Major health insurers lost money on government programs in Q3 2025. Medicare Advantage, Medicaid, and ACA marketplace plans—the ones covering 40+ million Americans—turned into financial black holes for companies like UnitedHealthcare and Molina Healthcare.
The fallout? Your 2026 coverage just got more expensive and harder to find. Healthcare Dive reported insurers are slashing benefits, exiting unprofitable counties, and reducing plan choices. With ACA subsidies expiring December 31, 2025, millions face premium shocks averaging 114% increases if Congress doesn’t act.
Here’s what happened, why it matters to your wallet, and what you need to do before 2026 open enrollment.
Why Government Health Insurance Became Unprofitable in Q3 2025
Three forces crushed insurer profit margins simultaneously:
- Medical costs spiked faster than government payments. Medicare and Medicaid reimbursement rates couldn’t keep pace with hospital bills, prescription drug costs, and specialist fees climbing 8-12% year-over-year.
- Biden administration tightened payment rules. Regulatory changes made it harder for Medicare Advantage insurers to justify rate increases, capping their revenue growth at 3-4% while costs rose double digits.
- Unexpected enrollment surges. UnitedHealthcare gained more Medicare Advantage members than projected, but these new enrollees used more healthcare services than anticipated, driving up claim costs without corresponding revenue.
The math stopped working. Molina Healthcare lost money on both Medicaid and ACA exchange plans in Q3. UnitedHealthcare’s Medicare Advantage division hemorrhaged cash despite being the market leader with 28% market share.
Meanwhile, Aetna and Humana dodged the bullet. They cut their Medicare Advantage footprints entering 2025, exiting unprofitable counties before losses mounted. That strategic retreat paid off—they avoided the Q3 bloodbath hitting competitors.
What This Means for Your 2026 Health Coverage
Insurers losing money today translates to fewer choices and higher costs for you tomorrow. Here’s what’s already locked in for 2026:
| Change | Impact on You |
|---|---|
| Plan exits from unprofitable counties | Fewer Medicare Advantage options, forcing plan switches |
| Reduced benefits | Higher copays, smaller drug formularies, narrower doctor networks |
| ACA subsidies expire Dec 31, 2025 | Premium increases of $2,400-$6,000/year for middle-income families |
| States raise Medicaid rates | More providers may accept Medicaid, but state budgets face pressure |
The ACA subsidy cliff hits hardest. Without congressional action, 3.2 million people could lose coverage entirely because premiums become unaffordable. Healthy individuals will drop out first, leaving sicker people in the insurance pool—a death spiral dynamic that drives premiums even higher.
States Scrambling to Fix Medicaid Payment Problems
While insurers cut back, states are doing the opposite—raising Medicaid reimbursement rates to keep doctors participating.
The pressure comes from two sides. Medical costs are rising faster than state budgets. Medicaid enrollment remains elevated from pandemic-era policies, even as federal matching funds decreased. States now cover 94 million Americans through Medicaid, straining budgets from California to Florida.
Higher state payments help. More doctors accept Medicaid when rates approach Medicare levels (currently Medicaid pays about 72% of Medicare rates on average). But insurers managing Medicaid plans still lose money because state rate increases lag behind actual medical cost inflation by 12-18 months.
That timing gap explains why Molina Healthcare struggled in Q3 despite state rate hikes. The money arrives too late to cover claims already paid.
Should You Switch Plans Before 2026?
Depends on your current coverage. Run through this decision tree:
If you have Medicare Advantage:
- Check if your insurer is exiting your county (plan exit notices arrive by September 30, 2025)
- Compare 2026 benefits during October-December open enrollment—expect higher copays and smaller networks
- Consider switching to Original Medicare + Medigap if your health needs are predictable and you want provider freedom
If you have ACA marketplace coverage:
- Calculate your premium without subsidies (multiply current payment by 2.14 for average impact)
- Review employer coverage options if available—group plans may beat post-subsidy ACA premiums
- Apply during November 1 – January 15 open enrollment to avoid coverage gaps
If you have Medicaid:
- Your coverage should remain stable—state rate increases help provider access
- Watch for eligibility redeterminations if your income changed
One strategy saves money for healthy individuals: High-deductible health plans (HDHPs) paired with Health Savings Accounts. These plans cost less upfront, and HSA contributions reduce taxable income by up to $4,300 individual/$8,550 family in 2026.
