Margin stability in health insurance plans

Only 4 in 10 Medicare Advantage plans were profitable for CY2024. That's down from over 6 in 10 in CY2020 and prior. --- Milliman's latest analysis of 435 #MedicareAdvantage Organizations (MAOs) shows a quick decline in profitability the last two years. Composite underwriting margins turned negative for the second year in a row, down to -0.7%, from +1.1% in 2023. That’s a nearly $3 billion loss on $423 billion in revenue. The news is worse for provider-sponsored plans (PSHPs). Aggregate losses deepened to -4.5%, compared to -2.8% last year. Nearly one in five PSHPs reported losses exceeding 20%. --- Here are the primary drivers covered in the paper: -Medical loss ratio (MLR) hit a 10-year high driven by rising inpatient and outpatient utilization. -CMS benchmark rates have flattened. -#StarRatings dropped, reducing bonus revenue and creating drug benefit volatility. -The Inflation Reduction Act began impacting plans, especially on the #PartD side. Administrative costs remain a challenge, especially for smaller or less efficient plans. The trends were more forgiving for larger plans. 45% of MAOs with over $1B in revenue still posted gains. However, only 40% of all MAOs achieved positive margins, down from ~60% just a few years ago. Some carriers have already exited the market. Others are dialing back benefits or raising member cost-sharing. --- The conclusion is similar to what I've covered in previous posts. There's a shift towards focusing less on growth and more on profitability. Plans will need to rethink growth strategy, pricing, and care management. How is your organization handling this pressure?

6 of 7 major health insurers paid out more in medical claims from 2021-2025. They cut administrative staff to offset the costs. Providers absorbed that burden. Medical loss ratio (MLR) measures how much of every premium dollar goes to actual medical care. An MLR of 90% means 90 cents goes to care, 10 cents to everything else: salaries, buildings, technology, profit. From 2021-2025, 6 of 7 major insurers saw rising MLR trends. CVS/Aetna: +6.8 points. Biggest jump (86.0% → 92.8%). 1,000+ employees laid off since October 2023. 30% of prior authorizations automated by 2024. $20B investment in AI and digital systems. Margin compression = aggressive cost cuts. UnitedHealth: +6.5 points. 82.6% → 89.1%. Billions quarterly on AI and automation. Late 2025 deployment of AI-powered prior authorization tools. Largest insurer, largest absolute margin squeeze. Elevance Health: +5.8 points. 87.7% → 93.5%. Highest MLR in the industry. Keeps only 6.5% of premiums. Blue Cross/Blue Shield plans. Provider appeals volume up 140%. Humana: +4.0 points. 87.1% → 91.1%. Medicare Advantage-focused. Margin compression from older, higher-cost patients. Centene: +4.9 points. 87.8% → 92.7%. Medicaid-heavy. Revenue grew 41.5% to $167B but MLR climbed faster. Molina: +4.5 points. 86.8% → 91.3%. Medicaid specialist. Revenue grew 65.8% to $44.6B. Strong growth but rising MLR. Cigna: -1.9 points. Only decrease. 86.7% → 84.8%. Keeps 15.2% of premiums: more than double Elevance. $200M+ quarterly on digital health. Early automation = margin protection while others scrambled. Provider impact: Industry administrative costs hit $67.4B annually in 2025, up 6.2%. Prior authorization volume per physician grew from 39 requests weekly (2021) to 43 requests (2024). Processing averaged 3-14 days in 2021. From 2021-2025, all major carriers deployed widespread automation. CVS cut 1,000+ administrative jobs while automating 30% of prior authorizations. Same pattern across all seven: MLR pressure → staff cuts + automation → provider burden increased. 28.7% of Medicare Advantage denials get reversed on appeal. External appeals: 64-83%. When most denials get reversed, it means the initial denial shouldn't have happened. Automated systems flag more cases, but fewer staff are available to review them. Prior authorization burden falls heaviest on radiology and imaging. High authorization exposure, declining reimbursement, 3-4 week approval delays. Each authorization costs providers $11-20 in administrative expenses. Some imaging centers dedicate full-time staff just to managing prior auth queues.

Elevance Health Earnings Call Translation: What They Say vs. What They Mean ▪️ What they say: “2026 is a year of execution and repositioning.” ➡️ What they mean: Growth is no longer the priority. The priority is fixing margins by changing who we cover, where we operate, and what we are willing to pay for. ▪️ What they say: “We are acting decisively in the areas within our control to strengthen margins, reduce volatility, and improve the consistency of our performance.” ➡️ What they mean: The controllable levers are utilization management, claims payment rules, network design, and pricing. Those levers are being pulled harder. ▪️ What they say: “We view 2026 as a trough year. We expect our Medicaid operating margin to be approximately negative 1.75%.” ➡️What they mean: Medicaid rates do not reflect actual utilization. Losses are being tolerated temporarily, not structurally. ▪️ What they say: “We expect Medicare Advantage membership to decline in the high teens percentage range in 2026, reflecting deliberate portfolio actions.” ➡️ What they mean: Markets, products, and members that don’t meet margin thresholds are being exited by design. ▪️ What they say: “The actions we’ve taken… position us to deliver meaningful Medicare margin improvement to at least 2% in 2026.” ➡️ What they mean: Fewer members, higher profitability per member. Volume is being traded for margin. ▪️ What they say: “We remain disciplined in our pricing and are willing to walk away from lower or negative margin public sector business.” ➡️ What they mean: If employers or public entities can’t absorb the premium increase, coverage is optional. ▪️ What they say: “We are strengthening our analytics to identify outlier utilization and billing patterns… including claims review enhancements and payment accuracy initiatives.” ➡️ What they mean: More scrutiny, more edits, more denials, and more aggressive post-payment recovery — especially in high-cost categories. ▪️ What they say: “The levers available when rates don’t keep pace with trend are benefits, networks, premiums, and exiting geographies.” ➡️ What they mean: Affordability pressure will be resolved by reducing coverage, narrowing access, raising prices, or leaving markets. https://lnkd.in/evJGw77K

