HMA Weekly Roundup

Medicaid Managed Care Profitability: Navigating Margin Pressures and Regulatory Shifts in 2024

This week, our In Focus section highlights findings from Health Management Associates Information Services’ (HMAIS’s) review of 2024 statutory filings submitted to the National Association of Insurance Commissioners (NAIC). These filings provide a nationwide view of Medicaid managed care plan profitability and medical loss ratios (MLRs) across 221 plans operating in 39 states, the District of Columbia, and Puerto Rico.

These data build upon and offer additional context to a previous analysis conducted by HMA and Wakely, an HMA Company, of increasing post-pandemic financial pressures driven by acuity increases resulting from the continuous eligibility unwinding and increases in behavioral health and home and community-based services access and utilization.

Medicaid Managed Care Underwriting Gains and Losses

As state Medicaid programs have increasingly moved from fee-for-service to managed care, a foundational assumption has been that efficient managed care organizations (MCOs) reduce waste and deliver high quality, cost-effective healthcare services. This transition has made Medicaid plan performance and sustainability a central focus for policymakers and actuaries alike.

Medicaid capitation rates must be actuarially sound, which means they must be projected to cover all “reasonable, appropriate, and attainable costs,” including medical administrative costs, plus a margin for insurance risk, even for nonprofit plans. According to the Society of Actuaries 2024 research, average underwriting margins in Medicaid rates ranged from 0.35 percent to 3.15 percent, with a consistent average between 1.2 percent and 1.3 percent.

However, actual results often deviate from projections for reasons that may be challenging to predict. Rate setting is an inherently forward-looking process, and even with conservative assumptions, unexpected shifts in enrollment, acuity, or service utilization can lead to significant deviations from projected results. Retrospective reviews show variability in margins over time (see Figure 1).

Figure 1. Historical Medicaid MCO Net Gains/Losses, 2012‒2024 (39 States, DC)

Based on HMAIS’s analysis, Medicaid MCOs sustained modest but steady gains from 2012 through 2017. After a decline between 2016 and 2019, margins rebounded to approximately 3 percent until 2022, narrowed in 2023 to 1.9 percent, and turned negative in 2024 at -0.9 percent.

For the first time in over a decade, more plans experienced losses than gains in 2024 (see Figure 2), with only 42 percent reporting positive margins, down from the decade high of 84 percent in 2022. This shift raises critical questions about sustainability and participation in Medicaid managed care.

Figure 2. Medicaid Managed Plans Likelihood of Gain, 2012‒2024 (39 States, DC)

The “Likelihood of Gain” chart tracks the percentage of Medicaid managed care plans reporting an underwriting gain each year from 2012 to 2024. For most years, the likelihood that a plan posted a gain was relatively high, typically between 60 percent and 80 percent. The probability reached a recent peak in 2022, with 84 percent of plans reporting gains, and remained elevated in 2023 (74 percent). In 2024, however, the likelihood of gain dropped sharply to just 42 percent, the lowest level in the 12-year period.

Risk Corridors, Medical Loss Ratios, and Structural Policy Shifts

MLRs show the portion of plan revenue spent on medical care as compared with the costs to operate the plan and the underwriting gain or loss described previously. When MLRs rise or fall, it can be an indication that medical cost trends experienced by health plans differ from the assumptions used by state rate setting actuaries. High MLRs are the key driver of underwriting gains, and low MLRs are associated with higher profitability. All states report MLRs to the Centers for Medicare & Medicaid Services (CMS), and some enforce minimum MLRs with a remittance provision, requiring plans to return funds if their MLR goes below a certain level.

Risk corridors are another tool that states use to manage financial volatility. These mechanisms share gains or losses between plans and states when results deviate significantly from pricing assumptions, offering protection to MCOs and the state alike, in contrast to minimum MLR provisions with a remittance provision, which only protects the state. During the COVID-19 pandemic, many states implemented or expanded risk corridors to recoup overpayments because of lower utilization. Some risk corridors were set retroactively—a practice CMS now prohibits.

In 2024, MLRs reached a decade high of 90.8 percent, as indicated by HMAIS’s analysis. Driving this increase were heightened utilization rates, increased enrollee acuity, and the end of continuous Medicaid coverage protections in 2023. As healthier, lower-cost members left Medicaid, plans were left serving a more complex population with higher per-member costs. Inflation in medical costs—especially for behavioral health and home and community-based services—added more pressure. Delayed or avoided care during the COVID-19 pandemic may also have played a role, as members sought more services in 2022‒2024, resulting in a surge in utilization greater than what was priced into rates.

Many states put risk corridors in place to stabilize margins from 2020 to 2022, which may have contributed to the tight band of outcomes around the high underwriting gains in that period. However, many states have been removing them for 2024, 2025, and 2026. Without these protections, plans may face greater exposure to underpayment in 2025 and 2026 if cost trends continue to outpace rate assumptions.

What to Watch

Rate setting conversations between states and plans for 2026 are happening now, and in many cases they are quite challenging. In addition to meeting actuarial soundness requirements, states also must balance their budgets, and some may be facing limitations on their traditionally used tools.

Looking ahead, it will be increasingly important that states and plans partner to find cost savings that can ensure the program’s long-term sustainability.

A subscription to HMAIS provides access to comprehensive financial intelligence on Medicaid managed care. Far beyond surface-level snapshots, HMAIS delivers health plan-level financial performance metrics, enrollment trends, and state policy developments that directly shape rate setting and operational strategy. Whether you’re a state official, health plan executive, or policy strategist, HMAIS provides the financial clarity and policy context needed to anticipate regulatory shifts, benchmark performance, and make confident, data-driven decisions.

For questions about the analysis discussed in this article, contact Gabby Palmieri at [email protected].

