The 2027 Medicare Advantage Reset: Who Ordered It, Who Pays

About 3.16 million people are losing their Medicare Advantage plan for 2027. That is 11% of everyone enrolled in individual Medicare Advantage, it is the third straight year the number has grown, and it is happening while the official story is that the market is stable and average premiums are falling. Both stories are true at the same time. This article walks through how that can be, who made the decisions and what they said about them, and what the math looks like from a kitchen table in Fargo.

Three years of letters

Non-renewal letters used to be background noise. From 2021 through 2024, the share of individual Medicare Advantage members who lost their plan to a termination or a service-area cut ranged from 0.4% to 1.5% a year, per ATI Advisory research cited by Medicare Market Insights.

Then the floor gave out, three years in a row: about 2 million people lost plans for 2025 (7% of members), about 2.87 million for 2026 (10%), and 3,156,598 for 2027 (11%), per Medicare Market Insights' October 8 analysis of CMS data.

Two mechanics drive the 2027 number. About 75% of affected members are in plans that are being terminated outright. The other 25%, roughly 800,000 people, are in plans that will still exist but are withdrawing from their county, which the industry calls a service-area reduction. And the cuts are not spread evenly across plan types: local PPO plans, the ones built around broader provider networks, account for 59% of all the disruption, with 19% of all local PPO enrollment (1,849,692 people) sitting in a terminating plan. HMO plans held at 7%. Carriers are not retreating from Medicare Advantage. They are retreating from its broadest-network products.

In short: for four years this problem stayed under 1.5% of members a year. It has now been at 7% or higher for three consecutive years, and the broad-network plans are taking most of the hit.

The decision: Humana, in its own words and numbers

To understand why this is happening, follow the biggest carrier through four dates.

November 2023. Humana raises its forecast to roughly 860,000 new individual Medicare Advantage members for the year, about 19% growth, and points to it as proof it is outgrowing the industry. That growth was fueled by generous benefits, and those benefits were funded partly by federal quality bonuses.

Here is how that money works, because the whole story turns on it. CMS grades every Medicare Advantage contract on a 5-star scale each October. A contract rated 4 stars or higher gets a 5 percentage point increase to its benchmark, the maximum amount Medicare will pay the plan per enrollee, and 10 points in certain "double bonus" counties. Higher-rated plans also keep a bigger share of the gap between their bid and that benchmark as a rebate: 70% at 4.5 stars and up, 65% from 3.5 to 4.5, 50% below that. Plans use those rebate dollars to fund the things that make Medicare Advantage attractive: $0 premiums, dental, vision, grocery cards. KFF estimates these quality bonuses will total at least $13.4 billion across the industry in 2026. The benefits seniors compare during Open Enrollment are, in part, this bonus money wearing a friendlier name.

October 2, 2024. Humana discloses in a securities filing that the share of its members in plans rated 4 stars or better will fall from 94% to 25% for the 2025 ratings year, mostly because its largest contract, covering about 45% of its members, dropped from 4.5 stars to 3.5. Humana's own explanation was that it narrowly missed higher industry cut points on a small number of measures, and part of what it later fought over was genuinely small: CMS test calls checking whether one call center could connect a caller to an interpreter, scored unsuccessful three times. Analysts estimated $1 billion to $3 billion in bonus revenue was at stake for 2026. For scale, Humana's entire net profit the prior year was $2.5 billion. By KFF's count, Humana ended up receiving roughly $1.5 billion of the industry's 2026 bonus money, 11% of all bonus dollars despite holding about 20% of Medicare Advantage enrollment.

2025, in court. Humana sued CMS in the U.S. District Court for the Northern District of Texas, arguing the downgrades were arbitrary, in part because CMS would not let the call center take a callback. The suit was dismissed in July 2025 because Humana had not finished CMS's own appeal process first. Humana refiled on July 22, 2025 after CMS declined to change the ratings. On October 14, 2025, Judge Reed O'Connor dismissed the case with prejudice, ruling the no-callback policy lawful and the downgrades neither arbitrary nor capricious. Humana appealed to the Fifth Circuit; by then it had already submitted its 2026 bids assuming it would lose. Its 2026 ratings slipped further: the share of members in 4-plus star plans fell from 25% to 20%.

July 29, 2026. On its second-quarter earnings call, Humana's CFO describes the 2027 exits, which Humana put at roughly 600,000 members (Medicare Market Insights counts about 601,000, 9% of its individual book), as cutting off "the lower tail of profitability," in service of a "sustainable margin of at least 3%" by 2028. The company expects to re-enroll roughly 40% of those members, about 240,000 people, into its remaining plans. It is not a company in distress: $40.9 billion in quarterly revenue, profit up 27% year over year. Its CEO, Jim Rechtin, said returning to top quartile star results is "what's required to be competitive in the marketplace."

