Managed Medicaid plans have gone from above-target profit margins during the pandemic-era enrollment boom to aggregate underwriting losses, with early 2025 data suggesting the losses aren’t slowing, according to a February analysis from Wakely.
The consulting group analyzed MCO financial performance across three periods: pre-pandemic (2019), during the public health emergency’s continuous enrollment provision (2020–2023), and during and after the Medicaid unwinding (2024–2025).
The analysis used NAIC statutory filings for 170 health plans that had Medicaid revenue in every year from 2019 to 2024, which covered 63% of all MCO enrollees in 2023. The study excluded dental-only, behavioral health-only and other non-comprehensive plans. California and New York, the two largest managed care programs, are underrepresented because most of their MCOs don’t file NAIC statements.
Seven notes:
1. Medicaid enrollment grew from 66 million in February 2020 to 87 million in April 2023 under the continuous enrollment period. During that time, MCO underwriting margins averaged about one percentage point above the 1-2% target range built into state rate-setting. The healthier-than-expected enrollees who joined during continuous enrollment drove lower average acuity, meaning plans were collecting capitation payments meant for a sicker population.
2. When redeterminations started in April 2023, over 31% of individuals who went through the process were disenrolled. Healthier members left, average acuity went up, and state rate-setting didn’t keep pace. The aggregate underwriting margin for the 170 plans went from 2.4% in 2023 to -1.0% in 2024, a $2.8 billion aggregate underwriting loss compared to a $7.1 billion gain the year prior. Enrollment fell 16.7% from 2023 to 2024 across the studied population.
3. Aggregate medical loss ratio rose to 91.2% in 2025, up from 90.9% in 2024. Average enrollment continued to fall, dropping another 13% to roughly 38.5 million members, and annual revenue declined 2.5% to $287 billion. CMS data separately showed total Medicaid enrollment fell by another 3 million beneficiaries between October 2024 and October 2025, even after the formal unwinding period ended.
4. Medicaid enrollment decreased 7.9% in 2024 while total Medicaid expenditures increased 6.2%, leading to a 15.2% per capita spending increase. The spike hit alongside the acuity shift, creating a double headwind that state rate-setting processes did not expect. The unwinding also happened much faster than the enrollment buildup (12 months vs. 37 months), making the acuity shift harder to price.
5. Georgia MCOs saw the biggest MLR deterioration from 2024 to 2025, with their MLR increasing 11.4 percentage points to 92.1% after posting the strongest 2024 underwriting margin of any state at 7.3%. On the other end, Arkansas MCOs improved their MLR by 6.9 points to 81.8%, and Kentucky improved by 6.3 points to 89.9%.
6. Among the five largest state markets by 2024 MCO revenue, Pennsylvania ($35 billion) posted a -1.4% underwriting margin, Illinois ($23.5 billion) posted -3.1%, Texas ($29.5 billion) posted 0.4%, Florida ($20.5 billion) reported 3.2%, and Ohio ($16.6 billion) came in at 0.4%. Virginia, with $13.6 billion in revenue, had the worst margin of any state at -6.4%.
7. Over the full six-year study period, the average MCO underwriting margin was 1.8%. When emerging 2025 results are included, that drops to 1.4%. Wakely noted that H.R.1 will lead to continued enrollment decreases and reduced federal Medicaid funding. Enrollment remains about 4.9 million higher than pre-pandemic levels despite the unwinding, meaning that further attrition is possible.
