The Medicare Advantage market is losing insurers at a pace federal regulators have never encountered, and enrollees are bearing the consequences. Roughly 2.9 million beneficiaries were forced to find new plans heading into 2026, with more insurer exits expected in 2027.
Now the Centers for Medicare and Medicaid Services (CMS) has signaled a shift that could reshape how insurers acquire struggling competitors.
Your coverage options for 2027 may depend on whether this move keeps more plans alive through the transition.
Federal regulators open a new path for midyear Medicare Advantage acquisitions
CMS notified insurance companies that it may allow midyear service area expansions when an insurer acquires a competitor, Modern Healthcare reported. Previously, the agency considered expansion requests only during the annual bid cycle in June, which limited how quickly buyers could absorb acquired plans.
Under the old framework, CMS would often force a buyer to shut down acquired plans operating outside the buyer’s existing service area. That restriction penalized insurers willing to rescue failing competitors, leaving enrollees stranded without coverage options in their markets.
The revised guidance could accelerate dealmaking across the program, John Selby, an independent health insurance consultant, told Modern Healthcare. He described the shift as a signal that federal authorities are bracing for deeper consolidation ahead.
“If the expectation is that they’re going to see more acquisitions and consolidation over the next few years, this is likely a preemptive move to make that process easier,” Selby said.
Michael Bagel, vice president of public policy at the Alliance of Community Health Plans, framed the decision as a direct response to coverage gap concerns. He noted that CMS is “willing to speed acquisitions up” to prevent prolonged breaks in coverage for seniors.
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Mounting losses are pushing Medicare Advantage insurers toward the exits
The urgency behind the CMS policy change becomes clearer against the financial wreckage building across the industry. Nearly 75% of health plans reported operating losses in 2025, and roughly 25% of financially vulnerable plans announced deals or exits in 2024 and 2025, HealthScape Advisors found in its August 2026 report.
Humana announced that its 2027 plan exits will affect approximately 600,000 members as the insurer focuses on margin recovery, Becker’s Hospital Review reported. Molina Healthcare is dropping all individual Medicare Advantage prescription drug plans for 2027 after determining the product did not align with its dual-eligible focus, Becker’s Payer Issues noted.
Other smaller carriers have also collapsed under pressure. Providence Health Plan shuttered after its Medicare Advantage sale fell through, and Georgia regulators closed Sonder Health Plan in August 2025 after the startup failed to secure a deal, Modern Healthcare reported.
“With margins compressed in literally every segment of the business, smaller insurers may need to pick their spots and choose segments where they feel the most comfortable taking risk,” Katherine Hempstead, a senior policy advisor at the Robert Wood Johnson Foundation, told Modern Healthcare.
Nearly 3 million enrollees lost coverage heading into 2026
The scale of disruption hitting Medicare Advantage enrollees has no precedent in the program’s history. The forced disenrollment rate jumped from a 1% annual average between 2018 and 2024 to 10% in 2026, affecting roughly 2.9 million people, researchers at Johns Hopkins and Georgetown University found.
The study found that rural beneficiaries experienced plan disruptions at double the rate of enrollees in urban areas. In seven states, more than 40% of Medicare Advantage enrollees lost their plans, with Vermont at 92%.
The 2027 enrollment cycle, running from October 15 through December 7, arrives amid this instability and narrowing options. Nonrenewal letters for plans exiting in 2027 must be dated no later than October 2 under federal regulations.
Key takeaways from the CMS policy shift
- CMS may now allow insurers to expand service areas midyear after acquiring a competitor, replacing the previous June-only bid cycle restriction (Modern Healthcare).
- Approximately 25% of financially vulnerable health plans announced affiliations, acquisitions, or exits in 2024 and 2025 (HealthScape Advisors).
- Forced disenrollment surged from a 1% average to 10% in 2026, displacing an estimated 2.9 million enrollees (JAMA).
- Humana’s 2027 exits will affect roughly 600,000 members, and Molina Healthcare is leaving individual Medicare Advantage entirely (Becker’s Hospital Review).
- Nearly 75% of health plans posted operating losses in 2025, indicating that financial pressure across the industry is structural (HealthScape Advisors).
