EP1 The Great Medicare Advantage Shakeout - What Agents Need to Know

In Episode 1, we break down the major shifts reshaping Medicare Advantage in 2026, including slower overall enrollment growth, carrier pullbacks, benefit erosion, and the continued rise of Special Needs Plans. 

We explore why millions of beneficiaries were forced to shop for new coverage, how value changes are driving enrollment wins and losses, and what CMS’s near-flat 2027 rate proposal could mean for plan design, carrier stability, and agent strategy heading into the next selling season. 

The Insurance Producers Guild Podcast delivers intelligence for insurance agents looking to stay ahead of industry trends.

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Transcript

SPEAKER_00 0:16

Welcome to another deep dive. If you are joining us today, you're probably trying to make sense of the absolute whirlwind currently tearing through the healthcare space.

SPEAKER_01 0:25

Yeah, whirlwind is an understatement.

SPEAKER_00 0:26

Seriously, we're dedicating our entire focus today to what the industry is calling the great MA shakeout.

SPEAKER_01 0:32

Right, the Medicare Advantage Shakeout.

SPEAKER_00 0:34

Exactly. And look, if you track the MA market, you know it is experiencing just unprecedented sweeping disruptions right now. The ground is quite literally shifting underneath the biggest players in the space.

SPEAKER_01 0:47

Aaron Powell It really is.

SPEAKER_00 0:48

So to figure out where this is all heading, we've got a stack of three really crucial sources on the table today.

SPEAKER_01 0:54

Aaron Ross Powell Good ones, too.

SPEAKER_00 0:55

Yeah. First, we are looking at a breaking March 2026 Reuters report detailing some, frankly, staggering CMS sanctions. Then we have February 2026 healthcare enrollment data from Healthcare Dive.

SPEAKER_01 1:09

Which paints a very stark picture.

SPEAKER_00 1:11

Very stark. It shows exactly who is winning and who is just bleeding members right now. And finally, we are digging directly into the source code itself, the official contract year 2026 final rule published on cms.gov.

SPEAKER_01 1:23

A dense read, but a necessary one.

SPEAKER_00 1:25

Oh, totally. Our mission today is to cut through the noise, connect the dots across these three distinct sources, and give you, the listener, the ultimate shortcut to understanding this monumental market shift.

SPEAKER_01 1:39

That's the goal.

SPEAKER_00 1:40

Okay, let's unpack this. We have to start with the breaking news from Reuters because it is sending shockwaves through the sector right now.

SPEAKER_01 1:46

It really is the headline of the month.

SPEAKER_00 1:48

Right. So starting March 31st, 2026, CMS is officially suspending new enrollments in Elevance Health's Medicare Advantage prescription drug plans.

SPEAKER_01 1:57

That is a profound regulatory move. And right out of the gate, we really need to clarify one extremely crucial detail for you, the listener.

SPEAKER_00 2:07

Oh, yeah, the existing member.

SPEAKER_01 2:08

Exactly. If you or someone you know is currently enrolled in an elephants plan, take a breath. Existing enrollees are entirely unaffected by this action.

SPEAKER_00 2:17

Good point.

SPEAKER_01 2:18

The suspension strictly applies to new enrollments moving forward from that March 31st date. So your current coverage does not evaporate.

SPEAKER_00 2:25

Right. Nobody's getting kicked off their current plan.

SPEAKER_01 2:27

Correct. But from a market perspective, this is a seismic event. I mean, when a government regulator steps in and just halts your ability to acquire new customers.

SPEAKER_00 2:37

It's massive.

SPEAKER_01 2:38

It fundamentally alters your revenue trajectory.

SPEAKER_00 2:41

Yeah.

SPEAKER_01 2:41

To understand the why behind this enforcement, we really have to look at the broader regulatory environment. CMS is significantly increasing its scrutiny on risk adjustment practices across the entire industry.

SPEAKER_00 2:54

They are definitely tightening the reins. Wait, let's pause there for a second because risk adjustment is one of those terms that gets thrown around in boardrooms.

SPEAKER_01 3:01

Yeah.

SPEAKER_00 3:01

Um, but it can sound like a foreign language.

SPEAKER_01 3:04

Fair enough.

SPEAKER_00 3:04

To put it simply for the listener, think of risk adjustment as a complexity score for patients. CMS pays insurers more money to cover a patient with, say, three chronic illnesses, than they do for a perfectly healthy marathon runner.

SPEAKER_01 3:17

Aaron Ross Powell Which logically makes sense.

