The Medicare Advantage (MA) market is set for significant changes as Humana and CVS have announced plans on reducing their Medicare Advantage plan in 2025. This strategic shift, aimed at boosting profitability, may lead to increased plan switching among seniors during the next open enrollment period, creating opportunities for other insurers to gain market share.

Recent expansions in supplemental benefits to attract seniors will likely be scaled back, affecting benefits and competitive dynamics. However, UnitedHealth, the largest MA insurer, is well-positioned to benefit from its strong focus on cost management and growth.

Who Could Benefit from Humana and CVS Reducing Medicare Advantage Plan?

Humana and CVS have announced plans to reduce their Medicare Advantage offerings for 2025. These changes are primarily driven by a desire to improve profits, often at the expense of supplemental benefits that have been heavily expanded in recent years. Benefits like enhanced dental coverage and allowances for home improvements or pet care might be reduced. Additionally, co-pays for specialty care could be increased, along with a higher maximum out-of-pocket burden for seniors.

Why Are Insurers Making These Changes?

The decision to cut benefits and raise premiums came from the need to navigate the “total beneficiary cost” (TBC) metric, which limits how much insurers can change benefits each year. Additionally, the Centers for Medicare & Medicaid Services (CMS) has capped the TBC change at $40 per member per month for 2025. This constraint forces insurers to strategically cut less visible benefits to maintain or improve their margins.

Who Stands to Gain from These Changes?

UnitedHealth appears to most likely benefit from Humana and CVS downsizing. As the largest MA insurer, UnitedHealth has shown resilience in managing utilization pressures and is poised for growth. However, other national insurers like Elevance and smaller regional plans might also capitalize on this opportunity to attract new members. Analysts believe that even a conservative shift in market share could significantly benefit UnitedHealth, potentially adding $13 billion in annualized revenue.

How Will Seniors Be Affected by Humana and CVS reducing Medicare Advantage Plan?

The impact on seniors largely depends on their awareness and willingness to switch plans during open enrollment. Historically, only about 10% of MA enrollees switch plans each year. However, the anticipated reductions in benefits and potential cost increases could motivate more seniors to explore other options. Insurers may strategically cut less noticeable benefits to seniors while preserving highly valued ones like over-the-counter and flex cards.

When Will We Know More?

More detailed information about benefit changes and market exits will become available in October when CMS releases data on 2025 bids. The full extent of the market shakeup will be clearer after the MA open enrollment period ends in March. Insurers will likely adjust their strategies based on member behavior and market conditions to balance profitability and member retention.

Learn more about Humana and CVS reducing Medicare Advantage Plan in 2025

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