The MA Reset, One Year On: Three Shifts the Stabilization Story Misses

The 2026 Medicare Advantage growth headline was flat to modestly positive. Underneath it, three structural shifts have compounded on plan buying decisions in ways sell-side stabilization commentary does not capture: an SNP rotation running through C-SNPs rather than the D-SNPs earnings calls point at, four plans in federal court over the same Star Ratings methodology, and a hard January 2027 CMS deadline that will consolidate supplemental benefit spend onto a small platform-compliant set. The three shifts are the compounding pattern behind CY 2027 plan buying, and any market shape read that misses them forecasts against a market that does not exist.

In this episode of the Upward Growth Podcast, Ryan Peterson breaks down the three shifts as the market shape read that enterprise financial analysis was not built to produce. The episode walks through the compounding pattern across a plan's Star tier and buying priorities, the three-path call in supplemental benefits ahead of the CY 2027 bid window, and the signals to watch in the late-September CMS Landscape file.

What you'll hear:

• The three shifts as one compounding pattern rather than three separate news cycles: how a plan's Star tier shapes its C-SNP appetite, which shapes its supplemental benefit consolidation posture
• Why market shape analysis and enterprise stabilization are answering different problems, and where the sell-side "when, not if" read runs short
• What the C-SNP vs. D-SNP composition inside the KFF 85 percent SNP growth number changes for anyone reading Medicare Advantage as a monolithic market
• How four plans (Clover, SCAN, Alignment, Elevance) in federal court over Star Ratings methodology reshapes 2027 QBP dollars and any account risk model built on top of them
• Why the January 1, 2027 CMS supplemental benefit verification deadline is a consolidation event, not just a compliance date
• The three legitimate paths in the supplemental benefit category (platform winner, partner under a platform, category exit) and why waiting is the wrong option
• What to watch for in the late-September CMS Landscape file: three signals that either confirm or complicate the three shifts

Read the full analysis in the Upward Growth newsletter: The Medicare Advantage Reset One Year On: Three Shifts the Stabilization Story Misses

About Upward Growth: Upward Growth is a health plan market advisory firm. We work with health tech vendors, investors, provider organizations, and management consultancies on how health plans actually buy, operate, and make decisions. 

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Connect with Ryan on LinkedIn: https://www.linkedin.com/in/ryan-peterson-1a20866/

