Medicare Advantage Market Faces Enrollment Declines and Regulatory Shifts Amid Profit Pressures

The Medicare Advantage (MA) market faces significant disruptions as the 2026 open enrollment period nears its close on December 7. MA plans, which cover over half of Medicare beneficiaries, are experiencing operational and financial challenges that could impact millions of seniors. Health insurers like UnitedHealthcare, Humana, Elevance, Centene, and Molina aggressively recruited members with appealing benefits such as low or $0 premiums and supplemental coverage not offered by traditional Medicare. However, these plans include restrictive network access and burdensome preauthorization requirements for procedures and medications, which are often underdisclosed to enrollees. During the COVID-19 pandemic, utilization of healthcare services declined as seniors deferred medical care. Insurance firms continued collecting premiums with high profit margins. As deferred care resumed, utilization increased, causing profit margins for MA sponsors to contract and stocks of major insurers to decline sharply year-to-date through December 2025. In response to profit pressures, insurers have increased cost-sharing measures such as higher deductibles, coinsurance on preferred brand drugs instead of fixed copays, and reduced supplemental benefits. These strategies prioritize limiting expensive claims over expanding access to care, reflecting a business model focused on maintaining premium revenues while managing utilization through prior authorization and selective enrollment. Enrollment in MA plans is expected to decline for the first time since the Affordable Care Act, dropping to around 48% of Medicare beneficiaries. Humana’s approach of dropping less profitable plans and reducing benefits exemplifies this trend, and other insurers are following suit, terminating approximately 3 million MA plan memberships requiring replacement coverage for those members. Insurers also reduced broker commissions to deter enrollment of higher-cost seniors, raising regulatory concerns. State insurance departments in several states have issued warnings to MA insurers about these incentive cuts, but enforcement power remains limited. The federal regulator, the Centers for Medicare and Medicaid Services (CMS), has not intervened decisively, leaving states to express frustration over lack of federal engagement. CMS under the current federal administration has proposed changes to the MA star rating system that will tend to increase profitability for MA plans. These include reinstating a 'reward factor' and removing quality measures related to customer service responsiveness. While plans with high star ratings earn bonuses, the proposed adjustments could net insurers an additional $13.2 billion between 2028 and 2036. Previously planned CMS initiatives to promote health equity in star ratings—rewarding plans for reducing disparities and supporting vulnerable populations—have been reversed. This policy shift indicates a deprioritization of equity-focused reforms in favor of supporting financial incentives for insurers. These market and regulatory dynamics underscore emerging risks for seniors navigating MA plan choices amid shrinking benefits, reduced broker support, and evolving federal policies favoring insurer profitability over expanded access or equity improvements.