: fewer marginal counties, fewer uneconomic PPOs, greater emphasis on Stars, stronger provider alignment, more value-based care, greater concentration on dual eligibles, and less willingness to buy membership with benefits that cannot be supported by long-term economics. The product will still outcompete traditional Medicare dramatically.
For beneficiaries, however, getting there could mean another uncomfortable year.
#medicareadvantage #enrollment #margins
— Marc S. Ryan
