What Payers Need to Know: Adapting Commercial Offerings Under the New Administration

Over the past decade, payers have experienced substantial growth as they’ve branched out beyond their traditional focus on the commercial sector. Shifts in public policy and the increased role of private insurers in government programs led to massive expansion in these markets. As the individual family plan (ACA), Medicare Advantage, and Medicaid MCO segments expanded, payers invested heavily in capabilities to manage these lines of growth. 

However, the growth of these markets is now over. With Republicans taking control of the White House, Senate, and House next year, payers are facing a new reality: a shrinking government market. 

Here’s what payers can expect under the new administration.

The ACA market is set to contract after the expanded subsidies expire at the end of 2025. Premiums are estimated to increase by an average of 79%; in some states, premiums will more than double. According to the Congressional Budget Office (CBO), the enrollment of the ACA marketplace will drop from 22.8 million members to 18.9 million by 2026. 

The Medicaid MCO marketplace is facing tremendous uncertainty, making it highly risky for payers. We can expect states to receive waivers to restrict eligibility through work requirements. That will increase the difficulty of qualification and registration. This isn’t a growing segment for payers any time in the near future. 

The glory dates of Medicare Advantage are over. Nearly half of all seniors are already enrolled in private MA plans. So, there’s limited room for new enrollment. Plus, changes in reimbursement methodology from CMS are squeezing margins. 

With the government markets stagnating, there’s an opportunity for payers to shift their attention back to the commercial segment. This market has undergone a profound transformation over the last decade. Two-thirds of all employers are self-insured now. This shift has altered the dynamics of how commercial insurance is structured.

This is a big difference from the profitable business models payers followed for years. Employers paid payers premiums to manage their employees’ healthcare costs. As long as claims were lower than premiums, there was profit. This system drove growth without requiring a lot of innovation.

With most employers being self-insured, payers are getting the fee for administering the plan, but they’re not receiving the premiums. 

Here are the three big implications for the payer business model:

1. Risk of losing commercial business: Now that employers are bearing more of the risk, they want more flexibility in the design of their plans. Specifically, they’re looking for tailored options that suit their employee base and budgets. A tech company with a primarily younger workforce may want to offer fertility treatments to attract talent. A manufacturing company with an older workforce may want to provide cheaper telehealth services. If payers can’t offer modular, customizable plans, they risk losing business to competitors, particularly national carriers that have already adapted to these expectations.
   
2. Risk of eroding margins: Due to lower margins per employee in the ASO market, payers need to find new ways to generate revenue. National carriers have already combated this issue by offering competitively priced baseline ASO products and then up-selling additional services (e.g. wellness programs or health management tools). Regional plans can adapt by building systems that allow them to offer services beyond the baseline and increase margins as a result.
   
3. Risk of Intermediation: Unable to handle these levels of customization, many payers have put their ASO business in the hands of third-party administrators (TPAs). This approach has resulted in a loss of control over the customer experience and plan customization. Payers still control the provider network, but they don’t have the ability to differentiate themselves with local offerings or innovative experiences. If payers continue to rely on TPAs, they risk being squeezed out by competitors who offer more control and flexibility. 

Payers are now realizing that as they work to refocus on the commercial segment, they need to retake control of their ASO offerings. The key to doing so comes down to these three changes:

1. Modernizing the claims system: The legacy, mainframe core claims processors that most payers have were designed to process claims based on medical policy logic. However, they’re not built to handle the complexities of modular plan design and customizable features. Conciliatory tasks (e.g., plan configuration and group onboarding) require IT to hard-code changes onto the mainframe using old languages such COBALT. The opportunity for payers here is to move these functions to the cloud and build no-code applications. That way sales teams can configure plans without involving IT. 
   
2. Connecting Disparate Applications and Data: It’s not enough to create modular plan designs within the core claims system. These plans need to be operationalized across the organization. This requires a common operating layer that connects all applications and data sources. This layer ensures that information is consistent and up-to-date across the entire organization, from claims processing to customer service. For example, a member app needs to know whether an individual is eligible for specific services based on their employer’s plan.
   
3. Creating Modular Customer, Provider, and Member Experiences: In order to offer customizable plans, payers must create user experiences that are flexible and configurable. This means developing applications that can adapt based on the underlying plan configuration (whether for members, providers, or external partners). These applications should integrate seamlessly with backend systems to ensure real-time updates, allowing changes in benefits, pricing, or coverage to reflect instantly. By adopting modular architecture and leaning on data-informed insights, payers will be able to enable personalized interactions. 

In 2025, payers will shift their focus back to the commercial segment, which now demands a flexible, modular approach to plan design. Meeting these demands will require the modernization of technology stacks, in-house ASO platforms, and greater control over offerings.  

At 3Pillar, we’re here to help. We’ve spent the past decade helping payers gain a competitive edge in the marketplace by modernizing their systems. If you’re ready to take the next step and assess your own technology stack, reach out to our team.