UnitedHealth Scales Back Medicare Advantage Plans in 16 Counties Amid Rising Program Costs and Funding Cuts

EDEN PRAIRIE, Minn., Oct. 1, 2025 — Rising program costs, federal reimbursement cuts, and regulatory challenges are leading UnitedHealth Group to withdraw certain Medicare Advantage offerings ahead of 2026.

UnitedHealth Group, the largest U.S. provider of Medicare Advantage plans, announced it will withdraw from 16 counties in 2026, a move that will affect about 180,000 members. The retrenchment underscores the growing strain on insurers as federal reimbursement cuts, regulatory shifts, and surging healthcare utilization converge to reshape the economics of the program.

The Centers for Medicare and Medicaid Services, or CMS, pays private insurers to administer Medicare Advantage, or MA, plans for older Americans and those with disabilities. UnitedHealthcare, the insurance arm of UnitedHealth Group, is the dominant player in this market, holding more enrolees than CVS Health’s Aetna and Humana combined. Yet even with scale advantages, the company now faces financial headwinds too steep to ignore.

“The combination of funding cuts, rising healthcare costs and increased utilization have created headwinds that no organization can ignore,” said Bobby Hunter, head of UnitedHealth’s government programs, during a Tuesday briefing.

Why is UnitedHealth Pulling Back Now?

UnitedHealth said it will cease operating more than 100 MA plans, representing roughly 600,000 members in total, by 2026. While the 16 counties represent the first confirmed exits, UnitedHealth expects wider retrenchment as it reassesses its portfolio.

Many of the discontinued plans will be preferred provider organizations, or PPOs, which allow members to see doctors outside a narrow network. These products are more costly and harder to sustain under tighter reimbursement rules. Health maintenance organizations, or HMOs, by contrast, are cheaper to manage but restrict patient choice. UnitedHealth’s pivot reflects a pragmatic attempt to contain costs while still offering coverage.

Hunter noted that closures would fall largely in rural markets, where maintaining provider access has become prohibitively expensive. The focus, he said, is on models that can be “sustainable and cost-effective.”

Pressures Building Across the Industry

UnitedHealth’s retrenchment comes after it suspended its full-year earnings guidance earlier this year, following its first quarterly miss since 2008. Increased utilization of services within Medicare Advantage drove unexpected costs.

In a second-quarter earnings call, executives highlighted regulatory changes due in 2026 that will reduce payments for certain diagnoses, estimating a $4 billion risk to profits. By its calculations, government funding will have fallen by around 20% between 2023 and 2026.

To adapt, the company is restructuring its offerings. Closing higher-cost plans and consolidating around HMOs represents a defensive strategy to mitigate looming payment cuts.

Impact on Patients and Competitors

Patients Face Narrower Choices: The 180,000 members affected by county-level exits will need to transition to new coverage, often HMOs. For rural enrolees in particular, that may mean reduced provider choice and additional referrals for specialty care.

Competitors Watch and Weigh Options: Rivals like Humana and CVS Health could benefit by picking up displaced members, but they face identical cost and regulatory pressures. Analysts suggest the entire Medicare Advantage market will see consolidation, with fewer plan types and narrower networks over time.

Is Medicare Advantage at a Turning Point?

The program has grown rapidly, with more than half of eligible seniors now enrolled in MA plans. Its popularity stems from added benefits such as vision and dental coverage. But growth has brought soaring costs, prompting CMS to adjust payments in ways that insurers argue make many plan models unsustainable.

UnitedHealth’s move, therefore, is not an isolated corporate decision but an early signal of how the industry will adapt. With demand rising as America ages, the sector faces a difficult balancing act: preserving access while maintaining fiscal discipline.

Balancing Access with Sustainability

UnitedHealth executives argue the retrenchment is essential to long-term viability. Hunter underscored that the company must “bring care to folks in a cost-effective way,” even if that means withdrawing from markets that cannot support current plan designs.

For policymakers, the changes highlight the challenge of controlling federal healthcare spending without reducing options for seniors. MA’s popularity ensures it will remain politically sensitive, but unchecked growth would burden the federal budget.

A Pivotal Moment for Insurers and Patients

UnitedHealth’s decision underscores how vulnerable even the strongest players are to incremental regulatory change. A shift in reimbursement formulas magnified across millions of enrolees can alter billions in profitability. By choosing discipline over breadth, UnitedHealth is signaling a new phase in the evolution of Medicare Advantage.

As 2026 approaches, patients may face fewer choices and tighter networks, particularly in rural America. Competitors may step in at the margins but will face the same pressures. Policymakers will be forced to confront a basic question about whether Medicare Advantage can remain both comprehensive and affordable or must be reshaped to ensure sustainability.

For now, UnitedHealth’s withdrawal from 16 counties may look modest. In reality, it represents the start of a wider recalibration, one that could redefine how older Americans receive care in the years ahead.

The combination of funding cuts, rising healthcare costs and increased utilization have created headwinds that no organization can ignore.

Inputs from Diana Chou

Editing by David Ryder