Insurance groups say proposed flat Medicare Advantage rates fail to meet the moment

The Trump administration has proposed flat rates in Medicare Advantage (MA) for 2027, and insurers argue in new commentary that those levels do not reflect the realities of the program.

In late January, the Centers for Medicare & Medicaid Services (CMS) released its annual proposed advance notice governing MA and Part D. 

The proposal includes a net payment rate increase of 0.09% in MA, meaning levels will be essentially flat if the plan becomes final.

The proposed rule drew immediate ire from the industry, which is already navigating significant financial challenges in this market. Multiple leading players have elected to exit certain MA markets. 

In official comments (PDF) submitted Wednesday to the CMS, the AHIP said the proposed rule "risks undermining CMS’ goal of providing beneficiaries with stable, affordable choices during the annual enrollment period."

"At a time of sharply rising medical costs and high utilization of medical services, the combined effect of the proposed policy changes and growth rates will not keep pace with the cost of caring for seniors in 2027," the organization, which is the largest lobbying group representing insurers, said in its comment letter.

The AHIP said an analysis from Wakely suggests the proposed advance notice could increase member premiums by $23 per month if insurers choose to maintain existing benefits, or $550 each year for a senior couple.

Many MA plans carry $0 premiums, which members value, and, to maintain that level, plans may need to cut benefits by 50%, the AHIP said. This could include cuts to priority benefits like vision and dental coverage, according to the letter.

The letter also says the proposed funding levels could lead to a $1,000 increase in the out-of-pocket cost exposure seniors face, per the Wakley analysis.

The AHIP said the CMS could avert these potential changes by adjusting the proposed payment rates to accounts for the rising cost of care for seniors and by phasing in updates to risk adjustment starting in 2028, which is consistent with the agency's approach to other key overhauls.

Failing to take action, the group said, could exacerbate inconveniences seniors are already feeling. For example, a recent study published in JAMA found that forced disenrollments in MA have risen as plans exit markets to adapt the cost environment.

The Blue Cross Blue Shield Association (BCBSA) echoed the AHIP in its own submitted comments, saying the challenges facing the industry are felt even more acutely by many of its members: smaller, regional Blues plans that have fewer avenues to absorb revenue losses in MA compared to the much larger conglomerates.

BCBSA said the proposed rates do not "sufficiently" address the rising cost of care and utilization, and proposed updates to risk adjustment will further disadvantage smaller plans in tandem.

"Unless CMS addresses these issues in the final rate notice, we are concerned that beneficiaries will face reduced choices, higher costs and fewer benefits in 2027," the BCBSA wrote.

In addition to making adjustments around the payment rates and risk adjustment, the BCBSA said it supports the agency's efforts to modernize and improve the star ratings program. The group said the CMS should put a focus on transparency and predictability and should take a phase-in approach to any major overhauls.

The Better Medicare Alliance said in a statement that if the CMS doesn't take action to adjust rates to account for the cost environment, the disruption that was felt during the 2026 enrollment period—such as the forced disenrollments—will likely worsen.

“President Trump has made clear that protecting Medicare is a priority,” said Mary Beth Donahue, CEO of the Better Medicare Alliance, in a statement. “The Final Rate Notice is an opportunity to deliver on that commitment by ensuring payment policies that preserve stability, affordability and choice for more than 35 million Medicare Advantage beneficiaries.”

And payer organizations weren't the only ones pushing back on the advance notice. The AMGA said in a statement that the flat rates also put pressure on providers amid rising beneficiary demand and inflation.

AMGA President and CEO Jerry Penso, M.D., said the group recognizes the CMS' efforts around payment accuracy and integrity, but the proposed increase "simply does not reflect the reality our members face every single day."

The AMGA said flat rates after an increase of about 5% in 2025 is a "dramatic reversal" that could significantly destabilize the MA market.

“Workforce costs are rising, supplies are more expensive and the infrastructure required to deliver high-quality, coordinated care demands ongoing investment," Penso said. "At some point, we have to ask: How long can providers be expected to do more with less?”