US insurers including UnitedHealth and Humana are reducing healthcare services for elderly clients and increasing prescription drug costs for the upcoming year, intensifying financial pressures on Americans already facing inflation. As older voters began selecting their government healthcare plans for 2027 this month, many encountered fewer options alongside higher prices following the cancellation of hundreds of plans and scaled-back coverage.
Medicare, the federal healthcare program for people aged 65 and older or those with disabilities, currently covers approximately 70 million Americans and accounts for over $1 trillion in government spending annually. However, the program does not cover all medical expenses. In some regions, plans that traditionally had no monthly premiums will begin charging as much as $79 starting January, according to local healthcare brokers. There have also been notable reductions in covered prescription drugs, further increasing out-of-pocket costs.
These changes come amid a politically charged atmosphere ahead of the midterm elections, where inflation and living costs remain central issues. Polling data indicates widespread disapproval among voters of President Donald Trump’s handling of the economy, including healthcare policies.
From a financial perspective, the cost increases benefit insurers. UnitedHealth’s healthcare division reported an operating margin increase to 3.3% in the last quarter, up from 2.1% the previous year. The company has repurchased $5 billion of its stock and paid out $6 billion in dividends this year. Humana’s net income margin remained steady at 1.7%, with its shares rising 57% this year, making it one of the top-performing companies in the S&P 500. UnitedHealth’s shares are also up 23%.
Analysts note that all major managed-care organizations are reducing benefits. Humana removed hearing-aid allowances from several plans, while UnitedHealth implemented broad benefit reductions across numerous categories. Both companies increased the maximum out-of-pocket costs for medical services next year by 8% and 11%, respectively, and hiked prescription drug coverage prices by approximately 30%. These adjustments primarily affect the 35 million Americans enrolled in Medicare Advantage plans, which constitute the largest portion of the federal health insurance system for those over 65. UnitedHealth and Humana together hold about 46% of this market segment.
Medicare Advantage plans are a significant source of revenue for insurers, with the government paying nearly $540 billion last year to operate these subsidized plans. UnitedHealth stated that its changes represent targeted adjustments intended to preserve core benefits and access to prescription drugs. Humana emphasized its commitment to offering affordable care and valued benefits such as pharmacy, dental, and vision coverage.
In response to rising costs, the Biden administration postponed new import restrictions on medicines from Canada, originally set to begin this month, amid concerns that these rules would increase drug prices for elderly Americans relying on cheaper imports. The Trump administration has maintained that Medicare costs will remain flat next year, but some experts warn that projected savings assume beneficiaries will shift to cheaper plans with more limited drug coverage. For individuals taking multiple or costly medications, enrolling in more expensive plans may be unavoidable.
Looking ahead, Medicare enrollment is expected to climb to 75 million by 2029 as the baby boomer generation ages. At the same time, Americans covered under Affordable Care Act plans, separate from Medicare, are projected to face a roughly 15% increase in costs next year. Industry experts caution that consecutive annual rate hikes in the 10% to 15% range could strain fixed budgets for many families.