2027 is shaping up to be a complex year for health plans, as demands from clients to demonstrate value get louder, according to a new report.
Analysts at consulting firm Numerof & Associates released their 2027 outlook report for the insurance industry, and said that in a world where the cost of healthcare continues to rise, more patients and plan sponsors are asking questions about what plans are bringing to the table.
Increasing transparency does make it easier for members to make their own healthcare decisions, but that alone isn't enough to resolve affordability challenges, per the report. It means that insurers will be tasked with engaging differently with consumers and transforming their experiences.
"The bigger issue is not just that healthcare costs keep rising but the traditional insurance model is becoming increasingly tough to sustain without demonstrating better value," said Michael Abrams, co-founder and managing partner at Numerof, in an interview. "Consumers and employers are getting more sensitized to the issue of value."
That interest in finding greater value is pushing employers to consider alternative models and approaches that can manage benefit costs, such as direct provider contracting, onsite clinics and care navigation programs.
The expectation is not just lower costs, but to drive better outcomes and have greater accountability over the medical benefit offerings, per the report. And this trend opens the door for new entrants to thrive, and challenge the role of health plans as the bridge between employers and providers.
Abrams said digital health companies that target certain specialty areas, such as musculoskeletal care or diabetes, have a significant opportunity to fill that gap.
"These digital healthcare companies aren’t necessarily replacing insurers; they’re competing for functions that insurers traditionally performed or should be performing," he said.
In addition, these trends are gaining steam at a time of significant policy upheaval, further complicating the outlook for health plans, according to the report. The expiration of the enhanced premium tax credits for Affordable Care Act plans has driven up costs, and Medicaid work requirements taking effect on Jan. 1 could significantly grow the uninsured or underinsured population.
Reimbursement trends in other markets, such as Medicare Advantage, are also in the mix, the report said.
Abrams said the "convergence" of those policy changes with increased pressure from clients and members makes for a uniquely challenging combination.
"Insurers are getting squeezed from a number of different things all at the same time," he said.
The report recommends that plans looking to survive in this complex time should focus on demonstrating their value to plan sponsors and enrollees, particularly around managing the total cost of care. Insurers should also rethink how they engage with members to support a stronger relationship with consumers.
It also means finding ways to think differently about their relationship with providers; a step that will be critical to addressing the cost of care. Payers should look for provider partners that can take on risk, and work proactively with providers to drive better outcomes and improve value.
Abrams said that payer-provider dynamics are often coercive rather than collaborative. In one market, the insurer may be more powerful and in another the provider, but in either case it's based around a show of dominance rather than working together.
"With continued consolidation on both sides, we have seen a kind of polarization where the only mechanism for resolution is who has the biggest market clout," Abrams said.