For 2027, CMS finalized a 2.48% average increase in Medicare Advantage (MA) payments, more than $13 billion, and about 4.98% once risk score trends are included [1][2]. In the same cycle, eleven insurers left individual MA entirely and the large carriers kept trimming counties [3].

Both facts are true because the stay-or-exit decision is not made on the national rate. It is made county by county, plan by plan, on a P&L that the national average hides.

How a plan gets paid (simplified)

Each county has a benchmark: what CMS will pay for a beneficiary of average health. The plan submits a bid for the cost of covering standard Medicare benefits. If the bid is below the benchmark, the plan is paid its bid plus a rebate, a share of the difference that must be spent on extra benefits or lower premiums. Payments are then scaled by each member's risk score, which reflects their diagnoses [4].

Two quality rules sit on top. Plans with 4 stars or more get a higher benchmark through the quality bonus, and higher-rated plans keep a larger share of the rebate. A plan just below the 4-star line works with a smaller budget than the same plan just above it.

That leaves four variables that decide revenue per member per month: the county benchmark, the bid, the risk score and the Star Rating. Costs are medical claims, pharmacy, administration and distribution.

Where the margin went

Medical costs did not normalize. Insurers have been cutting plans, benefits and broker commissions since 2025 because medical costs outpaced reimbursement [3]. Utilization stayed high well past when it was expected to come down, and reported member acuity kept rising [5].

Risk adjustment pays less for the same members. The 2024 CMS-HCC model was fully phased in by 2026. For 2027, CMS kept that model but excluded diagnoses from unlinked chart reviews and audio-only visits from risk scores [2][6]. PwC estimates the risk adjustment changes cost plans about 3.5% of revenue on average, and more than 10% for some plans serving sicker populations [7].

Stars moved money. Humana's 2027 exits, about 600,000 members, are mostly in plans rated 3.5 stars or lower, though the company says ratings were not the main criterion [5]. Humana also cut its earnings guidance as lower ratings reduced its quality bonus payments [5].

Part D got more expensive for plans. The Inflation Reduction Act redesign shifted more drug liability to plans. In comments on the 2027 rule, plans reported higher-than-expected costs from that shift and from higher utilization among members reaching the out-of-pocket cap [8].

Scale matters more when margins are thin. Systems, compliance, Star Ratings programs and networks are largely fixed costs. A regional or provider-sponsored plan spreads them over fewer members. In a survey of MA leaders by HealthScape Advisors, 93% said their MA business is not currently profitable, 79% do not expect profitability for at least two more years, and 54% at least somewhat seriously considered exiting in the past year [9].

The county P&L

A directional version of the math, per member per month:

Part C revenue  ≈ [bid + rebate share × (benchmark − bid)] × risk score × (1 − 5.9% coding adjustment)
Total revenue   = Part C revenue + Part D revenue + member premium
Contribution    = Total revenue − medical cost − Part D cost − variable admin
Annual margin   = Contribution × members × 12 − fixed costs of the county or contract
Break-even      = fixed costs ÷ (contribution × 12)

The 5.9% is the statutory minimum MA coding adjustment CMS applies to risk scores [6]. This is not a bid: actual payment involves standardization, normalization and actuarial assumptions this formula leaves out. It is enough to see which variable a county's result depends on.

Reading the result

The useful question is not whether a county loses money today, but whether it still holds up under the next likely hit:

If the county survives all three, the case to stay is solid. If it is positive today but breaks under one of them, the lever is restructuring: benefit design, network, bid assumptions. If it is negative today and only gets worse, exit belongs on the table.

Exit has its own cost. A plan that does not renew can be barred from a new contract or service area expansion for two years [10], and the operational work runs well past December 31 (see Exiting a Medicare Advantage market is a transition project, not a press release).

The counterpoint

Exits are not proof that the program is failing. Researchers at Georgetown's Center on Health Insurance Reforms point out that average gross margins in MA rose from $192 to $194 per member per month and remain the highest of any market the NAIC tracks, and argue that exits by less competitive plans are what a functioning market looks like [11]. Both readings can hold at once: the program can be profitable on average while specific counties and specific plans are not.

Run the numbers

We built a free screen for the math above. Enter a county benchmark, your bid, risk score, Star Rating and costs, and it returns the margin, break-even membership and the three stress scenarios, with a stay, restructure or review-exit result.

Try the MA County Viability Check →

If the answer points to restructuring or exit, the Health Plan Transition Checklist covers what comes next.

Sources

  1. KFF, "Medicare Advantage insurers will see higher payments as CMS backs off a key payment update," April 2026. https://www.kff.org/quick-insights/medicare-advantage-insurers-will-see-higher-payments-as-cms-backs-off-a-key-payment-update/
  2. American Hospital Association, "CMS finalizes Medicare Advantage rates for CY 2027," April 6, 2026. https://www.aha.org/news/headline/2026-04-06-cms-finalizes-medicare-advantage-rates-cy-2027
  3. Becker's Hospital Review, "Medicare Advantage looks stable for 2027. Underneath, it's shifting," October 2026. https://www.beckershospitalreview.com/finance/medicare-advantage-looks-stable-for-2027-underneath-its-shifting/
  4. MedPAC, "The Medicare Advantage program: Status report," Report to the Congress, March 2025, Chapter 11. https://www.medpac.gov/wp-content/uploads/2025/03/Mar25_Ch11_MedPAC_Report_To_Congress_SEC.pdf
  5. HLTH Works, "Medicare Advantage mass exit for 2027," August 2026. https://hlthworks.com/medicare-advantage-mass-exit-for-2027/
  6. Becker's Payer Issues, "CMS hikes Medicare Advantage rate 2.48% for 2027: 6 notes," April 2026. https://www.beckerspayer.com/payer/medicare-advantage/cms-hikes-medicare-advantage-rate-2-48-for-2027-6-notes/
  7. PwC, "From growth to margin challenge: Navigating the forces shaping Medicare Advantage." https://www.pwc.com/us/en/industries/health-services/medicare-advantage-margin-compression.html
  8. Federal Register, "Medicare Program; Contract Year 2027 and Certain Contract Year 2026 Policy and Technical Changes," April 6, 2026. https://www.federalregister.gov/documents/2026/04/06/2026-06600/medicare-program-contract-year-2027-and-certain-contract-year-2026-policy-and-technical-changes-to
  9. HealthScape Advisors, "Medicare Advantage health plan outlook for 2027." https://www.healthscape.com/insights/medicare-advantage-health-plan-outlook-2027
  10. 42 CFR § 422.506, Nonrenewal of contract. https://www.law.cornell.edu/cfr/text/42/422.506
  11. Georgetown University Center on Health Insurance Reforms, "Is the sky falling in Medicare Advantage?" https://medicare.chir.georgetown.edu/is-the-sky-falling-in-medicare-advantage/

Nimbotools is not affiliated with any insurer mentioned. This note uses only public sources and is a simplified model, not actuarial or financial advice.