Humana will cut Medicare Advantage benefits for 2027 as the gap between federal funding and rising medical costs forces the insurer to adjust its offerings and exit unprofitable plans, the company announced during its second-quarter earnings call on July 29, 2026. The nation’s second-largest Medicare Advantage carrier will exit approximately 600,000 members—about 8% of its 7.2 million MA enrollees—while working to recapture roughly 240,000 of those members in other, more profitable plans.
Humana President and CEO Jim Rechtin said during the company’s first-quarter earnings call in April that the funding shortfall is more pronounced than a year ago, despite the Centers for Medicare & Medicaid Services finalizing a 2.48% payment increase for 2027. “We are approaching bids with a focus on returning to a sustainable margin of at least 3% in 2028 and making progress against that in 2027,” Rechtin said, according to Becker’s Payer. The company is targeting supplemental benefits like dental, vision, hearing coverage, and fitness programs for reduction, according to Reuters reporting from May 1, 2026.
CFO Celeste Mellet told investors on the July 29 call that Humana is deliberately shuttering plans with lower capital returns to keep benefits stable and retain members in higher-margin plans. The insurer’s strategy reflects a broader challenge facing Medicare Advantage carriers: the 2.48% rate increase announced by CMS in April, while better than the initially proposed 0.09% increase, still falls short of what insurers say is needed to cover rising medical costs.
Humana’s benefit-cut decision comes as the insurer grapples with a sharp decline in its Medicare Advantage star ratings, which the Centers for Medicare & Medicaid Services uses to calculate quality bonus payments. The share of Humana’s MA members enrolled in plans rated 4 stars or higher dropped to 25% for the 2025 rating year, down from 94% in 2024, according to Becker’s Payer. That collapse in star ratings has significantly reduced the company’s quality bonus income from CMS, contributing to earnings pressure.
Industry Pressure Mounts as Insurers Prioritize Profit Recovery
Humana’s plan cuts are the second consecutive year of market exits for the carrier and signal that major Medicare Advantage insurers are not done downsizing despite receiving higher federal payments. UnitedHealth, Elevance, Centene, and Molina all posted stronger-than-expected Medicare Advantage results in the second quarter and raised 2026 earnings guidance, according to Healthcare Dive reporting from July 2026. These carriers have benefited from both the Trump administration’s generous 2026 rate hike and their own cost-control efforts, including exiting unprofitable markets.
The broader funding challenge reflects the fundamental tension in the Medicare Advantage program: insurers argue that federal payment rates do not keep pace with medical cost inflation, while Medicare advocates contend that plans already receive significantly higher payments than traditional Medicare. When CMS originally proposed a nearly flat 0.09% payment increase in January 2026, industry groups warned that such minimal funding would force widespread benefit cuts and market exits. Though CMS ultimately delivered a 2.48% increase in April, insurers like Humana have determined that even this higher rate is insufficient to maintain current benefit levels while hitting profitability targets.
Humana expects to bring back about 40% of the 600,000 affected members—roughly 240,000 people—in other plans, according to Mellet’s statement to investors. The insurer retains 7.2 million total MA members and has been the only major national carrier to grow enrollment in recent years, adding 1.2 million members in 2025 and expecting 25% membership growth in 2026. However, the company’s strategy now prioritizes margin recovery over enrollment expansion, signaling a shift in how the industry balances growth and profitability in the face of rising healthcare costs.
Sources
- Becker’s Payer — Humana CEO Jim Rechtin’s statements on benefit adjustments and margin targets during the company’s first-quarter 2026 earnings call (April 30, 2026)
- Healthcare Dive — Humana’s plan exits, member impact figures, and CFO Celeste Mellet’s statements from second-quarter 2026 earnings call (July 29, 2026)
- Modern Healthcare — Confirmation of Humana’s 600,000-member reduction and shift to benefit cuts for 2027 (May 6, 2026)
- Reuters / Yahoo Finance — Details on specific supplemental benefits targeted for reduction (dental, vision, hearing, fitness programs) (May 1, 2026)
- Woman’s World — Overview of Medicare Advantage benefit cuts affecting dental, vision, and hearing coverage (May 5, 2026)
- CMS — Finalization of 2027 Medicare Advantage payment rates at 2.48% increase (April 6, 2026)