Learn more about Upward Growth: https://www.upwardgrowth.com

Transcript

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Welcome back to the Upward Growth Podcast. This is episode five, and today's episode pairs with the article I published on Tuesday, August 18th, titled The Medicare Advantage Reset One Year On. Three Shifts the Stabilization Story Misses. And that's live at Upwardgrowth.substack.com. Now this article is a follow-on piece to one I wrote nearly a year ago to the day, titled Medicare Advantages Reset: What Vendors Need to Get Right. And that first article argued that what looked like a Medicare Advantage collapse was actually a familiar reset cycle. This new article, 12 months in, shows the reset is shaping the market into something structurally different from before. And that's what we're going to focus on today. If you're planning your CY 2027 exposure to Medicare Advantage right now, you're probably reading the sell side analysts. Good, you should. But the read they're giving you was built to answer a different problem than the one you might need the answer for. And frankly, you need both. Quick translation on who I mean by sell side. These are the analysts at places like Bank of America and JP Morgan writing stock research for institutional investors. Over the past two quarters, they've coalesced a bit around a when not if read on managed care margin recovery and commentary anticipating margin normalization by 2027 or 2028. It's important work, it's exactly what institutional investors pricing a stock need. And frankly, I read it every week. But if you're a health tech vendor selling into these plans, or an investor sizing exposure to vendors that do, or perhaps you're even a provider organization who's partnering with plans, you need something on top of that. You need to know what MA product lines are being funded in 2027, which counties look like exit risk, which supplemental benefit categories are being cut, and what a star tier a specific buyer might sit in, and whether that star tier frankly shapes their appetite for new vendor spend inside the CY20s 27 bid window or not. Rarely does that level of detail make its way into the enterprise margin analysis, and it can't really be extracted from it either. So the rest of this episode is about what market shape analysis actually surfaces this cycle and why the compounding of three specific shifts is the real story for anyone selling or investing into this market. Before I get into the three shifts themselves, there's a distinction I want to lay down first because it shapes how you understand everything else. Enterprise stabilization and market shape analysis are answering different problems, and both can be right at the same time. And a lot of the confusion in the market right now traces back to conflating them. So the enterprise margin question is whether plans hit their 2028 margin targets and whether the stocks are defensible at current valuations. Sell side analysts answer that credibly. Historical MA cycles do recover, and target margins come back once discipline returns. The 2014-2015 reset is a base case, and enterprise analysts are right to reference it. The Johns Hopkins researcher who ran the JAMA analysis on the 2026 disenrollment framed the pullbacks in a follow-up interview with the American Journal of Managed Care as quote, necessary market corrections intended to address historical government overpayments, end quote. That framing's directionally consistent with the sell-side stabilization view. Both reads are compatible and largely correct as far as they go. Now, market shape analysis is doing something else. It's trying to figure out what plans we'll actually be buying in 2027, in what categories, at what star tiers, in what geographies, you get the point. That's a different analytical problem. And the 2014-2015 comparison as the base case doesn't carry cleanly over this time frame. Here's why. Five things make this reset different from the last one. First, forced disenrollment in 2026 runs roughly three times the scale of the 2014-2015 cycle. Second, the Inflation Reduction Act rewrote Part D economics after 2022. Third, chart review exclusion under the tighter 2027 rate parameters reshaped risk adjustment revenue across every plan for CY 2027. Fourth, the cross-plan rotation into SNPs, which I'll get into in a minute, has no real parallel in the previous cycle. And fifth, supplemental benefit platform consolidation runs on a hard January 2027 deadline that no prior cycle had to accommodate. Plans crystallized their responses to all five of these during the Q1 2026 earnings cycle, and none of them was really present the last time this market ran a reset. So both frames can be true. The sell side is right about the margin recovery arc, and I wouldn't argue against it. The mistake, though, is planning your market strategy off of that arc alone. Planning market strategy off enterprise stabilization is like planning a real estate purchase off a stock analyst read on the housing market. It's the right domain, but maybe not the perfect analysis. Alright, let me walk you through what market shape analysis actually surfaced this cycle because it comes down to three specific shifts hitting the same buyer at the same time. Shift one is the SNP rotation. And of course, SNP here means special needs plans. And this is the biggest misread in the market right now. KFF, you know, forever known as Kaiser Family Foundation, put on an MA enrollment analysis showing SNPs accounted for 85% of net Medicare Advantage enrollment growth in 2026. General MA growth in 2026 was the slowest it has been in nearly two decades. Both numbers come straight out of the CMS enrollment file, so they're hard data. Now here's where a simple misread can happen. Public commentary and earnings calls both point at D SNPs as a growth story. For example, Senteen told the market their 2027 focus will be on the dual eligible population. Humana's Q1 language treated DSNP intake as the higher value pipeline. And so if you're sizing addressable population off earnings call commentary alone, you'd build against d SNPs. But the enrollment files say something different. C SNPs, chronic condition plans, are the actual growth engine right now. CSNPs added roughly 500,000 net new members from 25 to 26 compared to dSNPS adding 344,000. CSNPs grew 45% year over year, while DSNPs grew 5.7%. So while the public commentary sits with duals, the enrollment file seems to lean on the C SNPs. If you thought you're pursuing the duels market, the addressable population is not the one you sized against, and the buyer for a chronic condition program is a different account than the buyer for a state medicated integration. Now shift two is what's happening with the STARS ratings program right now. And unless you've been living under a rock for the last couple months and you're not familiar with Clover Health's lawsuit, I don't know what to tell you. There's so many folks who have been keeping up week over week with that and very easy to Google search and get to. What matters for this though is that it's now more systemic and it's broader than Clover. Because in July, Scan, Alignment, and Elevance all filed their own suits against CMS. They're arguing the agency violated the Administrative Procedure Act by treating similarly situated plans differently on Starry calculations. Combined disputed QBP dollars across those three suits are $290 million. And CMS filed a notice of appeal on the original Clover ruling to the 11th Circuit on July 21st. So that's four plans in federal court over the same rating methodology in 12 months. Meanwhile, that same JAMA analysis I mentioned earlier found 2.9 million MA enrollees were forced to change plans in 2026. That's roughly 10% of MA enrollees in a single year. And plans rated below four stars were disproportionately affected. Only about 67% of MA