Introduction
The Trump administration’s proposed flat Medicare Advantage (MA) payment rates for 2027 have drawn swift and sharp criticism from health insurers across the country. Industry groups argue that the proposal fails to address the rising costs that plans face today. Moreover, they warn that finalizing these rates could trigger benefit cuts, plan exits, and higher premiums for more than 35 million seniors who depend on Medicare Advantage.
What CMS Proposed for 2027
In late January 2026, the Centers for Medicare & Medicaid Services (CMS) released its annual Advance Notice for MA and Part D payment policies. The proposal includes a net payment rate increase of just 0.09% for Medicare Advantage — essentially flat compared to 2026 levels.
The projected increase amounts to more than $700 million in additional MA payments for 2027. However, that figure falls far short of the mid-single-digit increase of approximately 4% to 6% that payers had expected based on previous years.
By comparison, insurers received a more than 5% payment bump for 2026. The stark gap between expectations and reality immediately rattled the industry.
Why Insurers Say Flat Rates Fall Short
Rising Costs Outpace Flat Funding
Health plans operate in an environment of rising medical costs, growing care utilization, and expanding workforce expenses. A flat rate, insurers argue, simply does not reflect these realities.
The AMGA called flat rates after a 5% increase in 2025 a “dramatic reversal” that could significantly destabilize the MA market. Workforce costs are rising, supplies are more expensive, and the infrastructure needed to deliver high-quality coordinated care demands ongoing investment.
Furthermore, Elevance CEO Gail Boudreaux said the flat funding proposal “just doesn’t keep pace with the current medical cost and utilization trends.”She added that if funding consistently lags behind reality, plans will be forced to cut benefits, narrow networks, raise premiums, or exit geographies — none of which is good for seniors or the program.
A Program Already Under Strain
The MA market entered 2026 already under significant pressure. About 1 million fewer people are participating in the privatized Medicare program in 2026 as a result of plan exits, shifting premiums, and lower benefits — shrinking MA’s share of overall Medicare enrollment for the first time in nearly two decades.
Importantly, UnitedHealthcare expects to lose up to 1.4 million MA members in 2026 and may pull back further on benefits and geography if the rates are finalized as proposed.
Industry Voices: Key Reactions
AHIP
AHIP spokesperson Chris Bond said health plans “welcome reforms to strengthen Medicare Advantage.” However, flat program funding at a time of sharply rising medical costs and high utilization will impact seniors’ coverage. If finalized, the proposal could result in benefit cuts and higher costs for 35 million seniors and people with disabilities.
Better Medicare Alliance
The Better Medicare Alliance warned that if CMS does not adjust rates to account for the current cost environment, the disruption felt during the 2026 enrollment period — including forced disenrollments — will likely worsen. CEO Mary Beth Donahue called on the administration to use the Final Rate Notice as an opportunity to preserve stability, affordability, and choice.
Alliance of Community Health Plans
Ceci Connolly, CEO of the Alliance of Community Health Plans, described the Advance Notice as “disappointing and wholly unrealistic as medical costs and acuity continue to rise.” She expressed concern that the proposed rates will push more insurers to exit the MA market entirely.
Blue Cross Blue Shield Association
The BCBSA said it supports CMS efforts to modernize the star ratings program but urged the agency to focus on transparency and predictability and to take a phase-in approach to any major overhauls.
Risk Adjustment Reforms Add to Pressure
Beyond the payment rate, CMS has also proposed reforms to the MA risk adjustment model. The agency proposed eliminating a practice that allows insurers to add diagnoses after reviewing patients’ medical records — a move that addresses coding practices that have received scrutiny and that reportedly added billions in extra payments from 2018 onward.
These reforms would restrict insurers’ ability to inflate members’ risk scores and, correspondingly, their reimbursement from the federal government. Together, the flat rate and tighter risk adjustment create a compounding financial challenge for health plans.
CMS Administrator Dr. Mehmet Oz defended the move, stating that the proposals are “about making sure Medicare Advantage works better for the people it serves.”
Impact on Seniors and Benefits
Benefit Cuts Are Likely
Analysts and industry experts broadly agree that seniors will feel the consequences if the rates are finalized. According to a January analysis from Fitch Ratings, lower government reimbursement levels would result in higher premiums, reduced benefits, and fewer coverage options as insurers rationalize their products and market footprints.
Supplemental benefits — including dental, vision, hearing, and fitness memberships — are the most vulnerable, as these are often the first benefits plans reduce when margins tighten.
Rural and Underserved Communities at Risk
Regional health plans are particularly concerned. The Alliance of Community Health Plans noted that regional health plans, deeply rooted in rural and underserved regions, have remained in their communities even as other insurers fled — and the flat rate threatens their ability to continue doing so.
Market Fallout and Stock Declines
The proposed rates triggered an immediate market reaction. Shares of Humana dropped more than 20%, CVS Health shed 13%, UnitedHealth Group lost more than 19%, Elevance Health tumbled about 13%, and Centene dropped more than 10% following the announcement.
The announcement triggered a stock selloff that wiped out nearly $100 billion in market value. Analysts noted the proposal came as a significant surprise, given that prior-year notices had consistently delivered more generous increases.
What Comes Next
The comment period on the proposed rate closed on February 25, 2026, with the final notice expected by April 6. Industry groups have vigorously submitted comments urging CMS to revise rates upward before finalization.
If 2027 payment rates are finalized as proposed, insurers have threatened to further cut back their MA plans, continuing the contraction that began in 2024. The stakes are high — not just for insurers and investors, but for the millions of seniors who rely on Medicare Advantage for affordable, comprehensive coverage.
