Overview
Medicare Advantage plans reduce service areas to exit unprofitable or saturated markets, driven by factors like rising costs, lower-than-expected government payment increases, and increased utilization of benefits. Insurers are scaling back in counties and regions where financial performance is poor to improve profitability and sustainability, a trend that also includes reducing other benefits* and increasing scrutiny on plan operations. *This refers mainly to dental, vision, and hearing benefits. Additionally, any other perk such as the gym or OTC benefits could be scaled back.
I lifted the above quote from a Google AI Overview. It’s important to understand that the insurance companies that contract with Medicare and run Medicare Advantage (MA) plans, are a for-profit business. There’s nothing inherently wrong with that. Your local grocery store or gas station has to make a profit in order to stay in business.
If Acme Health, for example, is losing money in a particular county or state, they may scale back the benefits for next year or exit that county or state altogether.
Please see our companion article, What’s Driving Up Medical Costs.
A Second AI Overview
The monthly capitation rates for Medicare Advantage (MA) plans will increase by 5.06% for 2026, which is an increase of more than $25 billion in total payments compared to 2025. This final rate is a 2.83% increase from the rate announced in the January 2025 Advance Notice, due to updated payment data on the effective growth rate.
Despite the 2026 increase from the government, the increase in the utilization of medical services across the nation remains high and is outpacing the increased government monthly capitation* rates. And that is creating havoc for many companies’ MA plans.
*The “capitation rate” is how much an MA company receives per person per month from Medicare. This money, and the member’s monthly premium (if not zero premium), is what funds the MA plan.
Annual Notice of Change (ANOC)
You should receive your ANOC from both your MA and prescription drug plan (PDP) companies in late September. BE SURE TO KEEP ALL OF THE PAPEROWRK YOU RECEIVE FROM YOUR PLAN SPONSOR.
Disenrollment Notices
Some MA plan members will be receiving disenrollment notices. As of this writing, I know that Idaho is going to be particularly affected. There are two reasons for receiving a disenrollment notice.
- Reason #1: Acme health, for example, is either exiting your county or state altogether. They’re done. You will not be enrolling in a different Acme Health plan for 2026.
- Reason #2: Wonder Health is staying in the market, but they will drop your plan. Instead, they have created new 2026 plans. Since the new plans are enough different from your 2025 plan, Medicare requires you to apply for one of their new plans.
There are two variations. Wonder Health may pull out of counties A, B, and C but remain in counties D, E, F, and G. If you live in counties A, B, and C, there will be no Wonder Health plan in your county for 2026
If you receive a disenrollment notice, here are your options.
Option # 1: You can enroll in another MA plan in your county if other MA plans are available.
Option #2: You have guarantee issue (GI) rights to enroll in certain lettered Medicare supplement plans. GI means that you cannot be turned down due to any health reasons. When we do a GI Medicare supplement application, we attach a copy of your MA disenrollment notice. That’s why it’s so important for you to keep those notices.
There are two sets of GI rules.
- Rule #1 is for those who turned 65 prior to January 1, 2020. The Medicare supplement plan letters eligible for GI are A, B, C, F, K, and L. Plan F will have the highest premiums and best benefits. Plan K will have the most minimal benefits and the lowest premiums. The latter is still a good option for budget-minded members.
- Rule #2 is for those who turned 65 after January 1, 2020. The Medicare supplement plan letters eligible for GI are A, B, G, K, and L. Plan G will have the highest premiums and best benefits. As in Rule #1, Plan K is still a good option for budget-minded members.
To maintain your prescription coverage, you will need to sign up for a stand-alone Part D prescription drug plan.
Option #3: If you do not choose Options 1 or 2, you will be kicked back to Original Medicare as of January 1, 2026. If your MA plan was an MAPD (with prescription drugs) you will need to sign up for a stand-alone PDP.
Confused?
If you receive a disenrollment notice from your Medicare advantage sponsor and think all of the above is a confusing mish-mash, I couldn’t agree with you more. It is.
The good news is that you can call us with any questions, and we will do our best to guide you through the next phase of your Medicare journey.
Lastly, be sure to keep all paperwork you receive from your MA plan sponsor. End