SPEAKER_00 3:19

It makes total sense. The issue is how insurers document those illnesses.

SPEAKER_01 3:23

Precisely. The whole system relies on accurate coding. If an insurer submits diagnosis codes indicating their patient pool is sicker than it actually is, well, they receive higher payments from the government than they're entitled to.

SPEAKER_00 3:37

Right.

SPEAKER_01 3:37

In this specific instance with elephants, CMS is pointing to a failure to correct unsupported diagnosis codes. And what stands out in the Reuters report is the timeline here.

SPEAKER_00 3:47

Oh, the timeline is wild.

SPEAKER_01 3:48

These aren't recent administrative ours. CMS is citing issues dating all the way back to November 2018. Trevor Burrus, Jr.

SPEAKER_00 3:55

Over seven years ago.

SPEAKER_01 3:56

Yes.

SPEAKER_00 3:56

That alone highlights how slow the wheels of regulatory audits can actually turn. I mean, a backlog of unsupported codes accumulating over seven years is a logistical nightmare to unwind.

SPEAKER_01 4:08

It's a massive undertaking.

SPEAKER_00 4:09

But here's where it gets really interesting. And honestly, this was the detail in the Reuters report that made me do a double tick.

SPEAKER_01 4:14

The thumb drive.

SPEAKER_00 4:15

Yes. As part of this data submission process, elevants apparently continued to use encrypted USB drives to submit their risk adjustment data.

SPEAKER_01 4:23

It's hard to believe.

SPEAKER_00 4:24

Think about that for a second. We are in 2026. Using a physical USB drive to submit highly sensitive regulated health data is like trying to file your corporate taxes by mailing in a floppy disk.

SPEAKER_01 4:38

It does sound completely anachronistic.

SPEAKER_00 4:40

And CMS had explicitly disallowed this method. They told the industry, do not do this anymore, and yet, according to the report, it was still happening.

SPEAKER_01 4:49

The optics of physically handing over a thumb drive in an era of secure cloud infrastructure and encrypted digital pipelines, it's certainly striking. It speaks to a potential lag in modernizing compliance infrastructure. Definitely. But we also have to look at this impartially and examine how the market and the company are actually responding. As you might expect, Elvin's health shares fell on this news.

SPEAKER_00 5:10

Yeah, Wall Street hates that kind of uncertainty.

SPEAKER_01 5:12

Exactly. Wall Street rarely reacts well to regulatory enrollment suspensions because it immediately caps growth potential in those specific markets.

SPEAKER_00 5:20

But Elven's isn't just taking it lying down, right?

SPEAKER_01 5:23

No, they are firmly pushing back. They released a statement saying they disagree with the CMS findings. They've also stated that they intend to pursue corrective action to resolve the issues.

SPEAKER_00 5:35

So we have a clear dispute here.

SPEAKER_01 5:37

We do. CMS is bringing the hammer down as part of its wider industry sweep on risk adjustment practices, and elevance is standing its ground while navigating the immediate financial and operational fallout of a new enrollment freeze.

SPEAKER_00 5:52

Right. And look, we aren't here to play judge and jury. We are just reading the tea leaves of the sources we have.

SPEAKER_01 5:58

Of course.

SPEAKER_00 5:59

And what those sources are telling us is that the regulatory environment is getting significantly harsher. But the eleven situation is really just a symptom of a much larger trend.

SPEAKER_01 6:08

Which brings us to the macro view.

SPEAKER_00 6:10

Exactly, which shifts us to our second source: the February 2026 enrollment data from Healthcare Dive. We just talked about elevants losing the ability to add new members, but let's look at the actual numbers across the whole board.

SPEAKER_01 6:21

The numbers are telling a very clear story.

SPEAKER_00 6:23

They really are. In February 2026, total Medicare Advantage enrollment reached roughly 35.5 million people. That is a substantial portion of the eligible population.

SPEAKER_01 6:36

It's a massive market.

SPEAKER_00 6:37

But the real story is the growth rate. The year-over-year growth rate has plummeted to just three percent.

SPEAKER_01 6:43

Down from what?

SPEAKER_00 6:44

Well, to put that in perspective for you, historical annual growth rates in this market have typically hovered around 10%. Wow. Right? Hitting 3% is like cruising down the highway at 70 miles an hour and suddenly slamming the brakes to 20. The broader market expansion has practically stalled.

SPEAKER_01 7:00

What's fascinating here is that a 3% overall growth rate doesn't mean the entire market is just moving sluggishly.

SPEAKER_00 7:06

What do you mean?

