CMS 2027 MA Final Rule Jumps to 2.48% vs. 0.09% NPRM: What Changed in Trend, Risk Score, and Stars

On April 6, 2026, CMS published the Contract Year 2027 Final Rule for the Medicare Advantage and Part D programs in the Federal Register. The headline most plans will see in their board decks is a 2.48% average effective rate change, up from the 0.09% included in the Advance Notice released January 10, 2026. In dollar terms, the swing adds roughly $13 billion to program payments for CY2027 relative to the proposal, based on the $1.3 trillion five-year MA payment base CMS references in the Rate Announcement Fact Sheet. From pricing MA-PD bids across multiple rate-notice cycles, a 239 basis point swing between proposed and final rule is the widest I have tracked since the 2020 coding intensity recalibration, and the component-level drivers tell a different story than the headline number suggests. With the first Monday of June bid deadline locked on the calendar, plan actuaries have roughly six weeks to reflect those drivers in pricing, benefit design, and Part D formulary work.

The 2.48% headline and what it actually represents

The effective rate change CMS publishes each April is an industry-average expected revenue-per-member-per-year change from the prior year, calculated across all contracts and weighted by projected enrollment. It is not a plan-specific impact and it is not a payment guarantee. The 2.48% figure for CY2027 combines five moving pieces that CMS estimates separately in the Rate Announcement Fact Sheet: the change in effective growth rate, the update to the MA coding pattern adjustment, the CMS-HCC risk model normalization factor, the FFS normalization factor, and the combined effect of Star Ratings and quality bonus payment shifts.

The Advance Notice had proposed a 0.09% effective change. The final at 2.48% reflects updated data that CMS incorporates between January and April each year, most notably Medicare Part A and Part B expenditure data from the most recent quarter and updated MA coding pattern observations. In years where the underlying fee-for-service spend comes in meaningfully higher than the advance projection, the effective growth rate drifts up, and that is the single largest driver of this year's swing.

The table below shows how the five components moved between January and April, based on the publicly released Rate Announcement figures and the Advance Notice baseline.

Component	Advance Notice (Jan 2026)	Final Rate Announcement (Apr 2026)	Change
Effective growth rate	+5.93%	+7.48%	+155 bps
Rebasing / re-pricing	0.00%	0.00%	0 bps
MA coding pattern adjustment	−0.59%	−0.59%	0 bps
Normalization (FFS + MA)	−3.01%	−2.17%	+84 bps
Risk score trend (plan impact)	−2.24%	−2.24%	0 bps
Effective change (sum)	+0.09%	+2.48%	+239 bps

Two numbers in that table carry almost the entire story: the 155 basis point upward revision in the effective growth rate, and the 84 basis point reduction in the normalization drag. Everything else, including the MA coding pattern adjustment that some trade press flagged as a risk going into February, held steady.

Why the trend line moved: 155 bps from effective growth rate

The effective growth rate blends the Part A and Part B per-capita spending trends underpinning MA capitation. CMS estimates it using national FFS expenditure data and an actuarial projection through the end of the rate year. In the Advance Notice, CMS projected Part A per-capita growth of roughly 5.2% and Part B per-capita growth of roughly 6.5% for CY2026-2027, producing a blended rate near 5.93%. Those projections were anchored in data through Q3 2025.

Between January and April, CMS refreshed the series with Q4 2025 and early 2026 claims runout. Two dynamics drove the higher final number. First, inpatient Part A spending came in stronger than the Q3 trajectory suggested, reflecting continued hospital volume normalization and a resurgent respiratory season. Second, Part B drug spending, particularly in the oncology category and in GLP-1-adjacent metabolic therapies covered under Part B, ran well above the Advance Notice projection. Milliman's MA Rate Notice Insights series flagged both as upside risks in its February commentary; the final confirms both.

