🤝 Work with us on payor market strategy: Contact us

🟦 Connect with the author, Ryan Peterson, on LinkedIn.

🎧 Listen to the Upward Growth Podcast: Apple | Spotify

📰 Newsletter sponsorships: Learn More

Today’s Upward Growth newsletter is sponsored by Invent Health

Last week we shared why we built Invent Health as the all-in-one payer intelligence platform. Now we want to make it simple for you. If you advise a health plan, sell into one, or run one, our team is here to help. Bring us the hardest problem on your list in risk adjustment, coding, encounter submissions, or quality. Our experts will work through it with you and show you how our platform handles it, the same way it does today for a top-20 Medicare Advantage plan. - Rohit Bhardwaj, Founder and CEO, Invent Health

Talk to Our Experts

Interested in sponsoring Upward Growth? Contact Us

A few quick updates before we get into this week’s Q3 earnings read:

Last Friday we held the first Upward Growth Debrief, and it was a great group! Thank you to those of you who joined. It was so good to connect live and hear directly from this community about what’s on your minds right now. The next Debrief is Friday, December 4 at 1pm ET / 10am PT, and paid subscribers will get the Zoom link by email a couple of days before. If you’ve been thinking about upgrading to a paid subscription, now is a good time to join us ahead of the December call.

Next week I’ll be at HLTH in Las Vegas, catching up with clients, friends, and hopefully a few readers I’ve only known by email so far. If you’ll be there, send me a note and let’s find time. And if your team is planning early 2027 launches and has been thinking about newsletter sponsorship, let’s talk.

Finally, the Upward Growth audience survey is open for two more weeks, through November 24. It takes about three minutes, and your answers will directly shape where the newsletter and podcast go next. If you haven’t had a chance yet, you can take it here.

The Q3 earnings calls put specific 2027 numbers behind this year’s margin discipline, and hitting them now depends on operating work more than on further exits. UnitedHealth opened the cycle on October 13 and Humana closed it on November 6. In between, CVS announced it’s splitting in two, Cigna defended its structure the next morning, and Molina was the only one of the eight public payers in this article that didn’t raise its 2026 outlook.

Each of those made its own headlines, but taken as a group, they describe a market that has decided what it will defend in 2027 and is now waiting on what it can’t control, starting with state Medicaid rates and the next Medicare risk adjustment decision.

The spring calls set the margin-over-membership tone, followed by the exits and raised guidance the second-quarter calls locked in.

The article starts with what the raises say about where 2027 margin has to come from, then covers why CVS and Cigna kept the insurer, the pharmacy benefit manager (PBM), and care delivery together, why Medicare Advantage (MA) growth is going to plans that can absorb the members others exit, how work requirements will decide whether Medicaid’s recovery holds, and why the Affordable Care Act (ACA) Marketplace is consolidating around specialists and Blues.

Those 2027 numbers are also what Q4 and Q1 spending decisions inside these plans will be measured against.

Q3 Raises Came From Shrinking, Which Leaves 2027 to Operations

Third-quarter earnings calls usually do two jobs, closing out the current year and starting to shape expectations for the next one. This cycle leaned hard on the second job, and the raises that headlined it came with an asterisk: several plans that raised their 2026 outlook did so with fewer members than a year ago.

That combination shows how 2026 earnings got rebuilt. UnitedHealth, Elevance, and Centene raised while carrying meaningfully smaller MA, Medicaid, or ACA enrollment, and CVS raised after Aetna walked away from the exchanges. Much of the recovery came from pruning, meaning exits from the counties, products, and members that weren’t paying for themselves, along with repricing and benefit cuts on what remained. That approach has a limit, because a plan can only walk away from an unprofitable book once.

Their 2027 guidance reflects that limit. Elevance, Centene, and Cigna each told investors to measure 2027 growth from a lower baseline than the 2026 number they had just raised to, setting aside items like outsized investment income, one-time benefits, and, in Cigna’s case, the ACA business it leaves at year-end. Molina built its early 2027 outlook without assuming any improvement in its legacy Medicaid and Medicare cost ratios. When a CFO volunteers a lower jumping-off point, it signals that 2027 has to be earned through operations, meaning state rates that keep pace with cost trend, medical costs that land where they were priced, and lower operating expense.

Cost came up again and again on the calls. UnitedHealth tied its lower operating cost ratio to modernizing operations and streamlining administration, and Cigna gave the most detail on where its savings will come from, saying 20 to 30 percent of a new $3 billion productivity target will come from how it manages suppliers, partners, and vendors. After a year of shrinking back to margin, health plans need operations to carry 2027, and that changes what they’re willing to buy.

Inside plans where Compliance and Legal have picked up a bigger say over vendor decisions, Finance now has a public 2027 number to screen against too. A new contract has to either protect the 2027 figure the CFO just defended to investors or take cost out of the business. My guess is that spending that clearly does one of those moves faster through Q4 and Q1 than it has all year, with the rest pushed later into 2027.

Medicare revenue for 2027 is mostly locked, since the Centers for Medicare & Medicaid Services (CMS) finalized 2027 MA rates in April and held off on the risk adjustment model recalibration it had proposed. The calendar year (CY) 2028 Advance Notice, expected in late January or early February, will show whether that deferral holds for another year, and it arrives in the same weeks several of these plans give formal 2027 guidance. That makes it the earliest outside check on the commitments reaching past 2027, beginning with Humana’s 3 percent MA margin target for 2028.

CVS and Cigna used back-to-back days to show what they intend to own while they deliver on those numbers, and both arrived at the same answer.

Subscribe now

Integrated Payers Are Keeping the Insurer, PBM, and Care Delivery Together

CVS announced its separation the morning of November 4, and Cigna reported the next morning. Side by side, those two days are one of the clearest signals this year about what the largest integrated payers think is worth owning: a health plan, a PBM, specialty pharmacy, and care delivery under one corporate roof, with the businesses outside that core being separated, exited, or reviewed.

In the CVS split, the core stays with CVS Health, while the retail drugstores, mail pharmacy, and walk-in clinics become a separate company in the first half of 2028. In effect, CVS is unwinding the retail-and-PBM combination that began with the 2007 Caremark merger, while the 2018 Aetna deal stays intact.

Cigna made its version of the argument a day later by leaving its structure alone. Its third-quarter growth came from its health plan and specialty pharmacy businesses, and when analysts raised state-level pressure on vertical integration, Cigna defended that setup rather than signaling any openness to change. That stance carries weight because Cigna has already sold or exited what didn’t fit, from the MA business that went to Health Care Service Corporation (HCSC) to the ACA exchange line it leaves at year-end, and now runs each business line through a portfolio test that weighs management focus, scale, standardization, and automation. CVS applied a version of that logic to a much larger asset and reached a similar answer.

As best I can tell, both companies are keeping that core because of where cost is concentrating. Cigna estimates that 8 percent of patients now drive 55 percent of health care spending, and specialty drugs make up more than half of drug spend. A company that holds the medical benefit, the pharmacy benefit, and specialty pharmacy can follow and manage those high-cost patients across each of them, while a national drugstore chain adds little to that work and sits closest to the vertical integration challenges lawmakers have been raising, especially state fights over PBMs owning pharmacies. Separating retail keeps that combination intact and moves the most exposed business out.

Cigna’s eviCore review remains the one open item in that picture. The company hasn’t added anything since putting its utilization management (UM) and prior authorization business under review, and the review fits the pattern, because eviCore sells UM services to other health plans, a different business from managing Cigna’s own complex patients. Whenever a deal lands, the price becomes the reference point for how UM and prior auth assets get valued, right as plans decide how much of that work to automate, bring in-house, or keep buying.

CVS’s version of that model includes primary care and in-home health. Humana spent this year testing a related idea in Medicare Advantage, that a plan with strong Stars and care management operations can take on the members its competitors walked away from.

Medicare Advantage Growth Is Going to Plans That Can Absorb Exits

For the better part of two years, the message from the public payers on MA has been some version of margin over membership, and the 2027 plan lineup shows how seriously they meant it. Seniors will have fewer plans to choose from in 28 states, Centene cut nearly a third of its lineup, and UnitedHealth and Aetna each pulled standard plans from more than 100 counties. Humana went the other way, growing both individual MA and its dual eligible special needs plan (D-SNP) membership by roughly a quarter this year, with much of that coming from members its competitors let go.

For 2027, Humana says it priced its bids for margin first, retention second, and growth third, and trimmed plans where it wasn’t performing, yet it expects membership to rise again. Its bet is that a larger membership base can produce the 3 percent pre-tax MA margin it is targeting for 2028.

Humana’s Star Ratings recovery is what makes that bet plausible. Its largest contract, H5216, held about 45 percent of its MA members and nearly all of its group MA business when it fell from 4.5 stars to 3.5 two years ago, and it is back at 4 stars for 2027. Across the company, 95 percent of Humana’s MA members are now in plans rated 4 stars or higher, up from 20 percent for 2026. Clearing the bonus threshold on that contract restores quality bonus payments for a large share of Humana’s members in 2028, which gives it room to fund both richer benefits and better margins.

That leaves two approaches to MA on the record. UnitedHealth, Elevance, Centene, and Aetna are rebuilding margin by contracting, exiting unprofitable counties and products and bidding 2028 against a smaller footprint. Humana is rebuilding it by absorbing displaced members and relying on its Stars and care management work to make them profitable. Each is defensible, and they lead to very different 2028 bids.

HCSC shows how hard absorbing can be when the scale arrives at once. It bought Cigna’s Medicare business in a $3.3 billion deal that closed in March 2025, nearly quadrupling its MA membership, and for 2027 it is cutting its MA footprint from 948 counties to 478, with the deepest cuts in its own Blue Cross Blue Shield states (Texas alone goes from 229 counties to 47).

My read is that the difference comes down to what a plan brings to the members it takes on. Humana folded its growth into a Stars and care management operation it had spent two years rebuilding, and the 2027 ratings show that work paying off. HCSC took on Cigna’s members as a largely separate operation from its Blues plans, at least as of earlier this year. That’s a thesis rather than a proven claim. HCSC has had the Cigna business for nearly two years, while Humana’s absorbed members arrived in January, so 2027 is the year Humana’s version gets tested at this scale.

The risk in Humana’s strategy lives in the members that drove its growth. More D-SNP members and new chronic condition special needs plans (C-SNPs) push more of its membership into dual-adjacent populations, where an HHS Office of Inspector General (OIG) review of D-SNP risk adjustment practices is due in 2027 and the risk model recalibration CMS deferred could return for 2028. The compound pressure building around dual-adjacent SNP growth applies to whoever does the growing, and Humana is also pricing 2027 for higher medical and Part D cost trend than this year.

Medicaid plans face their own version of a shifting membership, except that the state sets the rate and, beginning in January, federal work requirements change who qualifies to stay enrolled.

Subscribe now

Medicaid Rates Are Catching Up to Trend as Work Requirements Shift Acuity

Across the Medicaid-heavy public plans, the Q3 message was consistent: state rates are finally catching up to cost trend, and 2026 looks like the bottom. What decides whether that recovery shows up in 2027 is narrower: states pricing the change in who stays enrolled once federal work requirements begin in January.

The rate numbers back that up. Molina said it is “likely observing the beginning of the turn in Medicaid margins”, with 2026 rates expected to average about 4.5 percent and its known January renewals closer to 7 percent. UnitedHealth called 2026 its trough year and expects Medicaid margins back to target by the end of 2028, Elevance said Medicaid ran ahead of its outlook on recent rate actions, and Centene held its composite rate near 5 percent with Medicaid on track for the year.

Those rates now have to absorb a change Medicaid plans have never priced at national scale. Under the One Big Beautiful Bill Act (OBBBA), expansion adults ages 19 to 64 have to show 80 hours a month of work, school, job training, or community service to stay covered beginning January 1 unless they qualify for an exemption, and states have to recheck their eligibility every six months instead of once a year. The Congressional Budget Office projected about 5.3 million fewer people covered over the next decade from the work requirement alone. For health plans, that’s a new hurdle between the rate a state sets and the members that rate is meant to pay for.

Plans pricing for work requirements expect the members who fall off to skew healthier, losing coverage through paperwork and verification friction, while sicker members, who are more likely to qualify for an exemption or to fight for their coverage, stay on. Nebraska’s first six months under work requirements offer an early look at how that plays out. Enrollment shrinks while costs rise per member, so a 2027 rate that covers trend but misses that shift still pushes a plan’s medical loss ratio the wrong way.

Molina and Centene are coming at that uncertainty from opposite ends. Molina is planning for it in its own outlook, assuming a 6 percent Medicaid membership decline and higher acuity in its 2027 cost trend without counting on any margin improvement, while Centene is pressing states to price it directly, with a few states in its July rate cohort already accounting for the shift and others in active discussions. Plans concentrated in expansion states will need to do both, building the shift into their own forecasts while pushing their states to recognize it in rates.

The rules themselves are also in motion. CMS’s June interim final rule narrowed who counts as medically frail, and 24 attorneys general and two governors sued to block those provisions. Whatever the court decides will reshape who gets exempted, and with it the acuity of who remains, which is exactly what state actuaries are trying to price right now.

So the Medicaid recovery built into the Q3 commitments needs 2027 rates that cover acuity as well as trend. The early read suggests most states are covering trend, which makes acuity the place where 2027 Medicaid results are likely to split. My guess is the shortfalls show up first in Q2 2027 results at plans concentrated in expansion states, right as those state actuaries begin building 2028 rates.

The ACA Marketplace Is Consolidating Around Specialists and Blues

While Medicaid’s membership is being reshaped by policy, the ACA Marketplace is being reshaped by which payers choose to stay. The moves of the last eighteen months add up to a fairly direct statement about who the individual market belongs to now. Aetna left for 2026, Cigna leaves for 2027, UnitedHealth has shrunk its exchange business, and Molina is cutting its footprint roughly in half, while Centene, Oscar, and Elevance are holding or growing. The national payers with large PBM and employer businesses are pulling back hardest, and the plans holding on are the ones whose core business is the Marketplace or who are anchored in a home state.

A lot of that comes down to what the risk pool has become. Without the enhanced premium tax credits, the people still paying premiums skew sicker, and benchmark silver premiums are up an average of 42 percent since 2025. Pricing that pool well means pricing for something that shifts from year to year, and a company with large employer, Medicare, or PBM businesses has less reason to live with that volatility than a Marketplace specialist, or a Blue whose home state isn’t optional.

I wrote about the split between plans that priced 2027 for a pool that keeps getting sicker and plans that priced for it to stabilize, and Q3 left that split intact. Centene, which priced for continued selection, has returned its Marketplace business to profitability and is holding nearly its full footprint, while Molina, which priced closer to stabilization, is shrinking to the states it believes it can price and saved its turnaround language on the Q3 call for Medicaid. When a plan chooses which business to be optimistic about out loud, that choice tells you where its leadership sees a path to profit.

Oscar is the strongest evidence of where the market is heading. In the same year Aetna and Cigna walked away, a company focused solely on the individual market is on track for the strongest financial year in its history, grew membership by more than a quarter, and expects to take more share in 2027. This year suggests the Marketplace now rewards operators whose pricing, technology, and member experience were designed specifically for this market, as competitors with other priorities step back.

Blues plans fill out the rest of that picture. Elevance raised its expectations for individual ACA membership this year, and a Blue anchored in its home state often absorbs displaced members because leaving its primary market isn’t an option the way it is for a national payer. I’d expect the 2027 Marketplace in most states to look like the local Blue plus one or two specialist operators, with fewer integrated nationals in the mix.

That shape matters beyond the exchanges. Fewer payers competing for individual members means fewer choices in thinner counties, and the plans that stay set pricing and networks with less competitive pressure. It also narrows the buyers for ACA-focused services and technology to a small group of operators, which favors anyone who understands how those few plans price and operate.

November’s election adds a variable without settling it. Democrats won both chambers on November 3, picking up seven Senate seats, which moves restoring the enhanced premium tax credits up the agenda. The new Congress isn’t seated until January, most legislation needs 60 Senate votes, and the President keeps his veto. I’d keep restoration out of the base case for 2028 assumptions and treat it as upside, especially since the selection already baked into the pool doesn’t reverse on its own.

Open enrollment is the first look at how that consolidation holds up, as more than 350,000 Cigna members across 11 states choose new coverage, with December 15 the deadline for plans that begin January 1. Where those members land, and whether they keep paying premiums, shapes how the consolidated market prices 2028. If a meaningful share go uninsured instead, the conversation turns to coverage gaps in counties where competitors have already thinned out. February effectuation data, set against the roughly 86 percent of 2026 enrollees who paid their first premium, will show which way it broke.

Final Thought

The public payers spent 2026 rebuilding margin mostly by getting smaller, and the Q3 calls showed how little room that approach has left. What shrinking rebuilt now has to be held through operations: running the insurer, PBM, and care delivery as one business, turning absorbed members into profitable ones, getting state rates to cover acuity, and pricing a smaller, sicker ACA pool correctly.

Some of that resolves quickly. The CY 2028 Advance Notice and the Q4 calls land within weeks of each other early next year, with February effectuation data right behind them. The rest plays out over a longer horizon, through Medicaid results in mid-2027, the OIG’s D-SNP review, the eviCore outcome, and a CVS separation that runs into 2028.

If you’re working through what this means for your positioning, your messaging, or your go-to-market strategy, Upward Growth is a health plan market advisory firm that works with health tech vendors, investors, provider organizations, and management consultancies to build strategy around how health plans actually buy, operate, and make decisions. Contact us here.

Thanks for reading.

Here’s to upward growth,

Ryan Peterson

The frameworks in the weekly Upward Growth newsletter help health plans, health tech vendors, investors, provider organizations, and consultancies understand the health plan market as it continues to shift.

If your colleagues are in those conversations, they should be reading this too.

💰 Invest In Your Team with a Paid Subscription.

Get a group subscription

Give a gift subscription

💡 Pro tip: Many subscribers expense Upward Growth through their company’s professional development, training, or learning budget. Here’s a one-minute email template to get your manager to approve expensing your subscription.

🤝 Work with us on payor market strategy: Contact us

🟦 Connect with the author, Ryan Peterson, on LinkedIn.

🎧 Listen to the Upward Growth Podcast: Apple | Spotify

📰 Newsletter sponsorships: Learn More

Today’s Upward Growth newsletter is sponsored by Invent Health

At Invent Health, we built the all-in-one payer intelligence platform because the health plan leaders we work with want fewer vendors doing more of the work. Risk Analytics, Coder Workbench, Encounter Submissions, and Quality Analytics share one view of every member, so every team at the plan works from the same information. We serve Medicare Advantage, Medicaid, and ACA plans. If you work with health plans, we’d like to show you what we’ve built. - Rohit Bhardwaj, Founder and CEO, Invent Health

Talk to an Expert

Interested in sponsoring Upward Growth? Contact Us

The Upward Growth audience survey launches today, and your answers will directly shape where the newsletter and podcast go over the next few months. It takes three minutes, is anonymous unless you share your email at the end, and is open through November 24. If you’ve gotten value from Upward Growth, tell us what matters most to you: Take the survey here.

A friendly reminder that the Upward Growth Debrief is this Friday, November 6 at 1pm ET / 10am PT. It’s the monthly live call for paid subscribers. I’ll open with fifteen minutes on what’s shifting in the market right now, including what doesn’t fit into the written newsletter, then we'll do Q&A and dialogue. Paid subscribers, watch your inbox for an email a couple of days before the call with the Zoom link and details. If you’ve been thinking about upgrading, come join us.

Finally, I’ll be at the HLTH conference in Las Vegas November 15 to 18, catching up with clients, friends, and a few of you I’ve only ever talked to over email. If you’ll be in Vegas that week, send me a note and let’s find a time to meet.

The 2027 Medicare Advantage (MA) Landscape File is telling two stories at once. The dominant one is retrenchment. The 2027 Landscape file read on operating discipline across the Nationals walked through the picture: Humana trimmed its individual MA footprint by 57 counties, Centene cut nearly a third of its lineup from 303 plans to 210, Health Care Service Corporation (HCSC) halved its county presence from 948 to 450 following its 2025 Cigna Medicare acquisition, and Molina exited individual MA entirely to redeploy toward Medicaid. Average Maximum Out of Pocket (MOOP) climbed around 9 percent market-wide, supplemental benefit availability dropped across food, Over-the-Counter (OTC), transportation, and fitness, and fifteen insurers set enrollment caps on 65 plans in eleven states. These are the moves plans make when managing to margin above all else.

The second story is the opposite. Chronic Condition Special Needs Plan (C-SNP) enrollment grew faster than any other product line in Medicare Advantage for 2027. The compounding pressure behind that growth is where I would focus plan leadership's attention right now.

Special Needs Plans (SNPs) grew 9.4 percent in plan count for 2027. C-SNPs grew faster than everything else in that umbrella, adding 192 plans for a 34 percent jump. Devoted Health alone added 133 of them, taking its count from 122 to 255 in a single year and entering five new states. That one company accounted for 69 percent of all net C-SNP growth in the market.

The surface growth is striking, and yet what sits underneath those numbers is more concentrated and more specific than the headline suggests. Dual Eligible Special Needs Plan (D-SNP) composition shifted inside the same window, with Coordination Only plans up 32, Highly Integrated Dual Eligible (HIDE) SNPs down 68, and Fully Integrated Dual Eligible (FIDE) SNPs up six.

Subscribe now

Where C-SNP Growth Is Concentrated and Who Is Watching

C-SNPs can target any of a long list of chronic conditions CMS allows, but in practice the market has clustered around three. Cardiovascular disease, chronic heart failure, and diabetes together account for roughly 95 percent of C-SNP enrollment nationally. The 2026 cycle saw C-SNP plan counts jump from 376 to 548 and enrollment grow 49 percent (an additional 500,000 members), with 207 of the roughly 215 new C-SNPs falling in that same clinical grouping. Between 2026 and 2027, plans built around those three conditions grew market-wide from 481 to 662.

These conditions do not fall evenly across the Medicare population. They cluster heavily in the same socioeconomic cohort that qualifies for both Medicare and Medicaid. In practice, C-SNP growth is pulling in beneficiaries who look dual-eligible by every measure except Medicaid status, which would route them into D-SNPs. That is the dual-adjacent population I keep returning to, and it is the engine driving the growth story's momentum.

Attention around this pattern has been building for over a year, and it has come from more than CMS. The Medicare Payment Advisory Commission (MedPAC), the Department of Health and Human Services Office of Inspector General (HHS OIG), and the National Association of Medicaid Directors (NAMD) have all weighed in, as have independent policy researchers and the industry coalitions whose own member plans are growing C-SNPs.

C-SNP Economics Under V28 and the Verification Rules

The cost of running a C-SNP in 2027 is higher than it was in 2026, and the revenue available to offset it is tighter. The pressures on both sides are market-wide, but they bite harder in the dual-adjacent cohort these plans are growing into than in a conventional MA book. The faster the growth in that cohort, the sharper the compression on both sides.

Start with the verification mechanics. CMS rules require independent verification of the qualifying condition through the enrollee’s treating physician before enrollment can take effect. Neither a diagnosis on a previously submitted claim nor a verification carried over from the prior plan clears that bar. The verification cycle runs on every new member every time, and the administrative load scales nonlinearly with plan growth.

The burden lands hardest in the dual-adjacent population. These members churn across coverage status at a higher rate than other MA beneficiaries, with less continuous provider relationships and more geographic movement. Verification cycles that work in a cleaner Medicare-only commercial-provider market break down faster in a population with higher churn and thinner continuity of care. Growing C-SNP plan counts 34 percent in a single cycle is a demanding lift under any conditions. Doing it in a higher-churn dual-adjacent cohort, while verifying every new enrollee through a treating physician, pushes the cost per new member materially higher.

Risk adjustment adds a second pressure. V28 reached full weight in 2026, and chart review exclusion was codified alongside it, closing off a meaningful lane of retrospective risk capture MA plans across the market relied on. These are both market-wide pressures, but they land harder in dual-adjacent populations than in the broader MA book. Complex multi-condition members are exactly where V28 reweighting reduced coefficients most, and chart review exclusion removes a source of capture that complex members disproportionately contributed to under the prior rule set. The combination compresses revenue per member in the same cohort C-SNP growth is drawing in.

Actuarial advisory to C-SNP operators has already flagged the claims-to-revenue timing mismatch inherent to prospective risk adjustment for C-SNPs, a dynamic V28 and the chart review exclusion sharpen rather than relieve. The same advisory tells plans to actively monitor CMS policy on dual enrollment in C-SNPs. That is the kind of language actuaries use when they want plans to carry policy risk in their forward bid modeling without saying the words policy risk directly to C-SNP sponsors.

Inside C-SNP enrollment, dual concentration shapes the economics. Higher-dual plans carry more coordination load, more supplemental benefit utilization, more provider mix complexity, and more exposure to state Medicaid environment shifts, while lower-dual plans sit closer to a conventional MA book with a chronic-condition filter. Both are growing, but growth is weighted toward the high-dual end of the distribution, where operating economics are tightest.

Some of that federal attention is already visible on the operating side. The HHS OIG workplan OEI-03-25-00210 is actively evaluating D-SNP risk adjustment payments tied to diagnoses reported only on Health Risk Assessments (HRAs) and chart reviews with no other records of service in MA or Medicaid data. The scope is formally D-SNPs, not C-SNPs. But the practices under evaluation (HRA-sourced diagnoses, chart-review-sourced diagnoses, thin corroborating service records) are not practices that stop at the formal D-SNP line. The workplan is scheduled for completion in 2027. Any findings will reach the C-SNP conversation whether or not scope formally extends.

That is where the operating pressure meets the federal attention stacking around C-SNPs. The verification economics, the V28 and chart review exclusion effects, and the OIG workplan are all tightening around the dual-adjacent population C-SNPs are growing into.

What CMS, MedPAC, and OIG Are Saying About C-SNPs

The regulatory signals around C-SNPs do not all carry equal weight. Ranking them matters for separating what is in motion from what is still being hinted at. The primary signals come from CMS itself, MedPAC, and HHS OIG, with NAMD, academic research, and industry commentary as supporting voices. It’s this industry collective that continues to catch my attention.

CMS wrote in a Request for Information on C-SNPs and I-SNPs with high dual concentrations that C-SNP enrollment growth “could be an intentional approach by MA organizations to circumvent” federal and state D-SNP integration requirements. That phrasing is unusually direct inside an RFI. The RFI itself, published in late November 2025 as part of the Contract Year 2027 Proposed Rule, asked whether to apply a State Medicaid Agency Contract (SMAC) requirement to C-SNPs and Institutional Special Needs Plans (I-SNPs) at high dual concentrations, and whether to extend the D-SNP look-alike contracting limitations to C-SNPs. Whether the Final Rule acted on either lever is a separate question; CMS's formal language carries weight on its own.

The April 2026 Final Rule deferred both C-SNP RFI levers to future rulemaking. On D-SNP integration itself, however, the Rule did act. The “substantially similar” network requirement gave way to a 120-day continuity-of-care transition period for passive enrollment. New exceptions to §422.514(h) policy allow D-SNPs to continue enrolling full-benefit duals in HIDE SNPs or Coordination Only D-SNPs where those members sit in Medicaid fee-for-service, plus a US Territory exemption. Both relax existing integration standards. One tightening sat alongside them: CMS finalized immediate termination authority for D-SNPs that lose their SMAC. On balance, the Final Rule reads as deregulatory on dual integration broadly, with specific tightening preserved around SMAC loss.

Where CMS asked, MedPAC answered. The March 2026 Report to Congress devoted a full chapter to C-SNPs functioning as D-SNP look-alikes, counting 92 such plans in 2026 against five in 2021 and roughly 100,000 additional members across the period. MedPAC concluded that policymakers “may want to consider applying the current limits on look-alike plans to C-SNPs.” For a MedPAC conclusion, that is as close to a direct recommendation as the Commission usually gets.

Academic research reaches the same conclusion from a different angle. The D-SNP look-alike threshold sits at 60 percent dual enrollment for 2026 and beyond, and 43 C-SNPs would already clear that threshold if the rule applied to them, based on 2024 enrollment data. When CMS tightened the D-SNP look-alike termination policy in 2023, dual enrollment did not shift into integrated plans, but it did rise in C-SNPs in affected counties. That is exactly the behavior CMS is watching for now. A public comment letter from academic researchers formalized the same concern in the 2027 rulemaking file.

Timing is what keeps HHS OIG in the primary tier alongside CMS and MedPAC. The D-SNP risk adjustment workplan completes in 2027, putting findings in play exactly as plans finalize 2028 bid work and start 2029 planning.

State Medicaid directors publicly backed CMS’s direction. In a comment letter on the CY 2027 Proposed Rule filed in late January 2026, NAMD supported CMS exploring look-alike safeguards for C-SNPs and encouraged the agency to monitor C-SNP and I-SNP participation to prevent circumvention of D-SNP integration requirements.

Finally, I found this industry positioning in the comment file rather intriguing. The Dual Eligible Coalition pushed back on a blanket SMAC requirement for all C-SNPs. In the same letter, the coalition recommended CMS develop an appropriate look-alike threshold for C-SNPs with a phase-out plan. An industry group representing dual-eligible-serving plans endorsing a look-alike threshold with a transition plan is a different kind of statement than straight opposition. The Health Care Transformation Task Force (HCTTF) similarly supported CMS exploring look-alike safeguards for C-SNPs. When both industry and delivery system reform coalitions endorse the direction, even in bounded form, the regulatory conversation may just shift from whether to how.

Of course, all of this needs grounding against the administration’s deregulatory posture on MA. CMS deferred the two C-SNP action levers from the CY 2027 RFI in the Final Rule, a near-term signal that the agency is not racing to act. But the October 16, 2026 press release announcing the first CY 2028 Proposed Rule noted that CMS plans to release another proposed rule with “policy and technical changes for Parts C and D later this fall.” That second rule is where C-SNP integration policy would land if CMS acts in this cycle, as deferral in the Final Rule is not the same as indefinite deferral.

Subscribe now

Modeling Compound C-SNP Exposure for the 2028 Bid Cycle

The operating side and the federal side are the same underlying bet moving at different speeds. Treating them as independent risks pointed at C-SNPs understates what their convergence does to 2028 bid math.

On the operating side, the pressure is already live. V28, chart review exclusion, verification economics at scale, and higher churn in dual-adjacent populations are compressing revenue and raising cost per member precisely where C-SNP growth is landing. Those forces act in 2027 regardless of what CMS does in the fall rulemaking cycle.

On the federal side, the trajectory is probabilistic and plays out over a longer horizon that still reaches into the 2028 bid cycle. CMS has flagged the pattern, MedPAC has recommended action, OIG findings on parallel D-SNP practices land in 2027, and industry has lined up alongside. The posture is deregulatory, but the specific action levers remain on the table, and the fall 2026 Proposed Rule is where they could appear.

And this is where plan bid math gets interesting. I wrote about SNP composition rotation as one of the shifts reshaping MA buyer behavior, and that rotation is accelerating into 2027. Plans leaning into dual-adjacent C-SNP growth as their only remaining expansion lane are concentrating the operating exposure and the policy exposure into the same book, the same cohort, the same cycle. A plan running a growth strategy that way needs its 2028 bid cycle to carry all of it at once: V28 at full weight on complex multi-condition members, chart review exclusion on retrospective risk capture, and a non-trivial probability that CMS acts on C-SNP integration in the fall Proposed Rule. Modeling any one of those alone understates what a move in another does to the margin picture.

Health plans with the most concentration also have the thinnest buffer if any one of these variables moves against them. Simply put, the same concentration driving headline growth also makes the bid-cycle math fragile.

Final Thought

My guess is that the next twelve months decide whether the compound pressure around C-SNP growth stays theoretical or becomes a 2028 bid cycle problem. CMS has already signaled where the action levers sit; the fall 2026 Proposed Rule is where any move on C-SNP integration would land first. Meanwhile, HHS OIG findings in 2027 could reach the C-SNP conversation on their own clock, independent of what CMS does. And beneath both timelines, the 2028 bid cycle keeps compressing margin regardless of what either rulemaking produces.

For leadership still holding footprint decisions open for 2028, I would treat operating economics and policy risk as a single system rather than two separate stories. A strategy built that way holds up through the 2028 cycle whether or not any single lever moves. Reading only one side leaves the plan caught when the other shifts.

Upward Growth is a health plan market advisory firm built for exactly this kind of question. We work with health tech vendors, investors, provider organizations, and management consultancies on strategy that starts from how health plans actually buy, operate, and make decisions, whether that means helping with 2028 bid planning, with portfolio companies exposed to C-SNP operators, or with plans themselves on where the operating and regulatory environment is heading. Contact us here.

Thanks for reading.

Here’s to upward growth,
Ryan Peterson

The frameworks in the weekly Upward Growth newsletter help health plans, health tech vendors, investors, provider organizations, and consultancies understand the health plan market as it continues to shift.

If your colleagues are in those conversations, they should be reading this too.

💰 Invest In Your Team with a Paid Subscription.

Get a group subscription

Give a gift subscription

💡 Pro tip: Many subscribers expense Upward Growth through their company’s professional development, training, or learning budget. Here’s a one-minute email template to get your manager to approve expensing your subscription.

🤝 Work with us on payor market strategy: Contact us

🟦 Connect with the author, Ryan Peterson, on LinkedIn.

🎧 Listen to the Upward Growth Podcast: Apple | Spotify

📰 Newsletter sponsorships: Learn More

Today’s Upward Growth newsletter is sponsored by Invent Health

If you sell to health plans, advise them, or invest in companies that do, you’ve watched plans cut vendors this year. They want fewer partners covering more of the work.

Invent Health is the all-in-one payer intelligence platform for Medicare Advantage, Medicaid, and ACA plans. Risk Analytics, Coder Workbench, Encounter Submissions, and Quality Analytics run together in one place, and a top-20 Medicare Advantage plan runs on it today. Whether you’re advising a plan or building alongside one, we can help. Talk to one of our experts.

Talk to an Expert

Interested in sponsoring Upward Growth? Contact Us

Article 3 of the RISE trilogy landed Saturday: Why the Separation Between Risk Adjustment and Quality Improvement Is Structurally Unsustainable. The argument is that the environment CMS has built makes the organizational line between RA and QI inside plans harder and harder to defend, and the plans that figure out the operating model shift early will be ahead when the rest of the market has to catch up. I’ll be moderating a panel on how plans are rethinking the line between risk adjustment and quality at the RISE Risk Adjustment Forum in Orlando tomorrow. If you’re at RA Forum, come find me.

Also, how is it almost November? The time change this weekend is going to hit hard; dark at 5pm is not my favorite part of the year. And SoCal doesn’t give you much in the way of a fall color show, so shout-out to the East Coast reader who sent me leaf pics last week while out on a stroll!

A quick reminder that the Upward Growth Debrief is Friday, November 6 at 1pm ET / 10am PT. It’s a monthly live call for paid subscribers. I’ll open with 15 minutes on what’s actually shifting in the market right now, including the stuff that doesn’t fit into the written newsletter, then it’s Q&A and dialogue. If you’ve been thinking about upgrading, come join us.

One last thing: Election Day is Tuesday, November 3. Whatever your politics, go vote. It matters.

Open Enrollment Period (OEP) for 2027 coverage opens November 1, which is when the pricing bets health plans made back in June get tested against actual member behavior. For plan leadership teams, the next ten weeks are where the risk pool assumption behind every 2027 rate filing either shows up accurately or doesn’t, and the window where 2028 market structure starts to resolve.

Timing-wise, this article sits in a specific vantage point. Several major health plans reported Q3 earnings in the past week, more Q3 reports land in early November, and OEP opens Saturday. That gives six months of operating data to audit the strategic reads health plans filed for 2026, with enough forward signal from the Q3 cycle to assess which reads extend into 2027 and 2028, and enough runway before OEP for the audit to be useful rather than retrospective.

Back in May, I wrote an article framing how to read the 2026 ACA shakeout, laying out five strategic postures for health plans staying in, along with how to think about who was exiting and why, and what to watch for through the back half of the year. The categories held up well, and the exits mostly followed the pattern the article anticipated. Where I’d go deeper is on something that article underweighted. Within almost every one of those categories, individual plans landed in different places based on how their management teams understood the acuity trajectory they were inheriting, and that understanding is doing more work than category membership in separating outcomes.

Most of this week’s article discusses Centene and Molina, because the split between them is the clearest example of that dynamic playing out, and because their pricing decisions carry over to the other categories. From there, I’ll cover where Oscar, the Blues, and the vertically integrated health plans that exited stand now, and where I’d update what I said in May about each. The article also audits the Enhanced Premium Tax Credit (ePTC) contrarian call I made in May, which has mostly held, but I’d push a bit harder now given where consensus seems to be drifting heading into the midterm elections and the following lame-duck session.

Subscribe now

What the 2027 ACA Market Actually Looks Like Heading Into OEP

The 2027 ACA market is smaller and sicker than the 2026 market, and that shift is doing most of the work explaining both the 2027 rate filings and the exit announcements that have piled up since summer. Shoppers opening the exchanges will see it as fewer plan options and materially higher premiums. Both stem from a risk pool that contracted and worsened in composition through 2026.

Enrollment contracted hard through 2026, with plan selection coming in around 23.1 million, a 5% drop from 2025. Effectuated enrollment, meaning the members who actually paid a January premium, tells the harder story: 22.1 million in February 2025 fell to 19.2 million a year later. Let’s pause a moment on that. Nearly three million people selected a plan for 2026 and then walked away before paying their first bill. That’s a bigger signal than the headline selection number, because the walk-aways skew healthier than the stayers, and the selection pattern is now baked into what health plans filed for 2027.

Those filings landed at a 15% median across 276 insurers, with 51 of those payers requesting above 25%. Plans are attributing roughly four percentage points of 2027 increases to morbidity worsening on top of the four points they already baked into 2026. That compounding is the data point worth sitting with. CFOs are managing a market where acuity keeps rising, which is a very different operating problem than a one-time jump. Analysis of first-month payment patterns across 80% of the ACA market showed paid members with about 10% higher morbidity than unpaid members, with only 86% of enrollees paying their first premium versus a historical effectuation above 92%. The working-age uninsured rate climbed to 11.2% for 2026, up from 8.9% in 2024, which is the sharpest two-year reversal in coverage trends since the ACA fully took effect.

The twelve or so plan exits announced for 2027 follow the pattern the May framework described, which the Aetna and Cigna discussion later picks up. The exits ran about as expected. What separates 2026 from 2025 is how the plans that stayed in actually performed.

Centene and Molina Priced the Same Risk Pool Into Opposite Outcomes

The split that showed up in Q2 2026 between Centene and Molina is cleaner and faster than I expected when I laid out the five posture framework in May. Both are Medicaid-core plans with an ACA book as an adjacent product line; both took material membership hits through 2026, and both priced against the same morbidity shift. Their Q2 Marketplace numbers moved in opposite directions.

Centene’s Marketplace membership fell roughly 40% year over year to about 3.5 million lives in Q2 2026, down from close to 5.9 million a year earlier, close to the percentage hit Molina took. The difference is reflected in the Marketplace line below the membership number. Centene’s Marketplace health benefit ratio moved from 90.6% in Q2 2025 to 79.2% in Q2 2026, an 11.4-point improvement on the ACA book specifically, and the consolidated Q2 operating result swung from a loss a year earlier to over a billion in profit. Centene attributed the improvement to pricing and risk transfer reflecting the acuity of the Marketplace membership, which translates to: management priced for the acuity shift and the pricing covered it. Worth flagging that roughly $0.50 per share of the Q2 beat came from non-recurring 2025 Marketplace and Medicare settlement items, so part of the headline isn’t run-rate. The operating trajectory on the Marketplace line is still dramatically better than anyone expected coming into the year. For 2027, Centene is holding at 29 states and exiting only Delaware and New Hampshire.

Molina went the other way on almost every number. The Marketplace book fell from 690,000 at Q2 2025 to 283,000 at Q2 2026. Its Marketplace medical care ratio moved against the company, from 85.4% to 88.9%. Marketplace medical margin dropped from $175 million to $69 million, and full-year EPS guidance got cut by $1.50 on Marketplace drag alone. CEO Joseph Zubretsky acknowledged on the Q2 call that the team had priced for an acuity shift but underestimated the stickiness of high-cost members, and the pullback for 2027 has landed at 7 states, down from 14.

This isn’t a story about Centene being better operators or Molina being worse ones. Both teams have built credible businesses over long time horizons, and both priced for the morbidity shift the April data surfaced. But where they differed is on what they expected the shift to do going forward.

Molina seems to have priced the morbidity shift as a one-time step up, meaning a repricing to a sicker but relatively stable new baseline. That is a defensible actuarial read, and it is the read most payers filed against for 2026 the first time around. If the pool resets at a higher acuity and then stabilizes, a 30% rate increase for 2026 is a reasonable response, and the back half of the year should start improving as pricing catches up to the new acuity level. That isn’t what the Q2 numbers showed.

Centene appears to have filed against a different model. The read is that the pool would keep selecting against the plan year over year, because the people choosing to pay a January premium in a world without enhanced subsidies are increasingly the sickest slice of an already-shrunken pool. It is a less comfortable read to defend to a board, because it implies 2026 pricing is still catching up to a target that keeps moving in 2027, and 2027 pricing is still catching up to a target moving again for 2028. It also implies the operating math only stabilizes once ePTC restoration happens or the pool bottoms out at a new structural floor, whichever comes first.

The split between pricing against stabilization and pricing against continuing selection is a cross-functional alignment question that cuts across actuarial, product, and finance, and whichever read those three functions privately hold ends up shaping every input the pricing deck depends on, from benefit design and network configuration to SG&A, reserving posture, and the forward trend each team hands over. When the three agree on the read, right or wrong, the filing is coherent and defensible. When they don’t, it becomes a weighted average of three different assumptions about the market, which is harder to defend when the actual numbers come in off plan and harder to reverse-engineer afterward.

