The 2025 Medicare Advantage (MA) and Part D bidding cycle brought unprecedented challenges with a redesigned Part D benefit, MA revenue pressures, and rising healthcare trends. On September 27, 2024, the Centers for Medicare and Medicaid Services (CMS) released the 2025 landscape file, providing the first view of plan sponsors’ reactions to market headwinds.¹ This article highlights the key changes to premiums and plan offerings in the prescription drug plan (PDP) market. A similar paper outlining highlights and changes to the MA-PD market can be found here.

Fewer plans, fewer carriers, and a surprise demonstration tighten the market

1. Plan offerings decreased: Across the country, the number of standalone PDPs will decrease in 2025, from 709 to 524, a decrease of 26%. Of note, 524 includes 60 plans offered by Clear Spring Health, which is currently under sanctions and may not enroll new members at this time.
2. Consolidation: Both CVS and United drastically consolidated their plan offerings. CVS cross-walked all PDP members from their enhanced plans into SilverScript Choice, their national basic plan offering. This is in contrast to three nationwide offerings in 2024. United moved from a similar three-product dynamic to two in 2025, cross-walking members from the higher premium enhanced plan (AARP Medicare Rx Preferred) to the lower premium enhanced plan (AARP Medicare Walgreens Rx ), but rebranded to retain the AARP Rx Preferred plan name. As such United retains nationwide enhanced plan offerings in addition to the required basic plan.
3. Carrier exits: Mutual of Omaha, a nationwide carrier, exited the PDP market alongside three regional carriers: Tennessee Rural Health Improvement Association, BCBS of Arizona, and Cambia Health Solutions. This represents about 220,000 members who will need to elect a new plan for 2025 or will be automatically enrolled into a new basic plan.
4. PDP premium demonstration program: Ninety-nine percent of individual PDP enrollees are in plans that participated in the voluntary demonstration program, which, among other provisions, limits the base beneficiary premium increase to $35 relative to 2024.² CMS has not indicated it will publish the “pre-demonstration” premiums.³
5. Continued basic PDP and low-income (LI) member auto-assignment disruption: The 2024 bidding cycle brought significant disruption to the number of plans eligible to receive auto-assigned LI beneficiaries, which is limited to basic standalone PDPs under the respective LI regional benchmark (LIB).⁴ The 2025 landscape file indicates continued disruption, as some carriers are in a similar situation as 2024, but others have another significant change in the number of eligible basic PDPs. The PDP premium demonstration may be driving perceived deviations or changes in strategy, given the change in premium due to the demonstration program. Some plans that would have been ineligible for auto-assigned LI members, prior to the demonstration, may be eligible now due to the lower premiums caused by the demonstration.

The PDP premium demonstration program holds down increases for beneficiaries

In the 2024 PDP market, carrier exits, Wellcare’s $0 premium plan along with significant LI benchmark changes were the key disruptive factors. In 2025, the significant influence of the Inflation Reduction Act (IRA) and the surprise announcement of an additional premium stabilization program continue to set the stage for another unprecedented PDP market.

Alongside the annual announcement of the national average bid amount and member premiums, CMS introduced a voluntary, three-year premium stabilization program that allows PDP carriers to opt into a program that would effectively cap year-over-year premium increases between 2024 and 2025 at $35 per month and provide carriers with additional risk corridor protection.⁶ This program furthers the effort of the Part D premium stabilization provision of the IRA, which caps the annual increase of the base beneficiary premium at 6%, a national average amount, and does not limit individual plan premium growth to 6%. The federal government will pay additional direct subsidy amounts to compensate plans for the reduced premium revenue.⁷ Figure 2 shows the number of members in plans with various premium increases between 2024 and 2025. The PDP premium demonstration curbs the premium increases for 3.1 million beneficiaries at $35 per month relative to 2024.

While the figures above show the year-over-year changes in premiums, 2024 marked the first instance of a $0 plan in the standalone PDP market. As of September 2024, about 1.9 million beneficiaries were enrolled in $0 premium PDPs. The number of $0 plans increased substantially from 14 in 2024 (all offered by Wellcare) to 47 in 2025. These 47 plans account for almost 3.6 million beneficiaries as of September and are now offered by Cigna, Clear Spring, Humana, and United, in addition to Wellcare. This proliferation of $0 plans is likely driven primarily by the stabilization demonstration, though the majority of $0 plans offered are still from Wellcare in 2025.

CMS stated that over 99% of beneficiaries were enrolled in a plan that participated in the demonstration. The Congressional Budget Office (CBO) estimates the PDP stabilization program will directly increase federal spending by $5 billion in calendar year 2025.⁹ Excluding Employer Group Waiver Plan (EGWP) beneficiaries, this translates to a $23 per member per month (PMPM) impact on premium. It represents a substantial offset to premium increases, which would have otherwise occurred, as CMS estimated the average premium for non-low-income (NLI) members in 2025 would be $40.00, relative to $41.63 in 2024.

