Huge utilization and medical expense still a factor in insurer recovery
Given the fiscal crisis happening in the health plan industry, I thought a quick blog summarizing Q3 2025 financial reports made sense. As well, a few more updates on Medicare Advantage (MA) contraction.
One of my biggest observations is that medical loss ratios (MLRs), the way health plans measure the percentage of medical costs against premiums, remains at record levels. This appears to be across all lines of business – government programs and commercial/employer coverage.
When MLRs are at 90 or well into the 90s (with the exception of commercial-only Cigna), you know things are upside down financially. And while plans continue to recover financially, there is little sign that high utilization, inflation, and costs will temper anytime soon. Further, developments in Medicaid and Exchanges as well as to some degree in MA could further complicate the medical cost picture.
Plans are seeking to mitigate these impacts by closing down less profitable products, benefit packages, and geographies across lines of business. Rising costs, though, remain a significant risk point to the recovery of health plans. But could rising utilization actually help plans in rate-setting. Theoretically, these costs are rolled out into MA rates over time. While a lag will likely mean plans do not see the 9% trend they say they are having, could the 2027 final rate still be stellar?
Plan Q3 financials summary
Below are the results for seven big publicly traded health plans, most of them with significant vertically integrated services, provider, and pharmacy benefit manager assets.
UnitedHealth Group: Investors cheered news from UnitedHealth Group that its efforts to get back to margins are working. United raised its full-year guidance when announcing its Q3 results. United reported that net earnings fell 59.4% to $2.54 billion and earnings from operations dropped 50.4% to $4.31 billion. Revenue grew 12.2% to $113.16 billion. But these figures beat Wall Street expectations.
United’s strategy has been to massively retrench in both MA and standalone Part D (PDP). United expects all its government lines of business to contract – MA, PDP, Medicaid, and the Exchanges. UnitedHealth Group is projecting its MA enrollment will decrease by 1 million now in 2026. That is up from a 600,000-member decrease it projected in July. It has expanded some markets in the Exchanges but exited less profitable ones.
Utilization and medical expense continues to be a challenge as its MLR was just short of 90% across all business lines. However, revenues from services entity Optum grew 8.3% to $69.2 billion. Earlier, the services entity was reporting struggles. United says it will have solid earnings growth in 2026.
Elevance Health: Elevance Health reported relatively good financial news for Q3 but warned investors about challenges in the Medicaid market. Ongoing eligibility determinations as well as changes to state programs are increasing the acuity of its Medicaid membership. The company said its Medicaid margins will drop 125 basis points year over year in 2026 due to the eligibility changes and high utilization. This is before widescale reductions take place under the One Big Beautiful Bill Act (OBBBA). Insurers have complained that state Medicaid rates have not recognized actual costs after post-pandemic policy shifts in enrollment.
The other major moving part for Elevance is the expiration of the enhanced Exchange subsidies, which could leave a sicker cohort and increased risk and costs in that line as well. But it is expanding in some of its Exchange states. Elevance also trimmed its MA footprint to stabilize that line.
Elevance posted an MLR of 91.3% — up compared to 89.5% same time last year. Its Carelon services entity did not meet investor expectations.
Elevance did post double-digit year-over-year growth for both revenue and profits. It had $1.2 billion in profit for the third quarter, up 17% from the $1 billion for the third quarter of 2024. Revenues for the quarter were $50.7 billion, an increase of 12.4% from the $45.1 billion reported in the prior-year quarter. Elevance had $5.1 billion in profit for the first nine months of 2025, down 8% compared to the $5.7 billion in earnings reported through the first three quarters of 2024. Revenues across the first three quarters of 2025 were $149.4 billion, an increase of 13.5% year over year.
Elevance Health’s new out-of-network care policy may reduce healthcare costs but also rankle providers. Elevance will penalize in-network facilities that use out-of-network providers.
CVS Health: CVS Health, hit by a literal financial meltdown, reported relatively good recovery news for Q3 2025. Its troubled Aetna insurance business and pharmacy benefit management Caremark are recovering. Because of this, CVS Health is forecasting double-digit earnings growth in 2026.
CVS Health had $103 billion in revenue for Q3. Revenue was up 7.8% year over year. The company recorded a Q3 net loss of $3.99 billion, compared with net income of $71 million in the same period for 2024. The decline was due to a $5.7 billion goodwill impairment charge from the healthcare delivery unit. Aetna had $36 billion in revenue in the third quarter, up 9% year over year. The medical cost ratio dropped from 95.2% to 92.8%.
Aetna is fully exiting the Exchanges in 2026.
Aetna is looking for ways to tighten networks to ensure all providers in the continuum of care, from primary care to specialty to hospitals, are aligned around value-based models. The insurer is building a team around provider experience and improving satisfaction.
The Cigna Group: The Cigna Group reported among the strongest news of any major health plan today. It posted a $1.9 billion profit in Q3, up from $739 million during the same period last year. Revenue reached $69.7 billion, a 9.5% increase year over year. Adjusted income from operations was $2.1 billion, less than 1% lower than third-quarter 2024. Its services entity Evernorth grew tremendously, including specialty pharmacy growth.
