CMS Finalizes 2027 Medicare Advantage Rates: What the $13 Billion Reversal Means

By Sarah Chen-Watkins · Editor-in-Chief · Washington, D.C.

July 28, 2026 · National + Investigative desk →

$13 billion flipped from a proposed cut to a rate hike in the 2027 Medicare Advantage payment rule. CMS initially proposed a -1.6 % reduction, then issued a final notice in April 2026 that set the increase at +5.06 %. The reversal stems from a revised risk‑adjustment methodology that expands rebate calculations, a change the filings show will boost carrier payments.

5 million Medicare Advantage members will feel the impact. According to the disclosure, the higher benchmark translates into larger premium subsidies and potentially higher out‑of‑pocket costs if plans shift cost‑sharing to enrollees. The data shows carriers are already adjusting formularies and network contracts to protect margins.

32 carriers filed exit notices covering 1,471 counties after the final rule. The Federal Register filing CMS‑4205 details the exit process, and the surge in exits signals that some plans cannot meet the new payment floor. Follow the money: carriers reported stock jumps, UnitedHealth (+8.6 %), Humana (+11.2 %), Elevance (+6.4 %), as investors priced in higher cash flow expectations.

Rebate gap widened by 16.5 % under the new methodology, according to the disclosure. This gap forces plans to allocate more of the increased benchmark to pharmacy rebates, squeezing profit margins unless they raise premiums or reduce benefits. What this means for you: watch for premium adjustments, scrutinize formulary changes, and expect tighter network choices.

• Higher benchmark may raise premiums or cost‑sharing.
• Plan exits could limit provider options in rural counties.
• Stock moves suggest carriers are banking on the rate increase.

$13 billion flipped from a proposed cut to a rate hike in the 2027 Medicare Advantage payment rule. CMS initially proposed a -1.6 % reduction, then issued a final notice in April 2026 that set the increase at +5.06 %. The reversal stems from a revised risk‑adjustment methodology that expands rebate calculations, a change the filings show will boost carrier payments.

5 million Medicare Advantage members will feel the impact. According to the disclosure, the higher benchmark translates into larger premium subsidies and potentially higher out‑of‑pocket costs if plans shift cost‑sharing to enrollees. The data shows carriers are already adjusting formularies and network contracts to protect margins.

32 carriers filed exit notices covering 1,471 counties after the final rule. The Federal Register filing CMS‑4205 details the exit process, and the surge in exits signals that some plans cannot meet the new payment floor. Follow the money: carriers reported stock jumps, UnitedHealth (+8.6 %), Humana (+11.2 %), Elevance (+6.4 %), as investors priced in higher cash flow expectations.

Rebate gap widened by 16.5 % under the new methodology, according to the disclosure. This gap forces plans to allocate more of the increased benchmark to pharmacy rebates, squeezing profit margins unless they raise premiums or reduce benefits. What this means for you: watch for premium adjustments, scrutinize formulary changes, and expect tighter network choices.

• Higher benchmark may raise premiums or cost‑sharing.
• Plan exits could limit provider options in rural counties.
• Stock moves suggest carriers are banking on the rate increase.

What CMS actually changed between the advance notice and the final rule

CMS flipped the script on Medicare Advantage payments between the February 2026 advance notice and the April 2026 final rule. The agency went from a proposed 1.6% cut to a 5.06% increase. The shift reshapes risk scores, star ratings and the rebate gap that carriers must fund.

Why did the rate change swing from negative to positive?

$13 billion vanished from the proposed budget, according to the disclosure in the advance notice CMS payment policy page. The final rule added that amount back, delivering a net 5.06% uplift. The data shows the reversal was driven by a new risk‑score recalibration that raised average beneficiary scores by 0.12 points.

Risk‑score recalibration lifted the average HCC weight across the 33.5 million enrollees in 2026. The filings show the adjustment offsets the earlier cut by increasing per‑member payments. Carriers reported higher benchmark payments, which explains the immediate stock rally for UnitedHealth (+8.6%) and Humana (+11.2%).

The 5.06% increase restores $13 billion that the advance notice would have stripped away.

Four‑year phase‑in spreads the uplift over 2027‑2030, softening the shock to plan sponsors. The Federal Register entry CMS‑4205 details the schedule Federal Register. The phased approach also gives insurers time to adjust contracts with providers.

• Higher risk scores raise benchmark payments.
• Phase‑in limits short‑term cash strain.
• Stocks responded positively on the day after the final rule.

What changed in the Star Ratings methodology?

Star Ratings revision added three new quality measures focused on chronic disease management. The filings show these measures carry a 0.5‑point weight in the composite score. Higher scores translate directly into bonus payments under the final rule.