Low-income targeting strategies remain divergent

While Wellcare, Cigna, and Clear Spring retain similar positions with respect to their low-income targeting strategies, other national carriers have clear differences relative to 2024.

• CVS and Humana altered their 2023 to 2024 trend of decreasing their number of plans below benchmarks. Both reversed course from only six plans below benchmark in 2024 to 15 and 17 below benchmark, respectively, in 2025.
• United continued its trend of bidding an increasing number of plans above benchmarks in 2025, decreasing their plans below benchmark from 13 to four.

The degree to which the stabilization demonstration played a role in increasing the number of plans below benchmarks for these carriers is unknown as CMS did not announce premiums prior to stabilization. However, it is possible some plans below benchmarks in 2025 intended to be above benchmarks, participation in the demonstration resulted in lower premiums, and, in turn, eligibility to enroll LI members without premiums.

In 2026 we will have negotiated prices, but will they lead to another turbulent PDP market?

In 2026 we will again see significant changes and novel situations for stakeholders in Medicare Part D, as the last major provision of the IRA, drug price negotiation, begins its direct impact on plans, beneficiaries, risk-bearing providers, and pharmaceutical manufacturers. Building strategies proactively to account for these provisions and the now public 2025 landscape information should be top of mind for all stakeholders impacted by the PDP market. Further, the PDP premium stabilization demonstration program is set to continue in some form into 2026, and will not be a surprise to plan sponsors despite the unknown future parameters, which may bring new aspects of behavioral bidding changes from plan sponsors.

Critical evaluation of how plan sponsors and national carriers could react, how member habits may change, and how other supply chain entities may pivot in response to the new landscape will be critical for success moving forward.

Caveats, limitations, and qualifications

The information in this paper is intended to describe premium changes and trends in the Medicare PDP market. It may not be appropriate, and should not be used, for other purposes.

We relied on publicly available enrollment and premium data from the Centers for Medicare and Medicaid Services (CMS) to support the data presented in this paper. If this information is incomplete or inaccurate, our observations and comments may not be appropriate. We reviewed the data for reasonability but did not audit the data.

Maddie Cline and Jake Klaisner are members of the American Academy of Actuaries and meet the qualification standards of the American Academy of Actuaries to render the actuarial opinion contained herein.

¹ CMS (September 19, 2024). Contract Year (CY) 2025 Medicare Advantage and Part D Plan Landscape Rollout – File Format Updates. Retrieved October 22, 2024, from https://www.cms.gov/files/document/cy2025-landscape-format-memo-20240919.pdf.

² CMS (September 27, 2024). Fact Sheet: Medicare Advantage and Medicare Prescription Drug Programs to Remain Stable as CMS Implements Improvements to the Programs in 2025. Retrieved October 22, 2024, from https://www.cms.gov/newsroom/fact-sheets/medicare-advantage-and-medicare-prescription-drug-programs-remain-stable-cms-implements-improvements.

³ CMS (August 1, 2024). Actuarial User Group Call: Part D Premium Stabilization Demonstration. Retrieved October 22, 2024, from https://www.cms.gov/files/document/part-d-premium-stabilization-demonstration-qa.pdf.

⁴ Cline, M. & Klaisner, J.K. (November 27, 2023). Low Income Disruption and the $0 Premium Introduction: 2024 Individual Medicare PDP Market Turbulence. Milliman White Paper. Retrieved October 22, 2024, from https://www.milliman.com/en/insight/low-income-disruption-0-dollar-premium-introduction-2024-individual-medicare-pdp-market.

⁵ Does not include De Minimis plans with premiums up to $2 under the LIB. Clear Spring is under sanctions and is not expected to receive new auto-enrollees nor to enroll new members for 2025 at this time.

⁶ CMS (July 29, 2024). Fact Sheet: CMS Releases 2025 Medicare Part D Bid Information and Announces Premium Stabilization Demonstration. Retrieved October 22, 2024, from https://www.cms.gov/newsroom/fact-sheets/cms-releases-2025-medicare-part-d-bid-information-and-announces-premium-stabilization-demonstration.

⁷ It is important to note that direct subsidy payments are subject to sequestration and premium is not. Therefore, the plan will not be made completely whole.

⁸ This graphic reflects premium changes based on September 2024 enrollment and corresponding 2024 premiums relative to 2025 premiums. It reflects cross-walks (e.g., CVS Smart Saver to CVS Choice) and excludes members currently enrolled in 2024 plans set to be terminated for 2025 (e.g., Mutual of Omaha PDPs). Percentage change figure excludes about 141,000 members with premium increases from $0 to $2.30.

⁹ CBO (October 2, 2024). Developments in Medicare’s Prescription Drug Benefit. Retrieved October 22, 2024, from https://www.cbo.gov/system/files/2024-10/Arrington_et_al_Letter_PartD_0.pdf.