Payers did pretty well this quarter, but that trajectory could change

After a year of disappointing earnings calls, Q1 2026 finally gave health insurers something to celebrate.

Despite challenges like the expiration of enhanced premium tax credits in the Affordable Care Act (ACA) marketplace, major payers like UnitedHealth, Elevance, Humana, CVS’s Aetna, and Cigna surpassed Wall Street’s expectations and largely did a better job managing medical costs than recent quarters. All those payers upped their full-year profit forecasts, too—except Humana, which reaffirmed its adjusted profit forecast but lowered its nonadjusted earnings forecast.

This doesn’t mean any of those payers are out of the woods, though, experts shared.

The performance improvement is a result of plans “aggressively” upping premiums and making “tough portfolio decisions” like narrowing networks, exiting unprofitable areas, and reducing members within Medicare Advantage (MA) and ACA marketplace plans, David Shapiro, general manager and SVP of member experience at healthcare consulting group Press Ganey, told Healthcare Brew over email.

“Health plans are raising expectations right now, but that shouldn’t be mistaken for cost pressures going away,” Shapiro said. “I’d characterize the industry tone as cautiously optimistic rather than confident.”

Insurers and industry experts have also said it’s hard to predict full-year medical cost trends based on Q1 because medical claims can take anywhere from weeks to months to process.

Medicare’s advantage. Still, this round of earnings calls was more upbeat than last year, when payers harped on higher-than-expected utilization and costs.

One arguable victory for plans? Next year’s MA payment rates.

MA providers got into a spat with the Centers for Medicare and Medicaid Services (CMS) over the agency’s initial lower-than-expected proposal that would have raised payments only about 0.09% per enrollee in 2027 (or 2.5% when taking into account new coding practices and population changes). The initial rate announcement also included multiple proposed changes to the risk adjustment system.

CMS delayed one of those changes and upped plan payments, bringing the average increase closer to 5% per enrollee when adjusted for coding and population changes.

“I don’t see any substantive rationale for backing off on that [risk adjustment] proposal. That was, I think, a gift to the industry,” Richard Kronick, an MA policy researcher and a professor in the department of family medicine and public health at the University of California, San Diego, told us.

Execs from payers like UnitedHealth, Aetna, and Humana, on the other hand, said in earnings calls that CMS’s tweaks haven’t helped them enough.

James Rechtin, CEO and president of Humana, said during the company’s April 29 call that the rate increase will help stabilize the industry but isn’t enough given rising medical costs. He added that the insurer will “adjust” (read: cut) benefits going forward.

Humana has a lot at stake. Unlike other payers, which shrunk their MA enrollment, the company saw its MA enrollment rise to 7.1 million by the end of Q1—1.3 million more people than the end of 2025—putting it on track to potentially surpass UnitedHealth as the largest MA insurer by year’s end.

Medicaid’s meltdown. There’s also going to be more insurer–government tension over Medicaid in the next few years.

“We believe upcoming [Medicaid] policy changes will likely cause volatility in 2027 and improvement in 2028 before reaching homeostasis in 2029,” investment firm Baird analysts wrote in an April 22 note about Elevance.

Medicaid and the Children’s Health Insurance Program (CHIP) had 75 million enrollees nationwide as of January, per CMS. But over the next few years, the program will see the phase-in of work requirements and more frequent eligibility checks that could cause 4.9 to 10.1 million people to lose Medicaid coverage by 2028, per a projection by the nonprofit research organization the Urban Institute, with funding from the Robert Wood Johnson Foundation.

There’s hope the broader managed care industry’s medical costs will settle down over the next few years, though, JPMorgan analysts wrote in an April 27 research note about UnitedHealth.

Predicting medical cost trends is “notoriously difficult,” but managed care’s growing shift from fee-for-service reimbursement to value-based care “will disproportionately benefit payers over providers,” the analysts wrote, by slowing medical cost growth and stabilizing medical loss ratios. (CMS announced in 2023 it aims to have all Medicare and the majority of Medicaid beneficiaries in value-based accountable care organizations by 2030.)