Clients counting on using annuity income or other retirement income to pay Medicare plan premiums in 2026 may need to factor in big rate increases.
Executives from UnitedHealth warned Thursday during a conference call with securities analysts that Medicare Advantage plan users' use of care in the first quarter of the year increased twice as fast as in 2024, and twice as fast as they had assumed when setting 2025 premiums.
"Our Medicare Advantage plan designs and pricing for 2026 will be fully informed by these trends," Andrew Witty, the company's CEO, told the analysts.
UnitedHealth executives held the analyst call to go over earnings for the first quarter. The company was the first health insurer to report its results for the quarter.
What it means: UnitedHealth executives were talking only about Medicare Advantage claim trends, not trends for Medicare supplement insurance.
But many insurers talked about seeing a surge in claims in late 2024, and the Centers for Medicare and Medicaid Services recently announced that subsidies for 2026 coverage will increase more than the agency had originally proposed because claims were much higher in late 2024 than it had expected.
The UnitedHealth comments and the CMS subsidy increase could be signs that issuers of Medicare supplement insurance will also face higher claim costs and pressure to ask for bigger premium increases.
Medicare basics: Medicare is a federal program that provides coverage for 64 million Americans who are disabled, are facing severe kidney disease or are ages 65 or older.
About 34 million people use Medicare Advantage plans, or federally regulated managed care plans provided by private companies, to fill in the many gaps in "Original Medicare" coverage.
About 15 million use a state-regulated product, Medicare supplement insurance, to fill in Original Medicare coverage gaps.
What UnitedHealth is seeing: UnitedHealth executives said that many of their assumptions about 2025 claims were correct.
Use of care by enrollees in commercial health plans and Medicaid plans was in line with the company's expectations, and the cost of the services that Medicare plan enrollees received was in line with expectations.
The surge in Medicare plan enrollee rates affected outpatient care and physician services more than the use of inpatient care.
Company executives suggested that the increase in use of care might be due to an influx of enrollees with health problems resulting from the plan menu changes that hit the Medicare Advantage market this past fall.
The company's Medicare business managers are assuming that the increase in use of care will continue throughout the rest of this year and into 2026.
The earnings: United Health reported $6.5 billion in net income for the first quarter on $110 billion in revenue, compared with a net loss of $1.4 billion on $100 billion in revenue for the first quarter of 2024.
The company ended the quarter providing or administering health coverage for 50 million people, up from 49 million people a year earlier.
Medicare Advantage enrollment increased to 8.2 million, from 7.8 million. Medicare supplement insurance enrollment held steady at 4.3 million.
Credit: Centers for Medicare and Medicaid Services
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