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Healthcare Plans — industry outlook

  • Period: 2026-10-19 to 2026-11-09
  • Events: 9
  • Generated: 2026-11-09T07:30:00.003Z

Margin Troughs and 2027 Recovery Trajectories

Medicaid and Medicare Advantage operators across the industry are characterizing 2026 as the bottom of a margin cycle, with 2027 positioned for structural improvement driven by rate alignment with cost trends. Molina (MOH) identifies the current 1.6% pre-tax margin as the "trough," expecting Medicaid margins to recover to a long-term target of 2.5% by 2029, driven by embedded earnings and operating leverage. Elevance (ELV) views 2026 as the floor for Medicaid margins, projecting a 2027 recovery to a 2–4% target range as rates better align with underlying costs; the company targets 12% EPS growth in 2027. Humana (HUM) plans to double individual MA pre-tax margins in 2026 (excluding Star rating headwinds) with a 3%+ pre-tax margin target by 2028. Alignment Health (ALHC) anticipates a "reset" period with elevated costs persisting through Q4 2026, but expects payment integrity and clinical optimizations to drive margin improvement in 2027 after a transformative phase. Centene (CNC) forecasts Medicaid HBR to improve slightly in 2027 as states begin pricing work requirements and acuity shifts prospectively, while its Medicare Advantage segment targets better-than-break-even results following a 2026 return to break-even. Conversely, Oscar (OSCR) and CVS (CVS) project elevated cost trends to persist; Oscar expects high single-digit to high six-digit medical cost trends in 2027, while CVS anticipates elevated trends requiring disciplined pricing in 2027. Humana explicitly raises its 2027 medical cost trend outlook to 8–9% (up from 7–8%), driven by a 14–15% Part D trend increase, a view of sustained pressure that contrasts with Molina's more stabilized 5.5–6.0% trend range for 2027.

Regulatory Headwinds: Eligibility, Work Requirements, and Star Ratings

A dominant theme across calls is the anticipated impact of federal work requirements, OB-3 eligibility terminations, and CMS fraud integrity initiatives on membership and risk pools in 2027. Molina (MOH), Elevance (ELV), and Centene (CNC) anticipate a 6–9% membership decline in 2027 due to work requirements, re-verifications, and non-citizen eligibility terminations starting January 1, 2027. Centene (CNC) expects disenrollment impacts to be methodical and smoothed through 2027–early 2028, while Molina notes 80% of states are leaning toward enrollment-friendly interpretations to limit attrition. Oscar (OSCR) anticipates continued CMS eligibility reviews removing non-utilizers to stabilize the risk pool, though it notes procedural friction may slow enrollment. In the Medicare Advantage sector, Star ratings remain a critical financial variable. Humana (HUM) projects a "one-time tailwind" in 2028 from achieving top-quartile Star ratings (4.17) in 2026, though it warns that the gap to top-quartile targets may narrow. Alignment Health (ALHC) identifies the potential for a 3.5-star rating in California for 2028 as a specific funding headwind, whereas Humana and Centene expect their Star scores to support margin expansion. Elevance (ELV) and Oscar (OSCR) note that state rate cycles for 2027 are increasingly incorporating recent cost experience and acuity shifts from disenrollment, with Elevance anticipating more favorable rate alignment in 2027.

Strategic Repositioning and M&A Activity

Executives are actively restructuring portfolios to prioritize margin over volume, divesting non-core assets, and leveraging technology. Humana (HUM) is exiting the Welsh Carson JV to replace it with a BlackRock JV, reducing its debt-to-cap ratio by 130 bps and creating options to purchase clinics starting in 2028. Molina (MOH) plans a full exit from the Medicare Advantage (MAPD) business by 2027 to eliminate $1.00 EPS losses, while redirecting focus to Medicaid and Marketplace segments. Centene (CNC) is executing an orderly exit from its Health Net commercial group business in California over 18–24 months and reducing its Medicare Advantage footprint to focus on high-value geographies. CVS Health (CVS) announced a separation into two entities by H1 2028: a "RemainCo" (Aetna, Caremark, Oak Street) and a "New CVS Pharmacy," aiming for investment-grade balance sheets for both. Elevance (ELV) is pivoting toward a value-based model centered on its Carillon health services division, targeting external sales growth and integrated clinical solutions. Oscar (OSCR) is expanding its total addressable market to 21 states and 713 counties in 2027, launching products like "RetireEase" and "HelloMeno" to capture the 28 million uninsured workers, while leveraging its "Lucy" AI platform to sell 800,000 new policies. Alignment Health (ALHC) is de-delegating inpatient utilization management and entering San Antonio and Charlotte to stabilize operations before potential state expansion in 2028.

Guidance Revisions and Financial Targets

Companies are raising or reaffirming 2026 EPS guidance on the back of operating outperformance, while 2027 targets vary by strategic pivot. Elevance (ELV) raised 2026 Adjusted EPS to at least $29.00, committing to 12% growth in 2027. Humana (HUM) increased 2026 Adjusted EPS to at least $9.50, with a long-term goal of 3%+ pre-tax margins by 2028. Molina (MOH) reaffirmed 2026 Adjusted EPS of at least $5.25 and set a preliminary 2027 EPS building block exceeding $9.50. CVS Health (CVS) raised 2026 Adjusted EPS to at least $8.20 and set a 2027 floor of $8.65, aiming for mid-teens EPS CAGR by 2028. Centene (CNC) raised 2026 Adjusted EPS to >$5.20, citing a recurring run-rate base of approximately $4.70. Oscar (OSCR) raised 2026 earnings from operations to a range of $850–$950 million and targets $4.00 EPS by 2029. Alignment Health (ALHC) expects FY2026 Adjusted EBITDA of at least $100 million, with membership growth of at least 20% projected for 2027.