HIMSSCast: 2026 Could Be the Most Challenging Year yet for Medicare Advantage Payers

Why It Matters

The payment freeze threatens profitability for MA carriers, accelerating market consolidation and reshaping how insurers compete on quality and member experience.

Key Takeaways

• CMS flat payment increase under 1% for 2026
• Rising utilization drives medical cost growth above trends
• Plans must shift focus to clinical outcomes, not documentation
• Consolidation accelerates as payers exit MA market
• Digital engagement becomes key for member retention

Pulse Analysis

The Centers for Medicare & Medicaid Services’ recent Advance Notice has sent a clear signal to Medicare Advantage (MA) carriers: reimbursement growth will be virtually flat in 2026, with a rate under 1 percent. Coupled with a revised risk‑adjustment formula, this move places insurers in a tight spot as medical expenses continue to outpace historical norms. The pressure is not merely fiscal; it forces a reassessment of cost‑containment strategies and highlights the growing gap between projected payments and actual utilization trends across an aging, chronically ill population.

In response, industry leaders are shifting their strategic focus from traditional documentation and billing mechanics toward measurable clinical outcomes and member‑centric services. Enhancing star‑ratings, improving chronic‑disease management, and delivering seamless digital experiences are becoming the new levers for revenue growth. Insurers that invest in data analytics, telehealth platforms, and personalized engagement tools can better demonstrate value, retain members, and justify higher payments under quality‑based incentives. Operational efficiency, too, is under scrutiny, with many firms streamlining provider networks and renegotiating contracts to protect margins.

The financial squeeze is also catalyzing consolidation across the MA landscape. Larger national carriers are acquiring regional players, while smaller entrants are exiting or merging to achieve scale. This realignment reshapes competition, giving nimble regional plans an edge if they can leverage localized service models and trusted provider relationships. For beneficiaries, the trend may reduce plan variety but could also improve consistency of care as dominant players standardize digital and outcome‑focused offerings. Stakeholders must monitor these dynamics closely, as they will dictate the future profitability of MA insurers and the quality of care delivered to Medicare beneficiaries.

HIMSSCast: 2026 could be the most challenging year yet for Medicare Advantage payers

Susan Morse · (date not provided)

MA plans are facing rising medical costs due to increased utilization across a population that is continuing to age and experience chronic conditions. In its Advance Notice released in January, the Centers for Medicare and Medicaid Services proposed changing the risk‑adjustment formula and released a flat payment rate of less than 1%【link】.

This happened just as the major insurers were reporting Q4 and full‑year 2025 earnings. As one executive said during a call, the Advance Notice MA payment rate came in below the medical‑cost trend.

Medical costs are running above historical norms, said Steve Mongelli, president at mPulse, a digital solutions company for the healthcare industry.

“The Advance Notice definitely shook the markets quite a bit,” he said. “It’s a tough time for the Medicare Advantage plans. Especially getting the news of a relatively flat year‑over‑year increase.”

CMS has been pushing for margin compression and is thinking about over‑billing in Medicare Advantage, Mongelli said. Plans need to adapt by moving in the direction of clinical outcomes, rather than concentrating on documentation.

“I think they really need to focus on the member experience,” Mongelli said.

And though challenges are forcing a compression in the MA market, competition will remain fierce.

“At the end of the day,” he said, “there’s still going to be a lot of choice.”

For more on what MA plans can do, please listen to Mongelli’s conversation with Susan Morse, executive editor of Healthcare Finance News.

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Talking Points

• Payers are leaving the MA market; plans are merging and others are being acquired. Consolidation will continue in 2026.

• CMS is looking at quality of care, reflected in its MA star‑ratings recalibrations.

• Revenue growth will come from clinical outcomes versus document mechanics.

• There’s pressure on plans to perform much more efficiently operationally.

• Member retention is important because there’s still a lot of competition.

• Member retention will come down to service and member experience.

• There is a reduction in options by plan design, which means the richness of plan benefits is being reduced.

• Regional plans competing against national plans can have an advantage in being more nimble and able to take advantage of table stakes such as service.

• Payers are apt to work with a smaller group of trusted partners for cost management and a stronger provider relationship.

• The market may no longer see smaller entrants in the MA market, the pop‑up plans.

• Plans that prioritize data and digital engagement will stand out and differentiate themselves for recruitment and retainment.

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More About this Episode

• [Humana's earnings fall on Medicare Advantage challenges]

• [Elevance Health latest health insurer to lower 2026 revenue expectations]

• [UnitedHealth Group's earnings reflect industry‑wide pressure]

• [Medicare Advantage insurers get a 0.09% payment increase in Advance Notice]

• [Star ratings stabilizing, but health plans should be ready for changes]

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Email the writer: [email protected]