The Centers for Medicare and Medicaid Services finalized a 2.48 percent average payment increase for Medicare Advantage plans in 2027, a sharp reversal from the near-flat 0.09 percent rate the agency had floated in January. That jump followed months of pressure from insurers, brokers and provider groups who warned the original number would push plans further into retreat. What did not change in the process is the underlying math: insurer medical costs are still outrunning the new payment level, and the same companies now setting 2027 bids say that gap will still surface as fewer extra benefits and, in some markets, no plan at all.
What the 2.48 Percent Figure Actually Measures
CMS’s own rate table for 2027 lists several different percentages, and they measure different things entirely. The Effective Growth Rate, an estimate of how fast Original Medicare per-capita costs are rising, finished at 5.33 percent for 2027, revised upward from the 4.97 percent CMS had projected in January after the agency folded in additional Original Medicare claims data through the fourth quarter of 2025. That growth rate is the input, not the number carriers actually see on their 2027 payments.
After subtracting adjustments for benchmark rebasing, Star Ratings changes, a revised risk-model normalization factor and the exclusion of certain unlinked diagnosis records, the finalized CY 2027 Rate Announcement lists an “Overall Expected Average Change” of 2.48 percent — the actual net payment increase CMS says Medicare Advantage plans will receive in 2027, worth more than $13 billion nationwide. Factoring in the industry’s own projected risk-score coding trend, CMS puts the effective increase at 4.98 percent, a distinction insurers and their actuaries track closely even though it rarely appears in headline coverage.
The final number moved because insurers pushed hard for it to. In January, CMS’s advance notice proposed a nearly flat 0.09 percent update, and the Better Medicare Alliance led more than 100 health plans, brokers and provider groups in a letter to CMS Administrator Mehmet Oz warning that years of “inadequate funding and significant policy changes” had already produced higher out-of-pocket maximums and plan exits, and urging the agency to “promote stability” before finalizing 2027 rates.
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Why a Higher Rate Still Left a Funding Gap
Humana signaled the higher rate would not be enough well before CMS finalized it. On its first-quarter earnings call in April, the insurer told analysts that the gap between what Medicare Advantage pays and its own medical cost trend was wider heading into the 2027 bid cycle than it had been a year earlier, and that closing it would require what the company called benefit and geographic adjustments — corporate language for narrower service areas and thinner plan offerings, even after accounting for the improved rate.
By its second-quarter call on July 29, Humana had a number attached: roughly 600,000 members will receive non-renewal notices in early October informing them their current plan will not exist in 2027, the vast majority in plans rated 3.5 Stars or below. Chief Financial Officer Celeste Mellet said the company expects to recapture a significant portion of that volume, similar to the roughly 40 percent it retained after a comparable round of exits affecting 2025 coverage, while Chief Executive Jim Rechtin tied the strategy directly to a goal of a sustainable pretax margin of at least 3 percent by 2028.
The 2027 pullback follows two consecutive years of retreat: Humana shed roughly 500,000 members exiting unprofitable plans and counties in 2025, and its 2026 footprint had already narrowed to 46 states and 85 percent of U.S. counties, down from 89 percent the year before. The response has not been uniform across the industry — UnitedHealthcare’s Medicare Advantage enrollment fell about 9 percent and Elevance Health’s dropped 14 percent during the same stretch, while several regional insurers posted record membership growth by holding their networks and benefits steady, evidence that the 2.48 percent rate lands very differently depending on a carrier’s existing cost structure.
What the Chain Means for Enrollees Heading Into 2027
The 600,000 non-renewal letters do not describe a benefit cut inside an existing plan; they describe a plan disappearing entirely, which is a different and blunter outcome. Members will receive those notices in the first weeks of October, just before the annual Medicare enrollment period opens on October 15 and runs through December 7, leaving a narrow window to compare remaining options on premium, drug coverage, provider networks and the supplemental extras that vary most between competing plans.
For members who keep a plan rather than lose one outright, the more likely effect of the funding gap is inside the benefit design itself. The same industry letter that pushed CMS toward the 2.48 percent figure cited rising out-of-pocket maximums as a symptom of inadequate funding in prior years, and Humana’s own description of benefit and geographic adjustments needed for 2027 bids points to the same lever: plans preserve the core medical benefits Medicare requires and trim the supplemental features layered on top, which is where insurers have the most discretion to protect margin.
CMS’s decision to publish two different net numbers, 2.48 percent before coding trend and 4.98 percent after it, is itself a signal of how uncertain the agency’s own actuaries consider the gap to be. Insurers are effectively being told to plan around a range rather than a fixed figure, and Humana’s decision to name a specific membership number for 2027 while other national carriers have not yet done so suggests the final scale of exits and benefit trims this fall is still being negotiated inside each company’s own bid, not settled by the rate announcement alone.
That negotiation plays out largely out of public view until insurers file their 2027 bids and CMS approves the plan-by-plan benefit packages later this year, well after the October non-renewal notices land. Until those bids surface, the clearest evidence of what a 2.48 percent rate increase actually buys enrollees remains the number Humana has already put on the record: 600,000 people whose current Medicare Advantage plan will not exist in 2027, regardless of how the payment math looks on paper.
This article was produced with AI assistance and reviewed by The Money Overview editorial team.
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