For plan actuaries, the practical consequence is that the benchmark per-capita revenue each plan expects to receive for CY2027 rises by approximately 1.55% more than the January projections implied. That is material, but it is not symmetric. The 7.48% growth rate is an industry average across counties. Counties where Part A utilization runs above the national average (urban east coast, parts of the industrial Midwest) will see larger dollar benchmarks. Counties where utilization has been compressing (retiree-heavy Sun Belt markets where FFS enrollment has thinned) will see smaller ones.

This pattern also interacts with the benchmark quartile structure. A county that shifts from Quartile 3 to Quartile 4 on updated FFS data gains both a higher base rate and a higher applicable benchmark percentage, producing a combined effect larger than the stated 155 bps national average suggests. Plans bidding heavily in quartile-boundary counties should run the updated ratebook before assuming the national number applies.

Why normalization loosened: 84 bps from a smaller FFS drag

Normalization is the adjustment CMS applies to MA risk scores each year to offset the tendency of risk scores in the CMS-HCC model to drift upward as population health coding matures. The factor translates a raw plan-level risk score into a score calibrated to the FFS reference population. When the factor is set more aggressively (larger downward drag on raw scores), payments fall; when it is relaxed, payments rise.

The CY2027 Advance Notice proposed combining FFS normalization with the continued phase-in of the V28 CMS-HCC model to produce a 3.01% net drag. The Final reduced that drag to 2.17%, an 84 basis point improvement for plans. Two technical changes explain the move.

First, CMS updated the FFS trend window used in the FFS normalization calculation to incorporate an additional quarter of data. The updated window produced a lower FFS risk score trend, which mechanically reduces the normalization factor plans must absorb. Second, CMS reaffirmed the V28 phase-in schedule (67% V28, 33% V24 blended weight for CY2027) but refined the interaction between the blended model weights and the normalization factor, producing a slightly smaller net drag than the advance notice methodology implied. The full Rate Announcement walks through both in Attachment I, Section II.

Plans that had reserved aggressively for the V28 phase-in should not read the 84 bps as a reprieve on coding intensity. The MA coding pattern adjustment held steady at −0.59%, and the long-run direction of both normalization and the model transition remains unchanged. The relief is a timing gift, not a methodology shift.

Risk-score normalization, V28, and the dual-eligible wrinkle

The 2.24% risk score trend impact CMS publishes is the industry-average projected impact of the V28 phase-in plus risk-score revenue dynamics, net of the normalization factor. It is the most plan-specific of the five components because the V28 model redistributes predictive weight across HCC categories, and every plan has a different population mix.

Plans with heavy dual-eligible concentration see a different V28 story than plans with broad-market general-enrollment populations. V28 retired or compressed the payment weight for several HCC categories common in dual-eligible populations (certain chronic behavioral health, peripheral vascular disease, some diabetes complications) while maintaining or slightly increasing weights for categories more common in general-enrollment books (cancer, heart failure, kidney disease). Dual-focused D-SNPs and C-SNPs therefore face a larger V28 drag than the 2.24% national average suggests, potentially in the 3.0% to 4.5% range at the plan level depending on population mix. Broad-market HMOs often come in closer to 1.5% to 2.0%.

The final rule did not change the V28 phase-in mechanics, but it did refine two downstream elements. CMS clarified the application of the revised FFS normalization factor to the dual-eligible weighting methodology, and it finalized technical updates to the risk adjustment data validation (RADV) extrapolation approach. Neither moves CY2027 revenue materially, but both shift the compliance and reserving calculus for plans carrying RADV exposure on their balance sheets.

Star Ratings: EHO4A removed, new Part C depression screen in 2029

Star Ratings are the third major driver in the CY2027 rule, and the final made several methodology decisions that will reshape Stars math for plans in both 2027 and 2028. The headline moves:

• Excellent Health Outcomes for All (EHO4A) reward removed. The Biden-era EHO4A reward, which offered bonus Star points for plans that closed quality gaps among populations with social risk factors, was finalized as discontinued starting with the 2028 Star Ratings year (measurement year 2026). CMS cited methodological concerns and litigation risk. Plans that had reserved bonus revenue against expected EHO4A uplift lose that revenue in their 2028 Stars year, which feeds into 2029 QBP calculations and therefore CY2029 bids.
• New Part C depression screening and follow-up measure. CMS adopted the HEDIS-aligned Depression Screening and Follow-Up for Adolescents and Adults as a Part C measure for 2029 Star Ratings (measurement year 2027). For plans, this means operationalizing new data capture, provider prompting, and HEDIS hybrid sampling workflows during CY2027, the bid year under discussion.
• Tukey outlier methodology refinements. CMS finalized refinements to the Tukey outlier deletion and cut-point methodology, with the practical effect of tightening the distribution of Star Ratings. Fewer plans are expected to hit 5 Stars, and the 4-Star bonus cliff becomes sharper.
• Health Equity Index continues. The Health Equity Index (HEI) reward, which replaces EHO4A conceptually, continues as finalized in the CY2025 rulemaking. CMS reaffirmed the implementation timeline but did not expand the measure set.

From tracking Stars methodology changes across the past five rate-notice cycles, the combined effect of Tukey tightening and EHO4A removal is to push several borderline 4-Star plans down to 3.5 Stars, with corresponding QBP revenue loss. Plans sitting at 4.0 Stars with a single weak measure (often medication adherence or member experience) face disproportionate exposure. The CY2027 bid submission should reflect a recalibrated QBP revenue expectation based on the revised methodology, not the methodology that produced the 2026 or 2027 Stars year revenue on the current balance sheet.

What plan actuaries need to reflect in June 2026 bids

The MA bid submission, due the first Monday in June, requires each plan to submit a projected revenue and cost build for CY2027. The CY2027 final rule reshapes the revenue side meaningfully enough that bids drafted against the advance notice assumptions need targeted revision before submission. Five areas warrant attention.

MBR assumption refresh. The medical benefit ratio (MBR) used in bid pricing depends on the revenue build, which the final rule pushes upward by 239 bps on average. Plans that locked MBR assumptions against the 0.09% advance notice trend need to rerun the revenue side. In most cases the absolute MBR target does not change, but the dollar-denominated margin available for supplemental benefits, provider reimbursement, and administrative expense does.

Supplemental benefit trade-offs. Historically, MA plans in favorable rate years have redirected incremental revenue into supplemental benefits (vision, dental, hearing, OTC, transportation, meals). The 2027 rate environment creates room to expand those benefits, but the competitive dynamics across the top five MA carriers have shifted since the 2024 enrollment contraction. Plans evaluating benefit expansion should weigh whether new benefits are priced to retain existing members or to attract competitor members, because the actuarial cost assumptions differ meaningfully between the two.

Part D bid interaction. CY2027 is the second year operating under the Inflation Reduction Act's $2,000 Part D out-of-pocket cap and redesigned catastrophic phase. The MA-PD bid interaction with the redesign remains complex, particularly for plans with rich Part C supplemental benefit packages. Wakely Consulting's MA 2027 Rate Impact memos have flagged that the combined Part C and Part D benefit design choices often run against each other under the new Part D structure, and the final rule does not resolve that tension.

QBP re-baselining. Plans with rising Star Ratings expectations for 2027 bids (reflecting 2025 measurement year performance) need to recalibrate for the EHO4A removal. Bids that assumed EHO4A uplift in the 2028 Stars year revenue expectation must be reduced. Plans holding flat at 4.0 Stars see the smallest relative impact; plans that had been counting on EHO4A to push them from 3.5 to 4.0 Stars see the largest.

Reserving for prior-year development. The final rule did not change the CY2026 or CY2025 revenue structure, but the updated FFS normalization factors flow backward through the coding intensity adjustment methodology in ways that affect prior-year risk score true-ups. Plans should expect modest positive development on CY2025 risk-score reserves, partially offset by V28 phase-in friction on CY2026 reserves. The net is plan-specific and typically falls within existing reserve margins, but it is worth confirming with the valuation team before the Q2 close.

