Delaware seniors who rely on Medicare Advantage plans should prepare for potential reductions in supplemental benefits such as fitness memberships, vision care, and dental coverage starting next year, according to industry analysts and investment professionals.
Federal officials announced this month that payments to insurance companies operating Medicare Advantage programs for individuals 65 and older or those with disabilities will increase by an average of 2.48% for 2027. Dr. Mehmet Oz, who leads the Centers for Medicare & Medicaid Services, has been working to reduce federal healthcare program expenditures.
Insurance company leaders have indicated in recent weeks that these payment rates, despite being higher than initially proposed, remain insufficient. Humana specifically announced Wednesday that benefit reductions would be necessary.
Supplemental services such as vision, hearing, dental care, fitness programs, meal delivery, and transportation support have successfully attracted approximately half of the nation’s 70 million Medicare beneficiaries to choose managed care options over the government’s traditional fee-for-service model.
Industry observers expect benefit reductions and potential market exits from certain regions could help Humana and competitors like UnitedHealth Group’s UnitedHealthcare and CVS Health’s Aetna manage increased expenses, according to five investment professionals.
Medicare Advantage programs represent 80%, 33%, and 12% of total revenue for Humana, Aetna, and UnitedHealthcare respectively.
“All insurers are likely to cut back on benefits, but Humana will be cutting back the most,” stated Kevin Gade, chief operating officer at Bahl and Gaynor.
Reducing these supplemental benefits tends to encourage expensive members with higher medical utilization to switch to different plans, Gade explained.
A CVS Health representative said, “Aetna continues to offer quality insurance coverage in a manner that is sustainable for our clients and our business.” UnitedHealth chose not to provide comment.
During a Wednesday conference call with analysts and investors, Humana CEO Jim Rechtin explained that benefit cuts would be necessary to achieve profitability goals, though the company would attempt to preserve the most valued member benefits.
“We will adjust benefits to remain on track to deliver our 2028 commitment of returning to a sustainable margin of at least 3%,” Rechtin stated.
Bobby Hunter, who oversees government programs at UnitedHealthcare, mentioned earlier this month that Medicare Advantage funding remains below expectations for 2027, but did not indicate specific benefit reductions.
An AHIP spokesperson, representing the insurance industry trade organization, commented: “As health plans incorporate recently released policies, they will continue to focus on keeping coverage and care as affordable as possible.”
Morningstar analyst Julie Utterback noted that Humana has been providing more comprehensive benefits in its 2026 offerings compared to competitors.
“Potential benefit changes in 2027 may just be a matter of leveling the playing field for Humana relative to peers,” Utterback observed.
Medicare Advantage insurers typically wait until June to reveal plan modifications, she noted. Given UnitedHealth’s recent statements, Utterback suggested changes are “not out of the question.”
Investment professionals indicated that Medicare Advantage companies would distinguish themselves through quality, or “Star” ratings, which influence bonus payments and enhance profitability.
“You have to be very particular within managed healthcare right now, especially companies with high government exposure and average ‘Star’ ratings, which is where Humana sits,” said Stephanie Link, chief investment strategist at Hightower Advisors, which holds less than 1% of UnitedHealth shares.
Medicare Advantage enrollment begins in October, coinciding with U.S. midterm elections that will decide whether Republicans maintain Congressional control. Voter frustration over increasing costs typically impacts the governing party.
“When Medicare Advantage funding doesn’t keep pace with costs, seniors pay the price. We’ve seen it play out year after year,” said Susan Reilly, vice president of communications at Better Medicare Alliance, a coalition supporting these plans.
Senior citizens consistently vote in substantial numbers.
Alex Mills, a professor at Baruch College’s Zicklin School of Business, suggested customers might be caught off guard by rising out-of-pocket expenses, potentially creating political pressure.
“It would not be shocking if there’s somewhat of a backlash,” said Bill Smead, founder and chief investment officer of Smead Capital.