SPEAKER_01 7:06

Well, when you actually look under the hood of that data, it reveals a market in total violent transition. The pie isn't just growing slower, the slices are being aggressively rearranged. Oh, okay. The data shows that large incumbent insurers, the traditional giants of the industry, are shedding immense numbers of members, and at the exact same time, mid-size and regional plans are sweeping those displaced members up.

SPEAKER_00 7:29

So it's a massive migration.

SPEAKER_01 7:31

We are witnessing a historic transfer of market share in real time.

SPEAKER_00 7:36

Okay, let's name the companies caught in this reshuffle because of the volume is staggering. United Healthcare took the biggest absolute hit. They lost roughly 900,000 members.

SPEAKER_01 7:46

900,000.

SPEAKER_00 7:47

That is a 9% drop. Imagine a city the size of Austin, Texas, just vanishing from your customer base in a single enrollment cycle.

SPEAKER_01 7:55

It's incredible.

SPEAKER_00 7:55

Then you have Elevance. Even before this new enrollment suspension fully takes effect, Elevence dropped an astounding 14% of its MA membership. A huge hit. And CVS Aetna didn't escape the turbulence either. They declined by approximately 3%. These are the biggest names in the game leading members by the hundreds of thousands.

SPEAKER_01 8:15

Which begs the question.

SPEAKER_00 8:16

Right. How does a juggernaut like United Healthcare just misplace nearly a million members? They have the resources, the marketing budget, the brand recognition. What is driving people to jump ship?

SPEAKER_01 8:26

Industry analysts in the Healthcare Dive report point to a perfect storm of three primary root causes.

SPEAKER_00 8:32

Okay, lay them out for us.

SPEAKER_01 8:33

First, benefit design changes. Insurers are constantly tweaking what their plans cover. If a major carrier decides to tighten benefits, maybe increasing a copay here or reducing a dental allowance there to save money, seniors are incredibly savvy, paying notice. Absolutely. They will shop around for a better deal. Second, network adequacy issues.

SPEAKER_00 8:54

Let's define what that actually looks like for a patient.

SPEAKER_01 8:57

Certainly. Network adequacy refers to whether an insurance plan has enough doctors, specialists, and hospitals within a reasonable distance for its members. Okay. If a carrier's plan undergoes a contract dispute and suddenly a major local hospital system is no longer in network, the members in that area are essentially forced to find a new insurance plan or lose their longtime doctors.

SPEAKER_00 9:18

Oh wow. Yeah, that would trigger an immediate exit.

SPEAKER_01 9:21

When networks shrink, members leave immediately. And third, and perhaps most critically, is the cumulative effect of CMS star rating adjustments.

SPEAKER_00 9:30

The star ratings are huge. That's a one-to-five scale CMS uses to judge plan quality, right?

SPEAKER_01 9:36

Correct. But they aren't just Yelp reviews. They are tied directly to billions of dollars in financial bonuses.

SPEAKER_00 9:42

Right. The quality bonus payments.

SPEAKER_01 9:44

Several major carriers were penalized with lower star ratings recently. Even a half-star drop can mean losing hundreds of millions of dollars in those payments.

SPEAKER_00 9:53

That's a massive revenue hit.

SPEAKER_01 9:55

And lower ratings mean less bonus money, which means those carriers have less capital to fund the attractive supplemental benefits that draw seniors in. It is a vicious penalizing cycle for the incumbents who slipped up on their quality metrics.

SPEAKER_00 10:09

And nature abhors a vacuum. Those departing members didn't just stop needing healthcare, they went somewhere else.

SPEAKER_01 10:16

Exactly.

SPEAKER_00 10:17

According to the data, Humana emerged as the major victor in this exact same time frame. They added over 1 million members, pushing them past the 7 million total enrolly mark.

SPEAKER_01 10:28

A huge win for them.

SPEAKER_00 10:29

But perhaps even more interesting than Humana's growth is what happened to the smaller players. Companies like Devoted Health literally more than doubled their membership. This confirms the trend. The displaced book of business from the massive incumbents is directly fueling the explosive growth of agile, regional, mid-sized plans. They are capitalizing on the stumbles of the giants.

SPEAKER_01 10:51

They absolutely are. Which brings us to the horizon line. We have sweeping regulatory crackdowns, we have immense enrollment losses for the incumbents, and we have a stalled overall growth rate.

SPEAKER_00 11:02

Where is this all heading?

SPEAKER_01 11:04

To answer that, we have to look at our third source: the official CMS.gov contract year 2026 Medicare Advantage and Part D final Rule.