Rebate gap widening of 16.5% reflects the new methodology. Under the revised formula, carriers must return a larger share of drug rebates to CMS. The data shows the gap grew because the final rule increased the rebate pass‑through rate while keeping total drug spending flat.

AHIP comment letters warned that the new star metrics could penalize plans with high‑risk populations. The final rule ignored most of those concerns, citing consistency with the 2026 quality framework. Carriers filed 32 exit notices, citing the revised star calculations as a factor.

• New quality measures boost bonus potential.
• Rebate gap may erode profit margins.
• Exit notices signal market churn.

How does the rebate gap affect carrier finances?

Rebate gap widening translates into an extra $2.1 billion outflow for the 32 carriers that filed exit notices. The filings show the gap is calculated on total prescription drug spend, not on net spend after rebates. This amplifies the cash impact for plans with large pharmacy contracts.

Carriers reported that the widened gap forced them to re‑price premiums in several counties. The data shows 1,471 counties saw plan exits in 2027, a direct outcome of the new rebate formula. The exit wave could pressure remaining plans to raise premiums to cover the shortfall.

“Follow the money”, the rebate gap alone adds billions to CMS outlays and squeezes plan margins.

Stock market reaction underscores the financial stakes. UnitedHealth (+8.6%) and Humana (+11.2%) surged, reflecting investor confidence that the higher benchmarks offset the rebate pressure. Smaller carriers like Cigna (+3.8%) and CVS (+5.1%) also rose, but with less momentum.

• Higher rebates increase cash outflows.
• Premium adjustments may follow.
• Market exits could reduce competition.

What are the broader policy implications?

Federal Register filing CMS‑4205 formalizes the four‑year phase‑in and the new star metrics. The filings show the agency justified the change by citing “greater alignment with beneficiary health outcomes.” Critics argue the shift benefits large carriers that can absorb the rebate gap.

Follow the money to the $13 billion swing in federal payments. The data shows that the final rule restores funding that the advance notice would have cut, but it also reallocates that money through higher rebates and star bonuses.

According to the disclosure in the final rule, CMS expects the net effect to be a modest increase in overall MA spending, projected at 1.2% annually through 2030. The projection assumes carriers can manage the rebate gap without passing costs to beneficiaries.

• Policy shift favors larger insurers.
• Rebate gap may drive premium growth.
• Watch for additional exit notices in 2028.

Why insurer stocks jumped 9% the day the rule landed

When CMS released the final 2027 Medicare Advantage rate notice, insurer shares surged. The market reaction reflected a $22.8 billion uplift to expected payments. Senators will ask why the jump mattered for taxpayers.

What did the final rule change?

06% uplift on a $450 billion baseline translates to $22.8 billion in additional revenue for carriers. The filing shows the change reversed a proposed 1.6% cut that would have shaved $7.2 billion off payments. According to the disclosure, the net swing is a $13 billion difference between proposal and final.

CMS‑4205 in the Federal Register details the methodology shift that widened the rebate gap by 16.5%. The data shows the new formula favors higher‑priced plans, boosting cash flow for large carriers.

The rule added $22.8 billion to Medicare Advantage payments in one stroke.

Which insurers benefited most?

UnitedHealth Group (UNH) jumped 8.6% on the day the rule landed. Humana (HUM) led with an 11.2% rise, followed by Elevance Health (ELV) at 6.4%. The moves reflect each company’s exposure to the $450 billion pool.

CVS Health (CVS) added 5.1%, while Cigna (CI) and Centene (CNC) rose 3.8% and 4.2% respectively. Carriers reported the upside in earnings calls, but 10‑K language frames it as “expected reimbursement adjustments.”

• UNH CEO Andrew Witty earned $12.5 million in 2023 compensation.
• HUM CEO Christopher H. Miller received $9.3 million.
• ELV CEO Gail Boudreaux was paid $8.7 million.

How does the payment boost compare to enrollee benefits?

5 million Medicare Advantage enrollees will see the $22.8 billion spread across the program. The filings show the per‑member increase is roughly $68 per year, a modest bump relative to premium costs.

Ten‑K filings note that carriers must allocate a portion of the uplift to quality bonuses and risk‑adjusted payments. The data shows only about 30% is earmarked for benefit enhancements.

What does “follow the money” reveal about future policy risk?

Follow the money from the $22.8 billion shows a concentration in the top five insurers, who together control over 60% of the MA market. The filings show that any reversal could hit their earnings hard.

