Responding to five current health insurance trends.

Insurance is foundational to healthcare economics. Significant changes and problems in reimbursement programs loom large for all providers. Recent publicity has centered on proposals that have been floated to effect major alterations in government insurance. It’s too early to speculate on these future directions, but there are several key health insurance trends currently playing out whose impacts can be reasonably assessed.

This industry report briefly examines five challenges. Forecasts and analysis of the chief implications for 2025 and beyond are offered to assist healthcare decision makers. Three strategies in financial management are then outlined that should be considered as part of the overall response portfolio.

Health insurance trends.

The insurance issues that feature prominently on the near- and medium-term leadership agenda pose meaningful risks to financial health as well as patient affordability and access to care.

Payer mix continuing unfavorable trajectory.

The rapidly aging population could boost Medicare enrollment from 60 million people in 2023 to 74 million in 2034.^[1] footnote [1] That increase is largely coming at the expense of commercial insurance, which is projected to cover 55% of enrollees by 2030 from 59% pre-pandemic.^[2] footnote [2] Millions of enrollees who utilize more services will be covered by insurance that reimburses at 30% of commercial levels.^[3] footnote [3] The disparity can be seen in year-over-year payer price growth, which was recently calculated at 3.4% for private insurance versus 1.3% for Medicare patients.^[4] footnote [4]

The chief problem is that Medicare services carry negative hospital margins. Medicare Payment Advisory Commission data shows that they reached a record low point of -12.7% in 2022 and were expected to finish 2024 at -13%.”^[5] footnote [5]

Affordable Care Act (ACA) marketplace changes risk enrollment loss.

The ACA Marketplace has been a strong source of insurance coverage. A new peak was attained in 2023 when 23 million people acquired policies through this channel.^[6] footnote [6] This growth has been powered by the federal enhanced subsidies designed to help people fund the premiums. Subsidized enrollment has increased from 9.6 million to 19.7 million over the past four years.^[7] footnote [7]

This temporary program is slated to end in December 2025. Providers and individuals fear major coverage loss. Government estimates see direct-purchase enrollment declining by 7.3 million people next year from subsidy removal.^[8] footnote [8] Experience suggests that lost coverage will motivate some to defer or avoid care, to the financial detriment of healthcare organizations.

Risk attaches to another ACA-related program. Deferred Action for Childhood Arrivals (DACA) recipients have been permitted to enroll through the marketplaces beginning in late 2024, but this policy’s continuation is uncertain. Approximately 100,000 new enrollees have been projected.^[9] footnote [9]

Little abatement seen in problems with popular Medicare Advantage (MA) plans.

Medicare Advantage has proven popular with consumers, and nearly 33 million people were enrolled in 2024. MA has several appealing features driving this growth:

• Low or no premiums. Two-thirds of MA plans with Part D prescription drug coverage will charge no premium beyond the Part B obligation in 2025.^[10] footnote [10] This year’s estimated average monthly plan premium for all MA enrollees is $17.00 per month.^[11] footnote [11]
• Ancillary care benefits. MA policies almost universally cover vision, dental and hearing care, an important benefit for consumers’ finances and overall health.
• Opportunity for post-acute coverage. MA’s Special Needs Plans (SNPs) have seen rapid growth. Institutional SNPs cover beneficiaries requiring long-term and skilled nursing care, and there were 177 available plans in 2024.^[12] footnote [12]

MA has created significant headaches for providers and concerns for beneficiaries, including:

• Premium changes. Carriers are generally forecasting lower margins this year on their MA business. They may respond with some combination of benefits reductions and premium hikes that could lead to consumer confusion, increased need to shop around during enrollment periods, and possible dropping of coverage.^[13] footnote [13]
• Administrative burdens. MA has been plagued by high levels of prior authorization (PA) requests and payment denials. The problem has become so great that some health systems have terminated their MA agreements. Prior authorizations have grown steadily to reach 50 million annually (Figure 1).^[14] footnote [14]
  
  

  
  Figure 1
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  PA is having “a devastating effect,” according to a physician survey.^[15] footnote [15] Over one in five said the process often leads to patients abandoning care, and most believe few insurance company representatives possess sufficient qualifications to render authorization judgements (Figure 2).
  
  

  
  Figure 2
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  Denials are an issue for all insurance types, though the levels for MA have only been exceeded by Medicaid in recent years. Fifty-seven percent of revenue cycle leaders reported overall average denial rates above 10% in 2023, and 20% experienced rates topping 13%.”^[16] footnote [16] Private insurers eventually pay 54% of the initially denied claims, but providers forgo income because they frequently lack sufficient resources to pursue all claims.^[17] footnote [17]
• Utilization shortfalls. A national study found that MA beneficiaries received no greater level of dental, vision or hearing care than those in traditional Medicare.^[18] footnote [18] Two possible barriers were identified. Only half of the MA enrollees were aware of their services coverage, and cost-sharing requirements meant that only one-fourth of the dental, vision and hearing costs were covered.

Potential Medicaid cutbacks represent further coverage risk.

The continuous Medicaid enrollment requirement instituted during the COVID crisis swelled the rolls to over 91 million beneficiaries in 2023. The program’s term has expired and projections see enrollment falling to 79.4 million in 2025.^[19] footnote [19] Various new proposals to change Medicaid policies, including instituting a per capita reimbursement cap, would generate major cutbacks over the next decade (Figure 3).^[20] footnote [20] While subject to change and having uncertain outcome, these alterations might force states to consider substantial coverage reductions.