Both teams reported Q3 since the Q2 commentary that framed the May through August read. Molina’s Q3 ran a 92.5% Marketplace MCR against 88.9% at Q2, which Molina framed as normal seasonality and in line with company expectations. Full-year guidance was reaffirmed rather than raised, and the 14-to-six footprint execution for 2027 stays on track. The language asymmetry on the call is the tell on where the forward read actually sits. Zubretsky called “the beginning of the turn” on Medicaid margins specifically, with no equivalent framing on Marketplace. That reads as a team executing the one-time footprint reset at smaller stable scale, not a team that has shifted toward the continuing-selection view of the risk pool. It’s the first of the two framings this section laid out, and the one that points toward a similar outcome in 2028 if the underlying read still doesn’t match what the market is doing.

Centene’s Q3 came out this morning and extends the same read. Consolidated HBR of 92.7% beat expectations, driven by the Medicare segment, with Medicaid and Marketplace described as on track. Full-year adjusted EPS guidance rose another $0.40 to above $5.20. Marketplace coming in on track rather than surprising in either direction, which seems to confirm the acuity trajectory Centene priced for keeps proving out.

This matters past Molina and Centene because every ACA health plan is answering the same question internally, and most haven’t been forced to answer it publicly the way these two have. The spread of 2027 rate filings maps roughly to the split: the 51 health plans that requested above 25% filed the Centene read of what’s coming, while most of the plans at or near the 15% median filed something closer to Molina’s. OEP, the November 10 Q3 earnings cycle, and February 2027 effectuation data will settle whose read described the market that actually arrived.

Subscribe now

Oscar’s Growth, Blues Unevenness, and the Aetna-Cigna Exits Through the Same Lens

The alignment that split Centene and Molina also shows up in the other three posture categories, in different operating shapes. Oscar’s tech-native growth, the uneven absorption pattern across the Blues, and the vertically integrated exits each run on their own operating model, but how aligned the pricing team is on the acuity trajectory they’re inheriting still sorts the outcomes inside each category.

Let’s start with Oscar. The membership growth to 2.96 million, the swing to positive operating income, and the stock price doubling in a year the broader market contracted are the numbers that made Oscar the 2026 ACA story. The number I didn’t expect is the 79.2% consolidated medical loss ratio holding steady while the book grew that aggressively. I expected the growth to come with a materially hotter MLR, because new membership typically runs sicker than mature membership in the first year. That didn’t happen, which means something in the operating model is doing more work than pricing alone can explain. Oscar’s tech stack and member engagement infrastructure are doing more work on the risk pool than the May framework gave them credit for. My May article, when discussing Oscar, emphasized operational efficiency and pricing agility, both of which held.

A second advantage doesn’t show up on the balance sheet. Oscar’s product and member-services functions run on the same tech stack, which makes the cross-functional alignment problem I described in the Centene and Molina section structurally smaller than it is for a traditional plan where product, actuarial, and finance work from different data pipelines. That isn’t the whole explanation for the 79.2% number, but it probably explains more than any single operational advantage. Oscar’s 150-plus additional metros for 2027 will expose whether the infrastructure advantage scales linearly with geography, or whether the first two years in new metros run hotter MLRs than the mature book because the member engagement model takes time to seat. My read is the second, and that it is a 2028 story more than a 2027 story.

The Blues absorbed the Aetna displacement through 2026 along lines that split the category in a worth-naming way. Every state has a dominant Blue, so the Aetna book had to land somewhere, but where it landed and how cleanly it got absorbed depended on the local Blue’s commercial profile. Blues with deep provider integration and a diversified employer and MA book took on the Aetna members without MLR deterioration. Blues in states where ACA sits concentrated inside a thinner commercial base ran defensively instead and let Centene or Oscar pick up the displaced members.

The same alignment that split Centene and Molina also shows up on the pricing side. Blues with deep provider integration and diversified books tend to run ACA on the same planning cycle and operating model as the rest of their lines, which produces a single enterprise view of the market when it’s time to price. Where ACA sits as a semi-standalone line, that alignment usually isn’t there, and the pricing filing ends up reflecting the local ACA actuary’s view without the enterprise behind it. The consolidation story playing out across the Blues is already sorting which Blue plays which role going forward, and the enterprise-aligned Blue and the semi-standalone-ACA Blue are structurally different operating companies at this point. Treating them as one buyer segment for the next eighteen months misses more than it catches.

Aetna and Cigna are the cleanest hold from my May article framework. The vertically integrated retreaters played out the way the capital allocation thesis called for, and there isn’t much to update. Aetna adjusted operating income was up 53% year over year to over $3 billion in its Q1 2026 release, validating the exit decision from a parent capital allocation standpoint. The $448 million premium deficiency reserve referenced in May was absorbed, and the margin story materialized on the timeline the thesis required. Cigna’s full 11-state exit for 2027 under incoming CEO Brian Evanko runs the same math against the Evernorth benchmark the parent is managing to. The exit decision and Centene’s decision to stay and price hard come from the same capital-allocation discipline, applied to parents whose adjacent businesses set very different margin benchmarks for what the ACA book has to clear. For example, Centene stays and prices hard because the Ambetter book is the margin story the parent needs. Conversely, Aetna and Cigna exit because the ACA book can’t clear the benchmark against the adjacent businesses the parent runs, and the capital allocation framework reaches the opposite answer when the parent portfolio is structured that way.

Where the ePTC Contrarian Call Landed Six Months Later

The Enhanced Premium Tax Credit (ePTC) through 2026 has largely followed the path Republican leadership telegraphed through the back half of 2025: limited incentive to spend political capital on restoration absent clear electoral pressure, and no near-term legislative off-ramp for health plans hedging their 2026 or 2027 pricing on it. The sequence that played out held that read up. The Senate failed to advance the Lower Health Care Costs Act by a vote of 51-48 on December 11, 2025, short of the 60 required for cloture. House Democrats then forced a discharge petition vote on a clean three-year extension in January, and the measure passed 230-196 with 17 Republicans crossing over. The Senate has not taken it up, and no floor action is scheduled heading into OEP.

The Senate rules behind passing a clean three-year ePTC extension are why planning for the enhanced subsidies to stay through 2028 is the operationally safe call, not just the political one. Senate rules let a minority block legislation unless 60 senators vote to end debate, which is a different problem than winning a majority. Even if Democrats sweep the November 2026 midterms, there aren’t enough Republican-held Senate seats on the ballot in states where Democrats can win to get them to 60.

That said, there’s a view beginning to circulate among health plan leadership teams that some form of partial restoration lands in a lame-duck session after the midterms, probably in a narrower income band or as a time-limited bridge attached to a year-end package, and that this would materially change the 2028 pricing picture. Partial restoration of that kind can move through a different legislative vehicle than a clean three-year extension, so the cloture problem above doesn’t close the door on it.

However, even if partial restoration lands at some point in 2027, it does not undo the selection pattern that built up through 2025 and 2026. Health plans that exited aren’t re-entering for at least one bid cycle. Members who became uninsured between 2024 and 2026 don’t return to the risk pool at the acuity they left it. And the plans now pricing against a continuing selection dynamic don’t suddenly reprice downward just because a subsidy returns, because the morbidity math underneath the pricing hasn’t reset. Restoration changes the forward slope without erasing the two years of selection that already happened. If I were advising a plan leadership team on 2028 bid assumptions, I would assume no restoration through at least the 2028 cycle and treat any restoration news as upside rather than baseline. That way the plan is positioned for restoration not landing, which is the harder scenario to recover from if the planning assumption was wrong, and any late surprise lands as upside rather than a stress test.

Subscribe now

What the OEP Window Resolves Between November 1 and February 2027

OEP runs from November 1 through January 15, with December 15 as the deadline for January 1 effectuation. A few watchlist items from May either resolve or sharpen within that window.

Where Cigna’s displaced 369,000 members actually land is one of the questions OEP starts answering immediately. The 2026 Aetna displacement is spread across Centene, Oscar, Elevance, Molina, and Kaiser. The 2027 replacement cohort is thinner, because Molina is out of capacity, Blues pickup varies by state, and Oscar’s growth story is concentrated in specific geographies. If Cigna’s displaced members land disproportionately at Oscar, the tech-native growth story extends further than it did in the May read. A different distribution, with some states’ displaced members landing at Blues and others going uninsured, surfaces the single-insurer county problem as a 2028 story in markets where competitors already thinned out.

State-level effectuation rates in February 2027 are the other read worth watching through Q1. The 86% January 2026 payment rate is the baseline the April data established. A drop from there in 2027 means the health plans that priced for continuing selection described the market accurately, and the Centene-Molina split extends across the rest of the field. The reverse outcome, with payment rates holding or improving, would signal the market finding a new equilibrium at smaller stable scale, which puts 2028 bids on a different curve than today’s forward reads imply. My guess is the number drops again, probably into the low 80s, but it is a guess with wide error bars.

The first signals on 2028 posture are largely in from the Q3 reports that have landed, and they read as extensions of the Q2 split rather than a reframe from any side. Centene and Molina played out as extensions of the stabilization-versus-continuing-selection split described above. Elevance’s Q3 raised full-year adjusted EPS guidance to at least $29.00 and reinforced a 2027 earnings baseline that extends the enterprise-aligned diversified payer read, consistent with the Blues absorption pattern discussed earlier. Oscar’s Q3 lands in early November and is the remaining signal worth watching hardest, specifically whether the tech-native growth story extends at scale or starts to show the metro-expansion MLR seasoning the Oscar section flagged earlier. A clean extension across the categories tightens the thesis. A divergence raises doubt about which Q2 reads were durable.

What This All Means for Health Plans Heading Into the 2028 Bid Cycle

The structurally advantaged position looks different in each of the five posture categories I laid out in May, which grouped payers by their strategic read on the ACA shakeout: Medicaid-DNA plans making concentrated bets on the exchange book, tech-native plans leaning on their operational infrastructure, selective Medicaid managed care operators who built lighter ACA footprints off their core book, Blues who were going to default-absorb the exits in their states, and the vertically integrated plans making the capital allocation case to pull back. Six months in, the plans in the strongest position inside each of those reads have planning flexibility going into the 2028 bid cycle, which opens for filings in June 2027. Centene made a concentrated bet on the exchange book, priced for the acuity trajectory, and now has the Q2 and Q3 numbers to prove the read out. Oscar’s tech-native operational model held its MLR flat while the book grew 46%, signaling that the member engagement infrastructure is doing what the May framework thought it might. AmeriHealth Caritas Next ran a selective ACA footprint off a core Medicaid managed care operation and avoided the overexposure that forced Molina into significant 2027 service-area cuts. The Blues, with deep provider integration and diversified books, absorbed the Aetna displacement in their states cleanly, which is the enterprise-aligned read playing out on the ground. That flexibility converts into either market share capture in the counties competitors just exited or margin expansion against a smaller stable book, depending on how each team wants to spend it.

Payers on the losing side of 2026 face either further retrenchment along the Molina path or more fundamental operating model restructuring. The Molina path means pricing for a smaller book, and trading improved risk pool concentration for a materially smaller national footprint. Blues with concentrated ACA exposure and thinner commercial diversification face a different version of the same question: either doubling down on a defensible subset of counties or accepting that the ACA book becomes a smaller line inside a broader state-level strategy. For either group, the operational work between now and June 2027 is less about pricing posture in isolation and more about getting actuarial, product, and finance aligned on a single defensible view of what the market is doing. Payers heading into 2028 with those three functions operating from different assumptions are the ones most exposed to another cycle of outcomes landing off plan.

OEP opens November 1. Centene and Molina already reported Q3, and neither changed course. The remaining Q3 reports through mid-November, plus state-level effectuation data in February, are where the full test gets graded in public.

Final Thought

The Centene and Molina split is diagnosable because both teams have given the market enough language to read their forward posture against the acuity trajectory. The 50-plus plans who filed somewhere between the two reads are diagnosable the same way, well before February effectuation data or next spring’s earnings commentary makes it unmistakable. Readers who treat cross-functional alignment as a planning input between now and the June 2027 bid cycle will see which plans are durable before the market has fully sorted them.

OEP is also opening alongside the loudest healthcare conversation Washington will have for the next several months on ePTC restoration. Whether restoration lands or not, the two years of selection that have already shaped the ACA risk pool don’t reverse. The 2028 rate conversations are coming regardless, and health plans building their 2028 posture against a continuing-selection view of the market will face a different problem than plans still priced for stabilization.

If you’re working through what the Centene-Molina split and the broader ACA market shakeout mean for how your organization is positioned, Upward Growth is a health plan market advisory firm that works with health tech vendors, investors, provider organizations, and management consultancies to build strategy around how health plans actually buy, operate, and make decisions.

Thanks for reading.

Here’s to upward growth,

Ryan Peterson

The frameworks in the weekly Upward Growth newsletter help health plans, health tech vendors, investors, provider organizations, and consultancies understand the health plan market as it continues to shift.

If your colleagues are in those conversations, they should be reading this too.

💰 Invest In Your Team with a Paid Subscription.

Get a group subscription

Give a gift subscription

💡 Pro tip: Many subscribers expense Upward Growth through their company’s professional development, training, or learning budget. Here’s a one-minute email template to get your manager to approve expensing your subscription.

🤝 Work with us on payor market strategy: Contact us

🟦 Connect with the author, Ryan Peters…

Read more

🤝 Work with us on payor market strategy: Contact us

🟦 Connect with the author, Ryan Peterson, on LinkedIn.

🎧 Listen to the Upward Growth Podcast: Apple | Spotify

📰 Newsletter sponsorships: Learn More

Today’s Upward Growth newsletter is sponsored by Florence

Florence is a clinically validated, automated care management platform that uses ongoing, intelligent two-way SMS to support patients through the critical transition from hospital to home.

As your care team multiplier, Florence checks in after discharge, reinforces next steps, identifies barriers, and escalates patients who need additional support. In deployed programs, Florence reduced 30-day all-cause readmissions by 29%, with reductions of up to 56% for CHF and 70% in emergency COPD admissions.

Interested in seeing what Florence could do for your TOC population?

Learn More

Want to reach health plan buyers, vendor executives, and investors? Contact Us

A few things to share this week:

We’re launching something new! The Upward Growth Debrief, a monthly live call for paid subscribers. I’ll kick off the call with 15 minutes on what’s actually shifting in the market right now, including the stuff that doesn’t make it into the written newsletter, then open it up for Q&A and dialogue. The first one is Friday, November 6 at 1pm ET / 10am PT. Upgrade here if you want in.

Article 2 of the RISE trilogy posted this week: Risk Adjustment Vendor Market Splits Around Specialty Depth. It builds on Article 1 on Plan-Side Risk Adjustment Vendor Evaluation Criteria and gets into how the vendor market is cleaving along specialty lines. Article 3 is still to come, on why the organizational separation between Risk Adjustment and Quality Improvement inside plans is structurally unsustainable, which is also the thread I’ll be moderating at the RISE Risk Adjustment Forum in Orlando on October 28. If you’ll be at the RA Forum, come find me.

A quick heads-up: a subscriber survey is coming to your inbox in the next couple of weeks. I want your honest feedback on what’s landing and what you’d want more of. Thanks in advance for helping me build an even better community here.

The 2027 MA Star Ratings came out October 8, and several threads from this release are worth pulling on. The CMS fact sheet math on 4+ star enrollment share. The dual-eligible dynamics inside Centene’s results. The HOS triple-weighting that showed up in the 2027 measure set and what it signals for 2028. The implications for 2028 bid season planning that is already underway. Any one of those is its own article, and some of them will probably show up in future weeks, or on the monthly Upward Growth Debrief for paid subscribers, where I can get into something without the length constraint of a Tuesday newsletter.

The thread I want to pull this week points at something structural. For the past 15 months, five of the biggest MA plans sat on earnings calls and in SEC filings and told the market, in near-identical language, how they’d fix their Stars problem. Humana called it contract diversification (actually, Elevance called it contract diversification a full year earlier). Aetna called it portfolio rationalization. UnitedHealth called it product repositioning. Centene called it dual-focused derisking. Different labels, but basically the same play. The 2027 release is the first scoreboard against those commitments. Humana produced the exact result its own public framing had modeled. The other four produced declines of 7 to 15 enrollment-weighted points from their 2026 baselines.

Part of the reason I am pulling this specific thread is that we track the quarterly earnings cycles from the five Nationals closely in this newsletter, including the past several Q1 and Q2 reads where I walked through what each plan was committing to and what the market was pricing in. The 2027 release is a natural checkpoint against the past 15 months of their commentary, and I wanted to see what the data actually showed.

Two notes before we go further. H-contracts are the individual Medicare Advantage contracts CMS assigns a Star Rating to, each identified by an H-number. A parent plan like Humana or Elevance operates many H-contracts under its corporate umbrella, and each one carries its own enrollment, its own rating, and its own financial consequences. For the enrollment weighting throughout, I used the CMS September enrollment file from the same year each ratings cycle was released, so the percentages reflect which members were in which contracts when each cycle took effect.

What makes this interesting is that it is the first cycle where the public scoreboard separated two things the plans had been describing as one thing. For 18 months, the margin environment required all five to exit unprofitable membership, concentrate the book in better-rated contracts and better-economic counties, and defend margin into the 2027 payment year. Those exits were defensible margin work, and they also happened to show up in Stars vocabulary because shedding low-rated contracts can lift the enrollment-weighted average by subtraction. The plans could tell both stories as one story, and the investor audience rewarded them for it. The contracts a plan kept required something the exits did not: measure-level investment at the H-contract on the heaviest-weighted CAHPS and HOS items, held across the three-year horizon those measures need to move. Humana was the only one of the five whose book forced that second kind of work, because H-contract H5216 sitting at 3.5 stars with roughly 45% of the company’s MA membership was existential and could not be exited away.

This points to the structural problem that awaits the four plans going into 2028. Every Q2 2026 guidance raise was defended on margin discipline rather than enrollment recovery, which seems to lock the industry into continued exits through 2027. Reversing course on the exits within twelve months would give back the story that justified the raise. Which means the four plans that produced Stars declines in 2027 have the least operational room to pivot to focused contract-level Stars work, because the margin commitments make it hard to add cost at exactly the moment the release says they most need to. The Q3 earnings calls over the next 60 days are the first live moment each CEO has to address this publicly.

How the Five Nationals Framed Their Stars Recovery in Public Disclosures

The five publicly-traded National MA plans (Humana, UnitedHealth, CVS/Aetna, Elevance, and Centene) converged on the same strategic play because they were absorbing the same hit. The 2025 Star Ratings cycle collapsed 4+ star enrollment share across the industry after CMS tightened cut points, applied the Tukey outlier method, and let the hold-harmless provision phase out. Humana’s version was the most dramatic, with H5216 dropping from 4.5 stars to 3.5 in a single cycle and taking roughly half the company’s MA book with it. The other four felt the same pressure in bid math, 2026 QBP exposure, and 2027 revenue planning. The response, across all five, was the same financial move described above, and the Stars vocabulary each plan reached for came from inside that move rather than alongside it.

Humana’s October 2, 2025 8-K named the play most clearly. The filing announced “an MA contract diversification strategy, beginning with the 2026 Annual Election Period beginning on October 15, 2025” and described a “fundamental shift” in the Stars program itself, grounded in strategic choices, data and analytics, and “an ‘always-on’ approach to Stars improvement.” The 8-K disclosed 1.2 million members in 4+ star plans for 2026, roughly 20% of the book, with an average Star rating of 3.61, and projected the 4+ share for 2027 would be “meaningfully higher than the approximately 20% noted above.” Humana also quantified the net Stars headwind for 2026 at approximately $3.5 billion on the Q4 2025 earnings call. The language was more pointed than any of the other four disclosures that followed, because Humana’s problem was more pointed: H5216 at 3.5 stars with roughly 45% of the book had to come back, or the margin story would not hold.

Elevance was first to use the exact “contract diversification” language, a full year before Humana, with CEO Gail Boudreaux introducing the phrase on the October 17, 2024 Q3 earnings call and the company committing several hundred million dollars of 2026 investment on the Q3 2025 call. Aetna reached for portfolio rationalization, spending 2024 trimming its MA footprint and then claiming in its October 2025 press release that “over 81%” of MA members were in 4+ star plans for 2026 and “over 63%” were in 4.5-star plans, with H5522 extending its 14-year streak at 4+. UnitedHealth landed on product repositioning, with the September 2025 8-K/A projecting approximately 78% of membership in 4+ star plans for Star Year 2026 and the Q3 2025 earnings call tying the projection to MA product exits covering roughly 1 to 1.4 million members. Centene framed it as dual-focused derisking, with six states exited and the Q3 2025 10-Q disclosing approximately 60% of MA membership at 3.5 stars or higher and approximately 20% in 4-star contracts.

The disclosures all use remarkably similar language because the plans were running remarkably similar strategies.

Subscribe now

How the 2027 Numbers Reconciled Against Each Plan’s Public Projections

The industry headline from the CMS fact sheet on October 8 is that roughly 71% of MA-PD enrollees are in contracts rated 4 stars or higher, a modest uptick from the 2026 cycle. At the industry level, that reads flat-to-slightly-positive. At the parent level, it hides a 74-point Humana swing on one side and 7-to15-point declines across the other four on the other.

Humana’s Q4 2025 earnings call projected a Stars-normalized doubling of individual MA margin year over year for 2026, with the normalization math requiring the 4+ share to return to roughly its 2025 level. The 2027 release delivered it.

The decomposition is where the Humana story earns itself. The 8-K named two motions, one being steering members into better-rated contracts for the 2026 AEP, the other being the “always-on” operational investment in Stars. Ratings movement at constant enrollment accounts for roughly 73.5 of the 74 enrollment-weighted points. Member redistribution at constant ratings accounts for roughly 0.3 points. The operational Stars investment did essentially all of the work. Twelve Humana contracts crossed the 4+ threshold between the 2026 and 2027 ratings, and the single biggest driver was H5216, Humana’s largest contract at roughly 45% of its MA book, moving from 3.5 to 4.0 stars. H5216 alone carries roughly 12,000 county-plan offerings in the 2027 AEP, and the 12 Humana contracts that crossed the 4+ threshold account for the bulk of what Humana is putting in front of beneficiaries this cycle. Steering happened too, with members moving into H7617 (already at 4.5 stars) and Humana stopping broker commissions on roughly a third of its products to shape the 2026 AEP flow. The 0.3 points is the measure of how little that mattered against H5216’s size.

UnitedHealth’s drop from 81% to 68% is from a baseline the company itself described in September 2025 as “consistent with historical performance.” Aetna’s 85% to 70% is sharper, because the October 2025 press release was built around “strong fundamentals and unwavering commitment,” and a 15-point decline is harder to narrate against that language than against a hedged projection. H5522 held and anchors the Employer Group book, but the Individual MA book outside H5522 moved against the stated story.

Elevance’s 54% to 47% is the signal in the dataset that execution alone does not explain the dispersion. Elevance’s “contract diversification” language codified the phrase in SEC filings across 2025, committed several hundred million in 2026 Stars-aimed investment, and sued CMS twice over Star Ratings methodology (the first time in November 2024 over a rounding issue that cost a contract its 4-star rating, which the Texas court dismissed in August 2025, and the second time in July 2026 over the Clover-related recalculation and the roughly $115 million in 2027 QBP exposure Elevance tied to the dispute, with the emergency injunction denied in August 2026). Elevance walked its 2026 projection from 38% to approximately 55% across 2025 and landed at 54%, reconciling cleanly to its own disclosure. The 2027 cycle delivered 47%. Being first on the language, committing material investment, suing CMS twice, and still delivering a 7-point decline from the recovery is the pattern that makes the dispersion worth explaining.

Centene’s 20% to 10% rounds out the four, and the forward-looking footprint signals a deeper retreat than the earnings call language suggested. The CY 2027 Landscape file shows Centene cut its county-plan footprint by roughly 30% going into the 2027 AEP, dropping 11 contracts entirely with zero replacements, while the other four Nationals cut 2% to 5% of their footprint. For a plan whose stated approach is derisking toward lower-income seniors and whose leadership has publicly questioned whether Stars methodology risk-adjusts appropriately for complex low-income populations, the 2027 result and the forward footprint reinforce the ceiling problem Centene has been describing for most of the past year.

Margin Work and Stars Work Are Not the Same Operational Motion

Shedding low-rated contracts and exiting unprofitable counties does two things at once. It cuts the margin bleed, which is why every one of the Q2 2026 guidance raises was defended on protecting the raise rather than growing into it. And it lifts the enrollment-weighted Stars average by subtraction, because the contracts and counties being shed are concentrated in the lower-rated end of each plan’s book. The 2027 release separated what the plans had been telling as one story. Moving the underlying contracts the plan keeps required a different kind of work, focused at the H-contract level on the specific measures CMS is weighting heaviest, and sustained over the three-year horizon it takes for CAHPS and member experience measures to actually move. Four of the five were running the margin playbook as the primary motion and letting subtraction carry the Stars number. Humana was running both, because H5216’s size meant exits alone could not fix the problem.

Aetna said the margin story most directly. “Margins over membership,” which is how CFO Tom Cowhey framed it to investors in May 2024. The 160 counties Aetna exited going into 2026, the cuts to OTC allowances and transportation benefits, the H5522 protection posture, all of it was margin work. The Stars benefit was the subtraction effect from exiting the lowest-rated contracts and counties. Aetna’s bet was that the subtraction effect plus H5522 holding would carry the enrollment-weighted number. H5522 held, but the subtraction effect was not enough on its own.

UnitedHealth was running the same playbook with different vocabulary. The 109 counties UnitedHealth exited going into 2026 (later revised to roughly 225 across the full repositioning) were primarily PPO plans in rural areas where CMS funding cuts, utilization pressure, and the benchmark math made the economics unworkable. Bobby Hunter, who runs UnitedHealth’s government programs, framed it directly: “The combination of CMS funding cuts, rising healthcare costs and increased utilization have created headwinds that no organization can ignore.” The pivot from PPO to HMO was about network discipline and total cost of care. The 78% projection in the September 2025 8-K was positioning the cleaned-up remainder, with the Stars benefit coming from exiting the lowest-rated contracts rather than from operational investment at the H-contract level.

Elevance did the measure-level work on top of the margin exits. The several hundred million dollars committed on the Q3 2025 earnings call went into member experience, and the investment itself is not in dispute. The problem is that it was spread across many contracts without a single one carrying enough enrollment weight to swing the number by itself. Elevance’s book has no H5216; rather, it has a long distribution of mid-sized contracts, which means focused measure-level work has to show up across many contracts at once, on the measures CMS is weighting heaviest in the specific cycle being measured. The 2027 cycle tripled the weight on CAHPS and HOS measures that take roughly three years of sustained work to move half a star on. The Elevance investment was in the right category and probably too late in the cycle to show up in 2027. The lawsuits are the hedge for exactly that timeline. If the operational work does not close the gap fast enough, the methodology fight is the backup.

Centene’s book is a different problem (which is why I would not read Centene’s 20% to 10% as a strategic failure in the same category as the other three). Centene has been saying publicly for most of three years that the Stars methodology does not risk-adjust appropriately for dual-eligible and low-income populations, where the structural ceiling on CAHPS and member experience outcomes is lower regardless of operational work. Independent analysis of Star Ratings variation across contracts with high D-SNP and LIS enrollment supports that argument. Centene’s 2027 strategy of further simplifying the footprint and leaning into dual-eligible with Medicaid integration accepts the ceiling and tries to make the economics work inside it rather than fight it.

A quick sidebar before moving on. Alignment Healthcare is not a National plan, but the single-contract concentration variable showed up in reverse at Alignment in the same release, and the mirror image is worth naming. Alignment’s California HMO contract H3815 serves roughly 75% of the company’s health plan membership and dropped from 4.0 stars to 3.5 for 2027. ALHC shares fell more than 20% on the news. Alignment’s 8-K attributed the decline to higher industry cut points and declines in triple-weighted HOS and Part D measures, which is a plan independently naming the measure-exposure variable that showed up across the five Nationals in this cycle. Alignment is pursuing administrative appeals and filed suit in D.C. District Court on October 10, asking the court to vacate the 2027 ratings before the 2028 selling season, with the complaint claiming the decline costs Alignment more than $200 million in 2028 payments. The suit is separate from Alignment’s still-pending 2026 ratings suit, though it rests on the same argument about CMS changing methodology outside notice-and-comment rulemaking. The mirror image is the point: single-contract concentration can swing the full enrollment-weighted number in either direction, and 2027 produced both the upside case (Humana’s H5216 moving from 3.5 to 4.0) and the downside case (Alignment’s H3815 moving from 4.0 to 3.5) in the same release.

The structural constraint for 2028 is why these four plan-by-plan reads matter past this cycle. Every one of the five raised full-year 2026 guidance in Q2, and every raise was defended in terms of margin discipline rather than enrollment recovery, extending the 18-month reset the industry has been working through rather than signaling a pivot out of it. The four plans that produced declines face a harder funding question going into 2028 than they would in a normal cycle, because adding focused contract-level work to the P&L runs against the margin story the Q2 raise was built on. Humana already carries that cost in its base. The other four would be adding it fresh.

Subscribe now

What Plan Finder Shows This Week and What the Q3 Calls Will Be Measured Against

The compounding effect of the 2027 release starts this week, not in 2028 bid season. The 2027 AEP opened October 15, and the dispersion is sharper in what plans are actually offering for 2027 coverage than in the enrollment-weighted scoreboard behind it.

The star rating next to each plan is one of the strongest signals in the AEP shopping experience. The enrollment flows that come out of this cycle will compound the dispersion the 2027 ratings created, independent of what the 2028 QBP math eventually says.

The Q3 earnings calls over the next 60 days are where each CEO has to address the gap between the margin raise they committed to in July and the Stars result the October release delivered. The calls run from Humana on November 6 through Aetna in early December, and what each one says about the gap, measured against what each one said over the past 15 months, is the clearest 2028 positioning signal the market will get before bid season.

What to listen for on Humana’s call is how much the company leans into the “always-on” infrastructure as replicable across the portfolio versus how direct it is about H5216 being both the problem and the solution, and what the focus is now that the big contract is back at 4.0.

UNH’s 13-point decline sits against a September baseline the company itself called consistent with historical performance, which makes the county exits read as cost-driven work and the Stars decline read as a separate question about the contracts UNH kept. Aetna’s 15-point decline sits against stronger language from the October press release, with H5522 holding up the Employer Group book and the Individual MA book carrying the full decline. In both cases, the margin exits did not deliver the enrollment-weighted lift the subtraction math implied.

Elevance’s 7-point decline from the 2026 recovery is the harder one to narrate, because the operational investment and the lawsuits were both real. What the market will be listening for on that call is whether Elevance addresses the CAHPS and HOS weighting shift, the three-year horizon on member experience movement, and the Clover-related recalculation it is still litigating.

Centene’s Q3 call is a different kind of question entirely. The 20% to 10% result combined with the roughly 30% footprint cut and 11 dropped contracts going into the 2027 AEP makes it harder to defer whether to keep fighting the ceiling or build inside it. The 2027 strategy of simplifying the footprint and leaning into dual-eligible with Medicaid integration is directionally the second answer. Whether Centene leadership says that out loud or keeps hedging between the two is a story worth watching.

The CMS Technical Notes drop later this fall and will show which measures drove which movements for which contracts across all five. That is the independent check against whatever each CEO says on their Q3 call.

The 2027 release is also the last cycle measured against the environment the plans planned for. The specific provisions and the pattern behind them in the CY 2027 Final Rule reshape the measure set for 2028 and 2029 toward clinical outcomes and away from administrative process, which rewards focused operational Stars investment at the H-contract level even more than 2027 did. The guidance commitments the five made in Q2 will meet that reshaped measure set in the 2028 bid cycle. Whichever of the four declining plans finds a way to fund contract-level operational Stars work inside the margin commitments will have the cleanest 2028 story.

Thanks for reading.

Here’s to upward growth,

Ryan Peterson

The frameworks in the weekly Upward Growth newsletter help health plans, health tech vendors, investors, provider organizations, and consultancies understand the health plan market as it continues to shift.

If your colleagues are in those conversations, they should be reading this too.

💰 Invest In Your Team with a Paid Subscription.

Get a group subscription

Give a gift subscription

💡 Pro tip: Many subscribers expense Upward Growth through their company’s professional development, training, or learning budget. Here’s a one-minute email template to get your manager to approve expensing your subscription.

🤝 Work with us on payor market strategy: Contact us

🟦 Connect with the author, Ryan Peterson, on LinkedIn.

🎧 Listen to the Upward Growth Podcast: Apple | Spotify

📰 Newsletter sponsorships: Learn More

Today’s Upward Growth newsletter is sponsored by Florence

Florence is a clinically validated, automated care management platform that uses ongoing, intelligent two-way SMS to help health plans find and re-engage patients, close priority care gaps, and improve HEDIS performance without adding to care-team workload.

And she can operate at scale: Florence has reached 50,000 patients in four weeks and actively managed a Medicaid population of 300,000+ without increasing staffing, augmenting care teams to focus their time where it matters most. In deployed programs, Florence increased Annual Wellness Visit show rates by 17.7% and prenatal visits by 325%. Want to see what Florence could do for your population? Let’s chat!


Interested in sponsoring Upward Growth? Contact Us

A few things to share this week:

Risk adjustment is the thread I keep coming back to. A few weeks ago I wrote about whether MA may be stabilizing, and Health Payer Specialist picked it up in a story on how the risk adjustment changes could leave Centene and Molina behind. That same shift is the thesis of a three-part series I’m doing with RISE. Article 1 dropped last week on the plan-side buying criteria that no longer fit under the new environment. Article 2 will discuss how the RA changes will affect vendors. And Article 3 will cover the organizational separation between Risk Adjustment and Quality Improvement inside plans and why the environment CMS built makes that separation structurally unsustainable. Keep an eye out for Articles 2 and 3 in the coming weeks!

Speaking of RA and QI, I’ll be moderating a panel at the RISE Risk Adjustment Forum in Orlando on October 28. We’ll be working through why the organizational line between risk adjustment and quality is harder to defend under the new rules, and what that means for how plans need to think about their operating model going forward. If you’re going to be at RA Forum, come find me.

Finally, a few newsletter sponsorship slots are open for November and December. Connect here if you want to reach health plan buyers, vendor executives, and investors.

Insurers filed their 2027 Medicare Advantage bids along four distinct operating paths, and the Landscape file CMS posted last week makes those paths directly comparable at the company level. The Big Six publicly traded insurers split in half on how they chose to prune. Fifteen regional and provider-sponsored plans filed formal enrollment caps that none of the Big Six touched. And Devoted stands alone as a counter-cyclical growth operator nobody else is really attempting. The 2027 rate math gave every insurer the same gap to close, and the file is the first place those different choices sit next to each other at the company level.

The CMS Landscape data shows total MA-PD General Enrollment plans down 155, or 4.6%, with cuts split roughly evenly between $0 premium and premium plans. Plan-level average Maximum Out-of-Pocket (MOOP) is up 9.4%. Plan-level average Part D deductible is up 30%. Roughly one in six MA members will land in a plan that won’t continue in their county next year.

What the aggregate numbers can’t show is which insurer chose which path and why. The choices locked in during August and September are now the ones each company has to defend through Q3 earnings, 2027 Star Ratings (dropping any day), and the CY 2028 Advance Notice in January. The peers worth benchmarking against for 2027 are the ones that chose the same operating path, and the next several months will show which paths held up.

Subscribe now

What Every Insurer Had to Absorb Before Building 2027 Bids

Every insurer that filed in September built its bid against the same CY 2027 rate math. CMS finalized the Rate Announcement at a 2.48% net average and roughly $13 billion in additional MA payments, and the rate still fell short of what plans needed to absorb underlying medical cost trend, Version 28 of the CMS-HCC risk adjustment model (V28) now at full weight, and Star Ratings volatility that pulled Quality Bonus Payment (QBP) dollars out of several large books. Nearly 70% of MA plan leaders surveyed in January expected leaner 2027 benefit packages than 2026, a notable jump from the prior year’s survey, fielded across 35 plans before most insurers locked their bids. Plan leaders had the forecast by spring, and the file shows which insurers acted on it and how.

Since Q1 earnings, I’ve been writing that margin-over-membership was the dominant 2027 bid driver across the Big Six, and the file is the first measurable test of what each insurer actually did with that framing. The margin story was the one earnings calls covered, and the market-shape layer is the one the Landscape file now makes visible. Those decisions are now locked in, and each insurer has to defend them through the next several quarters of earnings and bid cycles.

The Big Six Nationals Diverged on How to Cut 2027 MA Plans

The Big Six publicly traded insurers (UnitedHealth, Elevance, CVS/Aetna, Humana, Centene, and Molina) drove most of the aggregate plan-count change in the file, and the group broke along two directional patterns on how it chose to cut, with HCSC and Molina running separate stories covered later in the section. Humana and Centene cleared the low-Star tail of the retained book. UnitedHealth, CVS, and Elevance ran geographic-portfolio pruning that didn’t correlate with Star rating. Both groups worked the same rate math. Both matched the direction each insurer previewed on Q2 earnings calls.

Humana and Centene are where Star-preservation discipline becomes visible. Humana filed 72 exits against roughly 50 new plans for a net reduction of 22, with 78% of those exits rated 3.5 stars or below. That matches what the company told investors on its Q2 call about the majority of its 2027 exits involving plans rated 3.5 stars or below for the 2027 bonus year. Centene cut 57 plans net, from 157 to 100, with 82% of its 66 exits in the same low-Star range. In both cases, the pruning cleared the plans that were dragging QBP arithmetic and protected the Star math on the retained book. What makes the Star-preservation strategy actually workable is value-based care (VBC) infrastructure. Humana’s Q2 commentary framed the pruning approach around VBC alignment, with the majority of its individual MA members already in value-based arrangements, and that infrastructure is what lets the retained book run tighter clinical operations against 2028 Star measurement. Clearing the low-Star tail only pays off if the retained book can actually improve on its clinical measures, which is what both insurers have spent the last several cycles investing against.

UnitedHealth, CVS, and Elevance moved differently. UnitedHealth filed 77 exits and 35 adds for a net of 42, consistent with a wider scope than the preliminary 34-county filing that surfaced in broker channels earlier this year. CVS filed 87 exits against roughly 65 adds for a net of 22. Elevance filed 25 exits and 19 adds for a net of 6. The exit distributions skew the opposite direction, with 31%, 34%, and 38% respectively at or below 3.5 stars (see graphic below). To me, that pattern reads as network and economic cleanup rather than Star protection, with the trade-off landing between retained geography and retained enrollment.

The two groups are also betting differently on what 2028 will reward. Humana and Centene are wagering that cleaner Star distributions in their retained books will translate to QBP preservation when the 2028 Star Ratings arrive. Meanwhile, UnitedHealth, CVS, and Elevance are wagering that network economics drive 2027 margin recovery more than Star distribution does, and that outcomes in their mixed-rating books won’t move the ratings math enough to warrant preemptive pruning. The wagers also reflect different capital-allocation pictures at each insurer. For Humana and Centene, operating investment can concentrate on a smaller retained footprint. The three geographic-portfolio pruners have the diversified line-of-business revenue on their enterprise balance sheets to absorb MA margin pressure the regionals can't. The wagers are testable. The first resolution comes when the 2027 Star Ratings publish in the next couple of weeks and reset the starting line for every retained book. CMS previewed draft 2027 cutpoints in September that raised thresholds on many of the measures, which means some of the pruning decisions in the file will look prescient within two weeks, and some will look premature.

The motives behind each cluster are worth holding loosely. Both patterns are also consistent with simple margin discipline, where the Star correlation at Humana and Centene could be the arithmetic of QBP running through Medical Loss Ratio (MLR) math on plans that happened to be low-rated rather than a deliberate Star-preservation move. A less generous read is that both camps are partly unwinding footprint that got overbuilt during the growth years. Either way, the file settles what each insurer chose but not why, and the Q3 earnings calls will say more about the why than the file can.

HCSC is a different story from either Big Six cluster. Technically a Blues mutual rather than a publicly traded national, HCSC became national in MA scope through the Cigna acquisition that closed in early 2025, and the file shows the company retracing most of that footprint. HCSC’s MA-PD GE county-plan combinations dropped from 3,416 to 1,324, a 61% reduction, with unique counties served falling from 699 to 345. That is the largest geographic retreat of any single insurer in the file. In parallel, HCSC told brokers it is withdrawing entirely from Connecticut, New York, and the District of Columbia, cutting its HealthSpring footprint from 580 counties to 450, and exiting 11 additional unspecified markets. HCSC’s underwriting loss last year ran $4.57 billion, with the Cigna acquisition cited as a contributor. The read is less about Star preservation or geographic cleanup and more about an insurer retrenching from markets it acquired last year, which aligns with the broader Blues consolidation dynamic reshaping where Blues capital flows as mid-sized Blues organizations get pulled toward larger affiliations partly because the operating math of acquired growth hasn’t been working.

Meanwhile, it's a different story at Molina. The 2027 move reads less like a pruning strategy and more like line-of-business reallocation. Molina is scaling back MA at a time when the One Big Beautiful Bill Act (OBBBA) has reshaped the Medicaid environment where the company carries most of its enterprise exposure. The MA footprint reduction is enterprise capital flowing to Medicaid, not operating discipline within MA, and that's the distinction worth holding onto when the Q3 call lands.

Subscribe now

Why Regional and Provider-Sponsored Insurers Capped 2027 Enrollment Instead of Exiting

Fifteen regional and provider-sponsored insurers ran a 2027 strategy none of the Big Six pulled. They stayed in their markets, and they told CMS, in writing, how much enrollment they would accept. The 2027 file is the first time CMS surfaced the lever as a formal data column. 65 plans across those insurers filed capped enrollment capacity totaling 592,050 members, concentrated in 350 counties across 11 states. Wisconsin, Nebraska, North Carolina, Michigan, Maryland, Massachusetts, Minnesota, and Maine lead the capped footprint. The profile of who filed is specific: regional non-profits, provider-sponsored plans tied to health systems, and smaller Blues affiliates.

These insurers aren’t trying to grow into the counties nationals are vacating. They’re picking the geographies where they already know the operating economics and setting the terms before the Annual Enrollment Period opens. Regional and provider-sponsored plans have had this lever for years through network capacity constraints, broker commission structures, and plan design. 2027 is just the first year CMS is making it visible as a data point.

