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This is a difficult time for the Medicare Advantage insurers.
MA plans are facing rising medical costs due to increased utilization across a population that is continuing to age and experience chronic conditions. In its Advance Notice released in January, the Centers for Medicare and Medicaid Services proposed changing the risk adjustment formula and released a flat payment rate of less than 1%.
This happened just as the major insurers were reporting Q4 and full-year 2025 earnings. As one executive said during a call, the Advance Notice MA payment rate came in below the medical cost trend.
Medical costs are running above historical norms, said Steve Mongelli, president at mPulse, a digital solutions company for the healthcare industry.
"The Advance Notice definitely shook the markets quite a bit," he said. "It's a tough time for the Medicare Advantage plans. Especially getting the news of a relatively flat year-over-year increase."
CMS has been pushing for margin compression and is thinking about over-billing in Medicare Advantage, Mongelli said. Plans need to adapt by moving in the direction of clinical outcomes, rather than concentrating on documentation.
"I think they really need to focus on the member experience," Mongelli said.
And though challenges are forcing a compression in the MA market, competition will remain fierce.
"At the end of the day," he said, "there's still going to be a lot of choice."
For more on what MA plans can do, please listen to Mongelli's conversation with Susan Morse, executive editor of Healthcare Finance News.
Talking Points:
Payers are leaving the MA market, plans are merging and others are being acquired. Consolidation will continue in 2026.
CMS is looking at quality of care, which has been reflected in its MA star ratings recalibrations.
Revenue growth will come from clinical outcomes versus document mechanics.
There's pressure on plans to perform much more efficiently operationally.
Member retention is important because there's still a lot of competition.
Member retention will come down to service and member experience.
There is a reduction in options by plan design, which means the richness of plan benefits is being reduced.
Regional plans competing against national plans can have an advantage in being more nimble and able to take advantage of table stakes such as service.
Payers are apt to work with a smaller group of trusted partners for cost management and a stronger provider relationship.
The market may no longer see smaller entrants in the MA market, the pop-up plans.
Plans that prioritize data and digital engagement will stand out and differentiate themselves for recruitment and retainment.
More About this Episode:
Humana's earnings fall on Medicare Advantage challenges
Elevance Health latest health insurer to lower 2026 revenue expectations
UnitedHealth Group's earnings reflect industry-wide pressure
Medicare Advantage insurers get a 0.09% payment increase in Advance Notice
Star ratings stabilizing, but health plans should be ready for changes
Email the writer: SMorse@himss.org