Major Changes Coming to Medicare Advantage
UnitedHealthcare, the nation’s largest Medicare Advantage provider, announced during its second quarter earnings call that it plans to drop Medicare Advantage plans currently serving over 600,000 users. This decision represents one of the most significant scaling back efforts in the Medicare Advantage market to date.
The announcement signals a broader shift in the Medicare Advantage landscape, as multiple major insurers reassess their participation in these government-subsidized private insurance plans. This development will significantly impact hundreds of thousands of seniors who rely on these plans for their healthcare coverage.
Rising Healthcare Costs Drive Plan Cuts
Unexpected Medical Cost Increases
Tim Noel, UnitedHealthcare CEO, explained the company’s rationale during the earnings call: “We are seeing higher-than-expected medical cost increases, particularly in outpatient care. The American health system’s long-standing cost problem is accelerating.”
The surge in healthcare utilization has caught many insurers off guard. After years of profitable operations, Medicare Advantage plans are now grappling with members using more healthcare services than actuarial models predicted. This increased usage, combined with rising healthcare costs across the board, has squeezed profit margins significantly.
Impact on Insurance Profitability
David Lipschutz, associate director of the nonprofit Center for Medicare Advocacy, noted: “Medicare Advantage has been extremely profitable for most insurers for a very long time. But in recent years, insurers have complained about people using more healthcare services than they anticipated and the rising cost of healthcare across the board.”
The irony of the situation isn’t lost on healthcare advocates. As Lipschutz pointed out, “It’s bad for a plan’s business when people use healthcare from a plan that offers healthcare coverage.” However, he emphasized that insurers appear to be “trimming around the edges and not pulling out of areas altogether.”
Industry-Wide Medicare Advantage Retrenchment
Market Concentration and Major Players
Medicare Advantage enrollment is heavily concentrated among a small number of parent organizations. UnitedHealth Group holds the largest market share, and together with Humana, these two companies account for nearly half of all Medicare Advantage enrollees nationwide, according to the Kaiser Family Foundation (KFF).
Widespread Industry Pullbacks
Philip Moeller, a Medicare and Social Security expert, observed: “Nearly every Medicare Advantage insurer has either exited the business, such as Cigna, or is retrenching. UnitedHealthcare is the largest, and its reappraisal could have the biggest impact.”
Humana’s parallel retrenchment exemplifies this industry-wide trend. The company expects a decline of approximately 550,000 Medicare Advantage members this year, primarily due to exiting certain unprofitable plans and counties. However, roughly 40% of these affected seniors are likely to join other Humana MA plans, demonstrating that major insurers aren’t abandoning Medicare Advantage entirely—they’re simply becoming more selective.
What Medicare Beneficiaries Should Expect
Current Medicare Advantage Landscape
As of 2024, 34.1 million people are enrolled in Medicare Advantage plans, representing more than half of the eligible Medicare population according to KFF. Despite the industry pullbacks, enrollment growth has merely slowed rather than reversed. The average Medicare beneficiary still has access to approximately 42 Medicare Advantage plans in 2025.
Benefit Reductions and Cost Increases
Enrollees should anticipate several changes:
- Higher out-of-pocket prescription co-pay costs in some plans
- Reductions or elimination of certain supplemental benefits
- Increased deductibles for various services
- Modified coverage for dental and vision services
Traditional Medicare vs Medicare Advantage
Medicare Advantage plans have historically attracted enrollees through comprehensive benefit packages that traditional Medicare lacks. These plans typically include:
- Prescription drug coverage (Part D)
- Vision and dental benefits
- Fitness program access
- Low or no monthly premiums
In contrast, original Medicare’s monthly Part B premiums are $185 in 2024, with an annual Part B deductible of $257 that most beneficiaries must pay before coverage begins.
Government Subsidies and Plan Viability
Medicare Advantage plans can offer these additional benefits without charging extra premiums because in 2025, they receive an additional $2,255 per enrollee above their estimated costs of providing Medicare-covered services. This rebate portion has more than doubled since 2018, according to KFF data.
However, Medicare Advantage plans also employ cost management tools such as prior authorization requirements, which can create barriers to care. Additionally, these plans often maintain limited provider networks, restricting physician and hospital choices while frequently changing network compositions.
Medicare Open Enrollment Options
What to Do If Your Plan Is Dropped
For beneficiaries whose plans are terminated, several options exist during Medicare Open Enrollment (October 15 to December 7):
- Crosswalk to another plan offered by the same insurer
- Switch to a different Medicare Advantage plan
- Return to traditional Medicare with supplemental coverage
Expert Guidance on Plan Changes
Jeannie Fuglesten Biniek, associate director of the program on Medicare policy at KFF, explained: “When a plan is terminated by the insurer, if they offer another plan of the same type in the county, they can crosswalk somebody to that other plan.”
Expert Recommendations for Affected Users
Preparing for 2026 Changes
Healthcare experts predict that Medicare Advantage plans may implement the following changes for 2026:
- Reduced dental and vision coverage
- Increased specialist co-pays
- Elimination of fitness benefits like gym memberships
- Stricter prior authorization requirements
Making Informed Decisions
Beneficiaries should carefully evaluate their options during the upcoming open enrollment period. Consider factors such as:
- Current healthcare needs and anticipated future requirements
- Prescription drug coverage adequacy
- Provider network access and stability
- Premium and out-of-pocket cost comparisons
- Supplemental benefit importance and availability
The Medicare Advantage market is experiencing unprecedented changes, but beneficiaries still have viable options. The key is staying informed and making proactive decisions during open enrollment periods to ensure continued access to necessary healthcare services.
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