The capped capacity is a small share of the regional MA base. This is a visible operating signal, not a dominant market-share story. There’s no prior-year baseline to measure change against, so read the signal against its own structural logic rather than a trend line.

Why the Big Six aren’t on the list is worth unpacking. Regional plans and provider-sponsored entrants face harder trade-offs than diversified nationals in the 2027 rate environment, specifically because they lack the risk infrastructure and geographic footprints that let larger insurers spread MA margin pressure elsewhere in the enterprise. The cap filing is the operating artifact of that constraint. For a regional insurer, filing one is defensible as margin discipline and often a survival move, because MA losses can't be cross-subsidized with commercial, PBM, or services revenue. A publicly traded national doing the same thing would face immediate questions from capital markets about why it isn't growing, and the nationals don't need to anyway. Their diversified line-of-business portfolios absorb MA losses that regionals can't. What lets nationals prune aggressively is what keeps them off the regional cap list.

Devoted Drove Most of 2027 C-SNP Growth and the D-SNP Composition Shifted

Growth in the 2027 file lives in the SNP numbers, and the aggregate “MA shrinks for 2027” framing only holds if SNPs are excluded. Total SNP plan count grew by 169, or 9.4%, which is larger than the entire General Enrollment contraction of 155. Including SNPs, MA plan availability is roughly flat for 2027. The SNP mix is where several of the Big Six and Devoted placed their growth bets.

The composition inside the SNP growth tells the sharper story. C-SNPs added 192 plans, a 34% jump. D-SNPs shrank by 30, or 2.8%. I-SNPs added 7. The tilt toward C-SNPs isn’t new. KFF enrollment data from 2026 already showed C-SNPs doing most of the SNP growth work, with chronic-condition plans growing 45% year over year against D-SNPs at 5.7%. 2027 extends that pattern at the plan-count level, and the file shows which operator ran hardest at the opportunity.

Devoted ran hardest. Devoted alone added 133 C-SNPs, moving from 122 to 255 and accounting for 69% of market-wide net C-SNP growth. The rest spreads thinly across Aetna (+29), UnitedHealth (+14), and Humana (+12), with Elevance cutting C-SNPs by 5 (see image below). On the broader growth side, Devoted expanded county-plan combinations by 82%, from 2,852 to 5,204, and grew unique counties served from 683 to 847. The company closed a $1.18 billion financing round in early October tied directly to the 2027 expansion. As of September, Devoted held 538,000 members, with five new state entries scheduled for 2027. “C-SNPs are the growth story” is correct in aggregate but misleading in isolation. The right read: Devoted ran a specific concentrated bet on dual-eligible-adjacent populations, and no other operator in the file is attempting growth at that scale.

Why Devoted and not everyone else? C-SNP growth is concentrated in a condition category (Cardiovascular Disorders, Chronic Heart Failure, and Diabetes) that grew from 481 to 662 plans market-wide, and that category heavily overlaps the dual-eligible population. For an insurer that doesn't operate a state Medicaid MCO, C-SNPs are a way to grow dual-eligible revenue without facing the cannibalization trap the 2027 D-SNP integration rules created. The trap only applies to insurers that own both ends: the D-SNP and the Medicaid MCO it integrates with. Devoted owns the D-SNP side but not the MCO side, which is why most of its D-SNPs sit at Coordination Only and the C-SNP lane stays open on the same dual-eligible populations. Devoted Medical, the physician-aligned clinical arm, gives it the documentation and care-management infrastructure most carriers chasing dual-eligible growth don't have.

Operating-model pressure from risk-adjustment methodology forced the D-SNP composition shift. CMS tightened D-SNP integration requirements for 2027, giving plans a choice between aligning with a state Medicaid MCO contract or accepting narrower enrollment pathways. The file shows the result as a collapse of the middle integration tier. Coordination Only D-SNPs grew by 32, Highly Integrated Dual Eligible SNPs (HIDE) dropped by 68, and Fully Integrated Dual Eligible SNPs (FIDE) grew by just 6. Plans without the state MCO relationships needed to reach FIDE fell back to Coordination Only. The handful of plans with genuine MCO alignment pushed through to FIDE instead.

Subscribe now

2027 Benefit Repricing Hit MOOP, Part D Deductible, and PPO Economics

The benefit math in the file shows a specific operating choice. Insurers preserved the number members shop on and repriced the numbers members feel after they enroll. PPO products took the hit on both sides.

Plan-level average consolidated premium is up 8.5%, though the median is still $0. MOOP is up 9.4%, and Part D deductible is up 30%. Brokers lead with premium when they pitch a plan, but MOOP and the deductible are what members encounter when they actually use it. The 2027 rate math had to land somewhere, and insurers put it in the numbers members feel later. That lines up with September broker commentary that Humana and UnitedHealthcare were likely to cut benefits the most for 2027.

The product-type cuts tell the same story. HMO plans finished essentially flat at a net plus eleven, HMO-POS plans dropped 29, and PPO plans dropped 130. PPO is where the net exits concentrated, a pattern visible in the 2027 plan cuts broadly. On the member cost side, PPO MOOP grew more than HMO MOOP, up $642 on average versus $523. PPO members got hit twice: by the product exits, and by higher cost-sharing on the PPO products that remain.

PPO took the hit because of how its economics work when rate margins tighten. Because PPOs carry broader networks and more out-of-network utilization risk, they're the hardest MA product to run profitably in a tight-rate year. Insurers either exit PPO products (as UnitedHealth did with most of its 2027 exits) or reprice PPO member cost exposure to hold margin. The 2027 file shows insurers doing both, with the mix of exits versus repricing varying by insurer.

What insurers kept in their bid math matters more than what they cut. The categories insurers preserved are the ones carrying weight for 2027 performance: behavioral health engagement, chronic care management, and care coordination. The new Depression Screening and Follow-Up measure (2027 measurement year, 2029 Star Ratings) is part of why behavioral health held in several books. When nearly everything else got repriced, and a category didn't, the finance team concluded that category would protect 2027 margin or defend 2028 Stars.

That already-settled priority list is what Q4 vendor conversations and 2028 bid planning now run against.

How 2027 Insurer Decisions Shape the 2028 Bid Cycle

What insurers are buying this quarter is already shaped by the operating choice each one made for 2027. Whether you sit on the plan side, sell into plans, hold portfolio exposure, or advise the insurers themselves, those operating choices sort plans into distinct Q4 budget conversations.

Star-preservation insurers are spending into the retained book. The budget priorities are 2028 Star defense, risk adjustment accuracy under the new chart review rules, and member retention in the counties that stayed. Humana telegraphed this on its Q2 call, framing the 2027 bid approach around clinical excellence and operating efficiency on the plans it kept. The geographic-portfolio pruners are in a different Q4 conversation entirely. Their priorities are network stabilization, member reassignment inside the retained footprint, and the operational cost of executing the exits themselves. Devoted and the smaller counter-cyclical operators are in a scale year, with budget tilted toward member engagement, onboarding, and risk adjustment capability on populations they haven’t held before. The regionals that filed capped capacity are working the unit economics inside those caps, which favors categories that reduce medical cost per member over categories that add new ones.

The file doesn't show what HCSC, Elevance, UnitedHealth, and CVS are doing with capital across their non-MA books. The MA choice visible in the file is one piece of a broader allocation decision across commercial, Medicaid, PBM, services, and provider assets, and some of the MA pruning you see may be capital moving elsewhere within the enterprise entirely.

Roughly 5.5 million members whose plans don't continue in their county next year become their own 2028 setup. If a meaningful share end up redistributed across other MA plans rather than returning to Original Medicare, the insurers absorbing them inherit a cohort that tends to skew older, more medically complex, and less broker-engaged than voluntary enrollees. That cohort also fares worse on member sentiment measures, which matters more now that the 2027 Star Ratings tripled the weight of patient experience and complaints measures. An insurer that priced its 2027 bid for a healthier new cohort than it actually gets turns its 2028 margin story into a risk-mix story and its 2029 Star story into a patient-experience story.

The compound shocks pattern that's run through MA, Medicaid, ACA, and employer coverage this year sets the frame for how insurers approach the CY 2028 Advance Notice in January 2027. By late Q1 2027, the picture clarifies in several directions: pruners will know whether cleaner 2027 margins hold, non-pruners will know whether patience was the right call, and counter-cyclical bidders will know whether the cohorts they absorbed came in profitable. The 2027 operating choice sets up the 2028 operating choice, and insurers that benchmark against the right peer group this quarter go into the January Advance Notice with the clearest view.

Final Thought

The 2027 Landscape file is the first time 2026 operating discipline becomes measurable at the operator level. Four different playbooks ran against the same rate math, and the file finally lines them up in one view. The right benchmark is the peer group that made the same operating choice, not the peer group at the same enrollment size.

2027 Star Ratings are the first live test, and they drop any day. Every pruning decision in the file was built against 2026 Star Ratings, and the 2027 Stars publish into a market where the operating choices are already locked. CMS previewed draft 2027 cutpoints in September that raised thresholds on many measures, resetting the starting line for every retained book heading into 2028 bid planning. ANOC letters landed October 1, Plan Finder went live the same day, and Q3 earnings start mid-October. By month-end, every major insurer’s filing is visible, 2027 Stars have reset the 2028 QBP starting line, and Q3 earnings commentary has shown how each operating choice is being defended publicly.

If you’re working through what the 2027 operating-model mix means for your plan, your portfolio, or your vendor positioning, Upward Growth is a health plan market advisory firm that works with health tech vendors, investors, provider organizations, and management consultancies to build strategy around how health plans actually buy, operate, and make decisions.

Thanks for reading.

Here’s to upward growth,
Ryan Peterson

The frameworks in the weekly Upward Growth newsletter help health plans, health tech vendors, investors, provider organizations, and consultancies understand the health plan market as it continues to shift.

If your colleagues are in those conversations, they should be reading this too.

💰 Invest In Your Team with a Paid Subscription.

Get a group subscription

Give a gift subscription

💡 Pro tip: Many subscribers expense Upward Growth through their company’s professional development, training, or learning budget. Here’s a one-minute email template to get your manager to approve expensing your subscription.

🤝 Work with us on payor market strategy: Contact us

🟦 Connect with the author, Ryan Peterson, on LinkedIn.

🎧 Listen to the Upward Growth Podcast: Apple | Spotify

📰 Newsletter sponsorships: Learn More

This week’s newsletter is presented in partnership with RISE

CMS is coming to Orlando. Bring your questions.

With accelerated RADV audits, the exclusion of unlinked chart review diagnoses, and the CY 2028 Advance Notice on the horizon, we know you’re watching closely for what comes next. At The 27^th RISE Risk Adjustment Forum on October 27-29 in Orlando, Eliot Fishman of the CMS Innovation Center will present on Regulatory & Policy Updates from CMS: Preparing for 2027 and Beyond. Hear directly from CMS on the policy and regulatory shifts shaping risk adjustment, and what they mean for your organization.

Learn More

 
Interested in sponsoring Upward Growth? Contact Us

A quick note before we get into it. This one has been sitting with me. It came up in payer and provider conversations at a conference I attended last week, and the recent New York Times piece framing the story as hospital AI versus insurer AI gave the market a shared vocabulary for something many of us have been talking about more and more over the past year. On the flight home, I sat with it and wrote down what each side is actually doing and why. The article that follows is what came out of that.

I am not trying to take a side or offer a solution. What I do think is that starting from the assumption that both sides have real reasons for what they are doing, and that both sides are responding to pressures that are shaping the whole market, not just their side of it, is the first step toward a more useful conversation than the one the market is currently having. That is what I have tried to do here.

Both sides of the prior authorization (PA) interaction are automating, and the pace has compounded through 2026. Providers are deploying AI to draft, submit, and clinically justify PA requests faster and more completely. Plans are deploying AI to receive, adjudicate, and document PA decisions faster and more defensibly. The pressure clock underneath it all is the CMS Interoperability and Prior Authorization Final Rule (CMS-0057-F), which requires plans to support electronic prior authorization exchange by January 1, 2027. The arms race is the operating condition heading into CY 2027.

My read is that the arms race framing is doing part of the work but missing the actual mechanism. What is happening in PA is more accurately what I would call a parallel defense. Both sides are automating for defensive reasons, but their defenses run in parallel, driven by independent pressures rather than by each other. Providers are automating because their margin math would fail regardless of what plans do. Plans are automating because their compliance math would fail regardless of what providers do. The two defenses interact at the encounter level, which makes the pattern look like an arms race, but that interaction isn't what is driving either side. The pressures underneath each side are. I will use both terms throughout the article, but the parallel defense is the frame that actually explains the pattern.

The article walks through what each side is defending and why neither can back down unilaterally. From there, the frame carries into how to listen to Q3 payor and hospital-system earnings calls starting mid-October, and how to read PA-adjacent infrastructure spend heading into 2027 and 2028. Finally, it closes on the plan-provider pairs that sit outside the arms race, and what their absence from it says about the ones still in it.

Subscribe now

What Providers Are Actually Defending on the Submission Side

Providers are automating prior authorization to defend margin at the encounter level. Every denied PA on a submitted claim takes margin out of that visit or admission, and in a 2026 provider environment where the underlying rate math is already tight, the volume of leakage from PA denials has moved from operational annoyance to strategic priority. That is a primary driver behind the AI investment on the submission side.

A submitted PA is a bet that the documentation is complete enough, coded correctly enough, and clinically justified well enough to clear the plan’s adjudication threshold. If it doesn’t clear, the encounter gets reworked with additional documentation, appealed, or written off. Rework and appeals carry labor costs on both sides of the interaction. Write-offs are pure margin loss for the provider. Automating the submission raises the average quality of what gets sent in, so more requests clear on first pass and fewer land in the rework and appeal pipeline that compounds cost across the encounter.

Rates are tighter than they were two years ago, so every denied PA hurts more. The American Hospital Association (AHA) and hospital systems have publicly characterized the FY 2026 Inpatient Prospective Payment System (IPPS) payment update as inadequate relative to the actual cost trend. Medicaid Disproportionate Share Hospital (DSH) payments took a step-down under the One Big Beautiful Bill Act (OBBBA), and safety-net systems have been vocal about the pressure that has put on their operating margins. Commercial rate negotiation has tightened as plans absorb their own Medical Loss Ratio (MLR) compression and push back harder on annual increases.

Provider CFOs are saying this on their earnings calls. On Tenet Healthcare Corporation’s (Tenet) Q2 2026 call, CEO Saumya Sutaria pointed to clinical operations cost improvements and technology-driven automation and AI as core to the margin expansion the quarter delivered. HCA Healthcare (HCA) carried the same theme on its Q2 2026 call. The Community Health Systems (CHS) and Universal Health Services (UHS) Q2 conversations sat inside the same margin-management frame that dominated the public hospital systems this cycle. A recent BCBSA analysis found that hospitals using AI coding tools cost Blues plans roughly $942 million more for similar care than hospitals not using them, which is the parallel defense showing up as measurable dollars moving between the two sides.

A second layer of provider-side defense runs alongside the margin-management one, and it mirrors what the plan side is doing on its own compliance stack. Providers are automating for defensible clinical documentation against the post-payment scrutiny environment that has grown around prior auth. Downcoding on paid claims, retrospective denials that reopen previously approved encounters, and post-payment audits that reach back multiple years all live downstream of the PA decision. A clean, well-documented PA submission is the front-end evidence that supports the back-end defense. Automating the submission defends against denial today and clawback tomorrow.

Read together, the AI investment on the provider side is a rational response to margin compression from multiple directions at once, and to a documentation trail that has to hold up longer than it used to. The provider is defending revenue on the front end and defending the record on the back end. Both are defensive.

What Plans Are Actually Defending on the Adjudication Side

Plans are automating prior authorization to defend a compliance and audit exposure that has outrun manual PA. The AI investment on the adjudication side produces a defensible audit trail on every decision. The AI investment on the adjudication side produces a defensible audit trail on every decision. The compliance environment has moved that from optional to essential.

The pressure came from several directions at once, and it accelerated fast. The CMS-0057-F requirement set is the deadline everyone knows about, but the operational timelines around it have been active since January 2026. The argument that vendors who don’t sell prior auth still needed to price the deadline in already turned on the fact that plans were standing up new infrastructure ahead of the January 1, 2027 exchange requirement. Missing the operational milestones does not just create a technology problem for the plan; it creates a documented compliance failure that regulators, competitors, and the public can see.

Public reporting made that visibility concrete. On March 31, 2026, plans published PA metrics under the CMS-0057-F transparency provisions for the first time. The report card data which surfaced the range of approval rates, appeal outcomes, and processing times across Medicare Advantage (MA) contracts showed a level of granularity the market had not seen before. Once a plan's PA behavior is publicly available at that level of detail, the compliance environment stops being an internal problem and becomes a competitive and regulatory one.

CMS published its Program Audit and Enforcement Report on July 27, 2026, naming 14 civil money penalties totaling roughly $1.54 million and specifically flagging recurring problems with prior authorization and appeals processing. The dollar figures on individual civil money penalties matter less than the signal: CMS is naming PA compliance as a category it will enforce with the tools it has, and doing it in the same calendar year the exchange requirement lands.

Alongside the CMS enforcement thread runs a False Claims Act (FCA) settlement pattern that reset the ceiling for MA compliance exposure earlier in 2026. Kaiser Permanente affiliates settled for $556 million in January 2026, the largest MA FCA settlement to date, and Aetna followed with a $117.7 million settlement on March 12, 2026. To be clear, both of those are risk-adjustment cases, not PA cases, but the FCA pattern is relevant to the PA compliance environment as a market-level signal about MA compliance economics broadly, rather than as PA-specific enforcement. The pattern extends to the provider side of the network too. In August 2026, DOJ announced a $541.5 million self-disclosed settlement with The Villages Health System and a $2.4 million settlement with Monogram Health covering the same category of diagnosis-coding conduct on the provider-partner side of MA risk arrangements. Health plans and provider organizations are both getting hit by the same category of MA compliance enforcement, and the dollar ceilings are climbing on both sides.

The audit environment sits beneath it all. Risk Adjustment Data Validation (RADV) expansion, the V28 model phase-in, the chart review exclusion, and the Office of Inspector General (OIG) and Department of Justice (DOJ) focus on risk adjustment more broadly all raise the standard for what a defensible record looks like on any given interaction. The risk adjustment audit environment is not stabilizing even as the rest of the MA market is, and plans are defending their PA compliance economics against that same audit environment. What a plan decides on a PA today becomes an audit record tomorrow, and any decision a manual process can't document to the standard auditors apply becomes exposure the plan carries forward.

Read together, the plan side of the arms race is a rational response to a compliance environment neither the plan nor any single vendor can unilaterally change. Manual PA can't produce the volume of defensible records the environment now demands, and the cost of getting caught without them is denominated in tens or hundreds of millions of dollars per settlement.

Subscribe now

Why Neither Side Started It and Neither Can End It

The economics and compliance drivers on both sides are stacked so neither side can unilaterally back down. That is why the volume of automated PA submissions and adjudications has kept rising through 2026 rather than leveling off.

If providers back off submission automation, they accept margin compression on denied encounters and documentation exposure to plan-side post-payment scrutiny. Neither cost is one the provider CFO can absorb voluntarily in the 2026 rate environment. If health plans back off adjudication automation, they accept compliance and audit exposure at the same time they accept operational-metric exposure to the public reporting environment. Neither cost is one the plan CFO can absorb voluntarily either.

Both sides of PA are automating a fight neither side started, and neither side can end it alone, which is why the spend keeps compounding. Each side carries a cost the other side won’t accept, and the two positions reinforce each other at the encounter level.

AI-drafted submissions are meeting AI-adjudicated responses at scale through 2026. The first-pass denials from automated adjudication feed into an appeals workload the market did not carry at this scale just a year ago. Friction is relocating from the initial submission-and-decision interaction into the appeals pipeline, and my read of the March 31 public reporting was that the appeals volume was already trending that way.

Which is why the article keeps distinguishing between the two terms. Arms race captures the volume and the friction moving into appeals, which is why the market has landed on it. Parallel defense captures why neither side started it or can end it, which is why arms race is not quite the right term for what is happening. Both sides are protecting existing positions at rising scale, and the pattern is what a defensive equilibrium under real pressure looks like.

None of the added automation resolves the underlying opposition, as the two economic positions are opposed: provider revenue depends on approvals, and health plan margin depends on appropriate denials. AI on both sides accelerates the interaction and produces defensible records, but it does not touch what puts the two positions in opposition.

Subscribe now

Reading the Earnings Calls and the Next 24 Months of PA Spend

The Q2 2026 payor earnings calls turned the compliance environment into publicly stated operational commitments, and that step matters more than the specific numbers. When a public plan tells its shareholders on a recorded call what its PA plans look like heading into CY 2027, the plan has priced the arms race into its guidance and next year’s budget. Analysts have it in their models, and the plan is on the hook for it.

I wrote about what the Q2 health plan earnings calls locked in for CY 2027, and the pattern across the public plans was that PA operational targets, compliance spend, and CY 2027 planning came up on nearly every call, not just the ones from plans with the largest MA books. The Q3 calls in October and the Q4 calls in January will speak to progress against those commitments. The arms race is not a technology cycle plans can pause; it is how they run the business going forward.

Q3 payor earnings calls start in mid-October. What the plans say out loud on those calls (and what they don't) will signal how deeply the parallel defense is baked into CY 2027 for each of them.

The language worth listening for on the payor side runs across a few threads. If PA compliance spend gets framed as investment tied to CY 2027 rather than as an expense to be optimized, the plan is on the defensive-compliance frame and has priced the parallel defense into its budget. If PA operational metrics get discussed against public accountability rather than against clinical program quality, the plan is defending against the reporting standard the March 31 data now sets. Calls that treat the January 1, 2027 electronic exchange requirement as on track without caveat tell you the plan is on the compliance side of the deadline, not the exposure side. And if appeals volume shows up as its own operational line item, the friction moving into appeals is being priced in as a standing cost of doing business.

Whether the plans use that language or not is informative in both directions. If they do, the plan has built the parallel defense into CY 2027, and their guidance reflects it. If they don't, one of two things is happening. Either the plan sits outside the parallel defense because it is an integrated system or sits inside a tight value-based payment (VBP) book, or the plan is behind on what CY 2027 actually requires. Both readings are useful, and telling one from the other means matching the language on the call to the plan-provider pair the plan actually sits in.

Hospital system Q3 calls run in the same window and give a complementary read. Tenet, HCA, CHS, and UHS are the public-company hospital reads on the provider side, and each is worth listening to for a specific thread. Tenet on ambulatory acuity and how the technology-driven margin work that showed up in Q2 carries into the back half. HCA on the ACA volume-to-uninsured conversion and how that affects the DSH and margin math heading into CY 2027. CHS and UHS on turnaround-plan progress and where cost discipline sits alongside documentation investment. On all four, PA-related revenue leakage commentary, denial and appeal metrics reported as separate operating indicators, and clinical documentation investment named as its own line all show whether the provider side is treating the parallel defense as CY 2027 reality with the same seriousness the plans are.

The read on 2027 and 2028 PA-adjacent infrastructure spend across the market follows from the same frame. PA-adjacent spend keeps rising because parallel defense keeps producing new investment categories on both sides, and the plan-provider pairs outside it represent a small share of national lives. The spend shows up across three categories: submission-side automation on the provider side, adjudication and appeals infrastructure on the plan side, and the FHIR interoperability layer between them. Each category is defending against a different pressure. Beyond Q3, the levers that would meaningfully change the underlying pressure sit further out. The CY 2028 rate cycle, the next CMS enforcement report, and the next wave of FCA settlements can each move one side of the pressure, and each is worth watching for that reason.

Why Some Plan-Provider Pairs Sit Outside the Arms Race

A small number of plan-provider pairs sit outside the parallel defense because of how their relationship is structured. Looking at them says something specific about why the rest of the market is inside it.

Fully integrated systems where the plan and the provider organization are the same enterprise do not run PA the same way transactional plan-provider pairs do. Kaiser Foundation Health Plan and Permanente Medical Group is the canonical case. Utilization decisions get made inside the same organization rather than across a contract boundary, so front-end submission automation and back-end adjudication automation serve the same organization’s economics rather than opposed ones. Geisinger Health Plan and Geisinger fit the same pattern at a smaller scale. Integration weakens the transactional PA arms race but does not exempt any organization from the broader MA compliance environment. The same Kaiser affiliates named as the canonical integrated case are on the FCA settlement side of the plan-side argument earlier. Integration changes how a plan-provider pair experiences PA specifically. It does not change what compliance environment the parent organization operates inside.

Tight VBP relationships with meaningful shared risk sit in the same neighborhood, though the dynamic weakens for a different reason. When both parties share the downside on inappropriate utilization, the friction that transactional PA is trying to manage gets absorbed inside the risk-sharing arrangement rather than fought at the encounter level. SelectHealth and Intermountain are a great example. Some regional Blues with tight in-market health system alignment have a similar version, including BCBS Michigan with Corewell and Highmark with Allegheny Health Network. And some Risant-model integrations still forming are building toward it. The submission and adjudication automation still exist in these relationships, but they serve a shared economic frame instead of opposed ones. Provider-sponsored plans picking which lines of business integration pays for is where the next wave of these archetypes is likely to form.

Final Thought

The parallel defense is a rational response to conditions neither side can unilaterally change. The provider side is defending margin and documentation exposure. The plan side is defending compliance and audit exposure. Neither side can back off without accepting a cost the other side is not accepting, and the calendar and enforcement environment heading into CY 2027 give neither side reason to try.

Two conditions would change what each side is defending against. Payment model change with real shared risk, meaningful capitation or VBP arrangements, would weaken what puts the two economic positions in opposition and remove the incentive to automate the fight. Regulatory change that resets the pace of the compliance and enforcement calendar would give both sides room to unwind the defense rather than expand it. Neither is within the control of any single plan or vendor, and neither is teed up on the current calendar.

Which means the next 24 months of PA-adjacent infrastructure spend will keep compounding on the same defensive math that produced it, and the plans still inside the parallel defense will keep spending against a fight neither they nor their providers can end alone.

Thanks for reading.

Here’s to upward growth,
Ryan Peterson

The frameworks in the weekly Upward Growth newsletter help health plans, health tech vendors, investors, provider organizations, and consultancies understand the health plan market as it continues to shift.

If your colleagues are in those conversations, they should be reading this too.

💰 Invest In Your Team with a Paid Subscription.

Get a group subscription

Give a gift subscription

💡 Pro tip: Many subscribers expense Upward Growth through their company’s professional development, training, or learning budget. Here’s a one-minute email template to get your manager to approve expensing your subscription.

🤝 Work with us on payor market strategy: Contact us

🟦 Connect with the author, Ryan Peterson, on LinkedIn.

🎧 Listen to the Upward Growth Podcast: Apple | Spotify

📰 Newsletter sponsorships: Learn More

This week’s newsletter is presented in partnership with RISE

The risk adjustment conversations you can’t have in a webinar

Every fall, risk adjustment leaders from health plans and provider organizations gather at The RISE Risk Adjustment Forum to compare approaches, pressure-test strategies, and hear how their peers are navigating the same regulatory and operational challenges. 71% of attendees are director level or above, with perspectives spanning coding, compliance, legal, actuarial, provider engagement, and payment integrity. New this year in Orlando: dedicated D-SNP sessions, an ACA risk adjustment workshop, and a live RADV audit simulation.

See Who Attends

 
Interested in sponsoring Upward Growth? Contact Us

A few updates from me before we get into it:

I finished reading The Ghost Map this weekend, which is Steven Johnson’s book about John Snow tracing the source of the 1854 London cholera outbreak. It is a legitimate page-turner about amateur science and persistence, and it is also a reminder that mapping something new, whether a disease, a market, or an operating environment, tends to come from the people willing to knock on doors and count the data themselves. If you are looking for a book that reads fast and stays with you, I highly recommend it.

A subscriber survey is coming to your inbox in the next few weeks, and the reason for it is simple. I want your feedback so I can make sure this newsletter keeps earning its place in your inbox every Tuesday. When it lands, please take four minutes to help shape what shows up next.

And if this newsletter provides value, consider sharing it with a colleague or someone who might enjoy it. That kind of word of mouth is how it keeps growing.

Indiana just released the first major state Medicaid Managed Care Organization (MCO) reprocurement written for the operational environment created by the One Big Beautiful Bill Act (OBBBA). That's why this state Medicaid procurement matters to any health plan executive, health tech leader, or investor whose book touches a national payor.

The Indiana Family and Social Services Administration (FSSA) called the release the “Mother of All Procurements.” Four Medicaid programs, roughly $68 billion in contract value, about 1.4 million Hoosier lives, and one bundled award to each winning MCO instead of separate awards by program. It is the state’s largest health care procurement ever, and it is the first bid in the post-OBBBA operating environment. When the awards land in July 2027 and contracts start on January 1, 2029, the winning MCOs will be running the first post-OBBBA state Medicaid book at real scale. The losing bids will become case studies for every state Medicaid agency with a reprocurement coming behind Indiana’s.

As I wrote at the one-year mark on OBBBA, most of what has been written about OBBBA since it was signed has been forecast, not observation. Indiana is the first place the market gets to see what OBBBA looks like when a state writes it into a scope of work that bidders have to answer against.

The MCOs bidding into this reprocurement (Elevance, Centene, UnitedHealthcare, Humana, and CareSource) run Medicare Advantage, ACA, employer benefits, and other state Medicaid businesses at the same time. What they build for one line of business shows up in how they operate the others, and where they choose to concentrate operating investment to answer Indiana will shape how they show up in MA, ACA, and commercial for the next several years. And what Indiana rewards in its scoring will inform the Texas, Florida, Louisiana, Kentucky, Georgia, and Ohio Medicaid reprocurements running behind it through 2029.

What follows is the argument that the state Medicaid buyer is becoming more demanding at the same moment the federal buyer is pulling back on plan operations, and what that trade means for a health plan CEO pricing their operating model for the next 18 months.

Subscribe now

Bidders Have to Show Readiness, Not Promise It

The state Medicaid procurements released between OBBBA's signing in July 2025 and Indiana's release in late August 2026 were written before the OBBBA operational requirements (work requirements, tighter eligibility redetermination rules, reduced retroactive coverage) had been translated into specific state-level policy. Bidders responded by promising to build for the OBBBA environment once the specifics landed. But Indiana changed that and published the specifics before releasing the RFP.

FSSA published its Healthy Indiana Plan (HIP) work requirement rules roughly seven weeks before releasing the Request for Proposal (RFP), forcing bidders to answer against specific rules rather than plausible expectations. The pattern extends beyond work requirements. FSSA also published its proposed HIP 3.0 1115 waiver application in early August, laying out a program redesign around copayments, healthy behavior incentives, and enrollment controls that winning bidders will be operating under. A bidder who started building when OBBBA was signed can show the state evaluator concrete infrastructure and member-level outcomes, while a bidder who waited for regulatory certainty is answering the same questions with a promise.

For example, when Texas or Ohio drafts its own RFP language over the next 12 months, the drafters will have Indiana's evaluation approach in front of them as a framework already tested against legislators, auditors, and courts. The evaluation math changes when a bidder can walk the state evaluator through actual member communication workflows, actual redetermination pilots, actual value-based contracts already in production. That is a different evaluation than most historical Medicaid procurements, which graded narrative and capability rather than artifacts. And because Indiana is bundling all four of its Medicaid programs into a single award instead of separate awards by program, the evaluator gets to score integrated operational capacity across the entire book at once.

CMS Is Shrinking Federal Requirements While Indiana Is Expanding State Requirements

Federal regulatory posture on plan operations has shifted this year. The CY 2027 Final Rule, published April 2, rescinded the mid-year supplemental benefits notification requirement and several other member-facing operational requirements in Medicare Advantage. Legal analyses tracking the rule have described the CY 2027 package as advancing a broader deregulatory agenda on member-facing plan operations. That posture is not confined to MA. CMS rescinded the health-related social needs framework in early 2025 and shifted to case-by-case review of social determinants of health 1115 requests, softening the federal ask on operational categories state Medicaid agencies had been asked to build around. The market reflex has been to price this posture as relief on the plan's operating model.

That reflex is wrong. Indiana's RFP asks bidders to demonstrate value-based purchasing sophistication with defined progression across the contract term, targeted enhanced benefits design tied to specific member populations, and incentive infrastructure with measurable engagement targets. Each of those requires operational depth well beyond what the federal floor now demands. Rhode Island's most recent MCO RFP pushed in the same direction, folding independent behavioral health parity review, executive compensation transparency, and state approval of subcontractor relationships into its contract language. State Medicaid agencies have been sharpening what they require of MCOs across the last two RFP cycles, and Indiana is arriving as federal requirements pull back.

So why is this happening? The answer explains why the trend does not reverse when the White House changes. State Medicaid agencies own the fiscal risk on their programs in a way CMS does not. When a plan misses on quality or member outcomes deteriorate or a state’s Medicaid spending goes sideways, it is the state Medicaid director who has to sit in front of the legislature and defend it, not the federal government. That accountability structure has not changed with the political weather in Washington, and likely won’t. State Medicaid agencies have learned across the last decade that the way to manage that fiscal and political risk is to write increasingly specific operational requirements into their MCO contracts, so they have levers to pull when something goes wrong. The current CMS pullback on plan operations does not change that math. It makes state agencies more assertive, not less, because when the federal ask on plan operations shrinks, the state has to compensate to hold plans accountable.

For the health plan CEO trying to take all of this in, the operating cost curve for the next contract cycle sits above the previous one, not below it. The MCOs bidding into Indiana are running two sets of operating infrastructure now, one calibrated to satisfy CMS and one calibrated to satisfy the state Medicaid buyer. The federal set on plan operations is getting smaller while the state set is getting larger and faster, and the second set is compounding because each additional state that adds an operational requirement adds it on top of what other states have already asked for. Where a plan invests its next dollar of operational capacity, and how it prices that capacity across its book, gets shaped by that trade.

The broader operating pressure the market absorbed across the first half of 2026 hit MA, Medicaid, ACA, and Group at the same time, and this is one reason it did. A plan with a large Medicaid book is funding capabilities to serve state buyers that a Medicare Advantage-only plan does not have to fund, and the finance team inside that plan is making different calls about where to spend. Those calls affect what the plan is willing to pay for, negotiate on, or roll out on the MA side, on the ACA side, and inside its commercial book. If a vendor deal that used to close in Q2 has slipped to Q4, the forces inside the plan driving that reallocation are one reason, and Indiana is a leading indicator of how much more of this is coming.

Two Moves That Changed What Indiana’s Bidders Are Actually Bidding Into

In November 2025, FSSA terminated MDwise’s Medicaid managed care contract effective January 1, 2026, roughly eleven months before it was scheduled to run out. The state said MDwise was the most expensive and the lowest-quality plan in Indiana’s HIP and Hoosier Healthwise (HHW) programs, and that federal rules only required Indiana to keep three plans in market. MDwise fought the termination in Marion County court and lost. Roughly 300,000 members had to select a new plan mid-cycle.

What the MDwise fight demonstrated matters more than its specifics. Medicaid managed care incumbents have historically won renewal at the next reprocurement, and MCO strategic planning has been built on that expectation. A plan that ran its program acceptably and stayed in good standing with the state kept the book through the next cycle. Indiana just showed that a state agency will pull the contract mid-term when the performance case is bad enough, and will absorb the political and legal cost of doing it. That is a different bid dynamic than what has been true for a generation, and it changes how incumbents allocate bid preparation resources. It also changes how incumbents at other states read their own upcoming reprocurement, because if incumbency can be broken in Indiana, it can be broken elsewhere.

Indiana’s PathWays for Aging program, the state’s managed long-term services and supports (LTSS) program, has been in operational trouble almost since its mid-2024 launch. Two of the three participating MCOs were placed on corrective action plans shortly after go-live, the three insurers owed more than $100 million in late or improperly denied Medicaid payments to nursing homes. Earlier this year Indiana passed a law that will move long-stay nursing home residents out of PathWays managed care and back to fee-for-service before the new RFP contracts even start.

Peer state agencies are reading that move carefully. Indiana made a full commitment to managed LTC three years ago and has publicly walked part of it back because the operating model was not working, and it has reset the scope of the next contract accordingly. Other states with LTSS transition trouble in recent years, and there have been several, are watching how Indiana structures the new PathWays scope in this RFP. Bundling PathWays into the same reprocurement as HIP, HHW, and Hoosier Care Connect, rather than running a separate LTSS procurement, is Indiana’s way of saying LTSS accountability will now sit inside the same performance framework as the rest of the Medicaid book. That framework is going to become the reference model for peer state agencies dealing with their own LTSS problems. The same underlying logic is what drives plans choosing which lines of business to keep investing in.

Between MDwise and PathWays, Indiana has shown the incumbency assumption cannot be leaned on the way it has been, and that a state buyer will restructure a program mid-cycle when the operating model breaks. Bidders are answering this RFP on a different foundation than the industry has been standing on.

Subscribe now

Indiana Is Going Stricter Than the Federal Floor on Work Requirements

Winning bidders inherit fully implemented work requirements at contract go-live in January 2029. Interim contract holders operate under them starting January 2027. That means the operational infrastructure to serve the environment, from eligibility system integration through appeals capacity, is being tested in production during the window bidders are writing their responses. Indiana chose the sequencing so the interim contract holders’ operational learning would flow into the winning bidders’ plans by the time contracts start.

Indiana requires quarterly compliance verification and a three-month lookback for eligibility determination, both stricter than the federal minimum. It is one of a small group of states that go beyond what OBBBA established as the baseline for how work requirement compliance gets verified. The operational muscle a bidder demonstrates to serve Indiana has to work at that stricter setting, and what Indiana rewards in its scoring becomes a reference for peer states going stricter than the federal floor.

The stakes at that member scale are real. A Health Management Academy survey covered in Indiana Capital Chronicle found that 47% of Indiana Medicaid enrollees did not know work requirements were coming, 42% said they would ration medications if they lost coverage, and 32% said they would use emergency rooms more. Interim contract holders will operate in that environment starting January 2027, and whatever they learn about serving those members will flow into the winning bidders’ plans by the time contracts start.

For a plan whose own state reprocurement is coming inside the next 24 months, the build decision on work requirement operational infrastructure is Q4 2026 or Q1 2027, not 2028. Waiting until your own state’s RFP drops to start building the capability puts you behind bidders who already built it to bid for Indiana, and behind interim contract holders who accumulated the operational learning at real member scale through 2027 and 2028. That timing gap shows up in bid scoring.

Why Peer State Agencies Are Already Reading Indiana’s RFP as a Template

The all-four-programs-together award structure changes the math for every incumbent. Elevance runs all four programs today and has the deepest operational track record to defend, though its PathWays performance carries real vulnerability given the corrective action history. Centene, UnitedHealthcare, Humana, and CareSource each run partial books, which means each must prove capacity for programs it does not currently operate, either by building it or by lining up a subcontractor the state will accept. Humana faces the sharpest version of the problem, since it operates only in PathWays and is absorbing pressure separately across its Medicare Advantage business. Bidders who already run all four start the RFP with an advantage that scales with how thin the partial-book bidders' answers look on paper.

The reprocurement wave running from 2027 through 2029 includes Texas, Florida, Louisiana, Kentucky, Georgia, Ohio, and others. The size of the wave depends on which contracts get extended again, but the state agencies inside it are reading Indiana’s approach.

Two forces are pushing the Indiana template into peer-state RFPs faster than a normal RFP cycle would allow.

The first is the consultancy layer. State Medicaid agencies do not draft these RFPs from scratch; they hire external counsel and procurement consultants who work across multiple state procurements at once and bring language patterns with them. The “mother-of-all-procurements” framing gave the RFP a public profile that pulls the language into peer state drafting faster than a routine reprocurement would. As Chris Mitchem framed it in a recent Indiana Capital Chronicle op-ed, Indiana is applying category management to Medicaid, and that framing gives peer state agencies cover for adopting the same approach.

The second force is political alignment. Indiana Governor Braun signed nine “Make Indiana Healthy Again” executive orders in April 2025 with Health and Human Services Secretary Kennedy and Centers for Medicare and Medicaid Services Administrator Oz present, and the RFP references the state’s health initiative in framing its priorities. Republican-led state Medicaid agencies with procurements coming inside the next 24 months are aligning around similar language on member accountability, benefit design, and value-based purchasing, and the scoring pattern Indiana establishes moves fastest into Texas, Florida, Georgia, Ohio, Louisiana, and Kentucky. Democratic-led state agencies will draw from different parts of the template but will draw from it too, because state-level operational specificity on plan operations is politically neutral once the MCO has built the capability.

What plan CFOs are absorbing across this picture is that states are becoming the more demanding buyer on plan operations, which means MCO operating models are getting more expensive to run even as federal requirements contract. Plans that read that curve early will build the operating infrastructure at better margin than the plans that read it late, and they will bid into the reprocurement wave from a stronger position when their own state’s RFP drops.

Subscribe now

A Final Thought

Indiana just gave the market its clearest look yet at what the state Medicaid buyer becomes when the federal ask on plan operations pulls back, and the state ask expands to fill the gap. Peer state agencies are reading it, and national MCOs are building against it. If your operating model, your positioning, or your investment thesis assumed federal requirements would keep carrying the operational specificity, the window to update is now, not after the July 2027 awards land. Whoever reads the curve early will be operating from a materially better position 18 months from now than whoever waits for the awards to make it official.

If any of this shifts how you are thinking about your positioning, your messaging, or your go-to-market strategy, Upward Growth is a health plan market advisory firm that works with health tech vendors, investors, provider organizations, and management consultancies to build strategy around how health plans buy, operate, and make decisions. Contact us here.

Thanks for reading.

Here’s to upward growth,
Ryan Peterson

The frameworks in the weekly Upward Growth newsletter help health plans, health tech vendors, investors, provider organizations, and consultancies understand the health plan market as it continues to shift.

If your colleagues are in those conversations, they should be reading this too.

💰 Invest In Your Team with a Paid Subscription.

