What’s behind Medicare Advantage product deserts

Image of a mesa in the desert with the words "Medicare Advantage" on it and a cow skull in the foreground.

By Susan Rupe

Product deserts are locations where Medicare Advantage plan disruption, shrinking availability and choices are creating challenges for enrollees and advisors.

What is causing these deserts was among the topics discussed during the National Association of Insurance and Financial Advisors’ recent Medicare Collective Impact Day.

More than 35 million Americans are enrolled in Medicare Advantage today, a fivefold explosion in the past 20 years, said Craig Ritter, CEO of Ritter Insurance Marketing and managing partner at Integrity. “We’ve seen 8% annual compound growth, which is unheard of for an insurance product.”

MA enrollment reached its peak annual enrollment in 2023-24, he said, but is now growing in the low single digits.

“We’re going from great growth to normalized growth. We felt the impact, because at the end of the day it comes down to revenue minus expenses. The profit margin on MA drives benefits and commissions.”

Federal reimbursement to MA plans is not keeping up with the cost trend, said Bryan Keeven, president of Wholesale Health Affiliate Partners at AmeriLife. If the trend continues, it will impact MA benefit levels and service areas.

Star Ratings also impact MA plans, Ritter said. Between 2023 and 2026, the percentage of MA plans with four or more stars dropped from 89% to 64%. The Centers for Medicare and Medicaid Services gives plans with four or more stars a 5% bonus.

The risk score is lower for beneficiaries who are healthier, he added. The Biden administration changed the risk model, and those changes were implemented in 2026. They resulted in a 3% reduction in reimbursement levels for health plans.

“The Inflation Reduction Act radically changed the market,” Ritter said. “We saw a 100-fold increase in the direct subsidy to MA plans. Because health plans previously were sharing risk with beneficiaries and pharmaceutical companies through rebates and with the government through reinsurance. Now virtually all the risk falls on the health plan and how do you price for this?”

‘Birthday rules’ impact Medicare Advantage

Nine states have passed “birthday rules,” in which Medicare beneficiaries are able to changes plans around their birthdays without having to go through medical underwriting.

“Fewer carriers are interested in entering states with birthday rules,” Ritter said. “We’re also seeing higher rate increases in these states and some carriers limiting or changing commissions on these plans.”

About 2.6 million MA beneficiaries lost their specific plan for 2026 and were required to choose new coverage, Ritter said. In addition, since passage of the Inflation Reduction Act in 2022, there has been a 50% drop in the number of Part D prescription drug plans available.

Mark Hunter, chief distribution officer at Senior Market Sales, gave examples of Medicare “product deserts” - counties in the U.S. where there is no availability of MA zero-premium plans, counties where one plan has an HMO monopoly, counties where multiple plans are available but they all come from the same carrier and have the same network and formularies, and counties where the main hospital is not in-network with the MA plans available there.

“These are places with the illusion of choice but no actual choice,” he said.

Susan Rupe is editor in chief, magazine, for InsuranceNewsNet. She formerly served as communications director for an insurance agents' association and was an award-winning newspaper reporter and editor. Contact her at [email protected].