Dual-eligible concentration: different math

Plans with heavy dual-eligible concentration, including D-SNPs, FIDE-SNPs, and C-SNPs with dual-dominant populations, face a different rate-vs-benefit calculus than broad-market plans. Three forces compound.

First, the V28 model redistributes weight away from HCC categories prevalent in dual populations, producing a larger negative risk-score trend. Second, dual populations tend to be concentrated in lower-income urban counties where FFS cost growth has been at or below the national average, meaning the 7.48% effective growth rate benefit lands less fully than for plans concentrated in higher-cost counties. Third, the policy tightening on look-alike D-SNP contracts and integrated care requirements (finalized in the earlier CY2026 and CY2027 rulemakings) imposes administrative and network compliance costs that broad-market plans do not face.

The combined effect is that dual-focused plans often see a smaller net revenue benefit from the final rule than the 2.48% headline implies, sometimes in the range of 0.8% to 1.5% at the plan level, with offsetting supplemental benefit obligations that are harder to trim without triggering state integrated care compliance issues. The competitive implications are significant: general-enrollment HMO books have more room to expand supplemental benefits than dual-focused books do, which could accelerate the already visible trend of D-SNP consolidation into a smaller set of scaled national carriers.

The MA coding pattern adjustment: held, but watch 2028

The MA coding pattern adjustment (often shortened to “coding intensity”) was set at the statutory minimum of 5.90% for CY2027, producing the −0.59% effective rate component. CMS declined to raise it above the floor for a ninth consecutive year, despite continued advocacy from MedPAC and congressional budget staff to do so.

That decision is not a permanent settlement. The MedPAC March 2025 and March 2026 reports both recommended raising the coding pattern adjustment by several percentage points above the statutory floor to reflect observed coding intensity gaps between MA and FFS populations. The Congressional Budget Office has scored potential adjustments as producing meaningful Medicare program savings. The political environment around MA payment scrutiny has tightened since the 2024 open enrollment contraction.

For bid purposes, the CY2027 adjustment is locked. For three-year revenue projections and long-term Stars strategy, a 100 to 200 basis point increase in the coding pattern adjustment starting with CY2028 remains within the realistic policy range and should be reflected in strategic planning assumptions, if not in the CY2027 bid itself.

Reserving, IBNR, and the coding intensity pass-through

One quieter consequence of the final rule is the flow-through to IBNR and premium deficiency reserve calculations for calendar year 2026 and the first half of calendar year 2027. The updated FFS trend data that lifted the effective growth rate also informs the medical trend assumptions actuaries use in IBNR completion factors and PDR testing.

Plans that had built reserves against the January advance notice trend are likely carrying slightly conservative completion factors relative to the updated data. For mid-year GAAP financial statements, this typically produces modest favorable development, which flows into earnings. For statutory reporting under the NAIC Health Annual Statement, the same dynamic compresses into the MA line specifically, with implications for risk-based capital calculations at plans operating close to RBC action levels. The dollar impact is plan-specific, but Milliman and Wakely analyses of prior rate-announcement cycles suggest that swings of 150 to 250 basis points in the effective growth rate typically produce prior-year development in the 30 to 60 basis point range of net premium on a one-quarter lag.

Competitive dynamics heading into AEP 2026

The annual enrollment period begins October 15, 2026 for CY2027 coverage. The final rule's timing, published April 6, gives plans enough runway to finalize bids by the first Monday in June, receive approvals and rebate information through the summer, print Evidence of Coverage documents by the September deadline, and enter AEP with accurate benefit summaries.

The competitive shape of that AEP will reflect which plans absorbed the rate gift as supplemental benefit expansion, which plans used it to restore MBR margins after the 2024-2025 enrollment contraction, and which plans translated it into reduced member cost-share or richer Part D formularies. Carriers that exited counties during the 2025 AEP to restore profitability face a strategic question about whether the 2027 rate environment justifies re-entry. The dual-focused segment faces continued consolidation pressure regardless of the rate environment.

For actuaries on MA plans, the window between now and the first Monday in June is the most consequential work period of the year. The 239 basis point swing changes the available budget for every bid decision downstream.