Get a group subscription

Give a gift subscription

💡 Pro tip: Many subscribers expense Upward Growth through their company’s professional development, training, or learning budget. Here’s a one-minute email template to get your manager to approve expensing your subscription.

🤝 Work with us on payor market strategy: Contact us

🟦 Connect with the author, Ryan Peterson, on LinkedIn.

🎧 Listen to the Upward Growth Podcast: Apple | Spotify

📰 Newsletter sponsorships: Learn More

This week’s newsletter is presented in partnership with RISE

The CY 2027 risk adjustment rules are set. Now comes the operational work.

CMS’ finalized exclusion of unlinked chart review diagnoses is just one of the changes risk adjustment leaders must operationalize before January. The 27th Risk Adjustment Forum, October 27–29 in Orlando, is built around what comes next: identifying missed revenue, strengthening payment integrity, and preparing for greater audit scrutiny. If you’re responsible for accurate, compliant risk adjustment – and the revenue tied to it – this is your agenda.

Explore the Agenda

  
Interested in sponsoring Upward Growth? Contact Us

A few updates from me before we get into it:

Sponsorships are booked through late October, with November and December moving fast. Our readership is ~7,000 health plan and health tech executives, investors, and consultancies. If getting in front of that audience fits what you’re doing, reach out here. And a big thanks to our current sponsors for backing our work.

Next week I’m in Vegas for UiPath Fusion (Sept 22-25). I’m speaking Wednesday 9/23 as part of the healthcare and payer track. If you’re going to be there, come say hi.

One observation while writing this article: since CMS finalized chart review exclusion in April, the volume of “our AI helps with risk adjustment” messages I’ve seen has probably quadrupled, from new entrants and legacy players alike. Health plan buyers can tell the difference between vendors that have actually built for encounter-level coding, delegated risk enablement, and RADV readiness, and those still selling into the retrospective book with new marketing on top. That difference will matter far more in CY 2027 buying cycles than it did in CY 2026.

Some Medicare Advantage plans are absorbing the current CMS cycle with almost no impact on their risk adjustment revenue. Most are absorbing it hard. Which side of that split a plan sits on comes down to operating model decisions made years before V28, the April chart review exclusion, or Risk Adjustment Data Validation (RADV) audits at all-contract scale showed up. Together, those three CMS actions are compressing the risk adjustment factor (RAF) revenue line unevenly across the industry, and that unevenness shapes what a plan’s 2027 revenue guidance actually means, what its delegated risk deal pattern will look like over the next four quarters, and what its CY 2028 bid economics can carry.

The enterprise margin stabilization read on Medicare Advantage really doesn’t capture any of this, because uneven compression doesn’t show up in an industry average. Instead, it shows up inside each plan’s operating model or in coding workflow decisions made (or not made) over the last decade. And the industry-average number does not tell you what any specific plan will do next. That answer lives inside each plan’s operating model, one plan at a time.

V28, Chart Review Exclusion, and RADV Are Compounding

The retrospective risk adjustment model most MA plans have run for a decade has a specific structure, and the current CMS cycle is putting pressure on three points of it. The primary care encounter captures whatever the PCP documents at the visit. Whatever the PCP does not capture gets picked up later through chart review, sweeps, and retrospective analytics. CMS pays the plan on the full picture, which is what the visit captured plus what the plan recovered afterward. Every part of that chain has been under pressure for years. What is different about the last twelve months is that three CMS actions landed on three different parts of the chain at once, and reading each of them separately misses what happens when they interact.

V28 lowered the payment for the higher-RAF conditions that made V24 economics work. It retired hundreds of diagnosis codes, tightened others, and recalibrated the model around tighter documentation standards. The V24 cushion plans had been leaning on since 2024 finished phasing out on January 1. What is left is a coding model that pays less for the same visit than V24 did, and pays disproportionately less for the conditions the sweep economy was built around. The industry-average read on this is straight revenue compression, which it is. What the average read misses is that plans running heavy retrospective books on the deprioritized conditions absorb more of the V28 cut, and plans that were already coding tighter at the visit absorb less.

Chart review exclusion closes the retrospective channel for what the encounter did not code. In April, CMS finalized the exclusion of unlinked chart review diagnoses from CY 2027 risk adjustment payments, cutting roughly $7 billion in RAF payments across the MA book. (A narrow exception preserves unlinked reviews for beneficiaries switching MA plans, but it does not change the overall picture.) A Brookings analysis called out the workaround plans were most likely to try, noting that insurers “may often convert unlinked reviews to linked ones by inducing providers to report the diagnoses on encounter records,” with regulators calling it arbitrage recapture. Either way, diagnoses that used to get picked up in chart review now either land at the visit or don't get paid on. Plans whose visits were already catching those diagnoses are less exposed. Plans running heavy retrospective books absorb the full hit.

RADV expansion turns audit into a running problem instead of a lottery. CMS took audits from roughly 60 contracts a year to all 550 eligible contracts annually, pressed ahead after a September 2025 federal court ruling vacated the extrapolation methodology, and appealed to the Fifth Circuit. Whichever way the appeal lands, every MA plan is now facing audit exposure that used to hit roughly one contract in ten. Plans that were coding at the visit have less to worry about, because the code on the claim is the code the physician wrote in the note. Plans running heavy retrospective addition have more to worry about, because the gap between what the visit captured and what the plan submitted is exactly what CMS is reviewing.

The three actions don't sit on separate lines of the same P&L. V28 lowers what the visit is worth, which changes what the sweep team goes after retrospectively. Whatever the sweep team does recover falls under the chart review exclusion, because most of those diagnoses were unlinked to begin with. Whatever survives both then walks into RADV, which is reviewing more contracts, more often, against tighter standards than the retrospective book was ever built to meet. A plan cannot fix its V28 exposure without changing what it submits, cannot change what it submits without inviting more RADV scrutiny, and cannot avoid RADV scrutiny without giving up recovery it needs to cover the V28 cut. The three actions land together, and the sequencing that would have absorbed them across two or three bid cycles does not clear inside CY 2027.

Retrospective risk adjustment worked for a decade because the economics worked. CMS has spent the last twelve months changing the rules underneath. The political case behind the three actions has been building for years and is not going away. MedPAC put the payment differential between MA and traditional Medicare in front of Congress this spring at $76 billion for 2026, and Commissioner Tamara Konetzka called V28 a "very blunt tool." The commission is not saying CMS overreached. The commission is saying CMS is directionally right and not done. That leaves room for the CY 2028 cycle to keep moving in the same direction without political cost, and the aggregate revenue number analysts are watching across the industry is the wrong frame for what happens next. The compression is landing on individual plan operating models, and those operating models were built years ago.

Subscribe now

Which Health Plans Are Absorbing V28, Chart Review Exclusion, and RADV Cleanly

A small number of MA plans code the RAF at the visit. Most catch it afterward through chart review, sweeps, and retrospective analytics. That difference determines how much V28, chart review exclusion, and RADV land on a given plan's revenue line. The plans coding at the visit sit largely outside all three. Health plans that catch it afterward sit inside all three simultaneously.

Kaiser Permanente sits on the first side of the line because the primary care physician and the plan share a balance sheet. The doctor has no reason to leave a diagnosis uncoded, and the plan has no reason to reconstruct one afterward. Geisinger, Intermountain SelectHealth, UPMC Health Plan, Highmark with Allegheny Health Network, and Johns Hopkins Health Plans sit in the same position. The value-based care case for provider-sponsored plans has been made for years. What the current cycle adds is a specific RAF revenue advantage on top of everything PSHPs already had going for them.

UnitedHealth’s Optum-served MA lives sit on the same side of the line without the health system architecture. UnitedHealth spent the last fifteen years putting primary care under a payer P&L through owned and tightly aligned physician assets, and those Optum-served lives now code at intensities closer to Kaiser than to a typical network payer. CVS built the same architecture at smaller scale through Oak Street Health, Humana through CenterWell, and Elevance is assembling a variant through Carelon Health. Owning the primary care means the visit and the coding are one workflow instead of two, and the same setup that produces cleaner RAF also produces cleaner Stars and better MLR.

Devoted Health, Alignment Healthcare, and Clover Health (with its Home Care Physician model) got to the same side of the line a different way. They built the payer, the network, and the tech stack as one operation from day one, without owning provider assets the way Kaiser and Optum do. What they own is the contracts and the systems that keep the visit and the coding on one workflow inside a network built for it.

The fourth version of the same setup is what most of the mid-market and regional payers are working toward right now. A plan that contracts with an IPA, an MSO, or a physician group that takes real premium risk and coding accountability written into the deal puts that provider in the same operating position as Kaiser’s owned doctor. The plan does not own the paycheck, but the contract lines up the doctor’s revenue with the plan’s. The depth of the arrangement determines how much of the property gets delivered, and light delegation arrangements common through 2024 delivered relatively little. Q4 2026 is largely about moving those lighter deals into deeper ones on terms that transfer real coding accountability with the risk-share.

None of that setup was cheap or fast to build. Kaiser has been running its integrated primary care model for more than seventy years, and its position on MA coding intensity is the compounding result of a delivery system that predates CMS’s payment methodology by decades. UnitedHealth spent the last fifteen years and multiple ten-figure acquisitions putting Optum’s primary care footprint together (DaVita Medical Group, Reliant, Kelsey-Seybold, Atrius, Crystal Run, and adjacent assets in urgent care, ambulatory surgery, and home health). CVS paid roughly $10.6 billion for Oak Street Health in 2023 and took a $5.7 billion goodwill impairment on its Health Care Delivery unit in Q3 2025, and is closing 16 Oak Street clinics and slowing new openings. Humana has invested for years in CenterWell without producing an Optum-scale asset. Devoted raised roughly $2.6 billion across multiple rounds to reach where it is today. The payoff on all of it was uncertain under V24, because retrospective recovery closed most of the gap between the traditional plan and the vertically integrated one. Most plans looked at the capital commitment, the execution risk, and the V24 math, and made the right call for the last decade: keep running the retrospective book, invest incrementally in workflow.

The current cycle makes that whole investment look smart in hindsight and urgent going forward. The gap between the two sides of the line existed under V24. It just did not show up on the RAF revenue line the way it does now. KFF’s July analysis showing about six percentage points of industry-wide coding intensity compression since 2022 reads across the industry as uniform pressure. It is not uniform. It is landing harder on plans coding after the visit than on plans coding at it, and that gap widens with every year the current cycle continues. Grouping plans by ownership category (PSHP, vertically integrated, VBC-native, delegated) is a useful shortcut, but ownership doesn't tell you where the coding actually lands. A tightly delegated IPA can deliver the setup, and a provider-sponsored plan without operational integration often cannot. What matters is where the coding lands, and MA is now sorting on that in a way it did not have to under V24.

Buying Primary Care, Deepening Delegated Risk, or Managing Compression

For every plan without the encounter-coding setup already built, the current cycle turns a strategic call the industry could kick down the road under V24 into a Q4 2026 decision. What that decision looks like depends on the plan's capital position, its existing network, and how much MA book it wants to keep running.

Buying primary care assets is a ten-figure bet with multi-year execution risk. CVS is running that bet visibly right now with Oak Street, Humana with CenterWell, and Elevance with Carelon Health, each one at a different scale and time horizon, and none of them without integration cost and margin drag along the way. The path only clears at that scale, because owning primary care means carrying the revenue, the operating cost, the integration cost, and years of P&L drag before the payer side sees the benefit. UnitedHealth had fifteen years to build Optum. Nobody has that runway inside this cycle, and the capital required takes Centene, Molina, and every mid-market and regional plan out of contention. The buy path is really only available to the four largest publicly traded MA plans, and even those four are still working through integration years after they started.

Much of the industry is moving toward deeper delegated risk, and Q4 2026 is running the busiest renegotiation quarter in years. Cap structures, upside share percentages, coding accountability language, and RADV recoupment allocation are all in play because CY 2027 economics are locking in on both sides of every deal. The trade: the plan gives up some upside on RAF revenue, and the provider takes coding responsibility at the visit and absorbs a defined share of RADV exposure. The provider takes on real premium risk and gets the analytics, tooling, and revenue upside that come with it. The deals closing now move providers from light delegation on shared-savings metrics to full professional-services risk, with coding accountability written into the contract and RADV exposure shared under a defined formula. The plan loses some upside and walks away with an operating model that clears CMS review and produces defensible RAF into CY 2028. Under V24, plans kept most of the RAF upside because the retrospective book was still doing enough work to justify it. Under the current cycle, plans are giving up some of that upside to lock in providers who can code cleanly at the visit, and both sides understand what the trade actually gets them. Most of the operational change in MA over the next year is happening inside these deals.

Managed compression is the third path, and the honest posture for plans that cannot access the other two inside this cycle. The plan takes the RAF hit and defends margin elsewhere through some combination of network narrowing, benefit design discipline, and admin cost containment, running a smaller MA book with better unit economics rather than a larger one bleeding margin. The math is direct. The encounter-coding setup cannot be built, bought, or contracted into within twelve to twenty-four months. Running a broad network on a retrospective model in this environment erodes margins in a way no plan can afford to absorb. Centene's Marketplace book dropped from 5.9 million members to 3.5 million between Q2 2025 and Q2 2026, and CEO Sarah London emphasized stability on the earnings call. That is managed compression in practice, on their Marketplace book. Whether Centene runs the same play on MA will show up in Q3. Molina is signaling the same posture per CEO Joseph Zubretsky’s Q2 commentary on acuity mispricing and constrained options. Molina cannot afford the buy path and did not build the network for the delegated risk path at the scale CY 2027 requires. Public commentary from plans running managed compression tends to lead with network optimization and disciplined growth rather than call it what it is. The posture clearly surfaces when you read Q3 and Q4 language against actual network and benefit design decisions.

Taken together, the three paths sort the industry unevenly. The buy path is available to four of the largest publicly traded MA plans. The delegated risk path is where most of the mid-market and regional segment is running, and where the operational change over the next four quarters will concentrate. Managed compression is the honest read for plans without capital for the buy path or network flexibility for delegated risk, and how far that group extends across the industry will become clearer as Q3 and Q4 commentary either confirms or complicates the path each team is on.

Subscribe now

The Signals to Watch Before CY 2028 Bids Close

Four signals between now and the CY 2028 bid deadline will show which path each plan is really on, and reading them plan by plan against the encounter-coding line is where the analytical work of the next four quarters actually gets done.

Delegated risk deal announcements are the largest of the four. Between now and Q1 2027, the pattern shows which plans are executing at operational scale and which are running one or two market pilots while their earnings commentary talks about something else. Trade press covers major IPA and MSO deals with reasonable consistency, and the operational tells are visible in the announcements even when deal size is not disclosed. A plan expanding an existing delegated arrangement into new geographies, adding coding accountability to a light-delegation deal, or announcing a first full-risk deal with a large physician group is running the delegated risk path. A plan calling itself primary-care-focused in Q3 with no deal activity to match is likely running managed compression alongside the primary care talk, and reading the two together in October is worth more than reading them apart after the CY 2028 bid closes.

The Fifth Circuit ruling on the RADV extrapolation appeal is the near-term wild card. CMS filed its notice of appeal in November 2025, and if extrapolation returns, the math on delegated risk cap structures shifts, because the deals plans are negotiating right now were priced against paused extrapolation. Plans that locked deals before the ruling face repricing conversations with providers whose audit exposure just changed in a single court decision. Plans that held off gain leverage they did not have at the start of the quarter. The deals closing between now and the ruling with contract language anticipating both outcomes will set the reference terms for every renegotiation that follows.

October's Star Ratings release for CY 2027 tests the same operating property from a different side. The CY 2027 rule removed 11 administrative measures and put more weight on clinical outcomes and member experience. If provider-sponsored plans hold or extend their historical Star advantage under the new methodology, the same encounter-level workflow that produces cleaner RAF is producing cleaner member experience. If provider-sponsored plans compress toward the national average, the encounter-coding read needs recalibration and delegated risk becomes the only remaining defense for plans without an owned provider asset. Either outcome changes what is worth doing in CY 2028 planning. If the operating property holds up, providers that can deliver the workflow can charge more in the delegated risk deals still being written. If it does not hold up as cleanly, the buy path becomes more attractive for plans that can afford it and managed compression stops looking like a bridge posture.

The CY 2028 Advance Notice at the end of January is the last signal in the window and the most consequential. CMS will telegraph where payment accuracy pressure heads next. If it includes further chart review restrictions, a higher coding pattern adjustment, or explicit language on encounter data quality (all of which would extend the direction the CY 2027 final rule established), the direction the current cycle established compounds, and delegated risk becomes the only serious response for plans without an owned provider asset. If CMS softens on any of those, delegated risk deal economics move against providers, and managed compression becomes more attractive at the margin. Every plan negotiating cap structures right now would need to reopen the deal. The Advance Notice arrives with roughly nine months to the CY 2028 bid deadline, which is not enough time to change paths on the strength of what CMS publishes, but it is plenty of time to change the terms on which the current path runs.

Each of these signals is a headline on its own. All four, read together and against the path a health plan is already on, form the framework for the next four quarters. The delegated risk deal pattern and the appellate calendar move on the same timeline. The Star Ratings release in October and the Advance Notice at the end of January calibrate whether the direction holds or the terms reprice.

Final Thought

The current cycle has done more than compress the RAF revenue line. It has sorted Medicare Advantage into two groups, defined by a setup most plans did not build under V24 because retrospective recovery closed the gap. Kaiser, Optum-served MA lives, Devoted, and tightly delegated IPA arrangements running deep coding accountability all share the same operating property, regardless of ownership: coding lands at the visit, not after it. Everyone else is running one of three postures on CY 2028. The delegated risk deal pattern, the Fifth Circuit ruling, the October Star Ratings release, and the CY 2028 Advance Notice will separate the plans executing a posture from the plans wearing one.

The industry-average number tells you nothing about what any specific plan will do, because the compression is not landing at the industry level. It is landing on individual operating models built on specific coding decisions plans made a decade ago. Reading the market plan by plan against those decisions is the analysis the aggregate cannot do, and the next four quarters will show which plans were operating on the right side of that line a year before anyone else noticed.

If any of this touches your CY 2028 planning, your product roadmap, or your investment thesis, Upward Growth is a health plan market advisory firm that works with health tech vendors, investors, provider organizations, and management consultancies on strategy that starts from how health plans actually buy, operate, and make decisions. Contact us here.

Thanks for reading.

Here’s to upward growth,

Ryan Peterson

The frameworks in the weekly Upward Growth newsletter help health plans, health tech vendors, investors, provider organizations, and consultancies understand the health plan market as it continues to shift.

If your colleagues are in those conversations, they should be reading this too.

💰 Invest In Your Team with a Paid Subscription.

Get a group subscription

Give a gift subscription

💡 Pro tip: Many subscribers expense Upward Growth through their company’s professional development, training, or learning budget. Here’s a one-minute email template to get your manager to approve expensing your subscription.

🤝 Work with us on payor market strategy: Contact us

🟦 Connect with the author, Ryan Peterson, on LinkedIn.

🎧 Listen to the Upward Growth Podcast: Apple | Spotify

📰 Newsletter sponsorships: Learn More

This week’s Upward Growth newsletter is sponsored by Kbrax

Kbrax: Integrated Care Platform for Health Plans

25 years of experience deploying care coordination at scale for the nation’s largest payers. Kbrax helps health plans reduce readmissions, close care gaps, and drive measurable cost savings by integrating physical and behavioral health into one platform. From risk stratification to automated care journeys to member engagement via mobile app, it’s the care navigation infrastructure your clinical teams actually need. Serving Medicaid, Medicare Advantage, and commercial plans.

Schedule a Demo

.
Interested in sponsoring Upward Growth? Contact Us

A few updates from me before we get into it:

Just got back from RISE West in San Diego. The anxiety in the industry right now could be felt in the ballroom. Plan leadership and vendors are both trying to work through what the next 18 months actually look like, and this week’s article is a big part of that read. Full recap on LinkedIn if you want it.

I’m excited to be speaking at UiPath Fusion (Sept 22-25) in Las Vegas. UiPath is doing genuinely interesting work on the agentic AI side, and Fusion has a dedicated healthcare and payer track, including a session for Blues plans. My session picks up the same thread as this week’s article: how the pressures on plans stop looking like a list and start looking like one integrated squeeze, and where the right technology in the right places can help plans respond at scale. If you’re gonna being there, come say hello!

Also crossed 14,000 followers on LinkedIn recently. My marketing person said I need to mention it, so I’m mentioning it (lol). If we’re not connected there yet, let’s fix that. That’s where most of the between-newsletter conversation happens.

Three employer healthcare cost forecasts landed over the last three weeks: WTW at 11.1%, BGH at 9.2%, and Marsh this week at 8.2%, the highest projected employer trend since 2003. BGH's survey also documented something the cost numbers don't capture on their own: CFO involvement in employer plan decisions is now the norm at more than half of large employers, and cancer is moving up the cost driver list. The immediate read on all three is a commercial book story, and it is. But the same signal reshapes how Medicare Advantage (MA), Medicaid, and Affordable Care Act (ACA) plans have to operate for the rest of 2026 and into CY 2027, and that piece of it hasn't been much of the conversation yet.

Before we get into it, a quick word on how I'm using "commercial" throughout, since it will show up a lot. I mean the employer-sponsored line of business at diversified plans: the fully insured and self-funded coverage large and mid-sized employers buy for their workforces. It sits alongside the government lines (MA, Medicaid, ACA), and its profitability has subsidized thinner margins on those government lines for a decade. Squeeze commercial and every line inside the plan tightens, because the finances don't segregate by line the way the org chart does.

When employer CFOs pull up harder on their own commercial renewal conversations, plan CFOs get tighter across every vendor decision, not just commercial. When employers migrate covered lives out of fully insured commercial into Individual Coverage Health Reimbursement Arrangements (ICHRA) and level-funded arrangements, the plan’s negotiating leverage with hospitals shrinks for MA and Medicaid contracts too. When employers force PBM restructuring in commercial, the same rebate architecture reprices MA-PD and Medicaid managed drug spend on a lag of about a year. The pressure originates on the employer side and lands on the government side, and it’s landing on the CY 2027 operating decisions being made right now.

The way I want to work through this is to take the employer cost pressure those three surveys are describing and walk it across MA, Medicaid, ACA, PBM contracting, provider contracting, and how plans are picking which lines of business to run. All three land on commercial, but that pressure reshapes decisions being made this quarter across every book. What follows is what I see when I hold it up against each of those mechanisms.

This fits into what has been an unusually compounding year across every line of business for plans, tracked in prior pieces on the January Medicare Advantage reset, Q2 payor earnings and CY 2027, ACA rate filing exposure, and provider-sponsored plans deciding which lines are worth keeping.

The Market Is Moving Faster Than the Enterprise Commentary Suggests

The Q2 2026 earnings calls from the diversified national plans read as steady, with margins holding, guidance raised, and disciplined pricing paying off across the board. Analysts covering those calls have taken that as the sign that the pressure of the last two years is behind us. It isn’t. The Q2 commentary describes what already showed up in last quarter’s financials, and it lags what plans are deciding right now for CY 2027.

Both WTW's 11.1% before plan design changes and Marsh's 8.2% after cost-management measures are describing the same underlying dynamic from two ends of the same telescope: what employer costs look like before plans and employers respond, and what employer costs look like after they respond. Both endpoints are consistent with what plan finance teams are already absorbing on commercial renewal conversations for next year. None of it has surfaced on an earnings call (and probably won't until at least Q3 reports drop in late October). Meanwhile, benefit design finalization for CY 2027 MA is happening across September and October at every plan running an MA book, months before Q3 earnings will describe any of it publicly.

The pressure is already showing up in vendor decisions being made this month, in provider contract conversations being scheduled for early 2027, and in PBM rebate architecture being restructured on a commercial-first timeline. None of it looks like an enterprise problem yet, which is exactly why plans reading it now are already six months ahead of plans that will read about it on a Q4 earnings call.

The heaviest hit lands on plan finance, when the commercial cushion gets pulled.

Subscribe now

The Commercial Cover That Absorbed Government Book Losses Is Gone

Diversified national plans have used commercial profitability to subsidize thinner MA and Medicaid margins for a decade. That structural cushion is being pulled now, at the same time employer pressure is intensifying, which is why the effect on the government lines gets sharper from here.

Commercial margins were already compressing before this, and the cross-subsidy story has been priced into the enterprise financials for a couple of years. What changes now is the step from commercial being compressed but still generating surplus to commercial being actively defended against a 9.2% projected trend, with the CFO at the plan's own large employer clients pulling up the vendor selection conversation at the same time. Those are different states, and they land on plan finance differently.

Elevance guided full-year 2026 Medicaid operating margin to approximately negative 1.75% and signaled 12 to 18 months of additional Medicaid market exits ahead. UnitedHealthcare’s Q2 tells the sharper cross-subsidy story. Commercial cost trends there are running above 11%, and management no longer expects commercial margins to recover to their structural 7%-plus level inside 2027. Medicare Advantage margins, by comparison, are expected to finish 2026 above 3%. The old diversified-plan math (commercial as the engine, MA as the thinner recipient) has inverted.

Elevance and UnitedHealthcare are absorbing the sharpest part of the hit, but neither one is the extreme case. The Big Seven publicly traded plans sit across a much wider range of commercial book weight, ranging from Cigna at roughly 95% commercial (after selling its Medicare business to HCSC in early 2025) to Molina at zero. Where each plan sits explains a lot about the strategic moves it is making right now, and which plans still have the most to lose.

The commercial cushion that absorbed Star Ratings pressure on MA, Medicaid rate compression, and ACA member attrition doesn’t exist anymore. At the top of the chart (Cigna, Elevance, Aetna), that cushion is being pulled by employer pressure right now. At the bottom (Molina, Centene, Humana), it isn't there. Those plans either never had a meaningful commercial book to fall back on (Molina, Centene) or exited theirs already (Humana), and they've been operating in the world that Cigna, Elevance, and Aetna are just entering.

Two years ago, a marginal yes on a Star Ratings improvement vendor, a Medicaid care management platform, or an ACA member acquisition play was an easy call for plan finance at the top of the chart. That easy call is gone. For plan finance across the industry, this changes what it costs to say yes to any single vendor evaluation, and that is exactly the shift showing up in vendor scrutiny across every book right now.

Vendor Spend Scrutiny Just Tightened Across Every Book

I wrote in April about the five forces that had already tied operations and finance together in every vendor decision. The employer signal adds something new: pressure that originates outside the plan’s own line-of-business economics for the first time. When large employer CFOs push their own commercial renewals harder, plan CFOs feel it in every vendor decision they touch, not just commercial ones. BGH found that 59% of employers report increased CFO or finance team involvement in benefit and vendor decisions, and that employer-side pressure transmits into plan finance without segregating by line.

From outside the plan, the deal that stalled over the summer gets misread. Pipeline reporting logs it as a competitive loss. The actual cause is a plan finance team defending vendor spend across four lines of business under tighter scrutiny than at any point in the last three years. Anyone selling into MA, Medicaid, or ACA who is seeing deals slow down is watching their buyer absorb commercial pressure that doesn’t show up in the pipeline data.

The standard for vendor engagement is rising because of this. Plan finance teams will spend the hour on the vendor who walks in prepared for the ROI question at 70% of projected performance, models the outcome in language the CFO can bring straight into a budget meeting, and doesn’t need a second call to defend the assumptions. Anything softer than that stalls now, gets punted into next year, and often falls off the CY 2027 planning cycle entirely.

PBM contracting is where the tightening is most visible right now.

PBM Restructuring Starts in Commercial, Lands on Every Book

PBM contracting is where the commercial-to-government transmission is most visible right now. Employers are pushing hard on transparency, alternative rebate structures, and formulary control, and the survey documents an accelerating push across the respondent base. Pharmacy Benefit Managers (PBMs) contractually run separate operating models by line of business. State Medicaid PBM contracts are heavily regulated, and Medicare Advantage Prescription Drug (MA-PD) bid economics carry their own construct. On paper, the commercial and government-line PBM operating models sit in different contracts, under different regulators, with different bid economics.

In practice, the underlying economics don’t really care about that separation. The largest commercial PBM revenue streams are the ones getting restructured, and once those streams reprice, the rebate architecture and formulary economics that carried MA-PD, Medicaid managed drug spend, and ACA formularies get pulled along with it. Cigna Signature is scheduled to roll out to Cigna Healthcare's fully insured plans in 2027 and land as the standard offering across Express Scripts clients in 2028. A PBM that makes fee-based transparency the new commercial baseline can’t hold the old rebate architecture in place for its other books.

Optum Rx, Express Scripts, CVS Caremark, and Prime Therapeutics are absorbing the same pressure from their own commercial clients right now, and the industry is shifting toward pass-through and fee-based pricing across the board. Q3 earnings from Cigna, UnitedHealth, and CVS will show how each parent is positioning the commercial-first rollout inside its own PBM. Plan Rx procurement teams will be reading those calls for what they signal about MA-PD, Medicaid, and ACA repricing.

Q1 2027 is when MA-PD vendor pricing, Medicaid managed drug outcomes, and ACA specialty drug economics start shifting from the employer pressure landing now. Vendors serving Rx-adjacent categories across the government lines are downstream of a fight they may not be tracking. Plan Rx procurement teams are about to see rebate architecture conversations that used to sit inside commercial start showing up in MA and Medicaid contract negotiations.

The same pattern shows up in provider contracting, on a longer clock and with a heavier compounding effect.

Subscribe now

Provider Contracting Gets Harder as the Commercial Book Shrinks

Commercial rates subsidize thinner MA and Medicaid rates in most national provider contracts, and that subsidy was already showing strain through 2025. The employer signal is what pushes it past the point where plans can lean on it heading into 2027.

Through 2025 and 2026, plans were the ones cutting providers, tightening networks to defend margin against the pressures already inside their books. What changes now is which direction the leverage cuts. As employer coverage restructures at scale, commercial shrinks at fully insured national plans, and so does the plan’s leverage in rate negotiations with hospitals and provider networks. Providers push back harder on MA and Medicaid rates in the next contract cycle. The plans that spent 2025 and 2026 cutting providers to defend margin are entering 2027 with less commercial leverage on the ones who stayed.

The BGH survey documents accelerating employer interest in ICHRA, level-funded plans, and captive arrangements. On September 3, CMS and the Small Business Administration announced ICHRA is now the CHOICE Arrangement (Custom Health Option and Individual Care Expense). The name changed, but the direction didn’t: fewer covered lives inside fully insured commercial, more covered lives in individual market and self-funded arrangements. Plans need commercial to be bigger to protect provider negotiating leverage, and it’s now going the other way.

Provider contracts typically renegotiate on three-year cycles, which puts roughly one-third of national contracts in the market each year. The 2027 cycles are where the pressure hits first, and the 2028 and 2029 cycles compound the effect over the next two years. Any plan planning CY 2027 needs its contract renewal schedule sitting on the desk this fall, not waiting until spring.

This lands on every government line’s unit costs at the same moment health plans have less commercial subsidy to absorb them. MA takes the hit through unit cost inflation in contracts renewing without the commercial rate leverage plans used to bring. Medicaid takes it through state rate development, since provider rate changes negotiated with less leverage feed into rate case conversations with state Medicaid agencies over the next 12 to 18 months. And ACA silver plan networks tighten because plans priced 2027 against a commercial line that will be smaller than they modeled.

Which is why plans are deciding line-of-business selection in Q4 this year instead of next spring.

The Line of Business Review Just Compressed From Annual to Quarterly

The line-of-business math provider-sponsored plans have been running for the past year is now running at plans of every size. The employer signal is the accelerant that pulls those decisions into this quarter instead of the 12-to-18-month cycle where they used to sit.

The health plans that have already made this call point at where the pressure is landing. Provider-sponsored Baylor Scott & White Health Plan (BSWHP) is exiting Medicaid managed care and the Individual Marketplace, regional player PacificSource is pulling back from ACA and Montana, integrated-system Providence is winding down most of its insurance business starting in 2027, and Medicaid-DNA operator Molina is consolidating to roughly six core states for the same year. Four different plan types running the same math and reaching the same conclusion inside the same six-month window.

Line-of-business selection has moved from a 12-to-18-month strategic review to a Q4 decision, because the pressure across every book is compounding faster than a plan’s typical review cycle. The plans running quarterly reviews are pricing CY 2027 with six months of lead time on the plans that aren’t, and that gap is what makes this the sharpest thing to watch through the rest of the year.

Q3 earnings will start showing where each plan sits.

Final Thought

The employer signal is reshaping how plans have to operate for CY 2027, months before any of it will land on an enterprise financial. Plans reading the shift now are already pricing 2027 with it factored in.

The CY 2027 bid window closed in June, but the operational calls that turn those bids into real strategy (vendor budgets, network moves, benefit design, provider renewals) are still being made through Q3 and Q4. Q3 earnings from UnitedHealth, Elevance, CVS, Cigna, Humana, Centene, and Molina will start showing which plans are moving on this. Listen for language on employer renewal conversations, PBM revenue trajectory, and provider contract renewal cadence.

BGH’s Ellen Kelsay called the 2027 survey “emblematic of a bigger-picture issue with the overall healthcare system.” The trigger came from the employer side, the cascade lands on the government side, and what a plan CFO decides is defensible right now is what CY 2027 execution actually runs against.

If any of what’s above touches how you’re reading your CY 2027 exposure, Upward Growth is a health plan market advisory firm that works with health tech vendors, investors, provider organizations, and management consultancies to build strategy around how health plans actually buy, operate, and make decisions. Contact us here.

Thanks for reading.

Here’s to upward growth,

Ryan Peterson

The frameworks in the weekly Upward Growth newsletter help health plans, health tech vendors, investors, provider organizations, and consultancies understand the health plan market as it continues to shift.

If your colleagues are in those conversations, they should be reading this too.

💰 Invest In Your Team with a Paid Subscription.

Get a group subscription

Give a gift subscription

💡 Pro tip: Many subscribers expense Upward Growth through their company’s professional development, training, or learning budget. Here’s a one-minute email template to get your manager to approve expensing your subscription.

🤝 Work with us on payor market strategy: Contact us

🟦 Connect with the author, Ryan Peterson, on LinkedIn.

🎧 Listen to the Upward Growth Podcast: Apple | Spotify

📰 Newsletter sponsorships: Learn More

Today’s Upward Growth newsletter is sponsored by Kbrax

Kbrax: Integrated Care Platform for Health Plans

25 years of experience deploying care coordination at scale for the nation’s largest payers. Kbrax helps health plans reduce readmissions, close care gaps, and drive measurable cost savings by integrating physical and behavioral health into one platform. From risk stratification to automated care journeys to member engagement via mobile app, it’s the care navigation infrastructure your clinical teams actually need. Serving Medicaid, Medicare Advantage, and commercial plans.

Schedule a Demo

Interested in sponsoring Upward Growth? Contact Us

Some updates from me before we get into this week’s newsletter:

First, I'll be speaking later this month at UiPath Fusion (Sept 22-25) in Las Vegas. Fusion is UiPath's flagship annual event, and its programming includes a dedicated healthcare and payer track, including a full session just for Blues plans. If you're planning on being there, come say hello!

Also, this week we hit 6,500 weekly subscribers, and I don't take a single one of you for granted. One easy way to help the newsletter keep growing: forward this piece to a colleague, or share it on LinkedIn with a note about what landed. That kind of word-of-mouth is how this thing keeps building.

Provider-Sponsored Plans (PSPs) are deciding line by line whether owning the delivery system alongside the health plan is a revenue asset or a cost center. That principle explains many of the moves these plans have made over the last 18 months, whether that meant doubling down on Medicare Advantage (MA) and direct-to-employer, walking away from Individual Marketplace and Medicaid managed care, or experimenting with cross-system partnerships and Risant-style aggregation.

You can trace the pattern through the last 18 months of announcements. SelectHealth extended its MA product into Colorado through a partnership with UCHealth. BSWHP is exiting Medicaid managed care and the Individual Marketplace, while PacificSource is pulling out of the ACA market across Oregon, Idaho, Washington, and Montana, and fully leaving Montana across every line of business. Kaiser's Risant Health continues to hold Geisinger and Cone Health, with plans to add more systems. Each of these plans is asking itself: given how our plan actually operates, is this line of business worth keeping?

The market shock producing these decisions is the compound pressure hitting the ACA and MA payment environment right now: Enhanced Premium Tax Credits (EPTCs) expired at the end of 2025, Cost Sharing Reduction payment mechanics have been in and out of court through the summer, and the MA payment reset has forced every carrier to reprice against tighter margins. Last week's newsletter walked through how health plans priced 2027 ACA rates against a CSR rule the court has since paused, and how Q2 earnings made the bet harder to defend. PSPs are running against that same pressure. But when the provider system owns the plan, the repricing environment forces a second decision beyond how to price the line: whether the line is worth keeping at all, given what integration is actually worth there.

The article works through why the pattern is happening, what the selection logic predicts about the next round of moves, and where your own market read has to sharpen to match how these plans are actually deciding.

If you're watching PSP moves in your pipeline, your portfolio, or your competitive market, this frame lets you read them before the next filing hits. It also changes how you read the members those exiting plans are leaving behind, because the plans that inherit them are working through a different calculation than the national payers are.

Subscribe now

Why the Same Market Shock Reads Differently Across Provider-Sponsored Plans

The intro sketched three directions: doubling down, walking away, and experimenting. Each one runs against the same selection logic inside a specific set of lines, and working through them one direction at a time makes that logic visible and the pattern predictive.

The most visible direction right now is the doubling down, because it is happening in MA at the same time that the biggest national payers are contracting in the same markets. SelectHealth’s partnership with UCHealth launched its Colorado MA product for 2024, and got sharper this plan year when UCHealth chose to leave Cigna and Devoted MA networks and stay with SelectHealth. That narrowed the market’s MA access to UCHealth providers into the SelectHealth partnership. BSWHP is holding its MA and employer group business as the two lines where the integrated model earns its keep, while pulling back everywhere else. Multiple regional PSPs are expanding MA into adjacent counties within their existing provider footprint, while UnitedHealthcare, Humana, and Aetna are exiting them.

The walking away trend is showing up in the lines where that same integrated model runs at a loss. BSWHP is exiting Medicaid managed care and the Individual Marketplace; PacificSource is leaving Montana entirely and pulling out of the ACA market across three more states; and Providence Health Plan is shuttering most of its insurance business beginning in 2027, affecting 440,000 members predominantly in Oregon. These are largely line-of-business selection decisions, not failures. Each plan looked at which lines its operating model actually gets paid for and made the call accordingly. The mechanism that separates the lines that pay from the lines that do not is what the next section works through.

The experimenting direction is a smaller number of plans working on structural approaches to a constraint that doubling down eventually runs into: how to scale MA beyond the geography of a single provider network. Two structural approaches are showing up right now: cross-system partnerships between PSPs and peer systems, and holding-company aggregation of multiple integrated systems under a shared parent.

The through-line across all three directions is the same selection principle, and it predicts more than the moves that have already happened, because it also predicts which plans move next.

The clearest way to see why the current MA payment environment is producing this pattern is to compare what is happening at the national payers in the same market. UnitedHealthcare, Humana, and Aetna are collectively exiting more than 580 counties for 2026, while Kaiser now ranks as the fourth-largest MA parent at roughly 6% of national enrollment and was one of only two large insurers to grow MA enrollment year-over-year. In the same market where the biggest national payers are contracting, PSPs are pushing further into MA. That contrast shows the current payment environment is rewarding the two operating models differently. The doubling down is playing out in the lines where PSPs’ operating model actually earns its keep.

What Owning the Delivery System Is Worth in MA and Direct-to-Employer

PSPs have several operational levers they do not have to build from scratch to compete in MA, because those levers already run inside the delivery system. The clinical workflows that drive Star Ratings performance are already staffed and running, and so is the chronic care infrastructure that keeps Medical Loss Ratio (MLR) manageable. Care coordination follows from how the plan and the system already operate together, rather than being a program the plan has to fund on top. So when a PSP invests a dollar in coordination for its MA members, the delivery system captures much of that value back through its own P&L. Whether any given PSP fully realizes those levers is a separate question, but the cost of pulling them is structurally lower than at a plan that carries risk without the delivery system.

Direct-to-employer rewards the same operating model, for reasons that overlap with MA. Network depth is a differentiator that costs a PSP nothing to demonstrate, because the network is the delivery system the plan already owns. Care navigation is a joint product of the plan and the system rather than a bolted-on utilization management gate. When the plan wants to influence utilization, it can route decisions through the clinical relationships the delivery system already carries rather than through a prior authorization process that antagonizes the network and the member at once. And employer buyers evaluating a PSP are seeking an operating model that trades administrative friction for clinical alignment, which is exactly the trade self-insured employers with disability and productivity costs are looking to make right now.

For plans doubling down on MA, this is not theoretical. SelectHealth CEO Rob Hitchcock named the mechanism plainly: “To be successful in Medicare Advantage, you’ve got to have a strong clinical partner. For us at Select Health, we have a strong clinical partner in Intermountain Health, and I think that’s critical. Without a strong clinical partner, Medicare Advantage is only going to get harder.” Hitchcock was talking about Intermountain, which owns SelectHealth outright and gives it that alignment by construction. The UCHealth partnership in Colorado is the same mechanism, extended into a market where SelectHealth had to build the partnership rather than inherit it. A PSP's MA viability lives or dies on clinical alignment, whether that alignment comes through corporate structure or through a deliberately built partnership.

Benefit design tells the same story from another angle. PSPs run a different playbook than nationals or Blues, varying more from plan to plan on core benefits and including them at slightly lower rates in individual plans. Inside SNPs, they carry lower overall benefit inclusion, while nationals and Blues more consistently offer OTC allowance, health-related meals, and transportation. That pattern makes sense once you see that PSPs often already capture the value of care coordination through their delivery system, so their benefit design does not have to substitute for utilization management or member engagement the way it has to at plans without that alignment.

Finally, a PSP entering an MA market is competing on a different unit of value than a national payer entering the same market. The cost to acquire a member is lower because the delivery system is already there. Retention runs off different levers because the tools that keep a member healthy sit inside the same organization that carries the risk. And the growth constraint runs into provider network geography rather than into acquisition economics, which is why the current MA payment environment is rewarding the integrated operating model right now, while the plans that carry MA risk without the delivery infrastructure to earn back on it are the ones contracting.

