Why Medicare Advantage providers are cutting plans — and what to do if your coverage is affected

Last month, Humana (HUM) announced that it will exit some Medicare Advantage plans for next year, forcing more than half a million seniors to find a new health plan. The reason for the coverage cutback: high costs and slimmer profit margins in certain markets, according to Humana CFO Celeste Mellet. It's the second year in a row of plan downsizing for Humana.

This year, the company exited three states and 194 counties, affecting around 500,000 members. UnitedHealthcare (UNH) also jettisoned Medicare Advantage plans that served more than 600,000 seniors. According to KFF research, the percentage of Medicare Advantage enrollees who faced terminated plans this year reached 60% or higher in Wyoming, South Dakota, New Hampshire, North Dakota, and Vermont.

Medicare Advantage is enormously popular. More than 35 million people are enrolled in the plans — about 55% of all eligible Medicare beneficiaries nationwide, up from 24 million six years ago. The plans typically cover benefits not included in traditional Medicare, such as prescription drugs, eyeglasses, dental care, and fitness classes.

Plus, they often have very low or even no premiums. But as enrollment in these plans, which are administered by private insurance companies, has mushroomed, provider costs have also ballooned. As a result, insurers have been steadily shuttering plans, trimming some benefits, and increasing deductibles.

"Churning of the market by plans pulling out of certain areas in order to maximize profit and minimize losses reflects the challenges of a healthcare system that is overly reliant on private, for-profit insurance companies," David Lipschutz, associate director of the nonprofit Center for Medicare Advocacy, told Yahoo Finance. "Every year, plan sponsors make business decisions that are more attuned to the needs of shareholders than plan enrollees, leaving individuals scrambling to figure out their coverage," he said. In recent years, insurers have grumbled about people using more healthcare services than they anticipated and the rising cost of healthcare across the board, he added.

Humana's announced cutback is notable because so few organizations operate these plans. UnitedHealth Group is currently the largest in the market. Combined with Humana, it accounts for nearly half of all Medicare Advantage enrollees nationwide, according to KFF.