Significant changes occurred in Medicare Advantage plans each of the last couple of years, and more changes are on the way in 2026.
In 2024, I documented several factors that would cause higher costs and fewer benefits in Advantage plans in 2025.
The Centers for Medicare and Medicaid Services was in the midst of a three-year period during which payments to Advantage plan sponsors were reduced.
In addition, major sponsors of Advantage plans reported that their costs were higher than expected because of higher use of medical services and increased claims by plan members. CVS Health, Aetna and UnitedHealth Group announced disappointing earnings and saw their stock prices decline.
CMS also made tweaks to the regulations that resulted in lower payments or no payments to Advantage plan sponsors for some medical services.
Those factors did cause significant changes in Advantage plans for 2025. There were 6.6% fewer Medicare Advantage plans with prescription drug coverage available in 2025 than in 2024. UnitedHealth Group offered 5.4% fewer plans while Humana reduced its offerings by 2.5%.
Plans that covered about 1.5 million beneficiaries in 2024 were eliminated for 2025. In 2024, an average of 43 Advantage plans were offered in each county, while in 2025 that number dropped to 34.
The average premium for an Advantage plan declined for 2025, and many Advantage plans continue not to charge a premium in addition to the regular Part B Medicare premium.
But the maximum out-of-pocket cost increased, and many plans increased other costs (such as the copayment or deductible for each doctor visit) and reduced some of the supplemental benefits they offer. There also was a decrease in the number of medical care providers in some Advantage plans’ networks.
Unfortunately, for Advantage plan members, more of the same is likely when the 2026 plans are announced later this year.
Insurers continue to say in their earnings reports that they’re incurring higher costs than expected because plan members are receiving more medical services and the services cost more than estimated. In addition, government subsidies to the plans aren’t increasing as much as anticipated.
The changes in Part D prescription drug coverage also hurt Advantage plan sponsors just as they hurt insurers offering Part D policies.
For several years, Advantage plan sponsors prioritized increasing enrollment in their plans. They did this by offering more benefits and lower costs.
Now, Advantage plan sponsors are emphasizing profitability over higher enrollment numbers.
CVS and Humana responded to the changing market earlier, cutting plans and benefits offered for 2025. They now are more profitable than some competitors and their stock prices are higher, The Wall Street Journal reported.
UnitedHealth group, on the other hand, continued to emphasize higher enrollment for 2025 and is in much worse shape. It changed its CEO earlier this year and announced it is overhauling its Advantage plan strategy for next year.
The company is likely to reduce benefits and stop offering some plans. It recently estimated that plans with about 600,000 members won’t be offered next year.
Medicare Advantage plans still will be good options for many beneficiaries. But the race among insurers to offer more benefits and lower costs is over. The major Advantage plan sponsors will continue to offer plans, but they will ensure the plans are profitable.
This means beneficiaries must study changes in plan terms when they are received for Open Enrollment season in October. They also should review the alternatives offered in their areas.
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