Subscribe now

Why Integration Turns Into a Cost Center in Marketplace and Medicaid

The lines of business PSPs are exiting share a feature that flips the value of integration. The two lines driving most of the exits are Individual Marketplace and Medicaid managed care, and each one fails to reward integration for its own reason. The same operating model that gets rewarded in MA and employer group runs at a loss in both.

Individual Marketplace is the clearer of the two. Coordination investments in identifying rising-risk members, closing chronic care gaps, and building relationships between members and the delivery system take multiple years of member continuity to earn back. ACA marketplace churn does not give the plan that long. Members shop across plans annually, switch during Special Enrollment Periods (SEPs), and cycle in and out of Medicaid based on redetermination timing. A PSP that invests in coordination for a Marketplace member often funds someone whose next annual enrollment lands them at a competitor.

Medicaid produces the same result through a different mechanism. State Medicaid procurement selects on criteria that reward administrative capacity, MCO scale, IT infrastructure, and network breadth across the specific geographies the state defines. Those criteria do not select for provider-plan integration in the markets where the state has the most Medicaid members to place. A PSP whose delivery system runs in Dallas and Central Texas cannot win a procurement where the state's scoring rubric prioritizes coverage in West Texas markets the plan does not serve. That is exactly what happened to BSWHP: when Texas concluded its latest Medicaid procurement, BSWHP was awarded only a limited contract in Lubbock, a market where the health system does not operate hospitals. CEO Pete McCanna reinforced the point in a separate interview, describing how high turnover in marketplace and Medicaid populations makes those lines structurally harder for BSWHP than MA and employer group. The procurement did not reward what BSWHP does best where it does it, and the members it would have served would have churned out before the coordination investment paid back.

The exits following the same logic are already stacking up. PacificSource is pulling out of the ACA market across all four of its states and leaving Montana entirely, and had anchored the Oregon marketplace alongside Providence until both left it within the last two years. Every one of these exits is a plan reading the same math on the same two lines and reaching the same conclusion.

The pattern of PSP moves in the last 18 months keeps coming back to one question: does integration itself pay? Once a plan has decided which lines it wants to keep, the next problem is what happens when its growth ambitions run into the geographic limits of its own provider network.

How PSPs Are Scaling MA Beyond Their Own Provider Network

For PSPs doubling down, scale is the next problem to solve. A PSP's MA growth ambitions eventually exceed the geography its own provider network covers. The plan can price, design benefits, and file for expansion into new counties, but if the delivery system does not operate hospitals there, none of the operating advantages that made MA work in the home market come with it.

The SelectHealth-UCHealth partnership is one approach. It launched SelectHealth’s MA and individual products in Colorado for 2024, into markets where SelectHealth’s parent Intermountain Health does not operate hospitals but UCHealth does. Neither party gave up corporate independence. The two organizations share clinical operations without sharing a corporate structure, which is the specific alignment PSPs depend on to make MA work. And once the partnership was in place, the clinical partner had room to concentrate its MA network exposure into it, which is what happened this plan year when UCHealth exited Cigna and Devoted while staying with SelectHealth.

Kaiser’s Risant Health takes a broader approach to the same constraint. Risant holds Geisinger, added in March 2024, and Cone Health, added in December 2024, under a shared parent that preserves each system’s local operating identity while pooling infrastructure, capital, and operating discipline across them. The parent gives them scale advantages no single-system PSP can build alone, from technology platforms to capital access to shared clinical operations. Risant’s stated intent is to add four or five more systems over the coming years. The model is trying to prove that a group of integrated systems can share back-office scale without giving up the local clinical alignment that makes each one profitable.

Both approaches start from the same premise: the integrated operating model is worth preserving, and the way to scale it is not to give up what makes it work locally. A cross-system partnership solves the geography problem for one line in one market; an aggregation holding company solves it across multiple systems and multiple lines at once. Both are betting that integration wins against the national payer operating model when you extend it, and that the problem worth solving is how to extend it further.

This kind of scaling can look a lot like the health plan consolidation happening elsewhere in the market, but it is a different move entirely. Blues plans have been consolidating from within under financial pressure, and other regional plans are being absorbed into larger national footprints. Both of those consolidations are driven by losses and infrastructure gaps a bigger parent can close. Cross-system partnerships and Risant-style aggregation are the reverse: line-of-business scaling driven by the growth ambitions of an operating model that is already profitable where it operates. A PSP that reads its cross-system move as consolidation, or lets it be read that way from outside, will misjudge how far and how fast the integrated model can be extended.

And getting that read right is where the selection logic starts to matter for anyone building their own view of the PSP market.

Subscribe now

How to Read PSP Moves Before They Land

The selection logic changes how any read on a PSP has to work. Take an MA expansion into an adjacent county: a national payer prices that move against per-life economics, but at a PSP it is a bet that integration will pay off in that specific market. The same double read applies on the exit side. A Medicaid exit that looks like a plan giving up on a population is more often a procurement read against a state that scored on criteria the PSP couldn't fully address. And when you get to cross-system partnerships, what would trigger M&A speculation at a national plan is more likely just scale infrastructure for a line the PSP already earns on. Read any of these against the wrong framework, and you miss what the move is actually saying.

The clearest test of this is putting two PSPs that look similar side by side. BSWHP and PacificSource show up as roughly comparable accounts on any of the usual sorts of size, geography, membership category. But BSWHP is walking away from Medicaid managed care while PacificSource is holding it, because each plan's calculation on where its delivery system pays back is running against its own local conditions. That difference doesn't show up in any standard segmentation, but it predicts everything about how each plan will move next.

When BSWHP CEO Pete McCanna talks about turnover in marketplace and Medicaid populations, he is naming why lines fail his plan's operating model. And when SelectHealth CEO Rob Hitchcock names a strong clinical partner as inseparable from MA success, he is naming why lines succeed. Both are describing the mechanism their plan runs each line against, and both are doing it out loud six to twelve months ahead of the filings, exits, and expansions it will show up in.

Not every PSP has moved publicly yet, but the ones that haven't are running the same math their peers already ran. Watch for it in three places specifically: MA product filings that extend into new geographies, Medicaid contract non-renewals inside the next twelve months, and joint venture announcements without acquisition language. It also shows up in CFO commentary on earnings calls, where the internal read on each line's economics tends to surface first.

Read every PSP announcement as a plan telling you where integration pays in its book, and the pattern stops looking like scattered news.

Final Thought

Medicare Advantage AEP opens October 15. Q3 earnings from ACA-exposed payors and hospitals will grade what year one without Enhanced Premium Tax Credits (EPTCs) actually cost. Any PSP corporate restructuring, MA product filing, or Medicaid contract non-renewal that lands inside that window is running against the same selection logic, and it should be read that way.

This frame does not go away with the next payment update. It gets sharper as MA payment reforms mature and state Medicaid procurement keeps selecting for MCO scale over provider-plan integration.

If any of what’s above touches how you’re reading provider-sponsored plan moves in your pipeline, your portfolio, or your strategy, Upward Growth is a health plan market advisory firm that works with health tech vendors, investors, provider organizations, and management consultancies to build strategy around how health plans actually buy, operate, and make decisions. Contact us here.

Thanks for reading.

Here’s to upward growth,

Ryan Peterson

The frameworks in the weekly Upward Growth newsletter help health plans, health tech vendors, investors, provider organizations, and consultancies understand the health plan market as it continues to shift.

If your colleagues are in those conversations, they should be reading this too.

💰 Invest In Your Team with a Paid Subscription.

Get a group subscription

Give a gift subscription

💡 Pro tip: Many subscribers expense Upward Growth through their company’s professional development, training, or learning budget. Here’s a one-minute email template to get your manager to approve expensing your subscription.

🤝 Work with us on payor market strategy: Contact us

🟦 Connect with the author, Ryan Peterson, on LinkedIn.

🎧 Listen to the Upward Growth Podcast: Apple | Spotify

📰 Newsletter sponsorships: Learn More

Today’s Upward Growth newsletter is sponsored by HOMELINK

Employee ownership changes everything, and members notice that.

As an employee-owned organization, HOMELINK brings a level of accountability that’s hard to find in healthcare. Because every associate is personally invested, our team treats every member and every claim as their own. With a directly contracted national network and a 9.8/10 Member Satisfaction Score, we help health plans deliver the kind of experience members remember for the right reasons.

Learn more about HOMELINK

Interested in sponsoring Upward Growth? Contact Us

A quick note before we get into it: I’m currently booking Q4 speaking sessions and on-site trainings for health plans, health tech vendors, investors, and consultancies. A few great engagements are already on the calendar for October and November, and we’ll announce those soon. Q4 is filling in fast.

The speaking sessions are keynote and panel spots at industry events, board and investor days, and executive offsites where the room needs a sharp outside read on where the payer market is actually heading in 2027 and what that means for their book. Recent talks have covered ACA repricing, the MA reset, and how CFO-driven procurement is reshaping vendor selection.

The on-site trainings (in-person or virtual) are half-day and full-day sessions for leadership teams navigating a shifting payer market: commercial and growth teams selling into health plans, product and strategy teams building for them, and investment teams sizing exposure across payer-adjacent portfolios. We cover how plans actually make buying decisions, what the market is signaling for 2027 and beyond, and how leadership should be repositioning strategy, roadmap, and go-to-market against what’s happening at the plan CFO level right now.

If you’re thinking about Q4 or Q1 2027, the fastest way to start the convo is the Upward Growth contact form, and we can scope what would land best for your team.

Separately, I’ll be at RISE West in San Diego next week. I’m especially interested to hear what the Office of the Inspector General (OIG) has to say this year, given everything moving in the payer market right now. If you’re going to be there, come say hello and let’s catch up. 👋

In May, I wrote a piece called Five Health Plan Postures to Understand During the 2026 ACA Shakeout. The argument was that plans in the Affordable Care Act (ACA) individual market would take different postures on their 2027 rates depending on how they read the risk pool without the Enhanced Premium Tax Credits (EPTCs). That article was pre-filing, so most of what I laid out was speculative.

What’s on the table now is different. Plans filed their 2027 rates, a federal judge paused most of the rule they filed under six weeks later, and Q2 earnings from ACA-exposed public payors and hospitals showed what year one without EPTCs is actually costing the market. That combination has put plan CFOs with an ACA book in the position of defending 2027 pricing decisions against conditions that have already changed underneath them.

The 15% median premium increase across 276 insurers is going to get most of the headlines, but really the number plan leadership is actually managing to is messier. And that’s because some 2027 payment rule provisions may or may not apply by Open Enrollment Period (OEP). Further, provider economics are already visibly cracking on Q2 earnings calls, and the appellate ruling most likely won't come down before the Medicare Advantage (MA) Annual Enrollment Period (AEP) opens October 15 or the ACA OEP opens November 1.

Six months ago, how plans would behave in year one without EPTCs was a forward-looking read. What we have now is evidence, and plan CFOs with an ACA book are running it against their filed 2027 posture right now, before Q3 earnings force them to say publicly whether the posture still holds.

Subscribe now

What Health Plans Priced Into Their 2027 ACA Rate Filings

Every state’s 2027 filings are in, and the story they tell is not the median.

Peterson-KFF’s national tracker puts the median proposed increase at 15% across 276 insurers. The number tells you the market repriced. Where plans landed inside the range tells you what they think happens next. Filings inside the same OEP window include 22% state averages, 52% individual carrier requests, book-wide repricings, and outright market exits. Plans clearly do not agree on what the retained risk pool looks like.

The actuarial memos supporting the filings cite five drivers consistently:

• Morbidity of the retained risk pool after EPTC expiration

• Expected further enrollment decline through 2027

• The EPTC expiration itself and its downstream effect on take-up rates

• Tariff-driven pharmaceutical and durable medical equipment (DME) cost pressure

• Uncertainty about which provisions of the 2027 Notice of Benefit and Payment Parameters (NBPP) would actually apply

To me, that last one matters most as plans were telling regulators, in writing, that they were pricing 2027 rates against a rule they weren’t sure would even hold. Actuarial memos are not opinion pieces, and that caveat is on file in dozens of state Departments of Insurance right now as the plans’ own record of what they believed about the regulatory environment.

At the state level, the split gets sharp. UnitedHealthcare of New York filed a 52.1% requested increase, the highest single filing in the country, inside a state where the individual market request averaged around 21% overall. Washington’s preliminary rate request averaged 22.4% statewide. In Oregon, both Providence Health Plan and PacificSource exited the individual marketplace entirely, leaving Oregon consumers to shop across four plans rather than six. Further, PacificSource is also exiting the individual market in Idaho, Montana, and Washington, and leaving Montana entirely across every line of business. Two plans filing rates 20 percentage points apart on the same population made two different bets on the retained risk pool. But both actuaries can't be right.

At the plan level, the divergence tells the same story. Molina Healthcare walked, announcing a $1B reduction in marketplace premium exposure for 2027 alongside consolidation to roughly six core states. Centene held ground and repriced. UnitedHealthcare tested the ceiling with the New York filing. Providence and PacificSource concluded that no rate could stabilize their books and exited. What’s clear now is that a market filing inside a 15% median but including 52% requests, book-wide repricings, and multi-state exits is not a market operating with shared assumptions.

The CFO is the one making all of these calls. As I wrote in The CFO Filter last fall, CFOs became the actual decision-makers on vendor spend at most plans over the past two years. They're now the ones defending the 2027 ACA rate posture too, and both decisions are landing on the same desk against the same conditions. And all of this got priced before the rule got paused.

The Rule Plans Priced Against Got Paused

The rule plans wrote their 2027 rates against aren’t fully in force anymore. A federal district court in Maryland paused eight of its provisions in mid-July, four days before the effective date. HHS is expected to appeal to the Fourth Circuit Court of Appeals, with a September 14 deadline to file. Separately, 22 states led by New York filed their own challenge to the NBPP two weeks after the ruling. None of it resolves before OEP opens November 1.

The paused provisions touch enrollment verification, higher out-of-pocket limits for bronze plans, catastrophic plan eligibility, network adequacy, standardized plan requirements, and tax reconciliation. Katie Keith at Georgetown has been running a multi-part series on the 2027 payment rule and the Columbus II litigation for Health Affairs Forefront, and I’d recommend her coverage if you want the substance. What matters for plan-side decisions over the next three months is that whichever way the appellate ruling lands, the rules plans priced 2027 against will not be the rules that govern the market they wrote their posture for.

Plans are already inside the OEP marketing window. Consumer-facing materials, plan design communications, and network disclosures are being drafted or are already live, built on 2027 regulatory assumptions that no longer fully hold. If the paused provisions come back, some of that content has to be reconciled with rules that were not in force when it was finalized. If they stay paused, plans that wrote pricing memos against the full rule are running a book against a floor they never stood on.

The downstream effects of what plans priced against are already visible in Q2 earnings from both hospitals and payors.

Subscribe now

Q2 Earnings Calls Show What Year One Without EPTCs Costs

Projections about what EPTC expiration would cost the healthcare economy have been in the market for a year, but Q2 was really when the projections stopped being models and started being receipts.

In September 2025, the Urban Institute and Robert Wood Johnson Foundation (RWJF) modeled what EPTC expiration would cost the market. Their numbers landed at $32.1 billion in lost provider revenue and $7.7 billion in uncompensated care in 2026, with 7.3 million people losing subsidized coverage and 4.8 million becoming uninsured. The assumption underneath the RWJF numbers was that members losing coverage would stop using care. Q2 said the opposite. The newly uninsured are still showing up, and they are just not paying for it. That makes uncompensated care the line item where EPTC expiration is landing hardest, and it’s landing faster than any 2026 model priced in.

HCA Healthcare made the point most plainly. On the July 24 Q2 call, CFO Mike Marks told investors HCA’s original 80-85% assumption for exchange-to-uninsured conversion was “closer to one-for-one”, and the company cut 2026 EBITDA guidance from $15.6B-$16.5B to $15.4B-$16.1B. That single assumption change roughly doubled HCA’s modeled full-year exchange headwind to $1.0-$1.2B. Marks and CEO Sam Hazen laid out the mechanism on the same call. Exchange volumes fell about 15% year over year. Uninsured volumes rose about 15%. The migration is almost dollar-for-dollar, and the utilization decline HCA and its peers assumed would soften the hit did not materialize.

The rest of the sector confirmed the pattern with their own numbers. Community Health Systems (CHS) raised its ACA-related EBITDA loss projection from $20-$30M to $50-$75M in Q2, with uncompensated care running about 20% higher year over year. Universal Health Services (UHS) downgraded 2026 guidance citing the same dynamic. Tenet Healthcare raised guidance and outperformed, on cost containment and a higher-acuity mix that outran the ACA headwind. Even at Tenet, exchange revenue fell 17% year over year. Tenet being the exception doesn’t weaken the pattern. It tells you which operators have enough non-ACA levers to absorb the drag without cutting guidance, and which don’t.

The mechanism connecting rate filings to hospital P&Ls sits in the CMS effectuated enrollment data. Plan sign-ups for 2026 fell by roughly one million versus 2025. Effectuated enrollment, which counts the people who actually paid their premiums, fell by nearly three million, from 22.1 million in February 2025 to 19.2 million in February 2026. That is the largest single-year drop since the ACA marketplaces launched in 2014. The gap between click-through enrollment and paid coverage is the channel through which EPTC expiration is landing on provider P&Ls, and the size of the gap makes HCA’s one-for-one revision look conservative rather than aggressive.

On the payor side, Q2 produced the first real look at how plan management teams are absorbing the same dynamic. Two of the most ACA-exposed publicly traded payors reported within days of each other, and they used the same underlying market data to tell opposite stories.

Molina told the market it had mispriced the acuity of the retained pool and was shrinking to a book it believes it can price. Q2 marketplace membership fell to 283,000 from 655,000 at the end of 2025 and 690,000 a year earlier, and marketplace medical loss ratio (MLR) ran 88.9% against the 85.5% originally guided. CEO Joseph Zubretsky told investors, “we did include an element in pricing to account for the potential for an acuity shift. We underestimated the stickiness of high-cost members,” and announced the $1 billion reduction in marketplace exposure and consolidation to six states for 2027. The plain read: Molina’s current footprint can’t be priced to margin, and the smaller, geographically concentrated version it’s shrinking to is the one it believes can.

Centene told the market it can price the book…with an asterisk. MLR improved to 89.6% from 93% year over year, and Q2 profit rebounded to $1.1B from a $253M loss in Q2 2025. But CFO Drew Asher told investors approximately $0.50 of Q2 earnings came from settlements of 2025 items that would not recur in 2027, including $180 million in Marketplace risk adjustment favorability. Marketplace membership itself fell from roughly 5.9 million to 3.5 million year over year. The asterisk is about the 2027 earnings bridge, as management is telling analysts the pricing model works and asking them to remember the $0.50 when Q2 2027 comes around.

Same market and same members, but two different calls on how to price them for 2027. Q3 tells us which call the rest of the industry is closer to, and I walked through the broader payor picture in What the Q2 Health Plan Earnings Calls Locked In for CY 2027 last week.

Subscribe now

What Plan CFOs Are Deciding Between Now and Open Enrollment

Plan CFOs with material ACA exposure are trying to make one decision under three simultaneous pressures: the 2027 rates they already filed, the rule those rates were priced against that isn't fully in force, and what Q2 said about the retained pool. Q3 is where the pressure becomes public. Boards, state regulators, and everyone who buys from them or sells to them will be listening to how leadership talks about all three at once.

The six weeks between the September 14 HHS notice-of-appeal deadline and ACA Open Enrollment on November 1 are where those simultaneous pressures collide. MA AEP opens October 15 in the middle of that stretch. Appellate hearings on the NBPP are likely to run in late October. Q3 earnings from public payors and ACA-exposed hospitals land in the same window. Every decision gets made against all of it at the same time.

These postures matter because boards, regulators, and everyone across the table will grade plan leadership on the call they made and how it held up. Q3 is where Molina's shrinkage, Centene's discipline-with-an-asterisk, UnitedHealthcare's 52.1% ceiling test in New York, and Providence and PacificSource walking away become public commitments leadership has to defend for the rest of 2026 and into 2027.

Q3 earnings calls will get the coverage, but they're a lagging read. What plans are doing right now, between the appellate uncertainty and the OEP marketing deadlines, is where the real decisions get made. Plans are drafting rate-filing amendments against multiple appellate-outcome scenarios, sequencing network-narrowing communications for pre-OEP versus post-OEP release depending on how the appellate hearings look, and writing consumer marketing that has to hold up whether the paused provisions come back or don't. The sharpest plans are running competitors through the same lens, watching for amendments and footprint changes that move faster than any earnings release. By the time all of this surfaces on an earnings call, the operating decisions behind it are already six weeks old.

One piece of this hasn't shown up on any Q2 call yet, but it will soon. When Providence, PacificSource, Molina, and the other exiting plans left their markets, their members didn't disappear. They land on the plans that stayed, and the receiving plans priced 2027 based on their own historical book. Those members aren't a random cross-section. Some will fit the health status assumptions built into 2027 rates. Some will be exactly the kind of high-cost members Molina told the market it mispriced. Receiving plans will see it in their MLR before they've done the math on it. That conversation happens on Q2 2027 calls next summer, and by then the 2028 posture is already set.

The pattern I’ve written about before, of plans absorbing simultaneous pressure across every line of business, applies here. ACA is not the only book a plan CFO is reading Q3 signals from. What each plan says about ACA in Q3 also carries information about how the rest of the book is being read, and tracking compound shocks absorbing into plans over multiple quarters is how each earnings call becomes a read instead of just a data point.

None of this stops at health plans either. Hospital finance teams will use Q3 payor commentary to model Q4 rate negotiations, and the uncompensated care trajectory Q2 established walks into provider board meetings as the payor conversation heats up. Vendors selling into ACA-heavy plans are watching which buyers priced with conviction, because those are the ones who commit in Q4 and the rest can't move until Q3 resolves. And Q3 gives investors the first market-wide read on which management teams priced discipline versus optimism, which reprices ACA-exposed payor comps and ACA-adjacent hospital comps before Q4 closes.

Final Thought

Between now and mid-November, the market grades a set of bets plan leadership made this spring about the rules, the risk pool, and how far the retained members would stretch. Q3 earnings are the first grade. 2027 OEP results close the book on it.

Inside that window, listen for whether plan CFOs’ Q3 commentary matches their 2027 filed posture, what Q3 hospital calls say about the trajectory Q2 established, and whether the appellate court signals reinstatement during oral arguments. Read together, those signals tell you which management teams treated the ACA repricing, the NBPP pause, and the Q2 provider evidence as one connected story, and which ones treated them as separate news cycles. The first group is going to look considerably better in Q4 than the second.

If any of what's above touches your 2027 planning, Upward Growth is a health plan market advisory firm built for exactly this kind of moment. We work with health tech vendors, investors, provider organizations, and management consultancies on strategy that starts from how health plans actually buy, operate, and make decisions. Contact us here.

Thanks for reading.

Here’s to upward growth,

Ryan Peterson

The frameworks in the weekly Upward Growth newsletter help health tech vendors, investors, provider organizations, and consultancies work the health plan market as it shifts.

If your colleagues are in those conversations, they should be reading this too.

💰 Invest In Your Team with a Paid Subscription.

Get a group subscription

Give a gift subscription

💡 Pro tip: Many subscribers expense Upward Growth through their company’s professional development, training, or learning budget. Here’s a one-minute email template to get your manager to approve expensing your subscription.

🤝 Work with us on payor market strategy: Contact us

🟦 Connect with the author, Ryan Peterson, on LinkedIn.

🎧 Listen to the Upward Growth Podcast: Apple | Spotify

📰 Newsletter sponsorships: Learn More

Today’s Upward Growth newsletter is sponsored by HOMELINK

A high-performing network doesn’t have to mean high costs.

Too many ancillary care networks add complexity and cost. HOMELINK was built to reduce both. We bring together a directly contracted national network, Medicare compliance, and 100% of claims reviewed for accuracy and alignment before they reach your desk. As an employee-owned partner, we’re built to take accountability at every step, helping health plans manage spend by keeping care responsible, coordinated, and member-centered.

Learn More About HOMELINK

Interested in sponsoring Upward Growth? Learn more

🎁 Unlocked: This post includes the full deep dive. Most Tuesday articles start with a free section and then continue behind the paywall. Today’s post is left completely open so you can read the entire edition.

Paid subscribers get the full deep dive every week, plus playbooks, case breakdowns, and the ability to reply with their own questions.

Almost a year ago to the day, I published an article titled Medicare Advantage’s Reset: What Vendors Need to Get Right. The argument was that what looked like an MA collapse was a (more) familiar reset cycle. Plans pruning unprofitable contracts. Pricing and risk models realigning. Plans re-entering stronger once the math worked again. That framework mostly held up.

What twelve months of new evidence clarified is that the reset is reshaping the market into something bigger than the 2015-16 cycle I was matching against. I have watched it play out across the year and have published articles of my findings such as: Q1 2026 Payor Earnings Just Decided What CY 2027 Will Look Like and Early 2026 Hit Medicare Advantage, Medicaid, ACA, and Employer Coverage. Health Plans Are Absorbing It All at Once. Today's article pulls those threads together, and what is emerging is different enough from the 2015-16 pattern that the 2027 vendor and buyer questions need a different answer than enterprise financial analysis is producing.

Meanwhile, sell-side analysts have coalesced around a stabilization read on Medicare Advantage (MA) over the past two quarters. Articles such as Bank of America’s “When, Not If” framing on managed care margin recovery provide analysts with fair-value revisions on Humana and CVS, with commentary anticipating margin normalization by 2027 to 2028. That work answers the enterprise margin question credibly, and investors making stock decisions off those reports get a defensible read.

However, selling into these plans, investing in vendors that do, or partnering with them as a provider requires a different analysis. That analysis needs to dig into what MA product lines health plans are funding in 2027, which counties look like exit risk, and which supplemental benefit categories are being cut. It also needs to know what Star tier a specific buyer sits in and whether that shapes their appetite for new vendor spend inside the CY 2027 bid window. Rarely does that level of detail make its way into the enterprise margin analysis, and it cannot be extracted from it either.

Subscribe now

What the Stabilization Story Misses

Three shifts have compounded on your buyer’s decisions over the past twelve months.

One is the SNP rotation. Chronic Condition SNPs (C-SNPs) are driving more of the growth than Dual-Eligible SNPs (D-SNPs), which changes how vendors and investors should read the 85 percent number KFF published. Two is Star Ratings as the plan-side operational trigger for 2027 exits, with the rating methodology itself now being rewritten by four plans in federal court, extending a pattern that started with prior-cycle lawsuits. Three is a hard January 2027 Centers for Medicare & Medicaid Services (CMS) deadline on supplemental benefit verification that gives plans a regulatory pretext to accelerate the vendor cuts they were already planning, funneling the remaining spend onto the small set of vendors who can meet the standard.

Each of those shifts changes what a plan actually buys, cuts, or defends heading into 2027. Enterprise financial analysis captures none of them, because none of them show up in a margin walk. They show up in enrollment files, in courtrooms, and in verification requirements.

Shift One: The SNP Growth Story Is a C-SNP Story

The 2026 MA growth headline was flat to modestly positive. Underneath it, plans executed a specific rotation that reshapes buying priorities across every major buyer heading into 2027.

KFF's latest enrollment analysis found Special Needs Plans (SNPs) accounted for 85 percent of net Medicare Advantage enrollment growth in 2026. General MA (the individually available bucket, not group and not SNP) posted slower growth in 2026 than in any year between 2007 and 2025. Both numbers came straight out of the CMS enrollment file, so they are hard data points, not analyst reads.

The composition inside that 85 percent is where the buying decisions get made. C-SNPs are the actual growth engine, not D-SNPs, even though D-SNPs make up 78 percent of the SNP enrollment base. C-SNPs added roughly 500,000 net new members in 2025 to 2026, compared with D-SNPs adding roughly 344,000. C-SNPs grew 45 percent year over year while D-SNPs grew 5.7 percent, an 8x gap in growth rate despite C-SNPs starting from a much smaller base. The 2024 to 2025 flow ran the same way (C-SNPs added 476,000, D-SNPs added 159,000). Chronic-condition plans are the fastest-growing product in Medicare Advantage right now, and it is not close.

For a vendor who thought they were pursuing “the duals market,” that composition gap matters. The addressable population is not the one you sized against, and the plan-side buyer for chronic-condition programs is a different account than the buyer for state Medicaid integration.

The reason sits on the CMS side. New D-SNP integration requirements around state Medicaid coordination take hold in 2027, and plans spent 2025 and 2026 on operational readiness. That work slowed D-SNP enrollment throughput in the exact window it should have surged. C-SNPs do not carry the same integration requirement, so growth routed there instead. D-SNP throughput will recover once integration is in production; C-SNP will keep growing on its own economics.

Plan by plan, C-SNP enrollment numbers show where growth landed inside SNPs, and the pattern is coordinated across the peer set. Humana grew C-SNP enrollment 53 percent year over year, UnitedHealthcare grew 38 percent, Elevance grew 12 percent, Aetna grew 26x off a small starting base, and Devoted grew 17x. Compare that to what the same plans are saying on earnings calls. Centene has told the market 2027 will focus on "dual-eligible populations." Humana's Q1 2026 language framed D-SNP intake as the higher-value pipeline. The public commentary sits with duals; the enrollment file is loading up on C-SNPs. But it’s important to dig into the enrollment data, and not only rely on the press release.

You can argue that the “MA plan” buyer category is disaggregating into three product lines. A general MA book (shrinking pool with tighter vendor spend). A D-SNP book (growing pool, budget flowing into state Medicaid integration and duals-specific care management). And a C-SNP book (fastest-growing pool, budget flowing into condition-specific care programs, chronic care management infrastructure, and disease-state specialty vendors). And most major plans have all three, with different budgets and priorities within each. A vendor pitch that treats MA as monolithic, or that treats the SNP piece as a single duals story, will forecast 2027 pipeline off aggregate trend lines no plan is operating against, so take the time to segment your book by which of the three lines you actually serve.

The second shift is how plans decided which contracts to cut and hold, and what is now happening to the tool they used to make those calls.

Subscribe now

Shift Two: The Star Ratings Program Is Breaking Down

The Star Ratings program has settled into an annual pattern over the past two rating cycles. Plans invest tens of millions in Star improvement programs, CMS publishes the ratings each October, some downgraded plans sue, courts partially agree, and CMS ends up partially recalculating for some contracts while appealing for others. What ends up funding Quality Bonus Payments (QBPs) diverges from what CMS originally published. The 2027 cycle is the largest version of that sequence to date. The QBP program, which ties billions of dollars to those ratings, is showing signs of a systemic problem unlikely to survive to 2028 as it stands today.

Prior rating cycles have already produced this exact pattern. In 2024, Elevance and SCAN Health Plan won Stars lawsuits that prompted CMS to recalculate ratings for 60 plans and issue roughly $1.4 billion in additional Quality Bonus Payments. UnitedHealthcare followed with its own suit in October 2024 and won a court-ordered recalculation the following month. I wrote about the initial Clover v. HHS filing in June 2026 and discussed it on the Upward Growth podcast, framing it as a signal for broader pressure on the QBP program. If you want week-by-week detail on how each ruling and CMS response is playing out, Jenn Kerfoot at DUOS has been publishing a fantastic and thorough deep-dive series on the Clover ruling and CMS’s shifting positions. What matters here is not each individual case but the pattern. Plans have figured out that litigating a Star Rating downgrade is often cheaper than absorbing the QBP hit, and CMS is now spending significant resources defending a methodology whose flaws multiple federal courts have already ruled on.

Meanwhile, Johns Hopkins Bloomberg School of Public Health researchers, publishing in JAMA in February 2026, found that 2.9 million Medicare Advantage enrollees were forced to change plans in 2026, roughly 10 percent of MA enrollees in a single year. Plans rated below four stars were disproportionately affected. Only about 67 percent of MA enrollees now sit in 4+ star plans, down from roughly 80 percent earlier in the decade. Humana said on Q2 2026 earnings that 2027 exit decisions skewed to contracts rated 3.5 stars or lower. Plans are using Star Ratings to make consequential exit decisions, and then some of the same plans are suing over the same Star Ratings after the fact.

The last time the market saw this pattern was 2014-15, when Stars similarly triggered a wave of contract exits. What is different now is the scale. Roughly 10 percent of MA enrollees getting forced out in a single cycle is triple the ~3 percent hit that landed in 2014-15, and it is happening to plans that have already absorbed two consecutive rate cycles of pressure while absorbing compounding pressure across every other line of business at the same time.

For the current cycle, briefly: Clover filed in November 2025 and won a partial ruling from a Georgia federal court in May 2026 that adjusted its largest contract from 3.5 to 4.5 stars. In June, CMS agreed to voluntarily recalculate 2027 QBPs for certain contracts but retained 10 of 20 contested measures for others. In July, SCAN Health Plan, Alignment Healthcare, and Elevance filed their own suits, each arguing CMS violated the Administrative Procedure Act (APA) by treating similarly situated plans differently. Combined disputed QBP dollars are $290 million (Elevance $115M, SCAN $125M, Alignment $50M). On July 21, CMS filed a notice of appeal on the Clover ruling to the 11th Circuit Court of Appeals.

For the plan-side buyer, that means Stars is a moving number, and CMS's hold-harmless approach to the current recalculations means it moves in only one direction. Clover won and its 2026 rating moved from 3.5 to 4.5. CMS then voluntarily recalculated for other plans using a reduced measure set, though per analyst commentary the effect on average ratings for non-plaintiff plans was modest.

SCAN, Elevance, and Alignment are now in court arguing CMS should have applied the Clover methodology to their contracts too. If any of them wins, or CMS concedes further ground while defending the Clover appeal, additional plans could see ratings move up. The competitive picture shifts even without downgrades: plans that gain QBP dollars have more to redeploy into benefit design and member acquisition, while their competitors, whose ratings did not move, face a widening gap on the same lines. Any account risk model that treated a plan's Star tier as a fixed input six months ago is working from an out-of-date snapshot.

Where all of this lands is a QBP program that will not look the same in 2028 as it does today. Stars as a measurement system is not stable enough right now to run the operational and financial decisions that CMS has built on top of it, and every additional lawsuit strengthens the case for a rewrite. Whether the 2028 version is a modest methodology revision or a wholesale overhaul depends on the 11th Circuit ruling and how CMS responds.

That takes us to the third shift, on supplemental benefits, where a hard January 2027 regulatory deadline will consolidate a whole vendor category onto a handful of compliant platforms.

Shift Three: Supplemental Benefits Are Now a Member Selection Tool

Supplemental benefits used to be the growth lever. Plans loaded flex cards, Over-The-Counter (OTC) allowances, and food and grocery cards to win Annual Enrollment Period share. Plans are not trying to grow membership the same way anymore, so the benefit stacking has slowed too.

What plans are doing with benefit design heading into CY 2027 is doing two things at once. The obvious one is saving money. Reduced benefit spending protects margin under tight rate assumptions. The less-obvious one shows up in the county-level filings but not on the earnings calls: plans are shaping which members they attract and which they don’t. Cut general-population supplemental benefits and keep SNP-specific care management benefits, and you become less attractive to a marginal general MA shopper and more attractive to the D-SNP and C-SNP populations you actually want to grow into. Benefit cuts are member-shaping decisions, not just cost decisions.

The category-level pullback data already shows it. KFF’s 2026 MA spotlight found OTC benefits available in 66 percent of 2026 MA plans, down from 73 percent in 2025. Meal benefits, transportation, and fitness all posted declines, while dental has held steady. The trend has been building for two years, and it is accelerating into CY 2027.

Effective January 1, 2027, supplemental benefit spending routed through flex cards, OTC allowances, and food and grocery cards has to be verified in real time at point-of-sale, per the CY 2027 Final Rule we unpacked when it dropped, with each transaction tied to an eligible plan-covered item. Vendors serving these categories have to prove SOC 2 data-security compliance, CMS-grade verification infrastructure, and real-time integration with plan claims systems. Plans that were already trimming will use the deadline as the reason to consolidate remaining spend onto the smaller set of platform vendors that meet the standard. Everyone else gets squeezed out of accounts they have held for years.

For a vendor in the supplemental benefit category, that creates three legitimate paths and one bad option:

1. Platform-winner status: gaining accounts as competitors fail the verification standard and get dropped.

2. Partner-under-a-platform-winner: your product runs as an underlying feature inside a compliant platform (revenue continuity, less brand equity).

3. Category exit: harvest cash on the current book and redeploy capital elsewhere ahead of the CY 2027 bid submissions.

The wrong move is waiting to see how the market sorts out. The plan-side decision on who they consolidate onto is being modeled right now alongside CY 2027 bid economics.

And frankly, even if you do not sell into supplemental benefits, this still changes how you sell. Plans are using benefit design as a member-shaping tool now, not just a cost lever, and every product they buy from you gets evaluated on the same lens: does this help attract the members we want (SNP populations, high-risk-adjustment members, targeted geographies) or does it help retain members we are not trying to keep? Your framing on new products and renewals has to speak to that lens too.

That's why the sell-side stabilization story from the financial press keeps getting stretched past what it was built to answer.

Subscribe now

Enterprise Stabilization Is Not Market Shape Analysis

Two distinct analytical questions get conflated in the MA market right now, and separating them matters for what you do next.

The enterprise margin question. Whether plans hit their 2028 margin targets, and whether the stock is defensible at current valuations. Sell-side analysts answer this credibly. Historical MA cycles do recover, discipline returns, and target margins come back. The 2014-15 reset is the base case, and enterprise analysts are right to reference it. The Johns Hopkins researcher who ran the disenrollment analysis framed the 2026 pullbacks in a follow-up AJMC interview as “necessary market corrections intended to address historical government overpayments,” which is directionally consistent with the sell-side stabilization view. Both reads are compatible and largely correct.

The market-shape question. What plans will actually be buying in 2027, in what categories, at what Star tiers, in what geographies? That is a different analytical problem, and the 2014-15 comparison as the base case does not carry over cleanly.

Five structural differences make the market-shape analysis distinct. Forced disenrollment in 2026 runs roughly three times the scale of the 2014-15 cycle. The Inflation Reduction Act (IRA) rewrote Part D economics after 2022. Chart review exclusion under the tighter 2027 rate parameters reshaped risk adjustment revenue across every plan for CY 2027. Coordinated cross-plan rotation into SNPs (heavier on C-SNPs than public commentary implies) is a 2025-2026 phenomenon with no real parallel in the earlier reset. And the supplemental benefit platform consolidation runs on a hard January 2027 deadline that no prior cycle had to accommodate either. Plans crystallized their responses to those forces during the Q1 2026 earnings cycle. All five of these differences are material to current health plan buying decisions, and none were really present the last time this market ran a reset cycle.

Enterprise stabilization and market re-shaping are both true; they just answer different questions. Planning your market strategy off enterprise stabilization alone, though, is like planning a real estate purchase off a stock analyst’s read on the housing market. Right domain, but wrong analysis.

What the Three Shifts Add Up To

The three shifts are hitting the same buyer at the same time, and plans are having to allocate against all three inside the same CY 2027 bid cycle. Reading them in isolation is where the market-shape analysis breaks down, because on the plan-side P&L they do not sit in isolation. They compound.

A plan’s Star tier shapes its C-SNP appetite, since plaintiff plans with QBP upside will fund the C-SNP push harder than bystanders who are still absorbing the recalculation exposure. That same Star position drives the pace of supplemental benefit consolidation, because plans under the tightest budget pressure will lean hardest on the January 2027 verification deadline as the reason to cut vendors they were already trimming. And the C-SNP push itself determines what actually stays in the supplemental benefit portfolio, since SNP-specific care benefits will get protected inside the cuts while general-population benefits are the first to go. Each shift is a variable in the other two, and none of them can be understood cleanly without the other two in view.

The work between now and end of Q3 is to build a read on where each plan in your book, portfolio, or advisory relationships sits across all three shifts together, holding the product-line mix, the Star-plus-litigation posture, and the supplemental benefit standard as one connected picture rather than three separate reads. That is the market-shape analysis argued for earlier in this piece, and it is what turns the three shifts from three data points into an actionable answer to what plans will be buying in 2027.

Final Thought

Late in September, the CMS Landscape file drops. That is the next real data point that either confirms or complicates the three shifts.

Three signals to watch for inside the file. How much of the announced exits and county-level contractions translate to actual plan withdrawals, or whether plans held more footprint than earnings-call commentary implied. Whether the D-SNP and C-SNP plan-count expansion matches the growth commentary, which is the real test of whether the SNP rotation is landing at the filing level or is being oversold. And which supplemental benefit categories move which direction, and how the cuts distribute across plans.

Whichever way the file lands, the underlying point really doesn’t change. Enterprise stabilization and market-shape analysis are answering different problems, and anyone planning CY 2027 exposure off enterprise financial analysis alone will forecast against a market that does not exist. So read the shifts, segment against MA product line and Star-plus-litigation exposure, and settle your supplemental benefit position before the CY 2027 bid window closes. Everything else follows from that.

Finally, ff any of the three shifts touch your CY 2027 planning (repositioning a product for the C-SNP rotation, resetting account risk models against Star litigation exposure, making a stay-or-exit call in supplemental benefits), Upward Growth is a health plan market advisory firm built for exactly this kind of question. We work with health tech vendors, investors, provider organizations, and management consultancies on strategy that starts from how health plans actually buy, operate, and make decisions. Get in touch.

Thanks for reading.

Here’s to upward growth,

Ryan Peterson

The frameworks in the weekly Upward Growth newsletter help health tech sales and marketing teams navigate payor conversations as the market continues to shift.

If your colleagues are in those conversations, they should be reading this too.

💰 Invest In Your Team with a Paid Subscription.

Get a group subscription

Give a gift subscription

💡 Pro tip: Many subscribers expense Upward Growth through their company’s professional development, training, or learning budget. Here’s a one-minute email template to get your manager to approve expensing your subscription.

🤝 Work with us on payor market strategy: Contact us

🟦 Connect with the author, Ryan Peterson, on LinkedIn.

