Medicare membership, rising costs drag on health insurers' Q4 2025 earnings

Declining Medicare Advantage membership and climbing medical costs were the issues most impacting US health insurers during the fourth-quarter earnings season.

Many of the top publicly traded US managed care insurers' medical costs grew during the fourth quarter and throughout 2025, resulting in mixed responses from investors, even as most revenue grew year over year.

A common issue affecting the sector's fourth-quarter earnings calls was ongoing cost pressure, primarily related to government-subsidized Medicaid and Medicare Advantage plans.

Medical loss ratios rise

Rising medical costs have been an ongoing issue for insurers, particularly among Medicaid insurers, since states resumed the post-COVID redetermination process, removing some healthier, less costly individuals from the government-subsidized plans.

All six of the largest publicly traded US managed care insurers saw their medical loss ratios grow year over year. Of the six, all apart from The Cigna Group logged loss ratios exceeding 90% in the fourth quarter of 2025, with Molina Healthcare, Inc. posting the largest ratio of 94.6%.

Ratios also rose for the full year, with all apart from Cigna and UnitedHealth Group Inc. logging medical loss ratios exceeding 90%.

Molina CEO Joseph Zubretsky attributed nearly half of the underperformance for 2025 to the unprecedented cost trend and increased acuity in Molina's Marketplace segment.

Marketplace plans, offered through government-run sites rather than employers, saw their medical cost ratio hit 99% during the fourth quarter. For Medicaid, the medical cost ratio for the fourth quarter was 93.5%, impacted by unfavorable and unexpected retroactive premium rate actions taken by California, Zubretsky said. The senior-aimed Medicare medical cost ratio was even higher at 97.5%.

"We believe the medical cost trend in 2025 was an aberration, an anomaly by historical standards," Zubretsky said.

Molina was not alone in its cost woes, with industry leader UnitedHealth also pointing to rising costs among its Medicaid and Medicare plans.

New UnitedHealth CEO Stephen Hemsley, during an earnings call, said the company is focused on greater operational discipline.

"These overall results are tempered by the third year of Medicare funding reductions, ongoing funding shortfalls within our Medicaid state programs and our historical respect for rise medical cost trends," Hemsley said. "Improvement will be more evident within UnitedHealthcare in 2026."

Medicare Advantage insurers across the board stand to face more difficulties after the Centers for Medicare & Medicaid Services' Medicare (CMS) on Jan. 26 indicated support for a near-flat rate increase of just 0.09% for calendar year 2027. Industry analysts had expected a proposed rate increase of between 4% and 6%.

Cigna, which logged the lowest fourth-quarter medical loss ratio of 88%, likely benefited from the sale of its Medicare business in March 2025, a move the company began making as early as 2024.

The company still faced difficulties in 2025, including a lawsuit filed last year by the Federal Trade Commission (FTC) accusing Cigna and two other pharmacy benefit managers of marking up numerous specialty generic drugs. The "significant markups" allowed the three pharmacy benefit managers (PBMs) to allegedly generate more than $7.3 billion in revenue from dispensing in excess of the drugs' estimated acquisition costs from 2017 to 2022.

The FTC announced Feb. 4 that it reached a settlement with Cigna that requires its PBM to adopt "fundamental changes to its business practices" to boost transparency and push down consumers' out-of-pocket costs for prescription drugs. Cigna CEO David Cordani, during an earnings call, said the settlement will benefit his company's customers and blamed rising healthcare costs, in part, on burgeoning demand.

Medicare membership drops

Nearly across the board, managed care insurers saw analyst estimates of Medicare Advantage enrollment totals fall during the fourth quarter.

Of the five leading US managed care insurers that still offer Medicare Advantage plans, only Humana Inc. saw consensus enrollment grow during the fourth quarter.

Over the last year, Humana's Medicare plans have been adversely impacted by lower scores given by the CMS. The government body annually issues quality "Stars ratings" of Medicare Advantage offerings, which impact bonus payments insurers receive from the US government. Humana has been unsuccessful in legal efforts to overturn lower ratings.

In October 2025, the insurer disclosed that about  20% of its Medicare base was in four‑star‑or‑higher plans for 2026, down from 25% in 2025, growing from approximately 5.8 million members at the start of October to 6.34 million by the end of December.

Centene Corp.'s consensus estimate Medicare Advantage and Medicare Supplement enrollment will drop from approximately 1.01 million on Oct. 1 to 950,000 by Feb. 11.

In addition to membership attrition, Centene posted over $1 billion in losses in the fourth quarter of 2025. This capped off a year CEO Sarah London described as "undeniably challenging," as the company's outsized representation in the ACA marketplace was hit by political turmoil.

Elevance Health Inc. saw its consensus estimate membership enrollment drop from 2.37 million to 1.83 million by Feb. 11.

During a fourth-quarter earnings call, CEO Gail Boudreaux said that, for Medicare Advantage to remain strong, the program needs to be stable and sustainable. Stability needs payment rates to keep pace with the utilization and cost trends.

"Quite frankly, [the proposed rate] just doesn't keep pace with the current medical fasting utilization trends, and that does create real pressure on benefit stability and affordability for seniors," she said.