Health Plan Operational Realities of the 2027 Proposed Rules CMS’s proposed HHS Notice of Benefit and Payment Parameters for 2027 makes something unmistakable: This is no longer a policy exercise — it’s an operational and financial one. On the surface, the rule reads as refinement. Inside a health plan, it translates directly into PMPM pressure, margin volatility, and audit exposure. At a high level, I see five operational stress points: 1. Risk adjustment defensibility and extrapolated RADV exposure 2. Improper payment measurement and audit readiness 3. Eligibility and APTC reconciliation latency 4. Broker oversight and compliance cost 5. Network adequacy and ECP monitoring burden The first 3 carry the most immediate financial consequences. 1️⃣ Risk Adjustment: The Burden of Proof Has Shifted In an extrapolated RADV environment, the question is no longer “Did we capture the HCC?” It’s: Can we defend how we captured it — at scale? Diagnoses must be tied to defensible, face-to-face clinical encounters with clear documentation and continuity. CMS hasn’t banned HRAs or chart review — but the evidentiary threshold is higher, and the financial consequences of weak provenance are no longer theoretical. Even modest RAF distortion — over/understated — cascades into meaningful PMPM swings. Revenue leakage on one side. Clawback exposure on the other. As V28 recalibrates condition weighting and raises the bar on clinical specificity, marginal coding strategies become less viable — and infrastructure quality becomes the differentiator. This is no longer a coding optimization problem. It is a data lineage and workflow governance problem. 2️⃣ Improper Payments: Admin PMPM Is Quietly Expanding Improper payment measurement introduces real cost: - Audit preparation - Evidence assembly - External consulting - Slower close cycles These pressures accumulate in admin PMPM and compress margin long before they show up in headlines. Plans relying on retrospective reconstruction rather than structured provenance will feel this most acutely. 3️⃣ Eligibility & Reconciliation: Volatility Is the Hidden Risk Eligibility changes, APTC adjustments, and reconciliation timing mismatches introduce operational instability. Not just cost — volatility. And volatility distracts leadership, destabilizes forecasting, and increases rework across finance, compliance, and IT. The quiet assumption embedded in the rulemaking is this: AI without transparency, data without provenance, and workflow without governance will not survive regulatory scrutiny — or operational reality. None of these issues are solved with better messaging. They are solved — or exposed — when business and IT leaders sit in the same room and pressure-test whether their infrastructure can withstand audit, reconciliation, and near-real-time execution. That’s where strategy either holds up — or doesn’t. https://lnkd.in/eym4BK-Q

Medicare Advantage margins aren’t being compressed by one change — they’re being reshaped by many. While recent CMS updates point to a modest rate increase for 2027, most plans understand the reality: Rate growth alone will not offset rising medical costs, utilization, and regulatory pressure. The result? Sustainable growth in Medicare Advantage will depend less on pricing — and more on operational excellence. Here’s where plans are focusing: 📊 Risk Adjustment Scrutiny Is Increasing Regulatory oversight continues to intensify, placing pressure on: Coding accuracy and documentation Retrospective review strategies Vendor oversight and compliance The focus is shifting from maximization → defensibility. 🎁 Supplemental Benefits Need to Prove Value Supplemental benefits have become a key differentiator — but also a cost center. Plans are reassessing: Which benefits actually drive member engagement Impact on retention and Star Ratings Alignment with clinical outcomes The question is no longer “What can we offer?” but “What delivers measurable ROI?” 🤝 Broker Strategy Is Evolving Distribution remains critical, but economics are changing. Plans are evaluating: Broker compensation alignment with retention Acquisition cost vs. lifetime value Channel performance variability Growth at any cost is becoming less viable. 🔁 Retention Is the New Growth Strategy As margins tighten, member tenure matters more than ever. High-performing plans are investing in: Early member experience Proactive engagement and navigation Rapid issue resolution Retention is no longer just a KPI — it’s a financial strategy. The takeaway: Even with incremental rate increases, the Medicare Advantage landscape is entering a phase where margin expansion will be earned operationally — not given through pricing. Plans that align risk adjustment, benefit design, distribution, and retention strategies will be best positioned to compete. The next phase of MA growth will favor those who execute — not just those who scale. How is your organization adapting its strategy in response to evolving CMS policy and rate dynamics? 🎯 #MedicareAdvantage #HealthcareStrategy #ManagedCare #StarRatings #HealthPlanOperations #PMTAdvisors