🎧 Listen to the Upward Growth Podcast: Apple | Spotify

📰 Newsletter sponsorships: Learn More

Today’s Upward Growth newsletter is sponsored by RAAPID

RAAPID‘s KLAS Emerging Company Spotlight is out — and every customer interviewed said they’d buy again.

KLAS interviewed RAAPID’s health plan customers for its May 2026 Emerging Company Spotlight.

The results: A+ score for “would buy again*,” an A score for “likelihood to recommend,” and standout marks for “audit defensibility and partnership responsiveness.”

Independent validation from health plans that actually use the platform.

(*Emerging Data, n=5)

Click the button to see the full ratings and customer commentary in the KLAS report:

Request the KLAS Report

Interested in sponsoring Upward Growth? Learn more

A quick update on the podcast side of Upward Growth. We’ve locked in several guests to record over the next few weeks, and honestly, these are convos we’ve been wanting to have for a while. The format continues to be candid reads on where the health plan market actually is, what’s shifting, and what the operators and investors close to it are seeing right now.

If you have ideas for guests worth chasing, share them with us here. We’re most interested in candid perspectives from people inside health plans, leaders navigating major market shifts (whether that's plan strategy, regulatory response, or M&A), and contrarian takes on where the market is headed. The good ideas stand out fast, and we want to hear them.

Six of the largest publicly traded health plans reported Q2 2026 earnings over the last three weeks, and taken together, the story is "plans finally got healthy." All six raised full-year 2026 guidance, most beat estimates, and while medical loss ratio (MLR) movement was uneven across the six, the numbers looked strong across the board.

And sure, that's a clear theme. But the more useful read is what the six plans committed to on those calls, because Q2 is the quarter where the language from the Q1 earnings calls turned into public commitments plans now have to live with. Disciplined pricing became raised guidance tied to a specific membership trajectory. Portfolio management became a scheduled rollout timeline at Cigna and a set of exit dates for everybody else. Medicaid margin pressure became a coordinated message to state actuaries. Each of those commitments closes down some options and opens others, and the ones that matter for CY 2027 procurement, Medicaid rate advocacy, Star Ratings positioning, and the vendor deals in your pipeline right now are the ones worth pulling out.

This is the Upward Growth quarterly read on publicly traded health plan earnings, following the Q1 edition. What follows walks from the industry-wide moves (guidance and exits) to the plan-specific ones (Cigna under a new CEO, two Medicaid MCOs pointing their language at state actuaries, three plans putting prior auth metrics on the record) to what's happening operationally inside every plan while all this is going on, and finally to the downstream effects of the exits themselves.

The Guidance Raises Locked in Continued Shrinking Through CY 2027

The first thing the plans committed themselves to in Q2 was continued membership loss through 2027. All six raised guidance, and every raise was defended in terms of margin discipline (fewer, more profitable members), not enrollment recovery. That framing is only defensible if the market exits continue.

Let’s discuss what each plan actually put on the record. UnitedHealth raised full-year 2026 guidance while guiding to a 500,000 individual exchange life loss and a 1.1 million Medicare Advantage life loss for the year. Centene raised full-year adjusted diluted earnings per share from greater than $3.40 to greater than $4.80 on a Medicaid membership base already down 8 to 9% year over year. Humana raised while announcing another 600,000 Medicare Advantage life exit for CY 2027. Molina raised while telling investors that 2026 marketplace guidance had swung from a $0.75 per share gain to a $0.75 per share loss and previewing a $1 billion reduction in marketplace exposure for 2027. Elevance raised while keeping Medicaid at a negative 1.75% operating margin outlook and exiting D.C. Medicaid entirely. The Blues aren’t publicly traded, but they’ve been running their own version through affiliation and consolidation for the last two years, so the shrink isn’t just a public-plan story.

Each of those raises was defensible on its own, but taken together they lock the industry into the same posture for the next eighteen months: continued exits produce margin, continued margin protects guidance, and reversing course on the exits gives back the story that justified the raise guidance. No CFO who committed to a full-year 2026 number in July can walk it back inside twelve months without material damage to the plan’s equity story.

For vendors, this industry posture cuts two ways. First, on the shrinking book, per-member-per-month (PMPM) contracts signed against the pre-shrink member count were priced for a book that no longer exists. Any pitch built on retaining marginal members is now targeting the exact population the plan already decided to exit. The plan’s finance team is running that math, and the vendor economics assumed against the old book are not going to get defended by anyone inside the plan.

Conversely, the story runs the other direction for the growing book. Molina is expanding in Illinois Medicaid and was awarded Florida’s statewide Children’s Medical Services Health Plan in November 2025, expected to serve roughly 120,000 medically complex children. Humana’s Illinois Medicaid contract goes live in January 2027, and CenterWell added 130,900 senior primary care patients year to date. Cigna Healthcare’s specialty and care services line grew pre-tax adjusted earnings 22% in Q2. Vendors that can position against those specific growing segments have a live 2026 and 2027 conversation. Vendors that can only pitch across the whole book are working against the direction of travel.

And finally, the retained book itself changes the ROI story on solutions built around high-utilizer economics. The remaining membership skews healthier, more geographically concentrated, and less high-utilizer-heavy than the pre-shrink book. A pitch built on high-cost member intervention is now aimed at a population the plan has already thinned out.

Subscribe now

Cigna’s Q2 Was Its New CEO’s First Full Move on the Portfolio

Cigna’s Q2 turned the framework Brian Evanko sketched in April into scheduled operating commitments. The call was his first as CEO of The Cigna Group (he took over from David Cordani on July 1), and he used it to convert the four-variable test he laid out on the April 30 Q1 call while still incoming CEO into a set of dated moves.

The financial headline was $30.45 in adjusted earnings per share on raised guidance, a Cigna Healthcare medical care ratio of 84.5% (the best of any diversified national plan), Cigna Healthcare pre-tax adjusted earnings growth of 17%, and Evernorth Specialty and Care Services pre-tax adjusted earnings growth of 22%.

Evanko used the quarter to reinforce three portfolio decisions and preview a fourth. The Affordable Care Act (ACA) exit is running out through the rest of 2026, and Evanko treated it as settled. The eviCore strategic review is still open, and when analysts pressed on the July 30 call, Evanko kept the door closed with the same portfolio language he used in April. Signature, the rebate-free pharmacy model, is now scheduled to roll out to Cigna Healthcare’s fully insured plans in 2027 and become the standard offering across Express Scripts clients in 2028. And the Specialty and Care Services growth engine got a clearer name. Accredo, Verity, CarePath, and Shields are now running the segment, with hospital and health system solutions doing more of the growth than the pure specialty pharmacy line did a year ago.

The four-variable test (management focus, relative size and scale, standardization, automation) is showing up in each of those moves. Specialty and Care Services passes on all four variables and gets more capital and management attention. Signature is the enterprise bet on standardization and automation, and its being on schedule for the 2027 fully insured rollout is more important than the specific margin trajectory (Evanko told analysts to expect Signature margins in the 4% range, similar to legacy pharmacy benefit solutions margins). Pharmacy Benefit Services (PBS) is being reshaped underneath the Signature build: 2026 client retention above 97%, 2027 retention tracking mid-90s or higher, and new PBS business already secured for 2027 exceeding the prior two selling seasons combined. PBS is being repositioned around the Signature model while the transition costs work through the P&L.

For vendors, the Cigna procurement conversation for the rest of the year runs through two questions. First, does your solution align with the Signature architecture, or does it depend on the rebate flows Signature eliminates? And second, does it map to Cigna’s specialty and care services growth, meaning Accredo, Evernorth clinical platforms, or the hospital and health system channel? A yes on either question could mean a live conversation at Cigna, while a no on both means a longer road, because the segments that would have been buyers a year ago are the ones Evanko is either exiting or repositioning.

For investors and advisors, the eviCore review is the piece to watch. Whoever ends up with eviCore (a strategic acquirer with adjacent utilization management assets, a private equity sponsor, a recapitalized standalone) resets the comparable set for every utilization management and prior authorization asset in the market. That comp will move multiples across the category, and it will happen while CY 2027 vendor decisions at the plans running on eviCore are being finalized.

Elevance and Molina Pointed the Same Language at State Actuaries

Elevance and Molina used almost identical language on their Q2 calls to describe where they think 2026 sits in the Medicaid margin cycle. On Elevance’s July 15 call, CFO Mark Kaye stated that “we continue to see 2026 as the trough year for our Medicaid margin, with improvement over time supported by better rate alignment.” A week later, on Molina’s July 22 call, CEO Joe Zubretsky stated that “we continue to believe that 2026 represents a trough year for Medicaid margins, and we remain optimistic about the 2027 rate-setting process as state actuaries take account of more recent periods of observed medical cost trend.” Two plans, in the same window, same construction, same state rate cycle. And Zubretsky named the intended audience directly.

The audience is state actuarial teams, and they are building CY 2027 Medicaid rates right now. Every state actuarial office and every consulting firm supporting one is listening to those earnings calls. Once the framing is on the record from Elevance and Molina, they both have to defend it. If Medicaid margins do not visibly improve in 2027, both CFOs are going to be answering for it on the Q2 2027 calls, and the rate-setters will remember the public framing when they build the 2028 rate deck.

The One Big Beautiful Bill Act (OBBBA) sits behind all of this. State-directed payment restrictions phase in through 2028, provider tax caps limit state financing, and Congressional Budget Office estimates put federal Medicaid outlay reductions around $1 trillion over the next decade, which I walked through last month. Plans are not waiting only on rate updates; rather, they’re waiting on state financing certainty, which runs on a longer clock than any single rate cycle.

For vendors, that changes the timing on every Medicaid deal in flight. Procurement decisions being teed up in Q3 or Q4 at Elevance, Molina, or an aligned plan are more likely to slip until state rate signals resolve, and those signals will come in state by state through late Q3 into Q4 as state fiscal years close. The plans are stalling not because they lack budget, but because their finance teams need to see what the CY 2027 rate deck looks like before they lock a vendor commitment that would show up as a cost increase inside the very trend line the plan is asking the state to reprice.

The Medicaid vendors most likely to get funded through the rest of this year are the ones showing up with a pitch about how they will reduce a plan’s administrative or care management cost per member. Vendors pitching how they will grow the plan’s revenue are aiming at a budget that is not the priority right now. That is temporary (my guess is it will shift once the CY 2027 rate signals resolve), and vendors that adjust for it will hold their footing.

Subscribe now

Three Plans Put Specific Prior Auth Metrics on the Record in Q2

Prior authorization is where the internal build narrative showed up most visibly in Q2. Three of the six plans used their earnings calls to share specific Prior Auth metrics on the record.

UnitedHealth committed to eliminating 30% of prior auth volume by year-end. Aetna committed to deciding 95% of eligible prior auths within 24 hours and 80% in real time. Elevance’s Health OS targets 80% real-time decisions on eligible cases. Cigna made no new commitment (which reads correctly given their disclosed denial rate is already below 2%). And Centene made no commitment either, which reads a little differently because their published numbers had the most room to move. Those are the same commitments the guidance raises were, just measured against a specific denial-rate number the plans have to hit.

For vendors selling into any prior auth-adjacent category (utilization management, clinical decision support, provider workflow, member appeals), the negotiation is now against a stated deliverable, not an abstract build. That changes what a Q3 or Q4 pitch has to include: a credible read on whether the plan’s commitment holds on time, and a positioning of the vendor’s solution as either accelerating that commitment or filling the gap when it slips. Both positions can win a deal, but what loses is a message that ignores the commitment and assumes the plan is still in exploratory mode.

Remember, even those prior auth commitments have to run through the same Procurement, Finance, and Compliance review as every other vendor decision inside the plan right now, and that review is where the shape of Q3 and Q4 buying actually gets decided.

Why Your Vendor Deal Isn’t Moving Even When the Buyer Wants It

The commitments above are what the plans put on the record during their calls. What none of those calls really covered is the operational reality inside the plans while those commitments were being made, and that reality is the answer to why vendor deals across the market are stuck right now regardless of solution quality.

Every health tech CRO I am talking to is worried about their 2027 pipeline. The shift from 2025 to 2026 is real and specific. Through 2024 and most of 2025, plans facing a vendor decision they did not want to make or could not get through their internal process had a familiar way out. They extended the incumbent contract for one more year or deferred the decision. That decision-making (or lack thereof) worked because the internal review requirements had not yet reached the level they are at now. Vendors sat renewed with declining strategic conviction, prospective vendors sat waiting for the freeze to break, and the slow pace bought everybody another quarter.

The punt-to-next-year "strategy" is largely gone in 2026, driven by three specific pressures on plans right now: Office of Inspector General (OIG) and CMS audit defensibility, Star Ratings legal exposure, and artificial intelligence (AI) and data governance. Procurement, Finance, and Compliance are dealing with all of them at once, and every new vendor decision now runs through all three functions before it can move, regardless of what department originated it or what the solution actually does.

The first pressure is OIG and CMS audit defensibility. Elevance’s Q1 risk adjustment matter set the frame. The plan initially accrued $935 million against potential CMS liability, then ultimately paid CMS $342 million on May 27 to resolve the immediate sanctions threat. The gap between the accrual and the payment is less interesting than the reaction inside every other plan. When the Elevance matter went public in February and March, every payer compliance team pulled a defensive audit on their own historical risk adjustment submissions, and that work is still running through the industry in Q2 and Q3. Payment Year (PY) 2019 Risk Adjustment Data Validation (RADV) findings are expected in early 2027, and Kaiser Permanente’s $556 million settlement earlier this year set the ceiling for what these can look like at scale. Every procurement decision touching risk adjustment, quality, or member-level data now runs through internal review that assumes an OIG or CMS auditor will look at it later.

The second pressure is Star Ratings legal exposure, which just moved from a Clover Health matter to an industry-wide one. The May 27 ruling in Clover Insurance Company v. HHS threw out 20 measures CMS used to calculate the 2026 Star Ratings, finding them legally or procedurally improper. I wrote about why the Clover ruling was going to matter well beyond Clover itself when it came down, and Q2 confirmed it. CMS recalculated Clover’s rating using the court’s methodology, then issued a June memo saying it would voluntarily recalculate other plans’ ratings but only drop 10 of the 20 measures. Within weeks, Elevance sued CMS on July 1 claiming $115 million in lost bonus payments, SCAN Health Plan sued on July 7 claiming $125 million, and Alignment Healthcare sued on July 10 claiming $50 million. Three plans, three lawsuits, all citing the same Clover precedent. What was a settled operational discipline a year ago is now an active legal domain where Compliance and Legal have to weigh in on decisions the Stars operating team used to make on its own. The 2028 measurement year is running right now, and every vendor decision touching Stars-relevant workflows is being reviewed against the possibility that specific measures could be re-litigated between now and the 2028 ratings publication.

The third pressure is AI and data governance. Every plan is investing in AI, and the same investments powering the internal build also create governance obligations that did not exist eighteen months ago. Vendors selling AI-enabled solutions are being asked questions about training data provenance, model documentation, bias auditing, and third-party risk assessment. Data platform vendors face the same questions. Non-AI vendors are being pulled into the same conversation if their solution touches data that could feed a model somewhere else in the plan’s stack. I walked through how health plans are actually evaluating AI-enabled vendors in 2026 earlier this year, and the review requirements have only tightened since. The formal governance framework has not caught up with the review requirement, so internal teams are making case-by-case judgments, and case-by-case is always slower than a settled rule.

A vendor pitching a member engagement platform in Q3 is going to have Procurement pulling in Legal because the solution touches member data, Compliance because AI features could touch Star Ratings measurement, and Finance because the CFO who committed to guidance in July is watching every net-new spend against a shrinking book. What used to be a decision inside a single department is now a cross-functional review, and every function is understaffed for the volume of reviews landing on their desk.

Both the health plans and vendors I’m talking to are telling me deals are stalling more frequently. The buyer wants the product, but the plan can’t process the volume of new contracts moving through the system, regardless of the value and quality of the solution.

The pitches more likely to get through are the ones that arrive with the Compliance, Finance, and Legal answers already baked in, so the internal sponsor at the plan does not have to build that case themselves. Solution quality still matters, but the differentiator right now is whether the vendor has done the internal review work on the plan’s behalf.

Where the Displaced Members Land, and What That Means for Receiving Plans and MA Stars in 2028

The 5 to 7 million members losing coverage across Individual Exchange, Medicare Advantage, Medicaid, and MAPD exits are going to show up on receiving plans’ MLR before anybody is modeling them. And the Medicare Advantage share is going to show up on 2028 Star Ratings on top of it.

In urban ACA markets and metro Medicare Advantage counties, most of those transitions will have real alternatives. In the geographies and populations already most vulnerable to plan disruption, they will not. Rural Medicare Advantage counties where an exiting carrier’s plan was one of two options in market. Individual Exchange markets where the exiting carrier was the low-cost or the only preferred provider organization (PPO) option. Medicaid members caught in a plan exit who get force-assigned to a replacement without visibility into whether their specialist or their behavioral health provider is in the new network. And dual-eligible special needs plan (D-SNP) members built around a care team that no longer participates in the receiving plan. Many of the receiving plans are also cutting providers from their networks as they reprice for 2027, which makes the network-continuity story for displaced members even harder.

Two consequences fall directly on the plans that stayed in market and the vendors selling to them.

The first is adverse selection into the receiving plans. When a competitor exits, the plan absorbing the displaced membership does not get a random sample. It gets the members whose usage or geography made them uneconomical for the exiting carrier, which is the reason those members got dropped in the first place. The receiving plan now has to underwrite them at CY 2027 rates and manage them clinically against a book that was priced for a different member profile. That shows up in the receiving plan’s MLR in the second half of 2027 and gets debated on earnings calls in 2028. The plans absorbing displaced books have not yet discussed the adverse selection risk publicly, and they will not have to until those 2028 calls.

The second is the member experience data being collected right now, in Q3 and Q4 2026, for the 2028 Star Ratings measurement year, which applies specifically to Medicare Advantage plans. MA members going through a disruptive plan transition do not rate their next plan the way they rate a plan they picked in a stable market. Confusion, network mismatches, medication continuity gaps, and prior authorization disruptions all land in Consumer Assessment of Healthcare Providers and Systems (CAHPS) scores at exactly the moment the tripled CAHPS weight is redefining the Stars leaderboard. Any MA plan absorbing displaced MA members from Humana’s, UnitedHealth’s, or Cigna’s exits is going to see that land on the 2028 rating, and no CFO named it on their July call.

There is a political layer to this too. State attorneys general, CMS, and Congress are all watching the exits. If the 2027 open enrollment cycle produces public backlash over rural access, Medicaid churn, or Part D affordability, the regulatory response into 2028 gets harder for every plan that used the shrink to hit its 2026 numbers.

For MA plans absorbing displaced MA members, the pitch is direct: the 2028 Star Rating is being written in CAHPS data right now, and the tools deployed in Q3 and Q4 will show up on the rating. For plans absorbing displaced ACA or Medicaid members, the same argument works on adverse selection alone since Star Ratings doesn't apply to those books. Receiving plans in either case already know the risk is real.

Subscribe now

How Q3 and Q4 Play Out Given What Q2 Committed To

Pulling the threads together, Q3 and Q4 look different from what the Q2 earnings coverage suggests.

Health plans have earnings tailwinds, and their bandwidth to close new deals is the tightest it has been in two years. The plans that overperformed against April guidance will push harder on 2027 procurement than the ones that only met it. That harder push cuts two ways: it either accelerates internal builds, which shrinks the vendor category, or accelerates vendor consolidation, which is good for the category winner and bad for the rest. Either way, shortlists that ran through five vendors a year ago are running through two or three now, and each of those has to survive the same three-function review as everything else.

Q2 also surfaced four unresolved variables that will shape CY 2027 procurement and set the 2028 outlook:

1. The CY 2028 Advance Notice from CMS lands in January or February 2027, and the temporary risk-model freeze that made CY 2027 workable does not extend into it.

2. The Medicaid recovery language Elevance and Molina committed to has to actually show up in 2027 numbers, or those CFOs will have to defend the framing on the Q2 2027 calls.

3. The 2028 Star Ratings measurement year is running right now, and the 2027 Stars release in early October will preview what the tripled CAHPS weight actually does to the leaderboard.

4. The enhanced premium tax credit (PTC) question stays open through the CY 2027 rate cycle. Restoration slows the narrowing of ACA absorption capacity that carried the 2026 shakeout. Continued absence accelerates it.

None of the four are predictable, and each one will shape the CY 2027 buying environment more than the Q2 numbers themselves did.

Final Thought

The Q1 public health plan earnings calls were the language quarter. Q2 was the commitment quarter. The six plans that reported over the last three weeks locked in specific numbers, timelines, and portfolio moves they now have to defend for the rest of this year and into next. Reading Q2 as a commitment quarter, rather than a recovery, is where the useful work of Q3 starts.

If you are working through what any of this means for your positioning, your messaging, or your go-to-market strategy, Upward Growth is a health plan market advisory firm that works with health tech vendors, investors, provider organizations, and management consultancies to build strategy around how health plans actually buy, operate, and make decisions. Contact us here.

Thanks for reading.

Here’s to upward growth,

Ryan Peterson

The frameworks in the weekly Upward Growth newsletter help health tech sales and marketing teams navigate payor conversations as the market continues to shift.

If your colleagues are in those conversations, they should be reading this too.

💰 Invest In Your Team with a Paid Subscription.

Get a group subscription

Give a gift subscription

💡 Pro tip: Many subscribers expense Upward Growth through their company’s professional development, training, or learning budget. Here’s a one-minute email template to get your manager to approve expensing your subscription.

🤝 Work with us on payor market strategy: Contact us

🟦 Connect with the author, Ryan Peterson, on LinkedIn.

🎧 Listen to the Upward Growth Podcast: Apple | Spotify

📰 Newsletter sponsorships: Learn More

Today’s Upward Growth newsletter is sponsored by RAAPID

RAAPID‘s KLAS Emerging Company Spotlight is out — and every customer interviewed said they’d buy again.

KLAS interviewed RAAPID’s health plan customers for its May 2026 Emerging Company Spotlight.

The results: A+ score for “would buy again*,” an A score for likelihood to recommend, and standout marks for audit defensibility and partnership responsiveness.

Independent validation from health plans that actually use the platform.

(*Emerging Data, n=5)

Click the button to see the full ratings and customer commentary in the KLAS report:

Request the KLAS Report

Interested in sponsoring Upward Growth? Learn more

I snuck up to Big Bear recently for a couple of days. Most SoCal folks know it as the local ski spot, but in summer it turns into a different playground: hiking trails, mountain biking, and a few lakes to poke around on. Getting away and immersing in something different is how I stay fresh, open, and curious, and that’s the same mindset I try to bring back to the work.

And that mindset is what this week’s article calls for. On the surface, it looks like a piece about GLP-1s, but the real work is trying to read the tea leaves on what CMS is thinking, and where the next round of programs aimed at curtailing federal cost while improving clinical outcomes is heading. GLP-1 through the Bridge Program this week. ACCESS the other week, and its companion podcast episode too. Every one of these programs is a data point in the same larger picture.

And to be direct, a few readers and a client have been pinging me about Bridge since the ACCESS piece ran, asking whether I’d walk through it the same way. Most of the folks I talk to are having a harder time than usual keeping all these new CMS specialty coverage programs straight (I do not blame them...). Such Center for Medicare and Medicaid Innovation (CMMI) models like ACCESS, The Better Approaches to Lifestyle and Nutrition for Comprehensive hEalth (BALANCE) Model, and the standalone CMS demonstrations like Bridge that sit alongside them. So this week we'll discuss Bridge, why its ripple effects show up across every line of business you sell into, and what its design signals about how CMS structures the next high-cost specialty category.

The Medicare Glucagon-Like Peptide-1 (GLP-1) Bridge Program launched July 1. Its design is the reference architecture for how the federal government will structure coverage for the next high-cost specialty drug category. If you sell to health plans in any category, that design is now inside your 2027 pipeline.

Two key things to know as we get started.

First, GLP-1 coverage has been talked about as one story for two years, but really, that story is splitting. Five lines of business are each making a different 2027 coverage call on GLP-1, on different timelines, and the medical trend impact is a line item in nearly all plans’ 2027 pricing this cycle. That shapes what plans are willing to fund across the rest of your product categories, obesity-adjacent or not.

Second, Bridge's design will not stay inside GLP-1. The demonstration runs on a short runway, prior auth is retrospective, a central processor operates outside plan risk, and BALANCE, the permanent structure that was supposed to replace it, sits indefinitely delayed for Part D. That's CMS's template for how to structure federal coverage for a high-cost specialty category when the permanent framework isn't ready. Cell and gene therapy access is next. Cardiovascular specialty drugs after that. How Bridge plays out through Q4 tells you how CMS will structure the coverage decision on your buyer's next category.

But first, let’s dive into what Bridge actually is.

Subscribe now

What the Medicare GLP-1 Bridge Program Actually Is and What It Signals

Bridge is a temporary demonstration that gives eligible Medicare Part D beneficiaries access to weight-management GLP-1s at a flat $50 monthly copay. It runs July 1, 2026 through December 31, 2027, and it covers Wegovy (all formulations), Zepbound (KwikPen formulation only), and Foundayo (Eli Lilly’s oral orforglipron, FDA-approved April 1, 2026).

Bridge operates outside standard Part D coverage and payment flow, which means Part D plan sponsors do not carry risk for weight-management GLP-1s dispensed under Bridge. CMS uses a single central processor to handle prior authorization, claims adjudication, and pharmacy reimbursement. Providers submit retrospective prior auth requests after prescribing, and beneficiaries do not opt in. The CMS guidance also commits CMS to sharing utilization data with Part D sponsors ahead of the permanent implementation, whenever that lands.

Bridge was originally announced in December 2025 as a six-month bridge to the BALANCE Model. In May 2026, CMS indefinitely delayed the Part D portion of BALANCE and tripled the Bridge runway to eighteen months. The Medicaid portion of BALANCE remains active, with states able to opt in from May 2026 onward. What CMS is buying with the extended runway is utilization and cost data on real beneficiaries before committing to BALANCE in Part D.

Eli Lilly’s executive team has projected roughly 20 million Medicare beneficiaries could meet the Bridge clinical criteria of a Body Mass Index (BMI) of 35 or greater, or 30 or greater with a qualifying comorbidity. AJMC modeling puts the real-world reach far below that. Three things create the gap: the retrospective prior auth design, the requirement to document BMI at the time of therapy initiation (a paperwork burden for beneficiaries who started GLP-1 therapy years ago for a different indication), and the exclusion of Private Fee-for-Service (PFFS) plans, PACE, and several other niche MA plan types from participation."

Bridge and the ACCESS Model are both CMS efforts to reshape coverage for chronic and specialty conditions, but they operate at very different scopes and time horizons. ACCESS is a CMMI model, a durable framework built inside traditional Medicare fee-for-service, aimed at aligning outcome-based accountability across chronic conditions over the next decade. Bridge is a CMS payment demonstration outside the CMMI model structure, aimed at one drug class for one indication, on an eighteen-month runway. ACCESS points to where CMMI wants chronic care payment to go long-term. Bridge is the interim tactical solution while BALANCE sits indefinitely delayed for Part D. The deeper read on ACCESS and the outcome-based framework is in the ACCESS article and on the podcast episode.

Bridge's design is CMS's template for structuring federal coverage of a high-cost specialty drug category when the permanent framework isn't ready. GLP-1 is just where CMS is running it first. Cell and gene therapy access is the next category CMS applies this to. Cardiovascular specialty drugs after that. If your product or your portfolio touches either of those categories, how the Bridge rollout plays out through Q4 2026 is the leading indicator for how CMS will structure the coverage decision that lands on your buyer’s desk next.

That covers what CMS did. The rest of the market did something too, and it's different in every line of business. Let’s take a look.

What 2027 Coverage Looks Like Across the Five Lines of Business

Something worth naming before the walkthrough. Bridge itself is a Medicare-only program. But the pressure that produced Bridge (rising GLP-1 spend, coverage decisions plans and employers can’t sustain at current utilization) is showing up in every line of business, and each buyer segment is responding on its own timeline against its own math.

On the Medicare side, Bridge itself just changed the equation. MA plans had one indication lifted off their Part D risk sheet, and standalone PDPs got a new central-processing pipe with no relief on the member navigation problem it creates. Outside of Medicare, the pressure is showing up in different forms. State Medicaid programs closed their budgets against a spend line that was doubling year over year, and the elimination cycle isn’t over. Self-insured employers are locking their 2027 plan designs mid-August, working from consulting firm guidance that has pulled back over the last twelve months. ACA health plans filed rate increases in mid-summer that averaged 14%, with GLP-1s named as one of the drivers.

That’s why the aggregate story from the last two years no longer works. There are five different 2027 GLP-1 answers depending on who your buyer is, and where each of them nets out also tells you something about what they’ll fund from vendors across your other product categories this cycle.

Medicare Advantage

Bridge changes the MA bid math for 2027 by taking one indication off the plan’s Part D risk sheet. MA plans that include prescription drug coverage no longer have to price the weight-management indication into their 2027 bids. They still price GLP-1s for the approved non-weight indications like diabetes and cardiovascular risk reduction, but the weight-management piece shifted to CMS on July 1. The first implication is that member education about Bridge eligibility becomes a benefit differentiator. A plan that helps members navigate intake looks better on member experience than one that doesn’t. The second is that Q2 2026 earnings language on specialty pharmacy trend is mixed across the largest MA health plans. UnitedHealth’s Q2 call cited GLP-1s as part of a continued elevated commercial pharmacy trend. Humana’s Q2 call described pharmacy medical cost trends as “very elevated” without isolating GLP-1s. If you sell to MA plans in any category (care management, risk adjustment, quality measurement, member engagement, PBM tech), what those plans say about pharmacy trend across the next two earnings cycles is what your buyer will point to when justifying or cutting vendor budgets.

Standalone Prescription Drug Plans

PDPs don't hold the medical relationship, which shapes the Bridge angle here. Standalone PDPs serving dual-eligible populations need workflow for identifying who qualifies for Bridge versus who's covered through their existing Part D plan for other indications, because dual-eligibles enrolled in eligible plan types can participate but the qualifying rules are more complex than for the average MA-PD beneficiary. Vendors with PBM technology, member engagement platforms, or Part D workflow tools have a new addressable use case that did not exist before July 1, regardless of whether their product touches obesity at all.

Medicaid

Twelve state Medicaid programs cover GLP-1s for obesity treatment under fee-for-service as of August 2026, down from thirteen at the start of the year and sixteen the year before, and the elimination list is not one-off. Four states dropped coverage effective January 1, 2026 (California, New Hampshire, Pennsylvania, South Carolina), Massachusetts followed with a cut effective July 1, 2026, and Michigan and Virginia tightened eligibility to morbid-obesity thresholds. Pennsylvania Medicaid's GLP-1 spending grew from $233 million in 2022 to $1.3 billion in 2025, and the state projected $836 million in savings from elimination. The cost pressure driving that decision does not reverse in twelve months. For vendors selling to state Medicaid MCOs, the read-through is direct. States cutting GLP-1 spend are running the tightest 2027 rate cycles for their MCO contracts, which squeezes what those MCOs will fund from vendors across care management, risk adjustment, quality measurement, and behavioral health.

Commercial Plans and Self-Insured Employers

Fully insured commercial plans have already made their coverage calls (Blue Cross Blue Shield of Massachusetts, BCBS Michigan, and Harvard Pilgrim all discontinued weight-loss GLP-1 coverage effective 2026). Self-insured employers are still locking their 2027 designs, with mid-August the pressure point. The Business Group on Health 2026 survey of 105 large employers found 67% currently cover GLP-1s for weight management, but only 72% of covering employers intend to maintain in 2027 and 10% expect to drop. A Willis Towers Watson June 2026 pulse survey confirmed the direction (66% cover, 12% likely to discontinue for 2027). The Pharmaceutical Strategies Group 2026 Trends in Drug Benefit Design report, covering 237 benefits leaders, found 49% of payors not currently covering GLP-1s for obesity would not cover at any price, driven in part by discontinuation rates (nearly two-thirds of non-diabetes users discontinue within twelve months). Cigna’s Q2 call meanwhile cited decelerating GLP-1 prescription growth in the employer book. Three independent surveys and a payor earnings call are telling the same story: employers and commercial plans are rebalancing what specialty pharmacy categories they will fund. For vendors selling anything into self-funded employers, how the account handled GLP-1 coverage for 2027 tells you where the rest of their 2027 specialty spend is going.

Affordable Care Act Individual Market

ACA health plans are pricing GLP-1 exposure into 2027 rate filings alongside broader medical trend running double digits in most states. Peterson-KFF Health System Tracker analysis of 77 insurers across 16 states plus DC found a median 2027 rate increase of 14%, with a range of 1% to 52%. GLP-1s are named in most filings as one of the drivers, alongside utilization, coding intensity, and Independent Dispute Resolution costs. Employee Benefit Research Institute analysis published by the Blue Cross Blue Shield Association puts the GLP-1 add-on to employer premiums at up to 14%, even with tight clinical eligibility. That premium pressure is compressing what ACA plans can fund in 2027 across their product categories, not just obesity-adjacent.

What that means for your pipeline is the harder question, and it doesn’t sort by product category.

The GLP-1 Split Reveals Four Buyer Patterns That Repeat Across Specialty Categories

The pitch that worked at the start of the year is losing meetings now. Plans, employers, and state Medicaid programs have made their 2027 coverage calls on GLP-1, and they didn’t all land in the same place.

The decision patterns are worth naming, because they will repeat for the next high-cost specialty category. Any vendor selling into plans should recognize them.

Pattern one: the plan dropped coverage. Blue Cross Blue Shield of Massachusetts. Pennsylvania Medicaid. The employers on the discontinuation list. Once a plan or employer publicly ends coverage in a high-cost category, the political and budget cost of reversing that decision is prohibitive for at least two cycles. Track the plans that dropped GLP-1 coverage in 2026, because the ones cutting now are the ones that will cut on the next high-cost category you pitch them three years from now.

Pattern two: the account covers but is drowning in management overhead. Most plans that still cover GLP-1s are managing them with prior auth, biometric eligibility validation, weight-management program requirements, and dollar caps around $3,000 per member per year. It’s also the largest cohort by members. The buyer at these accounts measures vendor pitches against prior auth reduction, medical loss ratio impact, cost-per-member outcomes, and discontinuation catch rates. The pitch that works here reduces management overhead per member covered. The pitch that stalls promises to help serve more members. Care management vendors selling into oncology and specialty pharmacy vendors selling into rare disease run into the same buyer pattern.

Pattern three: the account is defending its coverage internally. Some regional plans and a shrinking cohort of employers are holding GLP-1 coverage against internal pressure to cut. The buyer at these accounts has moved past clinical merit and is building the internal ROI case to defend the coverage decision to a CFO looking at the same 14% premium math the Employee Benefit Research Institute cited. What sells here is real outcomes evidence: adherence data, weight-regain prevention, long-term ROI. Enrollment and engagement metrics won’t get the CFO to renew.

Pattern four: the workflow layer just changed. Bridge central processing means pharmacies and providers now handle GLP-1 workflow through a different pipe than standard Part D. That’s a workflow enablement sale for vendors with Part D infrastructure, prior auth support tools, medication therapy management platforms, or provider workflow tooling. Each time CMS introduces a new demonstration structure (Bridge now, cell and gene therapy access next), the operational workflow changes before the coverage rules settle. Infrastructure vendors get a real opening while the demonstration is running, and it closes fast once CMS finalizes the permanent structure.

These patterns show up in oncology, rare disease, and cell and gene therapy, not just obesity-adjacent categories. GLP-1 is the clearest example of all four hitting at once, which is what makes it useful for reading how your own category might be affected.

We've covered what Bridge actually is and why its design is the reference architecture for the next high-cost specialty category, how GLP-1 coverage splits across the five lines of business above, and the buyer decision patterns visible in the split. Below is the tactical layer underneath all of it: the discovery questions that tell you which pattern each account is in, the disqualification signals worth acting on early, the messaging shifts by pattern, and the fall enrollment watchlist that tells you whether Bridge's design becomes the template for the next high-cost category or stays a one-off.

Paid subscribers get this, plus 50+ frameworks, scripts, and deep dives built for health tech teams selling to health plans. One qualified conversation from these frameworks is worth more than a decade of subscriptions.

🔓 Upgrade to a paid subscription to keep reading.

Read more

🤝 Work with us on payor market strategy: Contact us

🟦 Connect with the author, Ryan Peterson, on LinkedIn.

🎧 Listen to the Upward Growth Podcast: Apple | Spotify

📰 Newsletter sponsorships: Learn More

Before we get into it: this month marks five years of Upward Growth. When I founded the firm in 2021, the bet was that the health plan market needed an advisory practice that actually explains how it works, in language health tech vendors, provider organizations, investors, and consultancies could act on. Five years in, that bet still feels right. What has not changed is that plans still have to buy carefully, and the companies selling to them still have to earn their way in. Upward Growth will keep advising clients through that reality, and this newsletter will keep sharing what we see in the market. Thanks for reading, whether you've been here since the beginning or you subscribed last week.

For a year now, I have been tracking a pattern of market resets rolling across the four biggest lines of health plan business. It started with Medicare Advantage’s reset last August. In May, I wrote about the five plan postures forming during the 2026 ACA shakeout. In June, I wrote about MA, Medicaid, ACA, and employer coverage all taking pressure at once. Medicaid, on the one-year mark of the One Big Beautiful Bill Act (OBBBA), is the sharpest example of the pattern yet.

OBBBA didn’t create one new Medicaid market. It created three.

Medicaid has always varied state by state. What is different this time is that OBBBA has already repriced the Medicaid market in three ways at once. Repricing should not be mistaken for shrinking. Repricing means the same MCO book of business, the same vendor contracts, and the same member panels are now worth different amounts than they were a year ago. Nothing about the underlying business changed on July 4, 2025. What changed is what buyers will pay for it, what contracts they will write, and what management will guide toward, because OBBBA changed what those pieces are worth in the field. Molina and Centene have marked down their own Medicaid books in earnings guidance. States are marking supplemental payment mechanisms down through the provider tax phase-down. Vendors are being pushed to reprice contracts under new terms. Members and providers in some states have already absorbed the marks. Others are about to.

The Medicare Advantage reset has been a rolling eighteen-month wave of federal pressure, including rate compression, risk adjustment overhauls, Star Ratings reweighting, and benefits scrutiny. Every MA plan is absorbing that wave at its own pace, but because MA is a fully federal program, all plans are absorbing it against the same regulatory backdrop. Medicaid is different. It took one federal shock, OBBBA, and its repricing is being absorbed three different ways because the program is a federal-state partnership. The feds set the terms. Each state chooses how, when, and how much to absorb them.

Even if you do not sell into it, the pattern is worth understanding. This is where federal-to-state fragmentation shows up most clearly. As Washington keeps pulling levers, reading how federal action travels through state execution into plan operations, and then into member and provider experience, is going to matter more, not less. OBBBA year one is the clearest example of that translation chain.

The rest of this piece walks through where the repricing is already visible in the data, how it is landing state by state, what MCO leadership is doing about it below the surface, and why the repricing is going to hold through 2028.

Subscribe now

The Repricing Is Already Visible

The OBBBA repricing already happened. Two market patterns from 2026 show me why: publicly traded MCO parents have marked down their Medicaid books in earnings guidance, and CMS spent 2026 telling states they are on their own.

The first is that MCO parents have already marked down their Medicaid books based on their own earnings guidance. The Big Five publicly-traded Medicaid MCOs are down 1.4 million members, or 3.8 percent, since OBBBA passed, but the raw number understates what management is actually pricing in. Molina and Centene both took their 2026 Medicaid membership assumptions to negative 6 percent year-over-year in Q1, worse than the negative 2 percent range both were carrying at the start of the year. Molina reaffirmed guidance rather than raising it as UnitedHealth and Elevance did, citing an ongoing challenging cost environment. Neither is trying to grow through the disenrollment wave; both are defending margin through cost discipline. RAND projects semi-annual redetermination alone will produce administrative attrition of roughly 923,000 people, not because they are ineligible, but because of paperwork failures. Molina and Centene are already running their books to that reality, and every other MCO parent is doing the same math. The marks are showing up in the FY 2027 planning documents plans are handing their vendors this quarter.

The second is that CMS spent 2026 telling states they are on their own. In January, CMS negotiated $600 million (M) in Medicaid technology vendor discounts through a narrow pledge with 10 state Medicaid systems incumbents. On April 28, CMS rolled out a state Medicaid IT modernization roadmap at its All-State Webinar, outlining what state Medicaid Enterprise Systems must build, in what sequence, without a matching federal build to help states get there. On June 1, CMS released the interim final rule on work requirements, giving states three months of usable procurement runway before the August 31 outreach deadline, down from six. And last week, CMS proposed the rule that codifies OBBBA’s provider tax pullback, accelerating $246 billion (B) in additional federal savings, discontinuing the 75/75 Test loophole, and bringing taxed health insurers under CMS oversight for the first time. Read together, those four moves say that the cuts are landing on schedule, that federal implementation support is narrow and uneven, and that every state has to fund its own price adjustment.

Both patterns say the same thing: the repricing is priced in at the parent-company level and endorsed at the federal level. Below is what it looks like state by state.

How the Three Markets Are Absorbing It

The 44 states required to implement OBBBA work requirements by January 1, 2027 are making three different strategic choices about how to absorb the repricing. The choices matter more than the timing. Four states are running live tests ahead of the deadline. Roughly thirty are building to the January 1, 2027 hard start on the standard federal timeline. And roughly ten are seeking the good-faith extension that pushes the compliance deadline to December 31, 2028, though CMS’s own June interim final rule assumes only two of those ten will be approved.

I have been calling these three postures Early Implementers, Deadline Builders, and Extension Seekers, and each is producing a different piece of the repricing for the members, providers, plans, and vendors inside those states.