Follow the chain and the shape is clear. Growth was built on bonus-funded benefits; a ratings cycle, hinging partly on three phone calls, cut the bonus; the courts upheld the cut; and the membership built during the growth years became the adjustable line. By the rules the program sets, each step was arguably the rational business move. That is exactly the problem, and we come back to it at the end.

The other bracket: Blue Cross of Minnesota. Not every exit is strategy. BCBS of Minnesota's Medicare Advantage arm, Aware Integrated, is terminating plans covering about 258,000 members, 90% of its individual book, after more than $500 million in Medicare losses over three years. The company as a whole posted a $353 million operating loss in 2025 on $10.4 billion in premium revenue. Its CEO, on October 1: "No organization can responsibly continue on a path of ongoing negative performance." It keeps selling Medigap, stand-alone drug plans, and its cost plans, which for many Minnesotans is where this story lands anyway.

In short: Humana is cutting from strength after the bonus money that funded its growth era got cut and the courts said the cut was legal. Blue Cross of Minnesota is cutting from losses. Same letter, same mailbox, opposite reasons.

The seven that left entirely

Underneath the big-carrier story is a quieter one that says more about the economics. Seven parent organizations are terminating 100% of their individual Medicare Advantage membership for 2027, and nearly all of them are plans owned by hospital systems: Providence St. Joseph Health (53,029 members in Oregon, Washington, and Orange County, California), Sharp Healthcare (17,281 in San Diego County), Memorial Hermann (14,586 in the Houston area), CHRISTUS Health (8,728 across 36 Texas and 8 New Mexico counties), Central Mass Health, the parent of Mass Advantage in Worcester County, Massachusetts (7,758), Aspirus in Wisconsin (5,938), and BMC Health System's WellSense in New Hampshire (5,107), which is finishing an exit it started last year.

The reasons, where they were stated at all, rhyme. Providence's exit is part of winding down most of its health plan after a sale fell through; its CEO cited regulatory overhead, rising medical costs, and competition from national carriers, and its insurance division lost more than $100 million in 2025. Sharp's CEO said the capitation model, where the plan absorbs costs above a fixed per-member payment, needs more scale. Memorial Hermann also announced in July that it will close its commercial insurance business.

These are the organizations closest to the actual delivery of care, the ones Medicare Advantage's designers hoped would thrive by integrating insurance and treatment. They are concluding, nearly in unison, that they cannot make the math work at local scale. And they are not alone: three Blue Cross Blue Shield plans, Wellmark (Iowa and South Dakota), Mississippi, and North Dakota, are dropping individual Medicare Advantage for 2027, and Braven Health, the Horizon joint venture in New Jersey, is out as well.

In short: when the hospital-owned plans and the local Blues both conclude the product only works at national scale, the problem is not any one company's management. It is the structure they all operate inside.

Where it lands

Now the geography, with denominators attached. First, the spread: the losses touch members in all 50 states and more than 2,500 counties, so this is a national event, but it is not an even one. Ten states hold 61% of everyone impacted, and two of them, Minnesota and Florida, hold about 1 in 5 between them.

Minnesota is the epicenter: about 346,000 of its roughly 549,000 individual Medicare Advantage members, 63%, lose their plan at once, driven by the BCBS Minnesota exit. Hennepin County alone accounts for about 67,000 people, the largest county impact in the nation. Florida has the biggest raw number, about 321,000 people, but that is 11% of its roughly 2.9 million individual MA members, so the experience on the ground is closer to the national average.

The Dakotas' numbers have a specific author: Blue Cross Blue Shield of North Dakota is dropping individual Medicare Advantage, and Wellmark, the Blues plan for Iowa and South Dakota, is doing the same. That likely explains much of how North Dakota reaches 40% of its market losing plans and South Dakota 41%. Wyoming hits 46%, Idaho 36%, Nebraska 34%. (Impacted-member counts for these five states were not published; the shares were.)

What remains is thinner where it was already thin. Wyoming goes from 14 plans to 8 for 2027 while its average monthly premium jumps 51%, from $45.91 to $69.23. In Idaho, the average premium rises from $27.81 to $37.93. Nationally, 193 counties now have no Medicare Advantage drug plan available for general enrollment at all, up from 123 in 2026, covering about 638,000 beneficiaries, and North Dakota just joined the list of states with such counties. Several South Dakota and Nebraska counties are down to an MA option with no drug coverage.

San Diego deserves its own line: about 30,000 county residents are affected, the second-largest county impact in the country, including Sharp's roughly 17,000 individual members, in a county with about 220,000 MA enrollees. One cushion there: California law gives people losing a plan a longer guaranteed-issue window for Medigap than the federal 63-day floor.

And yes, Minnesota's average premium actually falls for 2027, from $69.11 to $59.40. Averages are survivors' statistics: the plans that die leave the average. That is also how the national average premium can fall 16.5%, from $14.37 to $12.00, in the same fall 3.16 million termination letters landed.

In short: in six states, 34% to 63% of the individual MA market resets at once, much of it traceable to specific named exits, and in the rural ones what remains is fewer plans at higher prices.