Strategies and Reforms Shaping Medicare’s Future

As Medicare enters a new phase of transformation, the Health Management Associates (HMA) 2025 National Conference in New Orleans, LA, offers a timely and essential forum for healthcare leaders to explore the policy and operational shifts that are shaping the future of the program. On October 14‒16, 2025, attendees will have access to a robust lineup of sessions designed to unpack the implications of the Centers for Medicare & Medicaid Services’ (CMS) evolving strategy and provide actionable insights for payers, providers, and investors.

Reimagining Value-Based Care: A Main Stage Conversation

The conference’s main stage session, Shifting the Paradigm: Transforming Value-Based Healthcare for Lasting Impact, will explore how CMS is redefining expectations around global risk, consumer engagement, and return on investment. This conversation will spotlight the intersection of policy and practice, with speakers who bring deep expertise and diverse perspectives, including:

• Liz Fowler, Senior Advisor, HMA, and former Deputy Administrator and Director, Center for Medicare and Medicaid Innovation, CMS
• Kate Goodrich, MD, MHS, Chief Medical Officer, Humana
• Chris Klomp, Deputy Administrator and Director, Center for Medicare, CMS

Together, they will examine how value-based care is evolving across Medicare Advantage and chronic disease prevention and what it means for care delivery and system sustainability.

Workshops that Deliver Operational Clarity

Two expert-led workshops will take a deeper dive into the policies and mechanics of the changing Medicare landscape.

During the workshop, Medicare Models, Markets, and Momentum: What They Mean for Payers, Providers, and Investors participants will explore the most consequential changes in Medicare Advantage, including expanded risk adjustment validation (RADV) audits, coding accuracy expectations, and the role of artificial intelligence (AI) in compliance and care design.

Speakers include:

• Carrie Graham, PhD, Research Professor and Director, Medicare Policy Initiative, Georgetown University Center for Health Insurance Reform
• Dan Jones, Senior Vice President, Alliance of Community Health Plans
• Neil Patel, MD, Chief Health Officer, Patina Health

The conversation will continue with a workshop focused on Medicare’s shift toward prevention, person-centered care, and accountable innovation, which are intensifying the financial stakes for Medicare providers, organizations, and beneficiaries. During the session Delivering on the Promise of Payment Reform: Operational Strategies for Success speakers will explore how these priorities are shaping real-world models—especially for chronic conditions—and what they mean for payers, providers, and investors. They will unpack the growing use of downside risk, capitation, and upfront investments, and make the case for why payers and providers should invest in these models—and how to evaluate return on investment through both cost savings and improved outcomes. Speakers will include Julius Bruch, MD, PhD, Isaac Health.

Why These Sessions Matter

Medicare’s transformation is not just a policy shift—it’s a strategic imperative. These sessions offer clarity on CMS’s latest agenda, practical guidance from seasoned experts, and real-world strategies that attendees can bring back to their teams. Whether you’re navigating payment reform, operational redesign, or investment strategy, the Medicare track at HMA’s 2025 National Conference is designed to meet the moment.

Explore the full agenda and register.

Former Senior FDA Leader Julie Tierney Joins Leavitt Partners

Leavitt Partners, an HMA Company, is pleased to announce that Julie Tierney has joined the company’s team of health policy experts as a principal, located in Washington, D.C.

Tierney is a proven executive with more than 20 years of FDA legal, policy, and operational experience. She held a number of senior roles at FDA, including FDA chief of staff, overseeing more than 19,000 staff and a budget of more than $7 billion, and most recently served as deputy of the FDA’s Center for Biologics Evaluation and Research. She is an attorney with professional experience working in the FDA Chief Counsel’s office, on Capitol Hill and private legal practice.

During her career, Tierney has advanced novel policy solutions for regulatory challenges associated with cutting edge technologies, such as overseeing the development of new regulatory pathways for cell and tissue-based products and for genome editing products using a platform approach. She coordinated FDA responses to multiple public health crises and led several initiatives to help accelerate the development of therapies for patients with rare diseases, including the launch of the FDA Rare Disease Innovation Hub.

At Leavitt Partners, Tierney will help life sciences companies, patient organizations, and others understand and develop regulatory strategies and advance policy solutions for complex issues throughout the product life cycle. Her focus on FDA regulatory strategy and policy builds on a decade of Leavitt Partners’ work helping clients drive FDA policy solutions to put safe and effective medicines into the hands of patients.

“We are excited to have Julie bring her deep expertise in food and drug law and policy, FDA agency experience, and strong stakeholder relationships to our team,” said Josh Trent, chief executive officer of Leavitt Partners. “While we live in an era of increasingly personalized medicine and medical breakthroughs, the life sciences sector is facing a wide range of nuanced and interconnected policy, regulatory, and stakeholder complexities. The potential to build a healthier and stronger future for Americans through biomedical innovations, cutting-edge science, and technology has never been greater. Julie is uniquely equipped to enhance our FDA-related services to help clients navigate the pre- and post-market complexities of the evolving FDA policy and regulatory landscape.”

Tierney joins a team of highly experienced, bipartisan health policy and government affairs consultants, many with significant experience drafting and implementing FDA laws and regulations, and leading private sector life sciences solutions. The Leavitt Partners team includes former health policy directors and FDA subject matter experts from the U.S. Senate Budget Committee, the Senate HELP Committee, the U.S. House Energy and Commerce Committee, and other senior congressional offices. Leavitt Partners, founded by former HHS Secretary Michael O. Leavitt, features former senior political appointees in Democratic and Republican presidential administrations, leaders formerly serving in several U.S. Department of Health and Human Services agencies, and former leaders in the nonprofit and corporate health sectors.