Will Congress Extend ACA Subsidies?
Unknown. Three scenarios play out:
Best case: Congress extends subsidies through 2027-2028 in a year-end budget deal. Premium shock averted, insurance markets stabilize.
Middle case: Six-month extension through June 2026, buying time for negotiations. Markets face uncertainty but avoid immediate collapse.
Worst case: Subsidies expire December 31, 2025 as scheduled. Premiums jump 114% on average January 1, 2026. Healthy people drop coverage, risk pools worsen, insurers exit more markets.
The Kaiser Family Foundation estimates the worst case would drop ACA enrollment from 21 million to 17 million by mid-2026. That’s 4 million Americans losing health insurance.
Political gridlock makes prediction difficult. Healthcare policy typically requires bipartisan support, but election-year dynamics create unpredictability. Watch for movement during the November-December lame-duck session.
Frequently Asked Questions
Why are health insurers losing money on Medicare Advantage in 2025?
Medical costs rose 8-12% while government reimbursement rates increased only 3-4%. Biden administration regulations limited insurers’ ability to raise rates. UnitedHealthcare enrolled more members than expected, but those members used more healthcare services than projected, creating a revenue-cost mismatch that generated losses in Q3 2025.
What happens if ACA subsidies expire on December 31, 2025?
Premiums will increase an average of 114% for the 21 million Americans with ACA marketplace coverage. A family currently paying $300/month with subsidies could face $642/month without them. An estimated 3.2 million people would lose coverage because premiums become unaffordable. Healthy individuals dropping out would worsen risk pools and drive premiums even higher in 2027.
Should I switch from Medicare Advantage to Original Medicare for 2026?
Consider switching if your current Medicare Advantage plan is exiting your county, cutting key benefits like your preferred drugs or doctors, or raising copays significantly. Original Medicare plus a Medigap supplement offers broader provider access and predictable costs. However, Medigap enrollment requires medical underwriting in most states if you’re past your initial enrollment period. Compare total costs (premiums + expected out-of-pocket) for both options during October-December open enrollment.
Which states are increasing Medicaid reimbursement rates in 2025?
Multiple states raised Medicaid rates in 2025 to address rising medical costs, though the Healthcare Dive report doesn’t specify individual states. These increases typically range from 3-7% but still lag behind actual medical cost inflation of 8-12%. The rate hikes aim to improve provider participation in Medicaid networks, which currently pay doctors about 72% of Medicare rates on average. Check your state Medicaid agency website for specific rate change information.
How do I find out if my insurer is leaving my county for 2026?
Insurers must notify members by September 30 if they’re exiting a market. Check your mail for official notices. For Medicare Advantage, visit Medicare.gov/plan-compare starting October 1 to see 2026 plan availability in your ZIP code. For ACA marketplace plans, log into HealthCare.gov or your state exchange starting November 1 to view available 2026 plans. Insurers reducing footprints include those reporting Q3 2025 losses in government programs.
Bottom Line: Prepare for 2026 Changes Now
Health insurer financial struggles in Q3 2025 aren’t abstract corporate problems. They’re your premium increases, benefit cuts, and shrinking plan choices coming January 1, 2026.
Take action during open enrollment:
- Review 2026 plan options carefully—don’t auto-renew
- Calculate post-subsidy premiums if ACA subsidies expire
- Check if your current insurer is staying in your county
- Compare total costs (premium + deductible + out-of-pocket max), not just premiums
- Consider high-deductible plans with HSAs if you’re healthy and want tax savings
The coverage you have today may not exist tomorrow. Plan ahead to avoid gaps or surprise bills in 2026.
For the latest updates on ACA subsidy negotiations and 2026 plan availability, bookmark the Centers for Medicare & Medicaid Services and your state insurance department websites.