enrollees now sit in four-star or higher plans, down from around 80% earlier in the decade. In fact, Humana said on their Q2 earnings call that 2027 exit decisions skewed heavily to contracts rated 3.5 stars or lower. So plans are using star ratings to make consequential exit decisions. And some of the same plans are suing over those same star ratings after the fact. And finally, shift three is supplemental benefits. Effective January 1st, 2027, supplemental benefit spending routed through flex cards, OTC allowances, and food and grocery cards has to be verified in real time at the point of sale per the CY 2027 final rule. Every transaction has to be tied to an eligible plan covered item. Vendors serving those 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 benefits will use the deadline as the reason to consolidate remaining spend onto the smaller set of platform vendors who meet that standard. KFF found OTC benefits available in 66% of 2026 plans down from 73% in 2025. And that was before the deadline hit. So the consolidation is already underway. Okay, so let me talk about what all this actually means for how plans are operating right now, because this is where Upward Growth spends their time every day, helping vendors, investors, and provider organizations understand how health plans buy. Look, I read the sell side coverage on managed care margins, I read the legal analysis on the star cases, and I have opinions on both. But the day-to-day work that we do here is on the buying motion. So let's take a moment to look at what the compounding of those three shifts that we talked about earlier mean and how they affect a health plan's PL. First, a health plan star tier shapes its C SNP appetite, because plaintiff plans with QBP dollars flowing back onto their books after recalculation will fund the C-SNIP push harder than bystander plans still absorbing 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 that they were already trimming. And the C SNP push itself determines what actually stays in the supplemental benefit portfolio because 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. So what does that mean for what you should be doing between now and the end of the year? Well, if you sell into these plans, consider segmenting your book by MA product line first. General MA is a shrinking pool as we have seen with tighter vendor spend. D SNP has budget flowing into state Medicaid integration and dual-specific care management, while CSNP has budget flowing into chronic care management infrastructure and disease state specialty vendors. Most major plans have all three books with different budgets and different priorities inside each. A pitch that treats MA as monolithic is forecasting your 2027 pipeline off an aggregate no plan is actually running. Now take the time to segment your book by which of the three lines you actually serve. If you're strong in general MA and weak in the two SNP books, that's more of a repositioning convo, not a pipeline convo. But if you're strong in DSNP but have never sold to a chronic care management program, then the CSNP tailwind really isn't yours to catch. If you're on the investor side, the account risk model for any portfolio company with STARS exposed revenue needs to rewrite this cycle. Clover won its case, and its 2026 rating jumped a full point from 3.5 to 4.5 stars. CMS then voluntarily recalculated for a bunch of other plans, though per analyst commentary it didn't really move the needle much for most of them. And with scan, elements, and alignment now in court, if any of those three wins, or CMS concedes more ground while fighting the appeals, a set of plans could land on 2027 ratings that your account risk models didn't have six months ago. Some four-star plans could effectively become 4.5, some 3.5-star plans could become four. And their competitors who didn't move would be relatively worse off even though their own ratings didn't change. That changes the competitive dynamic on member acquisition, benefit spend, and everything else that flows off QBP dollars. So any model that treats a planned star tier as a stable field is going to misprice this. And the risk-adjusted revenue math on any portfolio company selling into stars exposed needs a refresh as well. So let's zoom out for a second, because there's a bigger concern under all of this. The pattern of the past few years where CMS runs SARS, plans sue after the fact, and CMS recalculates or defends isn't sustainable. Every additional lawsuit strengthens the case that the methodology itself needs a rewrite. Whether the 2028 version of STARS is a modest revision or a wholesale overhaul depends on what the 11th Circuit does with the Clover appeal and how CMS responds. But it's not hard to imagine a world where the whole QBP program looks meaningfully different a year or two from now. Any account risk model that assumes STARS and QBP work the same in 2028 as they do today is making a bet on stability that the last two years of litigation have made much harder to defend. Okay, that brings us to the third shift, supplemental benefits. If you sell into that category specifically, the stay or exit call needs to be made before the CY 2027 bid submissions. There are really three legitimate paths. First is winning platform status by gaining accounts as competitors who fail the verification standard. Another would be running your product as an underlying feature inside a compliant platform. And the third would be exiting the category, harvesting cash on the current book, and redeploying capital elsewhere. But waiting here is the wrong move because plans are modeling who they consolidate onto right now alongside these CY 2027 bid economics. One more piece worth naming, even if you don't sell supplemental benefits. Health plans are using benefit design as a membershaping tool now, not just a cost lever. Every product they buy from you gets evaluated on the same two questions, and they go something like this. One, does this help us attract the members we want, meaning SNP populations, higher risk adjustment members, targeted geographies? And second, does this help us retain members we're not trying to keep? Remember, your framing on new products and renewals has to speak to and answer those questions. Alright, so wrapping up here, late September the CMS landscape file drops, and that's the next real data point that will either confirm or complicate the three shifts that I just walked through. And so three signals worth watching when that file comes. First, 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. Second, whether the DSNP and CSNP plan count expansion in the file matches the growth commentary. That's the real test of whether the SNP rotation is landing at the filing level or being a bit oversold. And third, which supplemental benefit categories move which direction plan by plan. And this is so you can see how the January 2027 pressure is actually going to be distributing. Whichever way the file lands, the underlying point doesn't really change. Enterprise stabilization and market shape analysis are answering different problems. And if you're planning your CY 2027 exposure off enterprise financial analysis alone, you're forecasting against a market that isn't quite accurate. And so what to carry into your next conversation with a buyer, a portfolio, or a board is this. Where does each plan you touch sit across all three shifts right now and together? Answer that, and you'll have your read on what they'll be buying in 2027. And hey, if any of these three shifts touches your CY 2027 planning, drop me a note on LinkedIn or send me an email. I'm always happy to trade notes on what you're seeing and what I'm seeing. And if this show is earning a slot in your week, follow or subscribe on Apple Podcasts or Spotify and leave a rating so the next listener can find it. I'm Ryan Peterson. Here's to Upward Growth.