The 2026 Medicare Advantage Enrollment Surprise: Why Plans Are Underestimating Growth

The Medicare Advantage (MA) enrollment landscape in 2026 is poised for a paradox: while health plan leaders are cautiously tempering expectations for their own growth, industry-wide trends suggest a significant underestimation of enrollment potential. This disconnect between organizational caution and macro-level momentum raises critical questions for investors. By analyzing healthcare sector valuation dynamics and the insurance industry's strategic recalibration, it becomes clear that MA plans are underestimating their 2026 growth due to a combination of short-term financial pressures and misaligned market assumptions.

Healthcare Sector Valuation Trends: A Tale of Two Subsectors

The healthcare sector's valuation trends from 2023 to 2025 reveal a bifurcated landscape. Public healthcare companies, particularly those in non-essential services like plastic surgery and medical devices, saw inflated EBITDA multiples but faced volatility due to macroeconomic headwinds Healthcare EBITDA & Valuation Multiples: 2025 Report - First Page Sage^[2]. In contrast, essential sectors such as hospitals and addiction treatment maintained stable valuations, trading at EV/EBITDA multiples between 7x–9x A Closer Look: CMS’ 2026 Medicare Advantage Rate Announcement^[4]. This divergence highlights a broader industry shift toward operational efficiency and value-based care, which MA plans are now mirroring.

For MA insurers, the 5.06% payment increase for 2026—finalized by CMS—provides a critical financial buffer Medicare Advantage health plan outlook for 2026^[1]. However, rather than translating this into aggressive enrollment targets, many plans are prioritizing margin preservation. According to a Chartis report, 44% of MA leaders expressed optimism about their 2026 enrollment growth, while 25% anticipated declines Medicare Advantage health plan outlook for 2026^[1]. This hesitancy stems from the sector's recent struggles with rising medical costs and regulatory uncertainty, which have compressed profit margins. Yet, industry-wide data tells a different story: 91% of leaders expect 2026 performance to match or exceed 2025, signaling a disconnect between organizational caution and macro-level confidence Medicare Advantage health plan outlook for 2026^[1].

Insurance Industry Positioning: Profitability Over Expansion

The insurance industry's strategic pivot toward profitability has further muted enrollment expectations. Major insurers like Humana and CVS Health have adopted a “profit-first” approach, trimming unprofitable markets and reducing benefit generosity in 2024–2025 to stabilize margins A Closer Look: CMS’ 2026 Medicare Advantage Rate Announcement^[4]. This contrasts with growth-focused competitors like UnitedHealthcare, which now face higher medical loss ratios (MLRs) and declining profit forecasts A Closer Look: CMS’ 2026 Medicare Advantage Rate Announcement^[4]. The result is a sector-wide recalibration where sustainability trumps market share.

This shift is evident in MA leaders' prioritization of cost control and provider collaboration. Sixty-nine percent of leaders expect increased partnerships with providers in 2026, even as network participation declines Medicare Advantage health plan outlook for 2026^[1]. Such strategies aim to mitigate access-to-care concerns and reduce overpayments, which currently exceed traditional Medicare by 22% A Closer Look: CMS’ 2026 Medicare Advantage Rate Announcement^[4]. However, this focus on operational efficiency may obscure the long-term demand drivers for MA, including an aging population and the rise of Special Needs Plans (SNPs).

Underestimating the Demand Drivers

Despite the industry's cautious stance, three factors suggest MA enrollment will outpace current estimates:
1. Demographic Tailwinds: The U.S. population aged 65+ is projected to grow by 10% between 2025 and 2030, directly expanding the MA beneficiary pool Growth in Medicare Advantage Raises Concerns^[3].
2. SNP Growth: Chronic illness-specific SNPs (C-SNPs) saw a 70% enrollment surge between 2024 and 2025, driven by beneficiaries' demand for specialized care Growth in Medicare Advantage Raises Concerns^[3]. This trend is likely to accelerate as healthcare costs rise.
3. Regulatory Stability: The current administration's efforts to stabilize MA regulations—such as sunsetting VBID in D-SNPs—reduce uncertainty for insurers and beneficiaries alike Medicare Advantage health plan outlook for 2026^[1].

Investment Implications

For investors, the 2026 MA enrollment surprise presents both risks and opportunities. Plans that overcorrect for short-term margin pressures may miss out on long-term growth in SNPs and value-based care models. Conversely, insurers that balance profitability with strategic expansion—such as UnitedHealth Group and Elevance Health, which gained enrollment in 2025—position themselves to capitalize on the sector's resilience Medicare Advantage in 2025: Enrollment Update and Key Trends^[5].

The Congressional Budget Office's projection of 64% MA enrollment by 2034 Growth in Medicare Advantage Raises Concerns^[3] underscores the inevitability of this growth. Yet, as of 2026, the industry remains underconfident. This gap between reality and perception offers a compelling case for investors to overweight MA-focused insurers, particularly those with strong SNP offerings and provider integration.

Conclusion

The 2026 Medicare Advantage enrollment surprise is not a mystery but a misalignment between short-term caution and long-term demand. While insurers prioritize profitability and cost control, the healthcare sector's valuation trends and demographic shifts guarantee continued enrollment growth. For investors, the key lies in identifying plans that can navigate this transition without sacrificing market share—a challenge that will define the next phase of MA's evolution.