Insurer Cigna Healthcare generated $10.8 billion in adjusted revenue, down 18.3% year over year – largely due to the sale of its MA line. Excluding that, adjusted revenues for the insurance business were up 6% compared to Q3 2024. The medical loss ratio reached 84.8%, a 2.4% increase year over year. Cigna will expand in some of its existing Exchange states.
Cigna executives said the company is expecting pressure on its margins with its announcement that it will begin phasing out rebates at its pharmacy benefits manager (PBM).
Centene: Centene raised its yearly profit guidance despite ongoing struggles with health insurance Exchange spending and huge cuts to the federal health programs that are the foundation of its business. Centene posted a $6.6 billion loss in Q3 after incurring a one-time impairment charge related to ongoing market headwinds. The goodwill impairment charge was $6.7 billion and tied in part to the changes in the OBBBA. But Centene is making good progress on its turnaround. The company’s medical loss ratio was 92.7% in the third quarter, up from 89.2% at the same time last year but down sequentially.
Revenues were $49.7 billion in the quarter, which also beat Wall Street forecasts. By comparison, Centene reported $42 billion in revenue and $713 million in profit in the prior year quarter. Through the first nine months of 2026, the company posted $145.1 billion in revenue and $5.6 billion in losses. It brought in $122.3 billion in revenue and $3 billion in profit through the first three quarters of 2024.
Centene also emphasized its commitment to the Exchange line of business, saying even a smaller population after a subsidy expiration will still make coverage more affordable for many. Centene is contracting in some Exchange states but expanding counties in others.
Humana: MA-dominant Humana, the second biggest MA player behind United, slashed its earnings guidance at its Q3 financial announcement as enrollment ticks above initial expectations during open enrollment. It now projects to have about 425,000 fewer MA enrollees next year, not 500,000 fewer as previously anticipated. Investors worry that these additional members, driven by generous benefits, will increase medical expense more than projected. Humana says it is confident in projections despite higher enrollment numbers, but says it can throttle back enrollment with several levers if needed.
Operating expenses surged to $32.25 billion, up 11.75% year over year. Humana is spending more (hundreds of millions more) to better operations and increase Star ratings. Its Star Year 2026 rating actually dropped from a very low 25% of enrollment in 4 Star or greater plans to an even lower 20%.
Third-quarter net income declined 59.6% to $194 million. Revenue rose 11.1% to $32.6 billion. The medical loss ratio (MLR) rose to 91.1% from 89.1% a year ago. This was consistent with projections.
One analyst asked the burning question on Stars — why Humana didn’t crosswalk MA members out of one major contract suffering from low ratings to other contracts. Humana says that would be a short-term financial gain that could have negatives, including member attrition and hurt future Star performance. Humana says it will break up the master contract over time.
Molina Healthcare: Molina reported Q3 financials and cut its 2025 earnings guidance for the third time this year. It is citing high medical costs particularly in its Exchange line of business. Molina is not the first to report the Exchange medical trend concern. The impacts will only be worse in 2026 if Exchange credits expire, risk increases, and enrollment drops.
While Molina revenues beat analyst expectations, the plan missed on earnings. Molina is a Medicaid- and Exchange-dominant health plan with some MA dual eligible Special Needs Plan (D-SNP) lives. Molina posted a very high medical loss ratio (MLR) of 92.6% in the quarter, up from 89.2% at the same time last year. Exchange plans hit a 95.6% MLR, up from 73% same time last year. Medicaid margins were strong but pressured from continued utilization. MA saw high utilization as well.
Molina is pulling out of one-fifth of the counties where it sells health insurance exchange plans and also will not pay commissions in several states.
Medicare Advantage Contraction Counter Installment 4: Other MA changes and updates
Milliman issued an MA analysis recently. It is a good read and can be found here: https://www.milliman.com/en/insight/navigating-pressure-ma-pd-plans-2026 .
A few key findings:
- The MA plan count shift was driven largely by national carriers, which cut products a great deal as well as expanded SNPs. But Milliman notes that regional players played a significant role in the plan count contraction as well.
- In terms of non-SNP MA-PD plans, there are 231 fewer $0 premium plans in the market in 2026 vs. 2025. Milliman says this is the second consecutive year of decline in the count of these $0 premium plan offerings. But the contraction was much deeper in 2026 — 9.5% vs. 1% in 2025. Milliman also says that there are fewer plan offerings at all lower premium levels in 2026, indicating both eliminations and increased premiums.
- Six organizations fully ceased operations in 2026, impacting about 100,000 individuals. Another three organizations stayed in MA only with SNPs, impacting almost 210,000 members due to their eliminations.
- Preferred Provider Organizations (PPOs) saw a significant number of plan terminations and/or consolidations in 2026. This makes broad network access more difficult to find.
- Medical maximum out of pocket (MOOP) caps increased dramatically in 2026.
- Non-SNP MA-PD plans offering a medical MOOP at or below $4,200 will decrease by 8%. Plans offering a medical MOOP over $6,750 will increase by nearly 8%.
- The number of non-SNP MA-PD plans in 2026 with a $0 Part D deductible applicable to all tiers declined almost 24%. The count of plans with the defined standard Part D deductible increased nearly 14%.
#healthplans #margins #medicareadvantage #commercial #employercoverage #exchanges #medicaid #managedcare
— Marc S. Ryan
