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Medicare Advantage Faces $5.7 Billion Underwriting Loss Amid Rising Costs in 2024

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Medicare Advantage Faces Mounting Pressures After $5.7 Billion Underwriting Loss in 2024

The Medicare Advantage market, long seen as a reliable growth engine for health insurers, hit a major setback in 2024. For the first time in half a decade, the business line swung into the red, recording an estimated $5.7 billion underwriting loss.

This reversal has caught the attention of industry leaders, not only because of its magnitude but also because it highlights deeper structural challenges insurers must confront.

From Profit Center to Pain Point

Between 2019 and 2022, Medicare Advantage served as a cornerstone of underwriting gains across the sector. By 2023, its contribution had already dropped to just 20 percent of overall profits. The 2024 results confirm what many analysts feared: rising utilization and medical inflation have finally outpaced initial assumptions.

Nearly three-quarters of insurers heavily exposed to Medicare Advantage reported underwriting losses last year, a sign that the issue is not isolated but systemic.

“This is not a blip. The trend reflects both structural shifts in risk adjustment and higher medical cost burdens that will not subside quickly.”
– Senior Analyst, AM Best

What’s Driving the Downturn?

The decline in Medicare Advantage profitability comes from several converging forces:

  • CMS Risk Adjustment Changes: Revisions to the risk adjustment model have squeezed payment levels, affecting revenue predictability.

  • Falling Star Ratings: Contracts with four-star or higher ratings fell by more than 25 percent since 2022, cutting into quality bonuses and marketing leverage.

  • Medical Cost Inflation: Utilization rates have climbed, particularly for costly therapies like gene treatments, and inflation in medical services has consistently outpaced the consumer price index.

These combined factors have disrupted the once-stable underwriting dynamics of Medicare Advantage, creating uncertainty for carriers.

The Road Ahead: More Pressure in 2025 and Beyond

AM Best projects that profitability will remain under strain at least through 2025, with many insurers already rethinking their strategies for the 2026 plan year. The focus is shifting from rapid enrollment growth toward long-term sustainability.

“Balancing growth with margin discipline is now the defining challenge for Medicare Advantage carriers.”
– AM Best Report, 2024

For many insurers, that will mean sharper attention to network management, predictive risk modeling, and medical cost controls. Others may consider narrowing their geographic or product footprint to safeguard overall performance.

Strategies Insurers Are Exploring

While there is no single solution, industry executives are already signaling a range of adaptations designed to manage volatility in the Medicare Advantage space:

  • Improved data-driven risk modeling for more accurate projections.

  • Targeted care management programs to address high-utilization populations.

  • Strategic geographic pullbacks where profitability proves unsustainable.

  • More active contracting strategies with providers to manage unit costs.

Conclusion: A Market at a Crossroads

The $5.7 billion loss marks more than just a tough year. It is a turning point for Medicare Advantage and a wake-up call for insurers that the easy years of outsized profitability may be behind them. Sustaining growth in this sector will require sharper execution, tighter cost controls, and a willingness to adapt as CMS policies and consumer behaviors evolve.

Medicare Advantage is still a cornerstone of senior health coverage in the U.S., but its role as a profit center is no longer assured. For insurers, the challenge is clear: survive the turbulence of today to thrive in the long-term market reshaping tomorrow.