Implementation of 2025 Reconciliation Law: Medicaid Managed Care Rate Setting Uncertainty & Potential Plan Exits Authors: Jada Raphael and Elizabeth Hinton Published: Sep 21, 2026

https://www.kff.org/medicaid/implementation-of-2025-reconciliation-law-medicaid-managed-care-rate-setting-uncertainty-potential-plan-exits/ Managed care is the dominant delivery system for Medicaid enrollees with over three-quarters of Medicaid beneficiaries nationally enrolled in comprehensive managed care organizations (MCOs), accounting for half of total Medicaid spending in FY 2024. The 2025 federal budget reconciliation law is expected to create managed care rate setting challenges for states as the Medicaid provisions impacting enrollment and spending, including program financing changes, work requirements, and more frequent eligibility redeterminations for expansion adults, are rolled out. These changes can create uncertainty about enrollment and acuity as states and their actuaries develop capitation rates. Amid this uncertainty, executives from Elevance Health said during a July earnings call that they were exiting DC’s Medicaid market and expect to exit additional markets. Since then, Louisiana announced an Elevance Health plan will exit at the end of 2026. While MCO entries and exits in specific states or markets are not uncommon, decisions by Elevance Health and the other large, multi-state parent firms about overall participation in Medicaid markets could have broad implications for states, enrollees, and providers, given their large share of national MCO enrollment. This policy watch examines recent and anticipated managed care rate setting challenges and the potential implications of MCO exits.