Early Implementer states

This is where the coverage side of the repricing lands in real time. Members are cycling off, providers are absorbing revenue losses, and plans are running monthly marks against an actual disenrollment wave rather than a forecast. Nebraska hard-launched May 1 through a state plan amendment, betting on speed and becoming the template the rest of the country will read against. Montana followed July 1 through a state plan amendment and a Section 1115 waiver, seeking additional state-level exemptions and testing how much state-level customization the federal framework will actually allow. Iowa is scheduled for December 1 as the cautious version of an early move, giving itself runway to correct anything Nebraska surfaces before it goes live. And Arkansas launched a soft-launch version July 1 that notifies enrollees but disenrolls no one until January 2027, structured that way because Arkansas is the one state in the country that has lived through a full-fledged work requirement program before. Arkansas 2018 ran for less than a year and cost 17,000 people their coverage, overwhelmingly due to paperwork issues. That memory is why Arkansas 2026 looks structurally different from Nebraska 2026, even though both went early.

Nebraska is the loudest of the four because it went first and it went hardest. State estimates put 20,000 to 40,000 Nebraskans on track to lose Medicaid coverage, and Arkansas 2018 suggests that most of this will stem from administrative failures rather than actual ineligibility. Nebraska did not increase staffing to handle the new verification workload, which is why the same failure pattern is baked in. The provider-side impact is landing this quarter, not next year: Bluestem Health, a Federally Qualified Health Center (FQHC) serving 8,400 Medicaid patients, has estimated that 10 to 15 percent of its caseload could be disenrolled, resulting in a $400,000 to $600,000 annual hit to the clinic. Multiply that across the FQHC and rural hospital network in any Early Implementer state, and the provider-side repricing is a large amount of money leaving safety-net balance sheets right now.

Within the plans for these four states, work-requirements infrastructure is an operational build in Q3 2026. Outreach, member communication, eligibility integration, and retention vendors are in active procurement conversations that will close before the end of the calendar year. Chief Operating Officers are watching the ratio of members who lose coverage due to paperwork issues versus those who are actually ineligible, because that ratio determines whether each state’s enforcement model holds up politically and legally. For vendors calling into those conversations, the winning category is the one that can operate at the pace of a live workflow. The losing category is the one running enterprise sales motions into a workflow that will not wait.

Deadline Builder states

This is where the forecast side of the repricing is getting marked most aggressively. The disenrollment wave has not hit yet, but the CFO is pricing FY 2027 as if it has, and every rate negotiation, budget compression, and vendor renewal is happening around the expected mark rather than the actual one. Roughly thirty are choosing this path: they funded FY 2027 eligibility modernization, aligned their Medicaid director statements with the January 1, 2027 deadline, and posted procurement notices for community engagement infrastructure between April and July. The KFF survey of state implementation plans shows most of these states are adopting less restrictive verification policies than the law technically allows, which is a bet on avoiding the paperwork-driven disenrollment Nebraska is walking into now.

The first practical shock for enrollees in these states arrives August 31 with the beneficiary notification letters. The harder part comes on January 1, 2027, when compliance verification begins with no test period in place. Providers in these states are already sitting inside FY 2027 rate negotiations run against a member base projected to shrink meaningfully in the first half of 2027, and Pew’s analysis of the compounding state budget pressure is worth sitting with, because the fiscal squeeze on the state and the fiscal squeeze on the provider are the same squeeze approaching from different angles.

Inside the plans in these states, the crunch is tightest of the three. Building to a January 1, 2027 hard start with no test period means these plans cannot afford implementation error and cannot afford to overspend on categories that will not survive the next reprocurement scorecard. (Reprocurement is the state Medicaid managed care rebid cycle: MCOs have to compete every few years to keep or win the contract to serve a state’s Medicaid book, and losing it means losing the entire book of business in that state, not one contract line.) CFOs are running two parallel exercises: modeling the FY 2027 member-loss curve and cutting whatever vendor spend does not align with state reprocurement measures. Relationship equity is not saving incumbents in this bucket, because the CFO is not asking whether the vendor delivers value in the abstract. They are asking whether the vendor’s outcomes appear on the score their contract will be judged on. The reprocurement lens does not just decide net-new vendor spend anymore. It decides renewals, and that shift is where the sharpest repricing pressure inside the whole market is being applied.

Extension Seeker states

This is where the fiscal side of the repricing lands, independent of enrollment. Coverage looks stable today, but the provider tax phase-down is starting to eat state financing before the good-faith extension window closes, and the plan operating environment is being reshaped by state-level fiscal drag rather than by member churn. The extension technically pushes full compliance to December 31, 2028, but CMS is granting initial extensions only in six-month increments, and states must demonstrate continued good-faith effort each quarter to keep them. Extension Seeker is a rolling quarter-by-quarter negotiation with CMS rather than a two-year deferral anyone can bank on. The signals on the state side are consistent: no eligibility system rebuild funded in the FY 2027 budget; public statements from state Medicaid directors about needing more time; delayed or absent procurement notices for community engagement work; and open questions in state fiscal notes about whether the work can be funded within existing revenue.

Enrollees see coverage that looks stable, but Extension Seeker states are, on average, the ones with the least fiscal room to soften the impact when it does land. Whenever implementation finally arrives, the state will have less capacity to fund soft-landing infrastructure than a Deadline Builder state has today, resulting in a steeper coverage cliff on the back end. The provider picture is worse yet. OBBBA phases down the provider tax rate cap from 6 percent to 3.5 percent starting in late 2027, cutting roughly half of the base by 2031, and caps state-directed payments at lower rates. Both mechanisms are used by states to fund supplemental payments to providers, which constitute a meaningful share of rural hospital and safety-net revenue in expansion states. Extension Seeker states are the ones with the least cushion to backfill any of it.

The operating environment inside the plans in these states is doubled. MCOs are running two forecasts simultaneously: one that assumes the state’s extension request is approved, and one that assumes it is not. Given CMS’s own estimate that only two of ten will be approved, the second forecast is doing more of the work. Some plans are enforcing preemptively because they read the good-faith exception as narrow. Others are rebuilding FY 2028 assumptions and treating January 2027 as a target rather than a hard deadline. Neither posture is safe, and both are expensive.

For vendors, deals in these states have relationship value but not near-term revenue, and the repricing here looks like extended timelines and reduced deal sizes rather than lower unit prices. Paralysis inside these plans traces to the state Medicaid agency rather than to MCO leadership, and it is a version of the dynamic I wrote about earlier this year when I said vendors are not losing health plan deals to other vendors, they are losing them to forces inside the plans. What the February piece did not fully anticipate was that the largest source of that internal paralysis would trace all the way back through the plan to the state Medicaid agency itself.

Subscribe now

Four Behavior Changes Inside Health Plans

If the two market patterns in the free section are the marks visible from outside the plan, then the four behavior changes in this section confirm that the repricing is real inside the plan. Vendor rationalization has climbed to CEO level, the reprocurement calendar has become the filter that runs first on every material decision, incumbents are getting cut in categories where they used to be automatic, and the entire Medicaid story on Q1 earnings was cost discipline. Four behavior changes worth naming, in that order.

1. Vendor decision-making continues to climb the org chart. I wrote about this last year in the CFO Filter piece, when the pattern was first showing up: vendor decisions that used to sit at the VP level were being pulled up to the plan president or CFO for review because the CFO wanted the analytical case against the state scorecard before the incumbent was waved through. One year later, that pattern has not just held, it has accelerated. You can hear it in Q1 2026 earnings commentary. Centene CEO Sarah London described her Medicaid margin improvement as coming from “targeted and increasingly scaled initiatives to modernize and standardize processes to better manage medical cost trend.” That is enterprise-level language for a set of decisions that used to sit two or three layers down inside a Medicaid segment. When the CEO is on the earnings call describing process standardization and vendor rationalization as the Medicaid strategy, the org chart has already moved, and it moved because the assets underneath were being marked down and the CFO needed direct line of sight to defend the marks.

That was one of four behavior changes in this section, kept above the paywall so you get a feel for what the paid tier looks like. The other three, plus the forward read-through 2028 and what the Big Five parents’ state-mix exposure is going to surface across the Q2 and Q3 earnings cycle, are also in the paid section below.

Paid subscribers get all of it, plus 50+ frameworks, scripts, and deep dives built for health tech teams selling to health plans. One qualified conversation from these frameworks is worth more than a decade of subscription.

🔓 Upgrade to a paid subscription to keep reading.

Read more

🤝 Work with us on payor market strategy: Contact us

🟦 Connect with the author, Ryan Peterson, on LinkedIn.

🎧 Listen to the Upward Growth Podcast: Apple | Spotify

📰 Newsletter sponsorships: Learn More

A note from the authors: This is the first in a series called Inflection Points. Healthcare in 2026 is as fragmented and confusing as it’s ever been, and it got that way one messy decision at a time, with butterfly effects nobody saw until years later. This series goes back to those decisions, looks at what everyone in the room thought they were deciding, and reads them against the record they produced.

These pieces aren’t critiques of the people or the organizations. The decisions were made by serious people, under real pressure, with incomplete information, which is the only way decisions ever get made. We’re not here to tell anyone they were wrong. We’re here because the record is in now, and the record is more interesting than the verdict.

The Elevance-Louisiana Blue deal is the first entry because it’s where the for-profit Blues conversion path, which had run through 14 states since 1996, came to an end. What’s replaced it, a wave of nonprofit affiliations, is where Blues consolidation actually happens now.

Ryan writes Upward Growth, a newsletter on how health plans buy, operate, and make decisions. Andrew Tsang writes long-form narrative pieces on healthcare’s structural moments. We started talking after Andrew read the Upward Growth piece on Blues consolidation, and kept landing on the same thing: the moments that shape a market decide more than the people in them realize at the time.

If reading these makes the market you’re operating in a little more legible, we’ll have done what we set out to do.

Ryan and Andrew

Mardi Gras Night

Mardi Gras night in Louisiana belongs to the krewes - the private clubs that spend all year building floats so they can ride them masked through the city, throwing beads to strangers, on a single night. On February 13, 2024, while their floats were still rolling through New Orleans, eleven people who were nowhere near a parade dialed into a conference call to decide a $2.5 billion question: whether to sell the state’s largest health insurer.

From the street a parade looks like chaos. It is one of the most organized things Louisiana does - routes permitted, rolling order scheduled months ahead, every float built and owned by a club whose members paid for it. On Fat Tuesday the krewes hold the city until midnight, when carnival ends and Lent begins.

They had dialed in from wherever the holiday found them — home offices, parked cars, conference rooms borrowed from other firms. The board of Blue Cross Blue Shield of Louisiana was running a club of its own: 95,000 policyholders who technically own BCBSLA and pay their dues on the first of the month. The single agenda item was whether to walk away from a deal that would have sent 91% of its proceeds to a foundation and 9% to those 95,000 owners.

The buyer was Elevance Health — the country’s second-largest insurer, and the company behind Anthem, the name on insurance cards in fourteen states. The template it was running was older than the company itself: the 1996 Blue Cross of California conversion playbook, used state after state since and never once reversed. The CEO of BCBSLA was a physician named Steven Udvarhelyi, who for thirteen months had been the public face of the deal - in front of legislators, hospital lobbyists, two attorneys general, two insurance commissioners, and the new governor’s advisory council. Thirteen months is a long time to run that gauntlet.

By Mardi Gras night the deal was already in trouble. On the table was a senate report with thirty distinct findings - what Sen. Patrick McMath would publicly characterize as “blatant vote steering and monetary enticement.” Eight days earlier, board member Tim Barfield had testified under oath that the policyholder proxy vote was running against the deal “by a couple of percentage points” - a hearing someone close to the deal would later describe as “not your typical legislative hearing” but “an organized action.” The proxy consultant read the latest count. Still running against. The lawyers stayed on mute. For an hour, the board listened to itself.

That language - vote steering, intimidation, enticement - is the language of elections, not corporate proxies. Which is, on paper, exactly what a mutual policyholder vote is supposed to be.

The vote, when it came, was a formality — eleven voices in turn, none objecting. They notified the Department of Insurance at 10:30 that night, which canceled the next morning’s hearing before the next morning came. Whether the eleven then poured a drink or went to bed to avoid one, the record does not say.

Outside, the krewes were still rolling.

Twelve hours separated that board call from the hearing where the buy-side lawyers expected to close. In the 28-year history of Blue Cross conversions, no deal had come this close to the wire and walked. They die in court, months in advance. The $37B Aetna/Humana and $54B Anthem/Cigna deals were each killed by a federal judge in early 2017, and each walked the morning its ruling landed. They do not die on a Tuesday night, ten and a half hours before opening arguments.

The deal didn’t just fail - the template did. A playbook the entire insurance-M&A world had followed since 1996 ended on a conference call no one outside the room heard. The deal itself had lived exactly one parade season: first heard by the Department of Insurance on February 14, 2023; the hearing it died avoiding was set for the same year The morning after was Ash Wednesday — fittingly, Valentine’s Day that year. Louisiana had jilted its suitor and walked into Lent on the same morning, and some of its people were out celebrating. It takes the inside of this deal - and the outside - to understand why it failed.

Subscribe now

Why Udvarhelyi Wanted to Sell a Plan That Wasn't Failing

By every conventional market read, this should have been a closing.

To understand why, you have to start with the structural problem that defined every Blues conversion attempt of the 1990s. Mutual insurance companies are technically owned by their policyholders, which is what makes converting one to for-profit politically radioactive. You are, in a literal sense, taking something that belonged to millions of members and selling it to shareholders. Every Blues conversion attempt in the 1990s ran into the same wall: who gets the money, and on what authority. California found the answer in 1996, and the answer was the foundation. Capitalize an independent charitable entity with the conversion proceeds, give it a health mission tied to the state, and the expropriation argument loses its teeth. Policyholders don’t get cash, but the value they’re presumed to have collectively built is ring-fenced in something that still serves them.

Once that answer existed, the whole question of conversion changed. Blue Cross of California’s 1996 conversion to WellPoint Health Networks capitalized two charitable foundations with roughly three billion dollars in stock. The California Endowment grew into the largest health-focused private foundation in the state, and the California HealthCare Foundation became one of the most influential health policy grantmakers in the country. The deal closed in eighteen months. Once that proof point existed, every subsequent conversion ran on a version of the same playbook. Anthem (Indiana, converted) acquired Trigon (Virginia, converted) in 2002. Empire BCBS in New York converted in 2002, with 90% of proceeds redirected to the HCRA fund of George Pataki, New York’s combative former governor, and only 10% to a foundation, a wrinkle that revealed how thoroughly state politics had absorbed the model. WellPoint and Anthem merged in 2004. WellChoice was absorbed in 2005. Georgia, Missouri, Wisconsin, Maine, Colorado, Connecticut, and Kentucky followed in some form. What looked like M&A momentum was actually a working political answer to the one question that had killed every prior attempt, and the answer kept finding new states to apply it in.

When individual deals did die, they did so on procedural grounds within the same framework. For example, Maryland Insurance Commissioner Steven Larsen rejected the CareFirst conversion in March 2003 in a scathing decision finding the price unfair, the board’s process compromised, and the executive bonuses excessive. So while he rejected the deal in front of him, he did not reject the model. By 2004, conversion activity resumed.

Louisiana 2024 fit the rubric exactly: a $2.5 billion price, a multibillion-dollar foundation as the political release valve, a mutual-to-stock conversion mechanism, and an established acquirer with fourteen Blues state licenses already on its balance sheet. File early, propose a generously capitalized foundation, accept rate-review concessions, run the regulatory gauntlet, close. The structure was twenty-eight years of precedent compressed into a single transaction.

The deal had every market signal a 2010s playbook would have wanted. What it didn’t have was 2020s politics.

What Changed in 28 Years

The buyer in 2024 was running a playbook that traced back to 1996 and had shaped Blues consolidation ever since. The playbook had carried every prior conversion to a close, and for its first decade it kept working: the foundation absorbed the proceeds, the newly for-profit Blue kept its familiar brands, and members’ premiums didn’t visibly diverge. The model didn’t just hold — it grew, proving itself in market after market.

For 28 years, the WellPoint, then Anthem, now Elevance playbook shaped Blues consolidation. The conversion wave itself was clustered in the first decade: California in 1996, Virginia and New York in 2002, Georgia, Missouri, Wisconsin, Maine in the years after. After the CareFirst rejection in 2003, no acquirer attempted another nonprofit-to-for-profit conversion until Elevance came for Louisiana twenty years later. And not one of the fourteen prior conversions had ever been reversed.

The providers had the receipts. Doctors and hospitals spend their working lives on the receiving end of an insurer’s claims decisions, and Louisiana’s had a quarter-century of Elevance’s to look at. When the Louisiana State Medical Society (LSMS) voted against the deal, it didn’t do it in the way professional societies usually do - with a position paper and a sigh. The LSMS voted no as a policyholder, exercising its equity claim in BCBSLA that appears to be unprecedented. The Louisiana Hospital Association sent the Department of Insurance a letter cataloging $26 million in Elevance fines since 2019, most of them for denying Medicaid claims and stiffing providers on payment timeliness. In 1996 the buyer was WellPoint, ten minutes old, with no record to read. By 2024 the record was a quarter-century long, and it did not flatter the company asking 95,000 Louisianans to trust it.

The foundation looked like a shell. When a nonprofit insurer converts, the law won’t let the proceeds disappear into the buyer’s balance sheet; they capitalize a charitable foundation meant to serve the same public the insurer did. Louisiana’s was to be the Accelerate Louisiana Initiative, $3.1B promised for state health equity - a number that ought to disarm critics (it didn’t).

The deeper problem was the track record. California’s two conversion foundations spent the intervening decades doing what foundations do well — research on uninsured Californians, benchmark reports on health equity, multi-year grants to community clinics and advocacy organizations. These are pretty standard public health advocacy moves. But the objection was what it did not do: roughly 1.8% of grantmaking went to insurance subsidies, while the other 98% went to research, advocacy, and education that did not lower a single Californian’s monthly premium.

For a Louisiana policyholder watching their monthly premium rise every year, it was a practical choice between researchers studying inequity and a check covering this month’s bill - it was the difference between being studied and being served. When BCBSLA proposed the Accelerate Louisiana Initiative — the same three billion dollars, governed by four insiders — Louisianans did not have to imagine what could go wrong. They had California’s twenty-eight-year operating record telling them their premiums would keep going up no matter how many grants the foundation made.

The vote was the wrong shape. A mutual is owned by its members, and selling one needs their consent — a vote that looks like a corporate proxy but runs with the energy of an HOA election — and by February 2024, that governance had developed a constitutional problem. The buckslip BCBSLA mailed to its own members was titled “Grant your Proxy FOR our Plan of Reorganization.“ Senate Joint Committee findings documented “vote steering,” “voting integrity,” and “voting confusion” problems, including ballot design that favored the “FOR” option.

This changes the conversation from insurance wonkiness to something with more teeth: undemocratic voter steering. Whether a foundation is well-designed, whether Medicare Advantage scale is real, whether the fines are damning or routine — those are policy questions, with defensible arguments on both sides. Whether 95,000 people had been steered toward a vote about their rightful ownership of their own insurance company - that is no longer a policy question. It is a question about democratic process. A policyholder vote is, in the most literal sense, the only mechanism the owners have to consent to what happens to what they own. Engineering that vote is not procedural sloppiness. It has a different name in any other context - and that name is American.

The deal had to win both the substance and the process at once; the coalition against it needed only the process — and a stacked ballot handed them that.

The mutual identity question. The deal had walked into an election year, and the machine of state elections will steamroll corporate maneuvers. Jeff Landry had investigated the deal as attorney general - “as it currently stands, it’s a bad deal” - then won the governorship in October, and as governor-elect convened a private advisory council on the sale, its members instructed not to talk publicly about the meetings. BCBSLA sat on that council, and the deal it re-filed in December read like a list of concessions to the people in the room: the foundation re-incorporated in Louisiana, a board appointment for the governor, an observer seat for the incoming insurance commissioner. The deal team had negotiated with everyone it could see.

Then January 8, 2024: a new governor, attorney general, insurance commissioner, and state treasurer sworn in at the same noon ceremony - and the opposition began to roll. The new treasurer first: John Fleming, a family physician from north Louisiana, came out against the deal before his own inauguration day ended - “join my fellow physicians... vote no.” The hospital association voted no the same day. The senate committees by late January, drafting what became the thirty findings. The attorney general - the new one, holding Landry’s old office - on February 9, in a letter sent late at night. Thirty-six days from the noon ceremony to the board call, the moves to defeat the merger steadily marched forward. Same-day denunciations are not improvised; like the floats, they are built in the off-season and rolled out for the parade. The deal had made its concessions to the people with titles, and the coalition rolling past it had no one to negotiate with. A month after taking office, in front of the Senate Joint Committee, Fleming delivered the line he is most quoted for: “Their interests will be maximizing profits day in and day out and getting back the $2.5 billion purchase price.”

Convert a mutual to a stock corporation owned by Elevance shareholders and the policyholders lose the company they own. The deal priced that loss at 9% of the proceeds — about $3,000 per eligible policyholder — with the other 91% going to a foundation they did not control. Insurance is a way of pooling exposure to risk among people who share something — a state, a community, a profession, a family. That split made the pool visible enough that the people who owned it walked away from the sale. The LSMS called it “detrimental to put our patients’ health at risk to achieve exorbitant profits for a corporation.” That language sounds populist until you remember the people saying it were also, technically, the people selling. A mutual cannot sell itself without selling against itself.

What was different in 2024 was not the deal but the world it had to land in: most Americans now interacted with the Blue Cross brand through a denial code, and a sentence containing “three billion dollars” and “controlled by four insiders” read as a populist trigger rather than as a gift.

The M&A playbook written in 1996 was the answer to for-profit insurance. By the time it came to Louisiana in 2024, it had become a question — one the man who carried it to the board had spent thirteen months sure he’d already answered.

Subscribe now

The Four Forces Behind the Deal

From inside the deal, it never looked the way the opposition was reading it. Steven Udvarhelyi was a physician who had run BCBSLA since 2016, and he had been watching the numbers move in one direction for years. The plan he ran was not failing. Fitch had rated BCBSLA among the most profitable Blues in the country. Surplus was up 38% over five years. The company had been profitable in four of the prior five years. By the standard measures of a regional health plan, BCBSLA was holding its ground. The case for selling was in the slope of the line, not the value of it.

Four forces shaped what he was watching:

The most profitable book was disappearing. Large and mid-sized employers had spent two decades migrating from fully insured products to administrative services-only (ASO) arrangements, where the employer carries the medical risk and the plan earns a fee. ASO economics are an order of magnitude thinner than fully-insured economics. Every employer that crossed over took the most profitable kind of revenue BCBSLA had with them, and almost none ever crossed back.

The market was shrinking, and BCBSLA was concentrated in it. Roughly 90% of BCBSLA’s revenue came from employer-sponsored coverage. The employer-sponsored share of the Louisiana market had declined by 20% over the prior decade as employer count shrank, public coverage expanded, and the remaining employer book itself moved toward ASO. The plan was leaning more weight on a segment that was getting smaller and thinner at the same time.

Medicaid had become a national game. UnitedHealthcare and Aetna had built Medicaid managed care operations across dozens of states, with the data, technology, and operating leverage that comes with running ten million Medicaid lives at once. BCBSLA was running its Medicaid plan in one state. In every state procurement cycle, the national plans showed up with capabilities BCBSLA could not match and priced against a cost base BCBSLA could not approach.

The infrastructure floor kept rising. Udvarhelyi’s read on the runway was that by 2025 competing in any line of business would require investments in claims platforms, AI-enabled utilization management, member engagement technology, and analytics infrastructure that no single-state plan could build in time. Elevance had it. HCSC had it. BCBSLA did not, and the gap was widening every year.

By 2022, the trajectory had become unambiguous enough that the board authorized Udvarhelyi to find a partner. The deal in front of them in 2024 was the result. Udvarhelyi made the same argument everywhere he was allowed to make it, telling Louisiana lawmakers in 2023 that "the forces at play in the marketplace, the inevitable forces of consolidation, will happen and we will have to consolidate from a position of weakness." The deal was a chance to consolidate from a position of strength instead. The price would be better, the terms would be better, the foundation would be larger, and the employees and members would be protected by leverage BCBSLA would not have in five years.

This was a market intelligence read on where the business was headed. The opposition was reading where the business was. Both reads can be true at the same time. The structural tragedy of the Louisiana deal is that nobody in the room was actually arguing with anyone else. Instead, they were arguing about different timeframes. Resolving that would have required Udvarhelyi to make the case for the five-year trajectory directly to the providers, members, and legislators reading 2024 conditions, and the opposition pressure-testing the trajectory rather than rejecting the present-day terms it produced. That conversation never happened.

Two Years Later, Most of the Blues Are Under the Same Pressure

The BCBSLA-Elevance deal died two years ago, and the case Udvarhelyi was making to his board has largely held up. In August 2025, BCBSLA began rolling layoffs through attrition and position eliminations, citing rising medical costs and the expiration of enhanced ACA subsidies. Louisiana’s 2026 individual market rate filings came in with a weighted-average increase of around 21.9% across all carriers, later revised upward to 23.4%, the largest annual increase the state has seen in years.. The fully-insured employer book Udvarhelyi had been worried about kept shrinking. And the operating margin, which had been a slim positive 0.1% in 2024, dropped to -4.3% in 2025. The forecast he was selling against in 2023 is the present BCBSLA is operating in now, and the exit ramp he tried to take is closed for the foreseeable future.

Only seven Blues posted positive operating margins in 2025, down from eight in 2024. The for-profit acquisition path that ran for twenty-eight years is closed, but consolidation isn’t. It changed shape, and the chart shows the new shape working. Wellmark, the BCBS Michigan affiliate, posted +1.9%. Blue Cross of Idaho, which restructured into a mutual holding company, posted +1.7%. BCBS North Dakota, which joined Cambia in early 2026, posted +0.3% in its first year. Arkansas, which announced its Cambia affiliation in 2025, improved from -12% to -1.7%. The plans furthest from affiliation are the ones bleeding most: BCBS Arizona at -14.6%, North Carolina at -8.9%, and BCBSLA itself at -4.3%. The exception that proves the rule is BCBS Michigan, the parent itself, at -5.7%, expanding its affiliations across Wellmark, NextBlue, WyoBlue, and Vermont while bleeding at home.

Cambia spent the last twelve months absorbing two struggling Blues. HCSC closed a $3.3 billion acquisition of Cigna's Medicare business in March 2025, with 71% of its MA enrollment now in HealthSpring rather than in the legacy Blues plans. Highmark closed its Blue KC affiliation on March 31. BCBS Michigan is steadily building a five-state footprint while its own balance sheet deteriorates. The parent organization is becoming the operating unit. The local plan is becoming the brand the member sees on the card.

If you invest, the Elevance-style roll-up thesis is off the table, the deal flow you’re underwriting is now affiliations and shared-services consolidation, and the second-order opportunity is in the companies sitting downstream of the consolidated parents. If you sell to Blues, map your pipeline and installed base to parent organizations this quarter, because the plans most likely to affiliate in the next eighteen months are the ones sitting in the bottom third of that chart. If you advise plans, conversion advisory is a contracting market and federation advisory is the growth market. If you run a provider organization contracting against a Blue in the bottom third, the parent that absorbs them will have rate reference data across its footprint and less institutional incentive to preserve a local relationship that doesn’t perform.

Two years after the BCBSLA-Elevance deal collapsed, the question isn’t whether the Blues system is consolidating. The question is whether the plan you sell to, contract with, model against, or advise is going to be the one absorbed, the one absorbing, or the one bleeding out on a standalone basis.

Subscribe now

Close on Mardi Gras Night

Louisiana didn’t answer the question. It surfaced it. And the question — who is this insurance for? — has been forming longer than anyone in the BCBSLA boardroom on Mardi Gras night had been alive.

What has changed in ninety-seven years is not the pool — structurally, BCBSLA’s policyholders own the same thing its earliest member did — but what people are willing to do with it. Three live answers now compete for the role.

The for-profit answer. Insurance is a financial product. Shareholders accept risk, accumulate scale, and operate as one publicly listed company across many markets. This is the answer Elevance offered Louisiana, and the scale behind it is real. The Epic implementation BCBSLA was paying for out of its own pocket, Elevance had already amortized across forty-seven million members. The GLP-1 negotiations absorbing eight figures of regional plans’ annual budgets, Elevance ran through a national PBM with leverage no single-state plan can match. As of 2026, no for-profit acquirer has announced another Blue Cross conversion attempt. The path is not legally closed — it is politically exhausted.

The mutual answer. Insurance is a communal arrangement — owned by its members, governed locally, answerable to its community. This is the answer Bryan Camerlinck — Udvarhelyi’s successor, named CEO three months after the deal died — was testing under the Louisiana Blue rebrand: restructure internally, expand the profitable segments, outrun the trajectory before the scale gap becomes operationally fatal. The first two years of that bet have looked like Udvarhelyi’s February testimony reading itself back. Across 2024-2025, at least seven Blue Cross plans reported net losses.

None of these plans ran the business badly. The business has gotten harder for plans without national scale — exactly what Udvarhelyi predicted. The mutual answer is what Louisiana chose, and what Louisiana is now defending, with the data piling up on the side it just argued against.

The federation answer. Insurance is a multi-state nonprofit federation. Local plans keep their boards, brands, and mutual status, but share the infrastructure single-state plans cannot afford to build alone — claims platforms built once and deployed everywhere, compliance operations whose costs scale with rule volume rather than member count, drug procurement run through combined member volume. Cambia is deploying it in real time — North Dakota in February, Arkansas pending — with Highmark and BCBS Michigan running their own versions. Of 34 Blue Cross licensees, only eight posted positive operating margins in 2024. Most of the rest are choosing some version of the federation answer. Louisiana has not.

Underneath the three answers is the question itself: what is insurance supposed to do? In 1929, it pooled risk between a Dallas hospital and 1,300 of the city’s schoolteachers. In 1996, it became an asset class opening to public-market capital. In 2026, with seven Blue Cross plans posting losses and GLP-1 spending climbing thirty percent a year, the question has stopped being abstract: whoever owns the pool decides what the pool is for. The deal Louisiana refused was a vote on who that should be — 91% to four insiders, 9% to the 95,000 people who actually owned the company. The deals every other state has yet to make are votes on the same question.

What Mardi Gras night closed was not the deal, but one of the answers — and the next essays in this series profile the answers still competing for the role.

The frameworks in the weekly Upward Growth newsletter help health tech sales and marketing teams navigate payor conversations as the market continues to shift.

If your colleagues are in those conversations, they should be reading this too.

💰 Invest In Your Team with a Paid Subscription.

Get a group subscription

Give a gift subscription

💡 Pro tip: Many subscribers expense Upward Growth through their company’s professional development, training, or learning budget. Here’s a one-minute email template to get your manager to approve expensing your subscription.

🤝 Work with us on payor market strategy: Contact us

🟦 Connect with the author, Ryan Peterson, on LinkedIn.

🎧 Listen to the Upward Growth Podcast: Apple | Spotify

📰 Newsletter sponsorships: Learn More

🎁 Unlocked: This post includes the full deep dive

Most Tuesday articles start with a free section and then continue behind the paywall. Today’s post is left completely open so you can read the entire edition.

Paid subscribers get the full deep dive every week, plus playbooks, case breakdowns, and the ability to reply with their own questions.

Before we get into it: I hope everyone in the States had a safe and happy Fourth of July. The Upward Growth staff took the week off, which is why you didn’t get an edition last week. That was a last-minute call, and I should have flagged it in the newsletter ahead of time. Going forward, I’ll do better about announcing when we’re skipping a week.

Personally, I spent a good chunk of the break watching some World Cup and the Tour de France. (Well, reruns, as I’m not getting up at 4 AM to watch it live!) Watching a sporting event rerun changes what you notice: you already know how the stage ends, so the strategic decisions everyone made in the hours leading up to it come into sharper focus. The breakaway that would normally look ambitious looks doomed. The team that would normally look defensive looks like it made the right call two hours ago.

Not a bad way to read what CMS did around the ACCESS Model launch on July 5th. The stage is over, but it’s still worth examining what everyone was thinking in the six months leading up to it, and what those decisions signal about the ten years ahead.

CMS has spent the last decade running payment innovation experiments through CMMI, one bespoke pilot after another. Each had its own contract structure, measurement methodology, reporting requirements, and sunset conditions when Congress ran out of patience. Vendors selling to health plans watched them come and go. Investors mostly ignored them. Consultancies earned fees on the ones that stuck. The Congressional Budget Office documented that only four of the roughly fifty models CMMI has tested have been certified for expansion, and only one since 2018.

The ACCESS Model, which launched on July 5, looks like the same kind of experiment at first glance. Four clinical tracks, a 10-year test, Traditional Medicare beneficiaries only, and payment rates ranging from $90 to $420 per beneficiary per year. That top-end rate is thin enough that several scaled digital health companies passed on the first cohort, and the industry press covered the launch through much the same lens.

In the six months leading up to July 5, CMS assembled operational infrastructure around ACCESS at a scale no prior CMMI test has received at launch. It published a set of four core principles that define what makes a chronic care arrangement "ACCESS-aligned." It committed to publishing a sample provider agreement, standardized track-specific G-codes any payer can adopt, and a CMS-hosted FHIR API that will run outcome measurement for participants and aligned payers on the same infrastructure. And it got fourteen of the largest health plans in the country, representing 165 million member lives across Medicare Advantage, Medicaid, and commercial coverage, to publicly sign the ACCESS Aligned Payer Pledge committing to offer payment arrangements aligned with the model’s principles by January 1, 2028.

That machinery is what CMS is signaling about where outcome-based chronic care should go over the next decade, and if you step back, the Medicare payment rates are the least interesting piece of it. The reference architecture, the operational infrastructure, and the 14 major health plans that publicly committed to align with it before the model launched are what to pay attention to, regardless of whether you plan to participate.

CMS just signaled where outcome-based chronic care will go over the next decade, your health plan buyers' evaluation criteria will look materially different by the middle of 2027, and health tech categories just got repriced up or down. Four months ago I wrote that every health tech vendor would need a point of view on outcome-based pricing. ACCESS is the version in which CMS wrote the reference implementation for the whole market, and 14 major health plans have already signed on to build against it.

Take the example of Remote Patient Monitoring (RPM). In 2019, RPM codes existed, and reimbursement barely covered device costs. Same then, most digital health companies passed on the category. CMS iterated the codes, expanded eligible conditions, and the HHS Office of Inspector General documented Medicare RPM enrollees growing more than 10-fold from 55,000 in 2019 to 570,000 in 2022 with Medicare payments rising from $15 million to $311 million, continuing past $500 million in Medicare payments by 2024. The companies that built the operational and evidence infrastructure while payment was thin are the scaled winners today. ACCESS is the same shape of bet one level up, paying for outcomes rather than monitoring activity, and the ten-year commitment signals CMS intends to iterate.

Subscribe now

What ACCESS Actually Is

ACCESS is a 10-year voluntary payment model in Traditional Medicare that pays participating organizations through Outcome-Aligned Payments (OAPs) tied to condition-specific performance thresholds. Four clinical tracks cover early cardio-kidney-metabolic (hypertension, dyslipidemia, obesity, prediabetes), cardio-kidney-metabolic (diabetes, chronic kidney disease, ASCVD), musculoskeletal (chronic pain), and behavioral (anxiety and depression). Per CMS, these conditions affect more than two-thirds of people with Medicare.

Per CMS’s Payments Amounts and Performance Targets document, OAP rates range from $90 to $420 per beneficiary per year, depending on the track and care period. Monthly payments are capped at 50 percent of the annual OAP over the care period, with the remaining 50 percent withheld until semi-annual reconciliation. Participants receive full payment if at least 50 percent of the aligned beneficiaries meet the outcome targets. Below that threshold, payment is proportionally reduced, capped at a 50 percent reduction. A Substitute Spend Adjustment reduces the OAP by up to 25 percent if aligned members receive duplicative services from other Medicare providers during the care period. A separate co-management fee pays primary care physicians approximately $30 per review, up to $100 annually per beneficiary, for coordinating with ACCESS organizations.

CMS accepted more than 150 organizations into the first cohort, the majority of which have never previously served Medicare beneficiaries. Rolling admissions continue through 2033. Only Traditional Medicare beneficiaries are eligible for the model itself, though CMS explicitly notes MA plans may independently adopt similar arrangements. Beginning in 2028, ACCESS OAP expenditures roll into ACO benchmark and performance year calculations for MSSP and ACO REACH.

Those are the mechanics. What CMS built around them is what really matters.

The Four Principles Behind an ACCESS-Aligned Arrangement

The launch marks a departure from typical CMMI behavior. CMS published a set of four principles that private payers can use when structuring their own outcome-based chronic care contracts, and it built the operational infrastructure that makes replicating that structure cheap.

Per Cigna’s announcement of signing the Payer Pledge, a payment approach qualifies as ACCESS-aligned if it adopts predictable recurring payments, accountability for clinical improvement or control, flexibility in care delivery that facilitates technology-enabled care, and coordination with primary care and referring clinicians. Those four principles are the anchor of the reference architecture. Every private-payer arrangement marketed as “ACCESS-aligned” over the next three years will trace back to them.

Around the principles, CMS committed to publishing a sample provider agreement structure and payment adjustment code, standardized track-specific G-codes any payer can adopt, and a FHIR-based reporting infrastructure with a CMS-hosted API for outcome measurement. Most of that collateral is expected to be delivered in phases through late 2026 and 2027, ahead of the January 2028 pledge deadline. Once it ships, what previously required a payer to build proprietary outcome measurement infrastructure, negotiate custom contract language, and hire actuaries to price a new arrangement becomes a plug-in kit maintained by the federal government.

CMS is engineering the private payer market's replication path in parallel with the Medicare launch, and doing it publicly enough that fourteen major health plans could sign on to align before the launch. The Pledge is looser than a strict contract. Signatories commit to offering an outcomes-based option for technology-enabled chronic care but retain discretion on which conditions to target, which outcomes to measure, which vendors to work with, and how the model gets operationalized. The technical commitment is a set of principles with productization support behind it, not a uniform contract each payer will execute identically, and that distinction changes very little strategically. The signatories collectively represent 165 million members' lives, committed to aligning by a specified deadline with the operational infrastructure the federal government is building on their behalf.

Subscribe now

Who Signed On to the ACCESS Payer Pledge

The ACCESS Aligned Payer Pledge, signed in February 2026, drew the signatories that make the strategic signal difficult to dismiss.

Four of the largest publicly traded national payers are on it: Humana, UnitedHealthcare, Cigna, and CVS Health. CVS also brings Caremark, its PBM subsidiary, along with an integrated PBM, retail pharmacy, and clinical services stack that reaches most of the largest self-insured employer relationships in the country. Centene brings the largest Medicaid managed care footprint in the country, at 17.9 percent of national Medicaid MCO enrollment as of Q1 2026 per HMA. Seven Blues plans signed on, and given how the Blues federation replicates operational patterns across state licensees, the practical reach extends past the seven names on the pledge.

The pledge has already moved from a voluntary experiment to a reference standard for the private-payer market. Non-signatory plans will be evaluated against ACCESS-aligned language whether they signed or not, and by 2027 their vendors will be pitching them arrangements they had no formal say in designing.

Where Health Tech Just Got Repriced

Over the next 12 to 18 months, the ACCESS framework becomes the yardstick your health plan buyer uses to evaluate every outcome-based pitch, whether or not you sell into Traditional Medicare. That reprices any health tech category evaluated on softer criteria before the launch. Some categories got elevated. Others got deprioritized.

What Just Got Elevated

Longitudinal chronic condition management with outcome accountability, particularly across the cardio-kidney-metabolic stack, is the clearest winner. If your value proposition is managing a chronic condition end-to-end with measurable outcome performance tied to a defined care period, ACCESS validated your category as the reference architecture. What earns the validation is longitudinal accountability for outcomes against a public threshold with technology-supported care as the delivery method, not the marketing label “chronic care management.”

Behavioral outcome measurement got a bigger lift than most vendors realize too. The anxiety and depression track places behavioral outcome measurement within the same reference architecture as physical health outcomes, using G-codes and API infrastructure to make outcome reporting an administrative workflow rather than a research project. Behavioral outcome measurement has been the least mature category in the outcome-based conversation for years, with measurement gaps documented across the industry. A public federal target changes the category's trajectory.

Care coordination and multi-vendor attribution moved up materially, through a mechanism most vendors have not connected to ACCESS yet. The Substitute Spend Adjustment (SSA) penalizes participants up to 25 percent if aligned members receive duplicative services from other providers, which requires knowing who else is touching your member and what they billed for. Any private-payer replication that includes an SSA-style clause requires the same visibility. Attribution, care coordination, and multi-vendor claims analytics are materially more valuable across MA, Medicaid, and commercial lines than they were before.

Musculoskeletal outcome measurement just got its biggest category re-rating in a decade. MSK has been largely treated as a commodity-priced, volume-driven business for years. Hinge Health and Omada’s public market receptions validated the outcome-based digital MSK thesis at the equity level in 2025. ACCESS validates it at the CMS reference architecture level, which changes how the category’s comp set gets read by health plan CFOs during their internal build-versus-buy conversations.

Outcome measurement infrastructure itself is the pick-and-shovel bet underneath all of it. Every private payer that intends to align by January 1, 2028 needs the measurement layer that enables them to do so. Most do not have it built at the scale ACCESS-aligned reporting requires, and those that try to build from scratch face a harder job than those that partner with vendors already carrying that infrastructure.

What Just Got Deprioritized

Now let’s look at the flip side. Point solutions without a longitudinal outcome story are not sitting as well. Simply put, if you cannot tie your work to a condition-specific outcome threshold measured over a defined care period, your health plan buyer’s evaluation framework now discounts you relative to a competitor who can.

Engagement-metric-only pitches are next on the list. “We drive 40 percent engagement” is a features-not-outcomes conversation against the ACCESS reference. The framework rewards outcome attainment rather than activity, and your buyers will make that comparison out loud in the next RFP even if they were willing to accept engagement metrics 12 months ago.