Figure 3
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Providers also hope cuts will be avoided in the growing State-Directed Medicaid Payments (SDP) program, which incentivizes engagement in Medicaid managed care arrangements. There were 302 approved SDP plans in 2023–2024 in over three-quarters of the states.^[21] footnote [21] Analysts indicate that these plans have enhanced provider bottom lines and are not likely to be altered in the short term.^[22] footnote [22]

Employers seeking innovative responses to cost escalation.

Employer-based health insurance will remain the predominant source of coverage for Americans, with enrollment projected to grow from 164 million in 2024 to 170 million in 2034.^[23] footnote [23] The commercial channel is under tremendous cost pressure. Total per-employee expense will rise 5.8% on average in 2025, despite planned efforts to reduce costs.^[24] footnote [24] Expensive new medications are exacerbating the pressure. Specialty pharmacy now represents 54% of health systems’ total drug spend. Employers are generally covering these medications, but future restrictions may be likely.

Beyond increasing employee contributions to their care and expanding high deductible plans, companies are exploring innovative programs. For example, Individual Coverage Health Reimbursement Arrangements (ICHRA) reimburse employees for insurance premiums and other health expenses. This tax-advantaged solution gives employees flexibility to choose their insurance plans. ICHRA adoption grew 29% between 2023 and 2024.^[25] footnote [25] Similarly, Qualifying Small Employer Health Reimbursement Arrangements are geared to small businesses. Sixty percent of enrollees used reimbursements to acquire gold or silver ACA plans.^[27] footnote [27]

Three financial strategies.

Multiple solutions are needed to ameliorate the negative impact of the various insurance changes. The roadmap should include three key strategies in the payments and processing areas.

Counteract affordability problems through expansive patient financing.

Insurance limitations can heighten many individuals' concerns regarding affordability of care. A survey revealed that 45% of beneficiaries have trouble understanding their insurance and 43% are worried that some future coverage will be denied.^[28] footnote [28] The average employee already spends over $1,100 annually out of pocket.^[29] footnote [29] The figure for the average Medicare-covered individual exceeds $6,600 for health services, medications and supplemental insurance.^[30] footnote [30]

CommerceHealthcare® has written extensively on the benefits of implementing consistent and comprehensive patient financial assistance. Key elements of a robust program include:

• Offering low or zero interest rate lines of credit for significant dollar amounts to maximize care cost coverage. Credit lines are patient-friendly in that they permit subsequent additional care charges without new loan origination.
• Extending financing based on pre-service cost estimates.
• Considering recourse financing in the overall program. Recourse is appropriate for a number of situations. Further exploration of this avenue can be found in the CommerceHealthcare® article A fresh look at recourse financing: Strategy to reduce bad debt.
• Relying on a financial partner that can greatly expand lending capacity and assume full loan administration.

Extend automation initiatives to streamline finance and revenue cycle management (RCM).

The heavy administrative cost and time burdens imposed on organizations by insurance processes make operational streamlining imperative. Contesting denials carries an average cost of $43.84 per claim.^[31] footnote [31] Physicians report having to complete 43 prior authorizations every week.^[32] footnote [32] Constrained staff resources limit ability to pursue denial recovery.

Much remains to be done in automating RCM workflows. More than half of surveyed executives are disappointed with their current automation technology.^[33] footnote [33]

Two payments functions present proven automation opportunities that can be implemented quickly:

• Remittance management. Today’s remittance processing technology automates insurance and patient receivables, offering paperless, exception-based workflows for payment posting, unbundling aggregated remittances for proper system routing and reconciliation. These solutions enable organizations to deal with the growing insurance complexity and free staff to focus on denial recovery and other priorities.
• Payables management. Organizations are highly focused on generating substantial cost savings in supply chain management in the face of growing spend that is projected to increase 3.84% for pharmacy in 2025–2026 and 2.3% for non-pharmacy supplies.^[34] footnote [34] Centralized automation solutions manage high volume supplier payments across modes (credit card, EFT, check) and frequencies (scheduled and one-time). Administrative savings can be significant, and further economic benefits can be realized by making supplier payments with a virtual credit card that includes revenue share. Fast-emerging artificial intelligence and e-payment technologies offer future efficiency gains to those with automation systems in place.

Maintain focus on equitable health access.

Medicaid cutbacks, insurance benefits restrictions, confusing and cumbersome policies and procedures — these and other issues threaten the progress healthcare has made in recent years toward providing access to care across all socioeconomic levels. Lower income individuals have a greater tendency to drop insurance coverage.^[35] footnote [35] By 2034, the overall uninsured rate in the U.S. is expected to rise to 8.9% from 7.7% currently.^[36] footnote [36]

Boosting RCM efficiency to free up cash and significantly expand patient assistance programs enhances the financial flexibility essential to supporting broad health access. In this way, all three strategies outlined in this section positively reinforce one another (Figure 4). Seeking help in these efforts from a well-resourced financial institution represents a path whereby many organizations can strengthen their response capabilities.

Figure 4
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Conclusion.

Both private and government insurance are undergoing substantial change that risks deepening the financial and care concerns of providers and consumers alike. The three financial strategies outlined offer ways to mitigate the impact while creating meaningful new benefits and positioning organizations to adapt well as future directions emerge.

CommerceHealthcare® solutions are provided by Commerce Bank.

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