Elevance and Major Insurers Adjust Medicare Advantage Strategies Amid Cost Pressures

In response to rising costs and reimbursement pressures in Medicare Advantage (MA) programs, several insurers, including Elevance Health, are strategically exiting certain markets and plans for 2025. Approximately 150,000 individual and group MA members and around 400,000 standalone Part D enrollees will be affected by Elevance's plan withdrawals. These decisions aim to improve operational stability heading into 2026, a year anticipated to be volatile for federal healthcare programs due to ongoing cost challenges and policy changes.

Insurers are adapting by refining membership portfolios, with some scaling back benefits and exiting markets where costs have proven unmanageable. UnitedHealthcare, the largest MA insurer, announced exits impacting over 600,000 members, illustrating the broader industry trend toward risk and cost management. Elevance is simultaneously prioritizing plans like Health Maintenance Organizations (HMOs) and narrower network options, which offer members more control over costs while aligning with payer strategies to enhance financial performance.

While Elevance manages Part D plan exits, the company emphasizes that this move is a strategic prioritization rather than a reaction to uncontrollable market volatility. Elevance holds roughly 400,000 standalone Part D members, making it the sixth largest provider in this space, but the focus remains on growth opportunities within Dual Eligible Special Needs Plans (D-SNPs). Recent CMS regulations consolidating Medicaid and Medicare benefits management under single plans operated by Medicaid insurers position Elevance advantageously due to its extensive Medicaid footprint.

Elevance is facing additional operational challenges, including a $375 million expected revenue loss following an unsuccessful legal attempt to improve its 2025 Medicare star ratings, critical quality metrics that influence reimbursements. Despite these hurdles, Elevance has maintained its 2025 financial guidance but does not anticipate improvements in Medicaid margins in the latter half of the year, signaling ongoing cost pressures.

Broader insurer responses include increased scrutiny and regulatory oversight, such as plans to expand Medicare Advantage audits and enhance medical coding capabilities to address compliance and revenue cycle complexities. Congressional discussions around Pharmacy Benefit Manager (PBM) business practices also continue, with potential legislative reforms on the horizon aimed at improving transparency and reducing costs in Medicare Part D.

These market adjustments underscore the insurance industry's efforts to navigate federal healthcare program uncertainties, balancing financial sustainability with regulatory compliance and member service amid evolving policy landscapes.