The kitchen-table math

The 2027 Social Security raise is 3.6%. National inflation is running 3.7%, and Midwest inflation, the region covering Minnesota, the Dakotas, and Nebraska, is at 4.2%. For the average retiree, the raise is a real-terms pay cut before the plan letter even arrives.

What is driving it is not the grocery cart. Food at home is up 1.8% nationally; eggs are down 35% from last September ($3.49 to $2.27 a dozen); milk and bread are flat. It is the energy lines: gasoline in the Midwest went from $3.19 to $4.37 a gallon in twelve months, up 37%, electricity is up 9% to 19.7 cents per kilowatt-hour, and nationally, ground beef, up 7% to $6.79 a pound, is the grocery exception. For seniors in rural counties, where the drive to the pharmacy or the dialysis center is measured in half-hours, the pump price is not optional.

Now put the plan letter on the same table. The average retired-worker check is $2,071 a month. The average 65-and-older household spends about $5,119 a month ($61,432 a year, per the Bureau of Labor Statistics' 2024 Consumer Expenditure Survey). One check covers about 40% of that; even two checks fall short. About 1 in 5 Americans 65 and older is still working or looking for work, and 38.3% of employed seniors work part time; in Idaho, Wyoming, and North Dakota, the minimum wage is still the federal $7.25, unchanged since 2009.

This is who absorbs a benefits reset: people whose income is fixed by formula, whose costs are not, and whose plan was the one variable they thought was settled.

In short: the raise trails the bills, the checks do not cover the spending, and the plan cancellation arrives on top of all of it, not instead.

The fix is not in the mailroom

Here is the uncomfortable symmetry. The Humana that chased 860,000 new members with rich benefits in 2023 and the Humana cutting 601,000 members for 2027 are running the same play: a rational response to how Medicare Advantage is funded. Extra benefits are financed largely by quality bonuses and rebate formulas that reset every single year, $13.4 billion of them in 2026. When the bonuses flowed, benefits and membership grew. When one ratings cycle, decided partly by three test phone calls and upheld by a federal judge, cut Humana's bonus, the benefits and the members became the adjustable line. No carrier had to act irrationally for 3.16 million people to lose their plan; each followed the incentives in front of it. The hospital-owned plans followed their own math to the exit.

That is why the durable fix sits with Congress, not with any carrier's conscience. If supplemental benefits are the reason nearly half of Medicare beneficiaries chose Medicare Advantage, then the funding behind those benefits deserves the same stability as the core program: multi-year rate visibility instead of annual whipsaws, benefit continuity standards when a plan exits a market, and transition protections stronger than a 63-day window. Those are policy choices, available any time Congress wants to make them.

Until then, the protections that exist are personal, and they are real: Open Enrollment through December 7, a Special Enrollment Period from December 8 through the last day of February for anyone whose plan was terminated, and a guaranteed-issue right to buy certain Medigap policies with no health questions that closes 63 days after your old coverage ends (longer in some states, including California).

In short: the carriers followed their incentives, all the way to your mailbox. The incentives are set in Washington. Until they change, know your windows and use them.

References

• Medicare Market Insights: 11% of Medicare Advantage enrollees are losing their plan in 2027
• CMS: Medicare Advantage and Part D programs expected to remain stable in 2027
• KFF: Medicare Advantage quality bonus payments will total at least $13.4 billion in 2026
• KFF: Medicare Advantage plan availability varies widely by county for 2027
• Healthcare Dive: Humana to exit more Medicare Advantage plans in 2027
• Healthcare Dive: Humana's precipitous drop in 2025 star ratings
• Healthcare Dive: Humana loses Medicare Advantage stars lawsuit for a second time
• Healthcare Dive: Humana appeals star ratings loss to the 5th Circuit
• Healthcare Finance News: Humana plans to exit some MA markets, affecting 600,000 members
• Forbes: Humana forecasts growth of 860,000 Medicare Advantage members (2023)
• Becker's Payer: BCBS Minnesota cuts most Medicare Advantage plans following $500M loss
• Becker's Hospital Review: health system-owned insurers exiting Medicare Advantage in 2027
• Becker's Payer: The states losing the most Medicare Advantage plans in 2027
• Healthcare Dive: Providence Health Plan to close after Medicare Advantage deal falls through
• Hoodline / San Diego Union-Tribune: Sharp Health Plan ends individual Medicare Advantage plans
• SSA: 2027 cost-of-living adjustment
• BLS: Consumer Price Index, September 2026
• BLS: Midwest CPI, September 2026
• BLS: Average retail food and energy prices, U.S. and Midwest
• BLS: Consumer Expenditure Survey, 65+ households (via FRED)
• BLS: 38.3% of employed older Americans worked part time in 2024
• KFF: Number of dual-eligible individuals
• Kiplinger/SSA: Average Social Security check by state
• Medicare.gov: Special Enrollment Periods