Coding-focused revenue capture plays are the third. This is not a new observation. Earlier this year, I wrote that CMS is systematically ending the risk adjustment arbitrage era by pulling revenue-arbitrage tools out of MA. ACCESS is the constructive half of the same policy strategy. Margin is moving from coding to outcomes. That trajectory now has a public reference architecture, standardized billing codes in the works, and a January 2028 private-payer alignment deadline attached.

Adjacent-condition vendors outside the four current tracks sit in the least clear position. Women’s health, oncology, geriatric syndromes, GI, and dermatology chronic conditions are pre-launch categories, and the chronic conditions plans are most likely to layer in independently are COPD and substance use disorders. Your health plan buyers’ near-term evaluation frame is CKM, MSK, and Behavioral for the next 18 months, with COPD and SUD as the credible adjacent candidates. Positioning work here is anticipatory, and vendors who acknowledge the gap and show they understand the shape of future track expansion will be evaluated more favorably than those who pretend the four tracks do not exist.

The through-line across every category is the same argument. Your buyers’ evaluation criteria are becoming more stringent in a way that specifically favors vendors who have built the outcomes evidence stack rather than the outcomes narrative. ACCESS made that already-shifting trajectory explicit and dated it.

Portfolio companies and management teams within the elevated categories are facing a valuation and buyer-evaluation tailwind that will be evident in board conversations by Q3 2026. Companies outside the elevated categories are looking at an open repositioning window, with a mid-2027 deadline before the first ACCESS-aligned private-payer procurements are written. Vendors that have not started the repositioning work by the end of Q3 are visibly behind the ones that have. Which side of that line you land on depends on the line of business you sell into.

Subscribe now

How ACCESS Alignment Reaches Your Buyer by Line of Business

Three distinct lines of business fall under the 165 million-member figure, each with its own buying cadence and path from the Payer Pledge to your pipeline.

Medicare Advantage

Humana, UnitedHealthcare, Devoted Health, Cigna, and the Blues signatories collectively run Medicare Advantage franchises that touch tens of millions of MA lives. Their alignment commitment directly conflicts with MA vendor selection in 2026 and 2027, well ahead of the January 2028 deadline. If you sell into any of those organizations’ MA books, expect the ACCESS-alignment principles to start appearing in vendor evaluation criteria in the next RFP cycle. Some of those RFPs are being written right now, and the CFO gate that MA plans have been running since 2025 on outcomes evidence just gained a public federal benchmark to point at.

Medicaid

Medicaid moves through Centene faster than any other signatory. Their commitment spans state Medicaid contracts in roughly two dozen states, and the same operational infrastructure that runs their commercial and MA books does not neatly bifurcate by line of business, so ACCESS-aligned arrangements will flow into their state Medicaid MCO relationships as those contracts come up for rebid. State Medicaid agencies have not yet published RFI language that references ACCESS by name, but the channel is already committed at the largest MCO level, where the real replication mechanics live.

Commercial and Self-Insured Employer

Employer coverage runs through CVS Health, a Payer Pledge signatory. Beyond Caremark, CVS operates one of the two largest PBM-and-clinical-services stacks in the country, and its footprint sits inside the vendor selection process at most Fortune 500 self-insured employers. How ACCESS-aligned payment structures enter those employer contracts through CVS’s stack over the next 24 months is the piece of the 165 million number that has received the least attention so far, and the specific thing vendors selling through national PBM or health services partners should be watching for is the language shift in employer RFP templates over the next four quarters.

Beyond those three channels, evaluation criteria will bleed into standard vendor RFPs at plans that never signed the pledge. When Cigna and UnitedHealthcare ask their vendors about ACCESS-aligned principles, competitor plans borrow the question set. It doesn’t seem far-fetched that questions like “How does your solution map to a condition-specific outcome threshold?” will appear in health plan vendor RFPs across all lines of business within 12 months, whether or not the plan asking it intends to formally align with ACCESS.

And finally, private-payer implementations will consolidate on a smaller, curated set of technology partners per condition category rather than distribute across the current long tail of point solutions, which is the typical outcome when a health plan operationalizes a complex network strategy. Which side of that consolidation your product sits on will be decided over the next 12 to 18 months.

The Positioning Runway Between Now and January 2028

The federal government just did work that vendors, investors, and provider strategy teams normally have to build for themselves. The practical work now is translating what CMS shipped into positioning decisions your buyers and boards will care about.

The ACCESS Request for Applications and the Payer Pledge documentation are strategic documents, not program launch materials. The OAP structure, the Substitute Spend Adjustment, and the four core principles that define ACCESS-aligned arrangements are the language your health plan buyers will use in evaluation conversations as early as Q4.

Every vendor pitch, product roadmap, and portfolio position now maps somewhere against the four tracks. Aligned, adjacent, or outside. Each position now carries a repositioning question and a timing anchor. Whether the conversation is with your buyer, board, portfolio company, or client, everything works backward from January 1, 2028. That deadline shapes private-payer alignment, which shapes the 2027 RFP evaluation criteria, which in turn shapes the positioning work you should be doing right now.

Provider organizations face a P&L question about whether direct participation in the ACCESS framework is more valuable than referral positioning to an ACCESS participant. The 2028 ACO benchmark inclusion means ACCESS-aligned attribution will affect ACO benchmarks and performance year calculations, materially changing referral economics for MSSP and REACH participants.

Plans will build the alignment mechanics themselves once CMS publishes the sample provider agreement and G-codes. Vendors will need help translating their story to a reference architecture they did not write, and that translation work is where the next 12 to 18 months of consulting demand actually lives.

Health plan buyers have been getting harder on outcomes evidence for two years already. ACCESS turns that from a slow shift into a dated one. And because this is a CMS-driven initiative with fourteen major health plans already aligned to it, the fingerprints show up in vendor evaluations regardless of whether the plan running the evaluation signed the pledge, participated in the model, or has any Traditional Medicare business at all. Every plan you sell into is now looking at your outcomes story through a framework CMS just published, and that starts happening this fall, not in 2028.

Subscribe now

Final Thought

CMS rarely engineers the direction of a market this openly. When it does, the pattern is usually the same: modest reimbursement early, a small first cohort willing to build against thin economics, and a long iteration cycle that gradually widens the aperture. RPM followed that arc from 2019 forward. So did the shared savings work that eventually became MSSP, and the bundled payment models that reshaped how orthopedic groups think about episodes of care. The organizations that showed up early with the operational infrastructure to participate became the reference examples CMS pointed to when the model scaled, and the ones building alongside them captured the second-wave demand as private payers began replicating what worked.

The ACCESS Model is early in that arc, and what makes it different from prior CMMI experiments is the machinery CMS built around it before launch: a set of four principles that make an arrangement ACCESS-aligned, standardized billing codes any payer can adopt, a CMS-hosted API for outcome measurement, and a Payer Pledge already signed by every major national payer and a meaningful share of the Blues. Read the ACCESS Model as a signal of where CMS believes outcome-based chronic care should go for the next decade, and read the Payer Pledge as the first meaningful private-payer response. The reimbursement rates will iterate. The reference architecture, once the major payers commit to align with it, does not.

If you are working through what this means for your positioning, your messaging, or your go-to-market strategy, Upward Growth is a health plan market advisory firm that works with health tech vendors, investors, provider organizations, and management consultancies to build strategy around how health plans actually buy, operate, and make decisions.

Thanks for reading.

Here’s to upward growth,

Ryan Peterson

The frameworks in the weekly Upward Growth newsletter help health tech sales and marketing teams navigate payor conversations as the market continues to shift.

If your colleagues are in those conversations, they should be reading this too.

💰 Invest In Your Team with a Paid Subscription.

Get a group subscription

Give a gift subscription

💡 Pro tip: Many subscribers expense Upward Growth through their company’s professional development, training, or learning budget. Here’s a one-minute email template to get your manager to approve expensing your subscription.

🤝 Work with us on payor market strategy: Contact me

🟦 Connect with the author, Ryan Peterson, on LinkedIn.

🎧 Listen to the Upward Growth Podcast: Apple | Spotify

📰 Newsletter sponsorships: Learn More

🎁 Unlocked: This post includes the full deep dive

Most Tuesday articles start with a free section and then continue behind the paywall. Today’s post is left completely open so you can read the entire edition.

Paid subscribers get the full deep dive every week, plus playbooks, case breakdowns, and the ability to reply with their own questions.

The first half of 2026 hit nearly every line of business a health plan operates, and the headlines understated the picture.

• Medicare Advantage (MA) absorbed the CY 2027 Final Rule with the largest Stars overhaul in a decade, a Clover Health ruling that opened a bid recalculation window in the middle of an already-compressed bid cycle, and a Risk Adjustment Data Validation (RADV) audit cadence that has not let up.

• Affordable Care Act (ACA) enrollment shed nearly 4 million people in the first month after the enhanced premium tax credits expired and dropped from 23.1 million covered lives to 19.2 million, with double-digit 2027 rate filings already on file in early-filing states.

• Medicaid began absorbing the One Big Beautiful Bill Act (OBBBA) roughly $1 trillion in cuts across work requirements, eligibility redeterminations, provider payment changes, and state rate setting, on a state-by-state timeline that runs through 2030.

• Group (employer-sponsored commercial) absorbed Mercer’s 6.5 percent cost projection for 2026, the highest single-year increase since 2010, with 59 percent of employers responding with cost-cutting plan design changes in the first half.

MA, Medicaid, ACA, and Group commercial are each uncomfortable on their own. Health plans operating across multiple lines of business are absorbing all that compounding simultaneously, and the picture is materially worse than the individual stories suggest. A plan can absorb a major hit on one line of business and respond. The finance team reorders priorities, specialists get redirected, reserves get rebuilt, and the strategy calendar adjusts. None of that works when multiple lines of business take major hits at the same time, against one finance team, one actuarial bench, one provider contracting team, and one compliance staff. The response to each one is constrained by the responses to the others. The compounding is the story.

What follows is what the executive leadership team at the plan you are selling to, investing in, or advising is solving for in H2, and why the Medicaid phase-in running through 2030 is the variable that will keep rewriting the math on every other decision the plan makes for the rest of the year.

The Plan Underneath All of This Is the Same Company

Picture a regional Blues plan running roughly $4 billion in annual revenue across MA, Medicaid, ACA, and group commercial, with several hundred thousand to over a million covered lives in each. That plan has one finance team modeling reserves across all four lines, one provider contracting team negotiating with the hospital systems that anchor every line, one actuarial bench supporting bid recalculations and rate filings and audit response simultaneously, and one executive leadership team making the cross-line prioritization calls. The decisions that team makes in H2 will shape how the plan operates through 2027 and 2028.

The org chart will tell you the lines run separately. Plans have LOB Presidents for each major line, separate operating units, and specialist teams that don’t share much day-to-day work. None of that changes the company's fundamental structure underneath. The plan is one enterprise with one P&L, one capital allocation conversation, one executive leadership team, and one strategy-planning process, in which the lines are prioritized against each other during annual planning. Reserves are held at the company level. Major vendor commitments above a threshold get reviewed by an enterprise committee that includes the CFO and General Counsel. Multi-year strategy decisions are made by the CEO and CFO, with the LOB Presidents weighing in but not deciding.

Cross-line pressure gets sorted at that enterprise level, and the lines act on each other. MA pulling the actuaries through bid recalculation leaves ACA pricing on the same queue, waiting on the same people. Hard ACA reserve decisions in spring shrink the capital pool the Medicaid impact analysis was also drawing from. A state-level Medicaid rate assumption that just shifted in Q1 reaches back into the commercial pricing the plan was preparing to lock for renewal. Each move on one line is a constraint on the next move on another. These trade-offs get made by the CEO, CFO, and executive leadership team, not at the LOB level.

If you are reading the plan from the outside, this is the level to read. The headlines in MA tell you about MA, but the same plan's response also tells you about its capital posture, specialist availability, and strategy attention across every other line. Capital posture is where compounding shows up first, with three lines pressing on the same reserves at the same time, and the CFO running a tighter conversation than the headlines suggest.

Subscribe now

MA, ACA, and Group Are Hitting Capital Reserves at the Same Time

Four million people dropped out of the ACA marketplace in the first month after the enhanced premium tax credits expired, and the market settled at 19.2 million covered lives by spring, down from a peak of 23.1 million at the end of 2025. The lives that dropped coverage were the healthier subsidized ones, which left the plans writing on that market with a sicker pool to price against. Filings in early-filing states are showing rate increases above 15 percent, with “death spiral” warnings returning to ACA market analysis: healthier enrollees drop coverage, premiums rise to cover the sicker remainder, more drop, the cycle compounds. Several plans cut footprint, withdrew from counties that did not pencil at the new mix, and started repricing the markets they kept.

Elevance’s $935 million risk adjustment accrual in May was the most visible of the MA pressures hitting the same finance and actuarial teams. The CY 2027 Final Rule had landed in April with the largest Stars overhaul in a decade, the Clover Health ruling forced Quality Bonus Payment (QBP) recalculation and a bid resubmission window in the middle of the bid cycle, and RADV audits accelerated against a CMS coding workforce that grew from 40 to roughly 2,000 contract reviewers. Membership shed across MA continued through the first half of the year, and the plans carrying the most market exits also carry the most pricing pressure on what is left.

Mercer’s projection for 2026 employer cost growth landed at 6.5 percent, the highest single-year increase since 2010, and the employer-side reaction was immediate. 59 percent of employers made cost-cutting plan design changes in the first half on the group commercial line, narrow network adoption picked up across mid-market and enterprise buyers, and Individual Coverage Health Reimbursement Arrangement (ICHRA) migration accelerated as employers pushed pricing accountability back onto plans. The line plans had been counting on for margin stability is the line absorbing the most aggressive employer-side pushback in over fifteen years.

Three lines pressing on the same capital reserves simultaneously produce a hardened posture across the enterprise. The CFO is defending margin on all three lines at once, and the executive leadership team is maintaining the same public posture through Q1 2026 earnings calls: defend margin over chasing enrollment, model harder on rate, and tighten vendor evaluation. Enterprise investment committee approvals that used to clear in one meeting now clear in three. Multi-year vendor commitments above a threshold now go through legal and compliance review, which wasn’t part of the process 12 months ago. Nearly half of health plan C-suite executives report uncertainty about the near-term outlook, and the procurement posture vendors and partners face reflects that uncertainty. The posture is defensive across every line at the enterprise level, where the prioritization calls get made.

Capital posture is only half of what gets set this year. The other half is what the plan will actually pay out to deliver care, and the contracting team is working through that question against the same compounding from a different angle. Three lines are pulling on the same hospital systems at the same time, and how that plays out is the next collision.

MA, Medicaid, and Group Are All Renegotiating Provider Networks at Once

The same group renewal cycle pushing back hardest on commercial pricing is also pushing back hardest on the plan’s provider network. Employers shifting to narrow networks force plans to renegotiate composition with the systems they keep, and ICHRA migration accelerating in the first half brings a different actuarial profile through the network that has to be re-priced. Every employer that transitioned from a fully-insured arrangement to ICHRA in H1 sent the plan back to its hospital partners with a different risk profile and reimbursement structure.

OBBBA Medicaid is pulling on the same contracting team from a different direction. The phase-in includes provider payment changes that do not align with state rate-setting cycles, which means plans are renegotiating with the same hospital systems on the Medicaid side, using payment assumptions that may shift before the contracts are fully implemented. Some states are pushing payment changes through in 2026 while others wait until 2028. Hospital systems do not experience this as a state-by-state policy implementation, rather they experience it as the plan’s contracting team showing up with a different number than it had eighteen months ago, on the same line they were already renegotiating.

MA adds a third factor. Plans that exited counties in 2026 are rebuilding their MA network footprint in the markets they kept, often on the same hospital contracts that the group renewal and Medicaid renegotiation are touching. The county exits forced the network to be reconstituted under tighter economics, with the same systems holding more leverage in the remaining markets.

One plan, one provider contracting team, three lines pulling on it simultaneously, and the hospital systems on the other side of the table know exactly what is happening. A system that gives ground on MA network breadth knows the same plan is coming back asking for commercial rate relief in six months. A system that absorbs OBBBA-driven payment changes on the Medicaid side knows the commercial line will push for offsetting concessions at the next renewal. Systems can stage asks across the plan’s lines because they view them as a single balance sheet, even as the plan’s contracting team is still managing them as three separate negotiations.

Cross-line leverage also extends across renewal cycles, not just across lines at a single moment. A concession on Medicaid under OBBBA this year appears as the same system's opening position in the MA contract next year. A walk-away from a commercial renewal this quarter changes the terms of the MA network rebuild in that market two quarters later. The system's memory of the plan's give-backs runs longer than any individual contract cycle, and the contracting team is negotiating against that memory every time it comes back to the table. The Blues consolidation that accelerated in H1 is partly this collision: smaller plans could not sustain provider-side pressure across all of their lines simultaneously, and the affiliations are how they tried to absorb it.

Every one of those network moves runs through the actuaries, analysts, and lawyers the rest of the plan is also trying to deploy, and the rest of the plan is not where those specialists are. The audits already have them.

Subscribe now

The Audit Calendar Is the One Calendar That Doesn’t Move

Every other workstream inside a health plan has flex in its calendar. Capital posture tightens across a quarter, network negotiations stage across renewal cycles, and strategy reviews slip a month when the priorities ahead of them demand it. Audit response has no flex. The federal regulator sets the dates, the penalties for missing them carry real payment recovery and civil exposure, and no internal prioritization conversation changes any of it.

The wall expanded on four fronts in H1. Medicare Advantage RADV moved to a quarterly cadence against payment years 2020 through 2024 simultaneously, putting risk adjustment and compliance teams within every plan on a 90-day response cycle across 5 years of submitted data, with material payment recovery at stake. ACA HHS-RADV ran in parallel with Initial Validation Audit (IVA) requirements in revision through the 2026 Payment Notice. The Office of Inspector General issued its first MA-specific compliance guidance since 1999, raising the standard for every plan’s compliance program. And the public posting of prior authorization metrics in March introduced a new monthly reporting cadence for the same legal and regulatory affairs staff already managing the rest. Four federal compliance workstreams accelerated inside the same six months, and none of them had movable dates.

Other H1 pressures all live downstream of that wall. A plan can defer a vendor evaluation, slow a network renegotiation, or push a strategy decision to the next quarter. It cannot defer a RADV submission. So when audit work is dense, every other H1 priority has to plan around it.

Take personnel, for example. The people who own audit response are the same people every other H1 priority is trying to deploy. Actuaries running MA bid recalculation after the Clover ruling are on the RADV queue. Risk adjustment leadership signing off on MA submissions after the Elevance $935 million accrual is working HHS-RADV alongside it. Actuaries pricing ACA for the new morbidity are modeling the impact of audit findings on the same numbers. Compliance staff working OBBBA Medicaid implementation through 2030 are also working federal audit response timelines. One plan, one specialist bench, every pressure pulling on it.

Three of the four H1 collisions are working themselves out against an immovable audit wall. The fourth is a baseline that does not stop shifting. The Medicaid phase-in keeps changing the math the other three are pricing against, every quarter, for the next five years.

Medicaid Keeps Resetting the Math the Other Lines Are Pricing Against Through 2030

A typical line absorbs a shock, the planning team responds, and the company moves on. The Medicaid phase-in will keep generating new variables every ninety days through 2030, which means the company never gets to move on.

OBBBA’s Medicaid cuts are phasing in across work requirements, eligibility verification redeterminations, provider A typical line absorbs a shock, the planning team responds, and the company moves on. OBBBA Medicaid keeps generating new variables every quarter through 2030 as different states implement different pieces on different timelines, and the math the plan is pricing against keeps moving with them.

OBBBA’s Medicaid cuts are phasing in across work requirements, eligibility verification redeterminations, provider payment changes, state rate-setting cycles, RFP timing, and competitive dynamics in Dual-Eligible Special Needs Plans (D-SNPs). None of those tracks share a calendar. Work requirements are coming online in some states in 2026 and others in 2028. Eligibility verification systems are being rebuilt in states that have not yet implemented the redetermination cadence. State-level rate filings going in this year are pricing against federal payment assumptions that may shift before the filings get approved. By the time a plan’s strategy team finishes modeling what one state’s implementation means for the Medicaid line, two other states have moved.

Inside the plan, the work each other collision required already has to be redone. Capital reserves modeled during Q1 annual planning against a Medicaid rate assumption will be remodeled during the spring mid-year reforecast as Q1 results post and additional states implement payment changes, then re-run again during Q3 strategy refresh, with different inputs every cycle. Provider network economics renegotiated this quarter with a hospital system will be re-priced next quarter when an OBBBA-driven payment change hits the same system on the Medicaid side, with the system already aware that the assumptions have shifted. Actuaries and compliance staff who would have rotated off the current RADV wave will rotate into OBBBA compliance work every ninety days as new state implementations generate new federal compliance reviews.

That is what the executive leadership team at every plan operating across these lines is solving for in H2. Four collisions, one company, one set of leadership decisions remade quarter after quarter against a Medicaid baseline that will not stop moving through 2030.

Final Thought

H1 2026 hit nearly every line of business a health plan operates, and the headlines understated the cross-line picture. Four pressures are landing on one finance team, one provider contracting team, one specialist bench, and one leadership group at the same time, with a Medicaid baseline that will not stop resetting through 2030. Cross-line decisions are made by one CEO, one CFO, and one strategy-planning process, and every decision is constrained by the other three pressures working through the same group.

The next ninety days run through Q2 earnings posting in late July and August, the mid-year strategy reviews that follow, and the Q3 reforecasts that lock the 2027 capital posture. These are the cycles where H1 absorption becomes 2027 and 2028 operating decisions. Strategy work that has been sitting in committee since Q1 either gets approved or shelved, and what gets shelved signals where the company chooses to absorb pressure and where it chooses to defer. Audit deadlines will keep absorbing the actuaries and compliance staff every other line also needs, which means the second-half decisions on MA, ACA, and Group get made by a leadership team with less specialist support than it had when the year started.

What to read in H2 is how the plan underneath manages four pressures that remake each other every quarter, against a Medicaid baseline that does not stop moving through 2030. That is what your buyer, your portfolio company’s customer, or your client is solving for right now.

If you are working through what this picture means for your positioning, strategy, or portfolio, Upward Growth is a health plan market advisory firm that works with health tech vendors, investors, provider organizations, and management consultancies on exactly this kind of question. Get in touch.

Thanks for reading.

Here’s to upward growth,

Ryan Peterson

The frameworks in the weekly Upward Growth newsletter help health tech sales and marketing teams navigate payor conversations as the market continues to shift.

If your colleagues are in those conversations, they should be reading this too.

💰 Invest In Your Team with a Paid Subscription.

Get a group subscription

Give a gift subscription

💡 Pro tip: Many subscribers expense Upward Growth through their company’s professional development, training, or learning budget. Here’s a one-minute email template to get your manager to approve expensing your subscription.

🤝 Work with us on payor market strategy: Contact me

🟦 Connect with the author, Ryan Peterson, on LinkedIn.

🎧 Listen to the Upward Growth Podcast: Apple | Spotify

📰 Newsletter sponsorships: Learn More

🎁 Unlocked: This post includes the full deep dive
Most Tuesday articles start with a free section and then continue behind the paywall. Today’s post is left completely open so you can read the entire edition.

Paid subscribers get the full deep dive every week, plus playbooks, case breakdowns, and the ability to reply with their own questions.

Most people who aren't elbows-deep in CMS regulation cycles have never heard of the Medicare Payment Advisory Commission (MedPAC). They should. MedPAC is one of the few sources of analysis that consistently shapes what the Centers for Medicare and Medicaid Services (CMS) does next.

Congress chartered MedPAC in 1997 as an independent advisory body, and twice a year, in March and June, the Commission publishes a report to Congress with formal recommendations on Medicare policy. The report is the closest thing the program has to a neutral technical read on what's working and what isn't.

While the recommendations are not binding, they tend to be adopted at a higher rate than those of most advisory bodies. The site-neutral payment policy, which is reshaping outpatient hospital procurement right now, traces directly back to MedPAC. In fact, the current Medicare Advantage (MA) coding intensity adjustment exists because MedPAC pushed for it for a decade before Congress required it.

The June 2026 report dropped this past Monday. Three findings inside it should change how anyone selling into health plans (or backing the companies that do), thinks about who’s buying inside MA plans for the rest of 2026 and into 2027.

In its June 2026 Report to Congress, the Commission attached $22 billion in higher-than-justified MA payments in 2026 to coding intensity alone. It documented $23.7 billion in improper MA payments for fiscal year 2025. And the same report endorsed a federal role for technology in fixing Medicare enrollment, in the same chapter that flagged the broker channel as part of the problem the technology is meant to solve.

The health plan CFOs I talk to do not need MedPAC to tell them coding intensity is a margin issue, prior authorization is a political issue, or member acquisition costs are out of control. But what they do need is the dollar figures cited back to them by their boards, compliance teams, and actuaries, which is now happening for the rest of the bid review cycle.

For readers of this newsletter, this means each MedPAC finding will change how health plans evaluate vendors over the next 18 months. Recognizing which finding falls within your category and which plans are most exposed to it is what separates the vendors who adjust their positioning this quarter from those who get filtered out of 2027 procurement decisions without knowing why.

The MA Plans Capturing the $22 Billion and the Ones Leaving It on the Table

MedPAC’s June report estimates that the federal government will overpay MA plans by $22 billion in 2026 from coding intensity alone. The required coding intensity adjustment cuts MA risk scores by 5.9 percent (the statutory minimum), but the actual coding intensity gap between MA and traditional Medicare is closer to 10 percent. The four-point delta is the $22 billion.

The split underneath the average is the part of the Commission’s recent reporting that should have gotten more attention, as the headline and the operational reality are two different numbers.

By insurer count, the market is roughly split down the middle. About half of MA insurers code below the 5.9 percent adjustment minimum and get penalized by it. The other half code above the adjustment and retain net revenue from the gap. By enrollment, though, the split is quite lopsided. The half-coding above the adjustment covers 84 percent of MA enrollees because the upper-coding plans cluster in the nationals and the PE-backed regionals, where enrollment is concentrated. The other half covers 16 percent. The market is split 50/50 by plan count and 16/84 by member count, and the second number is the one you should be more aware of its implications.

The upper-coding half is concentrated in large nationals with mature risk adjustment operations and integrated provider assets, and in regional plans owned by private equity or backed by PE-style growth capital that have built risk adjustment into their operating models as the principal margin lever.

The lower-coding half is concentrated in mid-sized regional Blues with conservative compliance postures, provider-sponsored plans whose physician networks resist the documentation workflow burden, dual-eligible-heavy plans whose populations are clinically complex but documented unevenly, and newer entrants who built their networks faster than they built their risk adjustment infrastructure.

So, half of MA plans are coding above the CMS intensity adjustment, and the other half are coding below it. The Inovalon and Harvard study MedPAC cited found that MA enrollees use 18 to 22 percent fewer services than comparable fee-for-service (FFS) Medicare beneficiaries, with the variance concentrated in plans that document chronic conditions less aggressively, rather than in plans gaming the system. Plans that document chronic conditions aggressively end up coding above the federal floor. Plans that do not end up below it.

The distribution is due to the coding intensity gap, not primarily to fraud. It is about documentation completeness, encounter data submission discipline, clinical workflow integration with risk adjustment, and the operational maturity of the chart review and member outreach functions.

What Compliant Capture Actually Means in 2026

Compliant capture means the process of pulling documented but uncoded clinical complexity from a member's record into the risk adjustment submission. It is legal, expected, and aligned with how CMS designed the program. Plans submitting hierarchical condition category (HCC) codes that reflect conditions clinicians have documented and treated are doing the work the payment system asks them to do. (HCC codes are the diagnosis groupings CMS uses to set risk-adjusted payment per member.) The work of submitting HCCs that are not supported by documentation, or that are based on chart reviews that pulled diagnoses providers had not validated, is the work the Department of Justice and the Office of Inspector General (OIG) have been recovering against. The split in MedPAC's data is between plans that have built mature, compliant capture and plans that have not. It is not a matter of honest plans versus dishonest plans.

That line matters more right now than at any point in the program’s history, because the federal enforcement posture has shifted hard.

The OIG published its first MA-specific compliance program guidance in twenty-six years in February. The Department of Justice recovered $6.8 billion in False Claims Act settlements in fiscal year 2025, with MA risk adjustment named as a top enforcement priority. Elevance booked a $935 million risk adjustment accrual in early May, which triggered every other publicly traded plan to run an internal audit pass against the same exposure. Risk Adjustment Data Validation (RADV) audits are now expanding, and CMS has announced it will apply extrapolation to recover overpayments at scale.

Each of those facts has been in the trade press separately. MedPAC’s report consolidated them into a single document, attached the $22 billion figure, and put it before Congress in the same week the bid cycle was closing.

High-Coding Plans and Low-Coding Plans Are Buying Different Things Now

A plan in the upper-coding half is no longer making risk adjustment vendor decisions with the same internal stakeholders it had eighteen months ago. Compliance, legal, and the chief financial officer are now sitting at the table. The question those teams are asking is not how much more capture can you produce. It is whether the work the vendor already did holds up. Will the documentation survive an extrapolation-based audit? Will it withstand DOJ scrutiny? Does the chart review methodology align with what the OIG flagged as low risk in the February guidance? Do the contract terms put the audit liability on the vendor, or leave it sitting with the plan? Vendors who built their pitch around capture volume as the headline are walking into those conversations answering questions they did not prepare for, in front of stakeholders they did not previously sell to.

A plan in the lower-coding half is asking a different procurement question. Those plans are looking at the $22 billion figure and recognizing that their upper-coding competitors are being paid more per member by CMS for documenting the same kinds of patient complexity. The lower-coding plans are leaving compliant revenue uncaptured on their own membership, in a margin environment where every dollar of compliant capture matters more than ever. The growth, finance, and revenue cycle teams within those plans remain the decision-making authorities. Their internal political problem is that increasing coding intensity in 2026 will require doing so under the most aggressive federal enforcement posture in the program’s history. The procurement question becomes how to do the work compliantly at scale, with audit-defensible documentation built into the workflow from the start.

This is the next iteration of the regulatory squeeze that has been building since the OIG guidance landed in February and accelerated through the Q1 2026 payor earnings cycle. Every publicly traded plan that reported in April or May named margin discipline as the operating posture for the rest of the year. Risk adjustment is one of the largest single levers in the margin equation. MedPAC just made the upper and lower halves of the market visible at the same time the enforcement posture forced them to behave differently.

Risk adjustment is one of three dollar magnitudes that MedPAC applied to plan operations. The second was buried deeper in the report and got even less coverage.

Subscribe now

CMS Just Validated the Procurement Structure for AI Utilization Management

MedPAC's second number worth your attention is $23.7 billion in improper MA payments for fiscal year 2025. What CMS is already doing to recover that money is the part the trade press missed. The Commission’s chapter on Medicare payment operations walks through the Wasteful and Inappropriate Service Reduction (WISeR) Model, a Center for Medicare and Medicaid Innovation (CMMI) demonstration that launched in 2026. WISeR tests artificial intelligence (AI) and machine learning-based prior authorization in fee-for-service Medicare for high-volume services with established overutilization patterns, including cervical fusions, knee arthroscopy for osteoarthritis, and percutaneous vertebral augmentation. The model excludes inpatient stays, emergency services, and anything in which a delay could harm a patient.

CMS contracts with what it calls “participating data companies” (AI vendors, in commercial terms) to conduct medical reviews on flagged claims pre-payment. Vendors are paid a percentage of the expenditures avoided through appropriate care. The contract structure is essentially identical to the way MA plans have purchased utilization management services for the better part of two decades. The difference is that the agency itself is now the buyer, and the procurement vehicle is operating in fee-for-service Medicare under a federal demonstration.

The political weight of that procurement structure hasn’t been fully realized yet. The OIG’s 2018 report on MA prior authorization denials and its 2022 follow-up audit set in motion a decade of regulatory pressure on how plans had been operating in the category. The 2022 audit found MA plans denied prior authorization requests that met Medicare coverage rules 13 percent of the time. The Interoperability and Prior Authorization Final Rule (CMS-0057-F) went into effect on March 31st of this year and made prior authorization metrics publicly visible at the plan level for the first time in program history. WISeR is the agency taking the same direction of travel and inverting it. Instead of regulating how plans use prior authorization, the agency is contracting directly with AI vendors to run it itself, using a shared-savings structure that aligns vendors' economics with denial accuracy and clinical appropriateness.

Read in that sequence, WISeR matters less as a demonstration and more as a signal. The federal government is now buying AI-driven prior authorization under a shared-savings contract, and the language inside that contract makes the public health case for the work itself. That is what AI utilization management vendors had been waiting for through all of 2025, when the AI label carried headline risk and no federal customer existed to point to. Whether the demonstration will survive long-term is less known; however, the fact that the procurement validation now exists means vendors selling AI-driven UM to health plans can point to it tomorrow.

The commercial side of the UM market is moving in the same direction. Cigna placed eviCore on strategic review on April 30, with incoming CEO Brian Evanko explicitly framing the rationale as industry standardization and automation, making the asset a better fit elsewhere. eviCore is the largest pure-play utilization management asset in the commercial health insurance industry. The strategic review, in the broader context of Evanko’s portfolio rationalization, reads as a sales process with the buyer pool already in mind. Whoever buys eviCore (a strategic acquirer with adjacent utilization management capabilities, a private equity sponsor building a vertical, or a recapitalized standalone with a different growth model) will become the comp that resets multiples across the utilization management category for the next eighteen months.

The federal procurement validation and the commercial market repricing are happening simultaneously, and the MedPAC report quantified the established commercial precedent for both. The Commission cited KFF analysis showing 1.7 prior authorization requests per MA beneficiary in 2024 compared with 0.02 per FFS Medicare beneficiary, an 85-fold intensity differential between the two programs before WISeR even ran a claim. It also incorporated interviews with hospital representatives reporting 17 percent of inpatient claims initially denied by MA plans, with overturn rates on appeal of 60 to 80 percent. MA plan representatives pushed back during those same interviews, framing prior authorization as a tool to prevent inappropriate or wasteful care. Both readings are now on the record in a federal document, which means both can be cited in procurement conversations from whichever side of the table a vendor is selling.

For vendors selling AI-enabled utilization management or payment integrity into health plans, the ground has shifted. Through 2025, the AI label was a positioning liability, which is why so many vendors quietly buried it in their decks. They do not have to anymore. CMS just signed a federal contract for the work, and the language inside that contract makes the public health case for it. The reframe for the commercial pitch is to lead with clinical appropriateness, audit-defensible denial methodology, and shared-savings accountability. AI gets to be a how, not a what. The reason it matters is that health plans want to be able to defend their decision to buy the work in front of the same compliance teams now sitting at the risk adjustment table, and WISeR gives them the language to do so.

The third finding got its sharpest commentary forty-eight hours after the report dropped, when CMS itself responded to a related court case in a way that made the finding land harder.

Subscribe now

Why the June 17 CMS Memo Sharpened the Member Experience Pitch

The third MedPAC chapter carries the most direct implications for vendors selling into plans for member acquisition, retention, and experience. It is also the chapter most vendors will skip.

Medicare enrollment is genuinely hard. Beneficiaries face dozens of plan options, complicated coverage rules, and tradeoffs between MA and traditional Medicare that they often do not fully understand until they are living with the consequences. Decisions made during the initial enrollment period carry permanent financial implications, and most beneficiaries make them with little help. CMS funds the existing help, primarily through Plan Finder and the State Health Insurance Assistance Program (SHIP), but funding has not kept pace with MA enrollment growth. MedPAC put it directly in the report, writing that "there may be a need for additional updates to Plan Finder and greater support for SHIP, as well as an increased role for technology to help reduce the complexity of the choices that beneficiaries face."

That single sentence is the federal endorsement of the member experience technology category as a policy answer to enrollment complexity. Vendors selling decision-support tools, digital member onboarding, clinically informed enrollment guidance, supervised broker enablement, and plan comparison engines now have a federal advisory body citation they did not have before. The procurement justification shifts. A pitch that previously had to compete on “we help your members shop better” can now compete on “we help your members shop in the way the Commission advising Congress says they should be shopping.” The difference matters more in front of a chief financial officer or chief compliance officer than in front of the member experience team, because the citation moves the conversation from elective spend to advisable spend.

The same chapter creates the headwind on the opposite end of the same workflow. MedPAC named MA marketing growth and Third-Party Marketing Organizations (TPMOs) as contributors to beneficiary confusion and specifically called out insurance agent compensation. CMS caps initial enrollment commissions but does not cap supplemental bonuses, and the Commission flagged concerns that agents may be financially incentivized to steer beneficiary decisions toward certain plans through uncapped bonus payments. The chapter does not propose a specific rule change. It does signal that the next round of marketing rule tightening is coming, and the political risk sits on the unsupervised side of the channel, which has been the direction of travel since the TPMO rule changes in 2023.

And on June 17, CMS issued an updated guidance memo on the 2027 Quality Bonus Payment ratings, following the May Clover v. HHS ruling. CMS recalculated 2026 Star Ratings on a "better of" basis, meaning a contract keeps the higher of its original rating or the recalculated rating, with no plan exposed to a downgrade. The narrowness of what the agency conceded matters more than the recalculation itself. CMS removed the measures the court ruled it lacked authority to collect, but kept the measures the court flagged for rulemaking deficiencies. CMS has until late July to file its notice of appeal. The recalculation is structured to accommodate the court order without conceding the legal grounds underlying the program.

Read against the MedPAC endorsement of member experience technology, the agency's narrow Clover compliance reshapes one piece of the vendor pitch. Member experience vendors whose ROI math is built mainly on Stars uplift are now selling into a procurement environment where the regulatory citation underneath that math is legally contested. A plan CFO evaluating a member experience pitch in Q3 2026 cannot get a confident read from their own legal team or actuary on what the Stars architecture will look like in 2027 or 2028. CMS has not yet filed its appeal, but is expected to before the late July deadline. If the Eleventh Circuit eventually hears the case, it could overturn the ruling, narrow it, or affirm it in part. CMS could also pursue accelerated rulemaking on the procedural finding to cure the defect identified by the court. Congress could intervene. Each path produces a different Stars architecture, and none is predictable enough for a CFO to underwrite a vendor relationship priced solely on Stars uplift.

The move for member experience vendors is to reframe the ROI conversation around outcomes that hold regardless of how the Stars architecture resolves. Member retention. Friction reduction in the enrollment workflow. Gap closure that maps to clinical and operational value independent of measure specifications. Risk adjustment data quality that improves through better member engagement. Cost-of-care reductions tied to earlier intervention. Each of those holds up in front of a CFO regardless of how the Clover litigation resolves. Stars uplift becomes the bonus on top, not the headline.

The same dynamic hit equity-focused vendor categories after the CY 2027 Final Rule’s health equity rollback, when plans serving dually-eligible populations still needed the work, but the regulatory citation under the pitch went away. The procurement conversation shifted from “you have to” to “you choose to.” Choosing to requires a stronger ROI case than a regulatory citation ever did, and the vendors who already had that ROI case kept selling. The vendors who had built the pitch on the citation lost their footing for two or three quarters. The member experience category is now in that same transition, accelerated by the timing of the agency’s Clover response.

The CFO Filter Is Now Folding the Three MedPAC Findings Into the Same Question

The three findings are located in three different places within the plan's operating model. They share one operational consequence that ties them together.

The risk adjustment vendor conversation now includes compliance, legal, and the chief financial officer. The utilization management vendor conversation now includes the same compliance function, which is weighing in on risk adjustment vendor selection. The member experience vendor conversation now includes the chief financial officer asking whether the ROI math survives litigation the plan’s own legal counsel cannot predict. The common pattern across all three is that the procurement decision authority inside the plan has migrated up and across, away from the line-of-business owner who used to be your champion.

The CFO filter has been doing this for a while. I wrote about it last fall when the financial discipline shift was first making vendor renewal conversations look different. The pattern keeps showing up because the underlying pressure continues to compound. The CFO filter started tightening in 2024, accelerated during the Q1 2026 earnings cycle, and is now incorporating MedPAC’s three findings as additional lenses within the same filter. Each new lens makes the filter finer. Each new lens raises the procurement bar. Each new lens means the champion you have in the plan is bringing your pitch to a wider set of internal stakeholders than they did a year ago.

The practical implication is that your next plan conversation is one your champion is preparing to defend in front of a wider audience. The work this quarter is making your champion’s defense easier. That means the deck answers the compliance question before compliance asks it. The ROI model survives the CFO’s stress test before the CFO runs it. The audit liability terms are written in language that legal will not need to rewrite. The clinical and operational outcomes are documented in a way that holds regardless of which specific federal rule survives or evolves over the next eighteen months.

A vendor who has done that work before the Q3 conversation gives their champion something to defend with. Without it, the champion absorbs harder questions on the vendor's behalf, from a wider set of people than were asking them six months ago.

Subscribe now

Final Thought

None of the three findings in MedPAC’s June report requires Congressional action to reshape what plans buy. The regulatory architecture underneath each one could still move. The Clover ruling could be narrowed or overturned. The WISeR Model could end the way several CMMI demonstrations before it have ended. The coding-intensity adjustment could be re-engineered by a future CMS administrator with a different posture. None of that changes what is in front of you this quarter.

The operating question is which buyer is making the procurement decision inside each plan in the second half of 2026, and whether your pitch is built for the version of that plan they are running now or the version they were running eighteen months ago. MedPAC grouped the buyers, attached the numbers, and put the grouping in a federal document that boards and chief financial officers will be reading for the rest of the summer. The work this quarter is to read the grouping, find your buyer in it, and rebuild around what that buyer is being asked to defend.

If you want to think through what any of this means for your positioning or your next renewal conversation, reach out.

Thanks for reading.

Here’s to upward growth,
Ryan Peterson

The frameworks in the weekly Upward Growth newsletter help health tech sales and marketing teams navigate payor conversations as the market continues to shift.

If your colleagues are in those conversations, they should be reading this too.

💰 Invest In Your Team with a Paid Subscription.

Get a group subscription

Give a gift subscription

💡 Pro tip: Many subscribers expense Upward Growth through their company’s professional development, training, or learning budget. Here’s a one-minute email template to get your manager to approve expensing your subscription.