Medicare Advantage Market Faces Regulatory and Profitability Challenges in 2026

The 2025 Medicare Advantage (MA) market faces significant challenges as plan providers adjust strategy amid pressures from post-pandemic healthcare utilization and financial market expectations. MA plans, covering 54% of Medicare beneficiaries in 2025, have traditionally attracted seniors with low premiums and benefits not covered by traditional Medicare, such as dental and vision care. However, these plans often require prior authorization for services and limit provider networks, aspects that are not always transparent during enrollment. The COVID-19 pandemic temporarily suppressed healthcare utilization among seniors, boosting MA plan profits as premiums were collected without corresponding healthcare usage. As patients resumed deferred care, MA plan profit margins shrank, leading insurers like UnitedHealthcare, Humana, and others to respond by increasing cost-sharing measures and narrowing benefits to maintain profitability. This included raising deductibles for prescription drugs, implementing coinsurance for brand medications, and reducing supplemental benefits. Insurers are shifting focus towards enrolling healthier seniors to limit costly care needs. Some plans have been discontinued, forcing around three million enrollees in affected plans to seek new coverage in 2026. Reductions in broker commissions are also being used to discourage enrolling higher-cost individuals, raising regulatory concerns in several states about potential violations of insurance laws. State insurance departments have issued warnings but lack the authority to enforce changes, while the Centers for Medicare and Medicaid Services (CMS), the federal regulator for MA plans, has not intervened significantly. New CMS proposals under the Trump administration aim to increase MA plan star ratings and associated bonuses by removing certain quality measures focused on administrative performance, such as call center responsiveness, potentially increasing insurer revenues by over $13 billion from 2028 to 2036. CMS's rollback of the health equity index and reinstatement of the reward factor in star ratings diminish efforts to address disparities in healthcare access and outcomes for vulnerable populations, including minorities and disabled individuals. These regulatory shifts reflect broader federal government policy trends impacting the MA market. The dynamics in the MA market highlight tensions between insurer profitability and beneficiary access to comprehensive, affordable healthcare coverage. Market-driven incentives are leading to benefit reductions and selective enrollment practices that may impact the sustainability and equity of MA plans moving forward. Industry stakeholders and policymakers continue to monitor the restructuring of Medicare Advantage offerings amidst evolving regulatory guidelines, demographic trends, and economic pressures. The current environment underscores the critical role of regulatory frameworks and oversight in balancing insurer financial models with beneficiary health needs and protections.