If McKinsey’s 2024 Employer Health Benefits Survey is correct, health plans are going to be increasingly challenged to meet employers’ innovation and affordability needs.
About two-thirds of employer participants said, “…they are looking to switch carriers over the next four years or less, likely seeing alternative plans that reduce costs and improve member experience.” A similar percentage of respondents “are looking for cost savings of greater than 10 percent.”
In response to their employer research, McKinsey suggests,
“Payers that stay on the sidelines of innovation may risk losing membership in the coming years. Our estimates suggest that by 2030, roughly 12 million commercial members, irrespective of the plan they are enrolled in, could move to innovative products, which would represent just over 7 percent of the projected 165-million-member commercial market and about $500 million of the fully insured profit.”
The Cross-Market Affordability Challenge
At the risk of restating what every health plan executive knows all too well, healthcare costs are high and increasing every year.
As the American Medical Association shared,
“Health spending in the U.S. increased by 7.5 percent in 2023 to $4.9 trillion or $14,570 per capita. This growth rate is significantly higher than the 4.6 percent rise in 2022, and apart from the 10.4 percent rise in 2020 due to the COVID-19 pandemic, it is the highest growth rate observed since 2003.”
In 2024, the average family health insurance premium was $25,572, up 52 percent since 2014.
Healthcare affordability presents vastly different challenges across geographic regions, market segments, and stakeholder groups. While national pharmacy trend increases of 15-20 percent in 2024 affected the entire market, regional variations in benefits designs, provider consolidation patterns, and state regulatory frameworks have created a patchwork of affordability obstacles requiring localized solutions.
Technology partners serving multiple markets – for example, NASCO – must navigate these complex variations while delivering configurable platforms that accommodate regional administrative costs and rates, state-specific regulations, and employer-driven innovation in intelligent benefit designs and service level coverage options. The ability to enable affordability across diverse markets represents both a significant challenge and a strategic opportunity when confronted with customer and payer market healthcare demands and the cost conundrum.
Why Cross-Market Flexibility Matters: Regional Cost and Reimbursement Variations
Healthcare costs vary dramatically by region, with some metropolitan areas experiencing costs up to 250 percent higher than the national average. These variations extend beyond simple cost-of-living differences to fundamental market dynamics:
- Provider Consolidation Patterns: Markets with high provider consolidation, e.g., Northern California, show significantly higher reimbursement rates than more fragmented markets.
- Regional Practice Variations: Utilization patterns for diagnostics and procedures vary by as much as 30 percent between regions.
- Labor Market Dynamics: Healthcare workforce shortages and compensation differences create regional cost variances.
- Payer Market Concentration: Markets dominated by one or two large insurers demonstrate different pricing dynamics than competitive markets.
The healthcare solution platforms of the future must accommodate these variations through flexible, value-driven reimbursement methodologies, regional benchmarking capabilities, and market-specific analytics that provide accurate cost projections for each service area.
Healthcare regulations also vary significantly at the state level, creating compliance challenges for cross-market platforms. Technology solutions must incorporate regulatory intelligence layers that enable automation and adapt workflows with compliant documentation and reporting based on each state’s specific requirements.
Why Cross-Market Flexibility Matters: Employer Size and Industry Segmentation
Affordability strategies must adapt to employer characteristics that vary significantly across markets:
- Size-Based Variations: Small employers (<50 employees) have different compliance obligations and risk tolerance than mid-market (50-500) or larger employers (>500).
- Industry-Specific Needs: Healthcare utilization patterns and cost drivers vary significantly across industries, e.g., manufacturing vs. professional services.
- Workforce Demographics: Age distribution, family composition, and income levels drive differently affordability considerations (while being mindful of social determinants of health (SDOH) attributes.)
- Geographic Dispersion: Multi-state employers require solutions that function across regulatory boundaries.
Technology platforms serving diverse employer segments must incorporate segment-specific templates, benchmarks, and recommendation engines while maintaining the flexibility to customize for unique organizational needs.
Want to learn more? Stay tuned for an upcoming blog about technology enablers and the future of cross-market affordability solutions. At NASCO, we make it possible for health plans to innovate, grow, and ultimately provide better healthcare experiences for those they serve. Our decades of healthcare experience and technical expertise mean we can support health plans’ product innovation so plans can effectively compete and grow.