Medicare Advantage is heading into its 2027 sign-up season with a split personality. On paper, the average premium is falling. Underneath, the big insurers are still trimming plans, star ratings got tougher and standalone drug coverage keeps shrinking, all because the companies are putting profit margins ahead of membership growth.
That matters twice for anyone over 50. Investors in the managed-care giants are watching whether two years of cost cutting finally turns into steady earnings, starting with UnitedHealth Group on Oct. 13. Households on Medicare have from Oct. 15 to Dec. 7 to check whether their own plan quietly got more expensive.
- Centers for Medicare & Medicaid Services: the weighted average monthly Medicare Advantage premium is projected to fall to $12.00 in 2027 from $14.37, while the average standalone Part D drug plan premium edges up to $36 from $35.09.
- CMS 2027 Star Ratings: only about 37% of 508 Medicare Advantage drug-plan contracts earned four stars or more, down from about 44% for 2026, although roughly 71% of enrollees are in those higher-rated contracts.
- UnitedHealth Group filings: its Medicare Advantage membership fell to about 7.57 million at the end of June from 8.45 million at the end of 2025, as the company chose margins over enrollment.
Insurers spent 2026 repairing margins
For years Medicare Advantage was the steadiest growth engine in health insurance. Then seniors started using more care than insurers had priced for, and profits shrank. The response in 2026 was a broad retreat: fewer counties, leaner extra benefits and tighter networks.
UnitedHealth, the largest Medicare Advantage carrier, shows how that played out. Its second-quarter release, filed with the Securities and Exchange Commission, said the number of seniors it serves through Medicare Advantage contracted by 965,000 since the end of 2025. Management now expects full-year enrollment to fall by about 1.1 million and Medicare margins to finish 2026 above 3%. The company's medical care ratio, the share of premiums paid out in claims, improved to 86.7% from 89.4% a year earlier, helped by $860 million of favorable reserve development. UnitedHealth raised its 2026 adjusted earnings outlook to $19.50 to $20.00 a share.
Humana took the other side of that trade. Its second-quarter filings show individual Medicare Advantage membership up about 1.2 million, or 23%, so far in 2026, on track for roughly 25% growth for the year. The cost of that growth shows up in its insurance benefit ratio, 91.2% in the second quarter with full-year guidance of 92.75%. Humana said its 2027 bids should drive meaningful progress toward a pre-tax margin of at least 3% in 2028, and trade press coverage of its July call reported that planned 2027 plan exits would affect roughly 600,000 members.
Washington gave a bigger raise than expected
Federal payment policy is the other half of the story. In its final 2027 rate announcement in April, CMS projected a 2.48% average payment increase for Medicare Advantage plans, worth more than $13 billion, far above the 0.09% it proposed in January. Including expected growth in risk scores, the increase works out to about 4.98%.
The raise came with strings. CMS will stop counting certain diagnoses from unlinked chart reviews and from audio-only visits, a push against coding practices that inflated payments. Insurers get more money per member, but less room to boost revenue through paperwork.
CMS expects plan choice to stay broad. It projects about 5,532 Medicare Advantage plans in 2027, nearly the same as this year, with 97% of beneficiaries able to pick from 10 or more. Enrollment is projected near 34 million, about 47.4% of everyone on Medicare, and roughly eight in 10 current members can keep their plan at the same or a lower premium.
Star ratings got tougher
The 2027 Star Ratings, released Oct. 8, are the scorecard shoppers see on Medicare Plan Finder. They also set quality bonus payments for 2028, so they flow straight into insurer earnings a year out.
Fewer contracts cleared the bar. Only 188 of 508 drug-plan contracts earned four stars or more, and the number of five-star contracts fell to 15 from 22. Because the largest plans held up better, the enrollment-weighted average rating slipped only slightly, to 3.99 from 4.01. CMS also added new measures, including two medication safety measures for older adults, which raises the bar for plans that rely on bonus money.
Drug coverage is where shoppers feel it
The averages hide the pain in standalone Part D plans, the drug coverage paired with traditional Medicare. Avalere Health counts 316 standalone drug plans for 2027, down 12% from this year and 55% since 2024. Its analysis estimates that people who stay in the same plan face an average premium increase of about 50%, and about 21% of non-subsidized enrollees are in plans rising $30 a month or more.
Why does the CMS average barely move while those members see big jumps? The average includes cheap plans many people are not in. CMS says 93% of non-low-income beneficiaries can find an enhanced drug plan for under $6 a month, but many will need to switch plans to get that price. The standard deductible rises to $700 from $615, and the annual out-of-pocket cap rises to $2,400 from $2,100, according to the CMS rate announcement.
Medicare Advantage drug plans look friendlier. CMS projects their average drug premium falling to $7 from $11.32 after rebates, which is one reason some drug-plan shoppers weigh a move to Advantage.
What investors should watch
The earnings calendar lines up with open enrollment. UnitedHealth reports before the market opens on Oct. 13, with a call at 8 a.m. Eastern. Elevance Health releases results on Oct. 21. CVS Health, parent of Aetna, holds its call on Nov. 4, and Humana reports Nov. 6. Humana has also scheduled a virtual investor update for Dec. 10.
Three questions matter most. First, is medical cost trend still running near the high single digits insurers described this summer, or is it cooling? Second, how much 2027 membership are carriers willing to give up to protect margins? Third, how do the new star ratings change bonus money for 2028? Humana has already guided to a seasonal third-quarter adjusted loss of about $1 a share, so investors will focus on the full-year path rather than one quarter.
On financial Twitter, the managed-care debate has shifted from whether the industry is broken to whether the margin repair can last. On Reddit's Medicare forums, the conversation is more practical: members comparing annual change letters and asking whether their doctors are still in network.
What it means for your household
Start with your Annual Notice of Change, the packet plans mail each fall that lists next year's premiums, copays and drug coverage. If you have not opened it, do it this week.
Then run your doctors and prescriptions through Medicare Plan Finder or call 1-800-MEDICARE. People in standalone drug plans should be especially careful, since staying put is where the biggest premium jumps are. Free one-on-one help is available through your State Health Insurance Assistance Program.
Know the calendar. Changes made by Dec. 7 take effect Jan. 1. If you are in Medicare Advantage, a second window from Jan. 1 to March 31 allows one switch. Be cautious about leaving Advantage for traditional Medicare, because in most states a Medigap supplement can require medical underwriting outside your first enrollment window.
The bottom line: Medicare Advantage is not going away, but it is being repriced. Insurers are trading members for margins, regulators are paying more while tightening the rules, and the households that compare plans this fall are the ones most likely to avoid an unpleasant January surprise. This article is general information, not personalized financial or insurance advice.
