Medicare Advantage Insurers Axe Plans, Leaving Advisors to Navigate Changes

Insurers such as Humana, CVS Health Aetna, and UnitedHealthcare are scaling back their Medicare Advantage operations due to rising costs and lower government payments. This could significantly impact older Americans who rely on Medicare Advantage, with major implications for retirement planning. Insurers are cutting benefits and leaving unprofitable markets as they shift from expansion to profitability.

In a significant shift in the healthcare landscape, major insurers such as Humana, CVS Health Aetna, and UnitedHealthcare have announced plans to scale back their Medicare Advantage operations in 2025 and 2026. This move is driven by rising costs and lower government payments, which are pressuring insurers' margins and prompting them to rethink their approach to Medicare Advantage.

Medicare Advantage enrollment has surged over the past two decades, attracting beneficiaries with its $0 monthly premiums and expanded benefits compared to traditional Medicare. However, the allure of these benefits has been overshadowed by the increasing financial pressures on insurers. According to a report by KFF, these three insurers together provide coverage to 58% of all Medicare Advantage beneficiaries, nearly 20 million people in total [1].

The shift from expansion to profitability has led insurers to cut benefits and leave unprofitable markets. For example, CVS CFO Tom Cowhey stated that the insurer could drop 1 in 10 — or roughly 600,000 — of its Medicare Advantage members by the end of 2025 to improve margins [2]. Humana has followed suit, announcing plans to drop approximately 550,000 Medicare Advantage members by the end of 2025, while UnitedHealthcare has announced plans to drop more than 600,000 members by the end of 2026 [1].

The changes could have significant implications for older Americans who rely on Medicare Advantage. Experts warn that beneficiaries are likely to see fewer benefits, higher costs in the form of premiums and copays, and greater prior authorization requirements. For instance, Medicare Advantage insurers made nearly 50 million prior authorization determinations in 2023, compared to fewer than 400,000 for traditional Medicare beneficiaries [1].

Financial advisors are urged to educate themselves on Medicare and incorporate it into their retirement planning. Carolyn McClanahan, a physician and founder of Life Planning Partners in Jacksonville, Florida, advises clients to think twice before signing up for Medicare Advantage. She notes that while it may seem attractive when one is healthy, the picture changes dramatically when health issues arise [1].

The shift in Medicare Advantage operations highlights the need for retirees to carefully consider their healthcare options and for financial advisors to stay informed about Medicare's role in retirement planning. As the healthcare landscape continues to evolve, it is crucial for both beneficiaries and advisors to stay updated on the changes and their potential impacts.

References:
[1] https://www.financial-planning.com/news/medicare-advantage-cuts-what-advisors-should-know
[2] https://finance.yahoo.com/news/insurers-axe-medicare-plans-heres-220328892.html