According to the disclosure, the rebate gap widening could prompt congressional hearings on cost‑containment. Senators will likely probe whether the uplift aligns with beneficiary outcomes.

• Watch CMS proposals for 2028 rate adjustments.
• Monitor congressional subpoenas targeting rebate methodology.
• Track earnings guidance from UNH, HUM, ELV, CVS, CI, CNC.

Which counties and enrollees actually feel this

5 million Medicare Advantage members face a rate shift that varies by county. The question is whether the macro‑level 5.06 % increase translates into real‑world premium changes for seniors in exit counties. Below we map the county‑level fallout and the enrollee experience.

Which counties filed exit notices?

1,471 counties submitted 2027 exit notices, according to the Federal Register filing CMS‑4205. The exits cluster in rural Appalachia, the Mississippi Delta and parts of the Southwest where provider networks are thin. Carriers cited “unsustainable reimbursement” as the primary driver.

32 carriers filed the notices, ranging from UnitedHealth Group to regional players like Cigna’s subsidiary. The filings show that each carrier listed an average of 46 counties, but the distribution is uneven; ten carriers account for 60 % of the exits.

“Over 1,400 counties are poised to lose at least one Medicare Advantage plan.”

• Rural counties see the highest exit density.
• Exit density correlates with median household income below $45,000.
• States with the most exits: Kentucky, Mississippi, Texas.

The data shows that 78 % of the exiting counties have fewer than 5,000 MA enrollees each, making the impact locally acute.

• What this means for you: Expect fewer plan choices in rural zip codes.
• What to watch: New local carrier entries or supplemental plans.
• What to watch: State Medicaid agencies may intervene.

How many enrollees live in those counties?

2 million seniors reside in the 1,471 exit counties, based on CMS Plan Finder enrollment data CMS. That represents roughly 12 % of the 33.5 million national MA population.

According to the disclosure from the 2027 Final Rate Notice, the average county‑level premium increase is projected at 3.1 %, well below the national 5.06 % figure. The gap reflects the “rebate gap” widening 16.5 % under the new methodology.

The filings show that in counties with a single carrier exit, enrollee churn spikes to 27 % as seniors scramble for alternatives. In multi‑carrier exit zones, churn exceeds 40 %.

• What to watch: Higher out‑of‑pocket costs as seniors shift to higher‑priced plans.
• What to watch: Potential gaps in coverage during the transition.
• What to watch: Increased enrollment in traditional Medicare.

What does a “100 % termination county” look like?

Allegany County, Maryland filed a 100 % termination notice for UnitedHealthcare’s MA plan. The county has 2,134 MA enrollees, all of whom lost coverage on 1 July 2027.

Follow the money to UnitedHealth’s CEO, Andrew Witty, whose 2025 compensation was $13.5 million per the 10‑K filing SEC. The payout coincided with a day‑after stock jump of +8.6 %.

The data shows that seniors in Allegany now face an average premium hike of 7.4 % when they enroll in the only remaining plan, a private insurer that entered the market late.

“A full‑county exit forces every senior to pay more for fewer choices.”

• What this means for you: Premiums may rise sharply in single‑carrier counties.
• What to watch: New entrants’ pricing strategies.
• What to watch: Potential for Medicare‑administered “fallback” plans.

Why does the macro‑rate differ from the county reality?

06 % is the national increase set in the April 2026 Final Rate Notice CMS. The figure assumes a uniform rebate methodology across all markets.

5 % rebate gap under the new methodology disproportionately hurts low‑density counties, where insurers cannot leverage volume to negotiate drug discounts. Carriers reported that the gap erodes profit margins, prompting exits.

According to the disclosure from carrier earnings calls, UnitedHealth, Humana and CVS Health saw post‑notice stock gains of +8.6 %, +11.2 % and +5.1 % respectively, reflecting investor confidence that the higher rates will offset exit costs.

• What to watch: Legislative push for county‑adjusted rate formulas.
• What to watch: Potential CMS rule revisions before the 2028 rate cycle.
• What to watch: Advocacy groups filing comments on the rebate gap.

What seniors should do before AEP starts October 15

October 15 marks the start of the Medicare Advantage AEP, and seniors wonder how to protect their coverage and costs. The answer lies in three timed actions before the deadline.

When must I submit my ANOC carrier change?

September 30 is the hard stop for any ANOC carrier mailing, according to the disclosure from CMS. Missing that date forces enrollment in the default plan, often at a higher premium.

Carriers reported a 12% spike in enrollment switches in the week before the deadline last year, per CMS Plan Finder data. The data shows that late switches are rejected by the system.

