Medicare Advantage plans edge away from supplemental benefits

Modern Healthcare – Thursday, September 25, 2025
By Nona Tepper

Supplemental benefit vendors are bracing for another challenging year as Medicare Advantage insurers discontinue plans and downscale the perks they offer members.

Health insurance companies such as UnitedHealth Group subsidiary UnitedHealthcare and Elevance Health have announced they will eliminate unprofitable plans and pare back supplemental benefits in 2026 as they seek to restore profit margins amid high spending and stricter regulation.

Companies that contract with Medicare Advantage insurers to offer services such as non-emergency medical transportation, food and dental care could find themselves making less money as a result.

At the same time, insurers that vendors may have once counted as customers, such as UCare, will no longer offer Medicare Advantage coverage at all next year. Even insurers such as Humana, which have committed to maintaining their benefits, are continuing dramatic cutbacks from prior years.

“‘25 was the year of benefit degradation. I would say this year’s [annual enrollment period] is almost going to be a similar, if not worse, carbon copy than last,” said Jenn Kerfoot, chief strategy and growth officer at Duos, a supplemental benefits navigation startup. The sign-up campaign runs Oct. 15-Dec. 7.

Last year represented the first time in recent history that Medicare Advantage insurers cut back on supplemental benefits, as they reduced spending by an average of nearly $6 per member, per month, according to a report the actuarial firm Milliman issued in April.

This year, the Centers for Medicare and Medicaid Services will dispense $86 billion that insurers use to reduce out-of-pocket responsibilities and offer perks unavailable in fee-for-service Medicare, according to a report the Medicare Payment Advisory Commission, which counsels Congress, published in June. MedPAC estimates that insurers will spend $39 billion of that on supplemental benefits, or about $100 per member, per month.

As carriers continue to weather high medical costs, lower quality bonuses, a challenging coding update and a federal promise to annually audit their risk-adjustment data, they are focused more than ever on at least breaking even on their supplemental benefit investments, said Sam Melamed, CEO of NCD, a dental benefits vendor.

NCD expects a material reduction in the value of the dental coverage Medicare Advantage plans offer in 2026, Melamed said.

Insurers will likely spend on benefits they expect will entice current members to stick with their plans — but that they may not actually use, Melamed said.

“Part of the game theory is, ‘What are the benefits that you get more marketing bang for your buck than the expectation of what utilization will be?’” Melamed said.

This year, CMS began requiring supplemental benefits to have “clinical value” and barred insurers from using taxpayer dollars to pay for fitness equipment such as golf clubs. Next year, the agency was going to mandate that insurers notify enrollees midyear of unused supplemental benefits, but delayed implementation because of “logistical concerns.” Insurers still must submit data about how enrollees use supplemental benefits for the first time in 2026.

Because most Medicare Advantage insurers are focused on maintaining or reducing membership for 2026, insurers will likely lessen the value of prepaid debit cards and other benefits that have driven enrollment, said Ryan Langston, a director and senior analyst at the investment bank TD Cowen.

“Given that no [Medicare Advantage] plan we know of is making a target margin, I think it’s very easy to believe we’re going to see another year of broad benefit reductions,” Langston said.

Insurers are also mulling how the end of the Value-Based Insurance Design model, or VBID, fits into their benefit plans, said Tyler Overstreet Cromer, who leads the complex care programs, policy and research practice at the consulting firm ATI Advisory. Under the demonstration program, participating insurers were required to offer enrollees at least two of three categories of non-emergency transportation, healthy food or benefits that supported activities of daily living.

“I will not be surprised if we see some drop-off in those specific offerings,” Cromer said.

Previous cutbacks have already taken a toll on some supplemental benefits vendors.

Last month, non-emergency medical transportation company Modivcare filed for Chapter 11 bankruptcy reorganization after its debt obligations ballooned to $1.4 billion. Although the majority of the company’s business is Medicaid managed care, Modivcare reported that Medicare Advantage plans scaling back services contributed to revenue declines. Modivcare did not respond to an interview request.

“The lack of growth and insurer pullback is hurting folks,” said Ari Gottlieb, an independent healthcare consultant.

The tumultuous market has provided an expansion opportunity for some companies, however.

This month, NationsBenefits paid an undisclosed sum to add the non-emergency medical transportation provider CareCar to its suite of services. In December, NationsBenefits bought General Vision Services. In November, it acquired the food-as-medicine vendor Good Measures.

NationsBenefits profits from all of its supplemental benefit offerings, and does not rely on more lucrative perks, such as hearing aid coverage, to subsidize other services, said co-CEO Michael Parker.

“By integrating, we can lower the cost of delivery for health plans and members, and have the platform be sustainable for the long-term,” Parker said.

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