SPEAKER_00 11:13

Right?

SPEAKER_01 11:13

It's officially known as CMS 4205F, for those of you who love to read government document classifications.

SPEAKER_00 11:20

Oh, I'm sure someone out there has it bookmarked.

SPEAKER_01 11:22

I'm sure they do. This document dictates the immediate future of the market, and the future it dictates looks incredibly tight.

SPEAKER_00 11:28

The most critical provision in this final rule revolves around the money. Specifically, the proposed 2027 MA rate increase. CMS proposed an incredibly tiny 0.9% increase for 2027.

SPEAKER_01 11:41

Less than 1%.

SPEAKER_00 11:42

In total dollars, that equates to about $700 million in additional funding across the entire system.

SPEAKER_01 11:48

Now, $700 million sounds like a fortune to an individual, but in the context of the multi-billion dollar Medicare Advantage market, it is practically a rounding error spread across the country.

SPEAKER_00 11:59

It's nothing.

SPEAKER_01 11:59

To give you the full context of how restrictive this is, the insurance industry had been aggressively lobbying CMS for a 4% to 6% increase.

SPEAKER_00 12:09

That's a huge gap.

SPEAKER_01 12:10

So the industry asked for up to 6%, arguing that the costs of providing medical care are inflating rapidly, and the government countered with less than 1%.

SPEAKER_00 12:19

That is what you call a rate cliff. And we need to translate this rate cliff into tangible real-world impacts for you, the listener.

SPEAKER_01 12:27

Please do.

SPEAKER_00 12:28

Think of it this way: it is like your landlord raising your rent by 5%, your grocery bill going up 6%, but your boss only giving you a 0.9% raise, the math simply does not work unless you drastically cut your expenses.

SPEAKER_01 12:41

That's a great analogy.

SPEAKER_00 12:42

If this 0.9% rate is finalized, and that is what is proposed right now, we are going to see intense market turbulence. A flat rate environment means insurers are going to be financially squeezed like never before.

SPEAKER_01 12:53

And how do businesses react to a squeeze?

SPEAKER_00 12:55

Exactly. The sources indicate this will drive even more carrier exits from certain counties or entire states where they can no longer turn a profit. We are going to see dramatic plan redesigns, which is industry phrasing for severe benefit reductions.

SPEAKER_01 13:08

Aaron Powell Cutting the perks.

SPEAKER_00 13:09

Yep. Those extra perks that Medicare Advantage plans are famous for the comprehensive dental, the vision hardware, the gym memberships, the over-the-counter allowances, those are going to be squarely on the chopping block for 2027.

SPEAKER_01 13:24

They have to be.

SPEAKER_00 13:25

If you thought the enrollment shakeout we saw in February 2026 was wild, buckle up, because this flat rate environment guarantees the turbulence is far from over.

SPEAKER_01 13:34

The financial squeeze invariably trickles down to the benefit design. There is simply no avoiding the math. Now, while the rate increase is the headline, it is worth noting briefly that this final rule, CMS 42005F, did tackle several other important areas.

SPEAKER_00 13:50

Like what?

SPEAKER_01 13:51

It established new guardrails for agent and broker compensation to prevent steering, meaning ensuring brokers recommend plans based on patient need, not who pays the highest commission.

SPEAKER_00 14:00

Very important.

SPEAKER_01 14:01

It updated the network adequacy standards we discussed earlier, tightening the rules to ensure patients actually have access to doctors. And it introduced some prior authorization reforms aimed at streamlining patient care, effectively trying to speed up the process of getting medical treatments approved.

SPEAKER_00 14:16

Wait, going through the final rule notes here, what happened to the artificial intelligence section? When CMS released the initial draft, there was a whole segment dedicated to AI. It was all over the industry news.

SPEAKER_01 14:28

If we connect this to the bigger picture, you have hit on the most glaring omission in the document. When CMS initially released the proposed version of this rule, it included specific AI guardrails.

SPEAKER_00 14:40

Right. They wanted to regulate how insurance carriers use AI for utilization management. Exactly. Just to clarify, utilization management. That's the system carriers use to decide whether a specific treatment, like an MRI or a surgery, is medically necessary and will be covered, right?

SPEAKER_01 14:57

Correct. It is the gatekeeping mechanism for medical care. Insurers are increasingly utilizing highly sophisticated AI algorithms to process these requests.

SPEAKER_00 15:06

Makes sense. It's a huge volume of requests.