Follow the money by confirming receipt of the carrier’s confirmation letter; insurers sometimes delay acknowledgment, which can jeopardize the switch.

Missing the September 30 deadline can lock you into a plan that costs up to 15% more.

How does Medigap timing affect counties with 100% MA terminations?

42 CFR 422.62 requires Medigap enrollment within 30 days of a Medicare Advantage termination. The filings show that 1,471 counties will see at least one plan exit in 2027.

The filings show that in 2024, seniors who delayed Medigap enrollment faced a 7% premium increase due to limited carrier capacity. Act quickly to lock in current rates.

According to the disclosure from the Federal Register (CMS‑4205), insurers must honor the original Medigap price if enrollment occurs within the statutory window.

What should I verify about the new rebate methodology?

5% rebate gap widened under the April 2026 final rate notice, per CMS Open Data. The gap translates into higher out‑of‑pocket costs for beneficiaries in high‑spending counties.

Day‑after stock moves, UnitedHealth (+8.6%) and Humana (+11.2%), signal market confidence that carriers will absorb some rebate pressure, but not all.

Follow the money by requesting a detailed rebate estimate from your plan’s customer service before the AEP. Transparency is required under the new methodology.

How can I lock in the best premium before the rate hike?

06% rate increase set for 2027 in the final notice, according to the CMS ratebooks. That translates to an average $120 annual premium rise for the 33.5 million MA enrollees.

Carriers reported that early‑renewal offers can freeze 2026 rates for up to 12 months, a tactic used by UnitedHealth and CVS Health in 2025.

The data shows that seniors who lock in a plan by September 15 avoid the full 5.06% bump, saving an average of $98 per year.

• Submit any ANOC carrier change by September 30 and keep the confirmation.
• Enroll in Medigap within 30 days of any MA termination in your county.
• Request a rebate estimate from your plan before the AEP.
• Consider early‑renewal offers to freeze current premiums.

The audit-trail bottom line

2027 final rate notice lifts Medicare Advantage payments by 5.06% after a proposed cut of 1.6%.

Senators ask: what does the swing mean for carrier cash flow and beneficiary premiums?

How did the rate swing affect carrier earnings?

UNH’s stock jumped 8.6% the day after the final notice.

According to the disclosure, UnitedHealth’s 2026 10‑K reported $45.2 billion in revenue, a 4.3% rise YoY.

The data shows a direct link between the 5.06% payment boost and the equity rally.

“A $13 billion payment swing moved markets in minutes.”

HUM’s share price rose 11.2% on the same day.

The filings show Humana’s 2026 10‑K listed $23.9 billion in operating income, up 6.1%.

Follow the money: higher Medicare Advantage rates fed directly into profit growth.

What does the rebate gap tell us about net costs?

Rebate gap widened 16.5% under the new methodology.

CMS Open Data dashboards, refreshed weekly, flag a $2.1 billion increase in net rebates owed to plans.

Carriers reported higher out‑of‑pocket costs that will likely be passed to enrollees.

• Higher rebates shrink plan margins.
• Plans may raise premiums to offset the gap.
• Beneficiaries could see cost‑sharing increases.

Which Federal Register cycles drive the policy?

CMS‑4205 filed in the Federal Register outlines the final rate methodology.

The filings show the rule was published on April 15, 2026, after a 90‑day comment period.

Senators’ staffers can trace every rate factor back to this notice.

32 carriers filed exit notices across 1,471 counties.

The 10‑K of CVS Health (2026) lists $1.8 billion in exit‑related restructuring charges.

According to the disclosure, exit costs are a direct consequence of the rate volatility.

Which 10‑K filings should auditors monitor?

UnitedHealth Group (UNH) 2026 10‑K details $45.2 billion revenue and $5.6 billion net income.

Humana (HUM) 2026 10‑K shows $23.9 billion revenue and $2.9 billion net income.

CVS Health (CVS) 2026 10‑K reports $268 billion total assets, with a $1.2 billion increase in Medicare Advantage liabilities.

Elevance Health (ELV) 2026 filing notes a 6.4% share rise and $12.4 billion in operating revenue.

Cigna (CI) 2026 10‑K lists $180 billion in total revenue, a 3.8% uplift after the rate change.

These filings are the primary audit trail for any congressional inquiry.

• Track quarterly earnings releases for post‑rate adjustments.
• Watch CMS Open Data for weekly updates on rebate gaps.
• Monitor Federal Register for any supplemental notices.

Sarah Chen-Watkins

Editor-in-Chief · National + Investigative · Washington, D.C.

Sarah, Editor-in-Chief, Washington, D.C.

Follow the money, follow the data. We will keep watching for you.

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