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Health plans have grown increasingly complex, and understanding the trends and forces affecting their business are essential for cross-industry stakeholders. This piece will help members gain insight into the trends in the health plan market and learn how to better understand their customers, help them meet their goals, and build lasting partnerships.
1. Health plans are renewing their focus on clinical cost management as rising medical loss ratios (MLRs) threaten their margins.
- MLRs are growing for most health plans due to rising use and the cost of care, reversing their pandemic-era financial gains.
- MLRs above the CMS mandated 85% minimum in Medicaid and Medicare Advantage reduce plan margins in these public programs.
- Clinical cost management strategies are top of mind for plans in 2025 as they attempt to reestablish sustainable MLRs, but challenges include:
- Determining accurate trend lines for medical costs as members seek the care they deferred during COVID.
- Creating and implementing organization-wide approaches to cost savings that go beyond specific ad hoc attempts.
- Plans that succeed in managing their clinical costs will be those that use a data-driven approach to identifying the most impactful savings opportunities and can translate them into actionable guidance.
2. With Medicaid funding cuts on the horizon, health plans will be asked to do more with less — and will need to work harder to keep Medicaid beneficiaries enrolled and eligible.
- Health plans focus on doing more with less in Medicaid due to uncertainty regarding both utilization and future funding:
- There is a 4% projected decrease in national Medicaid enrollment for 2025, while plan spending is expected to increase by 7%.
- Plans now cover a riskier member pool because active care users were more likely to stay enrolled after unwinding.
- States now face deep cuts in federal Medicaid funding, which could lead to states shouldering up to an additional 30% of the cost burden for their Medicaid populations.
- As states pay more for Medicaid due to macroeconomic uncertainties and the expiration of federal pandemic relief, they will rely on health plans for collaboration and support.
- Medicaid plan leaders are prioritizing improvements in member engagement, care quality, provider relations, health equity, and cost management.
3. While growth in Medicare Advantage (MA) remains possible for health plans, sustainability requires better management of growing costs under increasing government scrutiny.
- MA is a type of Medicare health plan offered by private companies that contract with Medicare.
- After years of decreases to their payment rates, MA payers received a significant increase to their benchmark payment rate for 2026 in order to better align CMS payments with the rising cost of care for seniors.
- MA plans face tighter margins as utilization increases and uncertainty around government payment rates remains. In response, plans will prioritize higher-revenue populations and reductions to supplemental benefits.
- MA Special Needs Plans (SNPs) continue to be an engine of MA enrollment growth, with over 50% of new MA members entering the program through a SNP in 2025.
4. Plans focus on managing navigation as employer-sponsored insurance (ESI) costs increase.
- Employers expect an 8% increase in their healthcare spend in 2025 according to a BGH survey.
- Health insurance costs have increased due to inflation, hospital consolidation, and rising medical and pharmacy utilization, making traditional cost containment approaches more challenging. To address this, employers and their plan partners are:
- Leaning into care navigation strategies to drive cost savings.
- Exploring new payment approaches, from level-funding and direct contracting for themselves to variable copay plans and individual coverage health reimbursement arrangements (ICHRAs) for their employees.
- Employers rely on benefits brokers and plans as trusted partners to navigate the added administrative burden associated with changing benefits and adopting cost containment strategies. These partners will maintain that trust by demonstrating their commitment to employer cost containment despite the greater compensation they receive from higher premiums.
5. Individual market enrollment has grown to its highest point, but plans will need to implement more creative cost containment tactics when COVID-era subsidies disappear at the end of 2025.
- Enrollment in the individual market, which is commercial insurance purchased directly by individuals, has increased by 113% over the past five years due to COVID-era subsidies and (more recently) the migration of individuals disenrolled from Medicaid. COVID-era subsidies end after 2025, however, which will dampen growth and increase premiums as healthier individuals leave the individual market.
- Cost containment is becoming the key to plan success as spend will grow 8% (projected) in 2025 for plans in the individual market, which is putting upward pressure on premiums in a price-sensitive market.
- Plans are shifting their enrollment and cost containment strategies from existing approaches, like more comprehensive care management and benefit packages, to more managed networks and tech-enabled enrollment.
- How can you tailor your value proposition/solution to align with the changing trajectories of Medicaid, Medicare Advantage, ESI, and the exchanges?
- How can you enable your health plan partners’ clinical cost containment strategies?
- How does your product support overarching health plan goals to improve member experience?
Posted on June 13, 2025
Updated on August 13, 2025
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