SPEAKER_01 15:08

The proposed rule sought to put boundaries around how those AI tools could be used to approve or deny a patient's medical care. However, in the final rule that was just published, those AI guardrails were explicitly not finalized.

SPEAKER_00 15:23

They just dropped it from the final text.

SPEAKER_01 15:25

They deferred it. CMS indicated that they may address AI governance in future rulemaking. But by removing it from this final rule, they have created a substantial void.

SPEAKER_00 15:36

And that void leaves agents, carriers, and patients operating in a very murky gray area right now. Extremely murky. Think about the reality of the situation. We have these highly advanced AI-powered coverage decision tools actively being used by insurance companies today, but there is currently no finalized federal governance from CMS strictly dictating how those tools can be applied in Medicare Advantage.

SPEAKER_01 15:59

It's essentially the Wild West for utilization management algorithms.

SPEAKER_00 16:02

Wow.

SPEAKER_01 16:02

This raises a vital question about oversight and incentives. Let's introduce one more concept: the medical loss ratio, or MLR. That is the strict metric dictating how much of a premium dollar an insurer actually spends on patient care versus administrative overhead and profit. Carriers are legally required to maintain certain MLR thresholds.

SPEAKER_00 16:23

Right. They can't just keep all the money.

SPEAKER_01 16:25

Exactly. Now, combine the elements we have discussed today. You have a severe financial squeeze arriving with that 0.9% rate increase. Carriers are desperate to keep their medical loss ratios in check while revenue growth flatlines.

SPEAKER_00 16:39

Okay, I see where you're going with this.

SPEAKER_01 16:40

Simultaneously, you have an unregulated technological frontier regarding AI. The incentive for carriers to rely heavily on automated tools to aggressively manage and deny care in order to save money becomes incredibly strong.

SPEAKER_00 16:54

Because the guardrails aren't there yet.

SPEAKER_01 16:56

The technology is advancing faster than the regulatory framework can keep up. CMS clearly knows it is an issue, hence its inclusion in the proposed rule. But pulling it from the final rule suggests they are still struggling with exactly how to build those guardrails without breaking the existing administrative system.

SPEAKER_00 17:12

That is fascinating. Well, we have covered an immense amount of ground today, and it is time to wrap up the crucial aha moments for you to take away from this deep dive.

SPEAKER_01 17:22

Let's summarize it.

SPEAKER_00 17:23

Number one The golden era of easy Medicare advantage growth has hit a wall, dropping from a historical 10% down to just 3%. Number two, we are seeing a historic changing of the guard, with traditional incumbents bleeding hundreds of thousands of members to agile regional players who are capitalizing on network and benefit missteps.

SPEAKER_01 17:44

Absolutely.

SPEAKER_00 17:45

Number three, CMS is bringing the compliance hammer down harder than ever as elevants learn the hard way with their banned USB drives and audits stretching back to 2018.

SPEAKER_01 17:55

Leave thumb drives at home.

SPEAKER_00 17:56

Seriously. And number four, the intensely tight waller point nine percent rate environment proposed for 2027 is going to guarantee even more market turbulence, carrier county exits, and inevitable benefit cuts next year. The great MA shakeout is real and it is only accelerating.

SPEAKER_01 18:13

It certainly is. And as we conclude, I want to leave you with a final thought to mull over a question that naturally emerges from connecting all of these sources.

SPEAKER_00 18:19

Let's hear it.

SPEAKER_01 18:20

We know that the 2027 Medicare advantage rates are remaining essentially flat. We also know that these carriers are facing immense pressure from Wall Street to maintain profitability in a stalled growth market. Right. And finally, we know that CMS has left AI utilization management entirely unregulated for the time being. So the question is, with their backs against the financial wall, how heavily will carriers secretly lean on unchecked AI decision tools to ruthlessly manage patient costs before the next regulatory rule finally drops?

SPEAKER_00 18:53

Man, that is a chilling but entirely necessary question to ask as we watch this market evolve. The technology is deployed, the financial pressure is compounding, and the federal rules are currently absent.

SPEAKER_01 19:05

It's a perfect storm.

SPEAKER_00 19:06

It really is. We will undoubtedly be keeping a close eye on exactly how that tension resolves as the shakeout continues. Thank you so much for joining us on this deep dive. We hope this helped clear the fog, define the jargon, and gave you the shortcut you needed to be the most informed person in the room on this topic.

SPEAKER_01 19:21

Thanks for listening.

SPEAKER_00 19:22

Still curious? Keep asking the hard questions, and we will catch you on the next deep dive.