MARKET BACKDROP
How market pressures cascade through health systems & employer plans
Organizations are operating in a pressured, uncertain environment filled with market noise. High economic and consumer inflation coupled with financial volatility across industries strains organizations’ ability to plan and project. Tariff uncertainty and ongoing legislative reform introduce additional layers of unpredictability.
Employers, insurance carriers, and providers are feeling the combined effect of rising costs and diminishing flexibility to absorb them. As cost pressures intensify, traditional levers lose effectiveness, and the capacity of networks and pricing structures to maintain stability reaches its limit.
Healthcare provider insights
Rising costs, staffing challenges, and financial strain are driving uncertainty across the healthcare landscape. Watch a breakdown of how these shifts are affecting healthcare providers and showing up for employers and members.
From system & provider strain to plan costs
For health systems, post-COVID margin recovery has slowed, labor shortages persist, and demand for care continues to rise amid growing consumer expectations:
- Margin pressures are at an all-time high
- Policy changes are threatening reimbursement levels
- The cost of supplies and labor is increasing
- Providers are caring for a sicker population
To help address this, many organizations turn to contract strategy, renegotiating reimbursement levels or pursuing consolidation to protect their bottom line. The ripple effects of broader market cost pressures extend across the entire healthcare ecosystem and drive additional pricing pressure and disruption. Health systems balance recovery against rising demand, carriers adjust, and employers navigate higher trend downstream.
PROVIDER CONTRACTS, DISRUPTION, & PLAN STRATEGIES
Contentious provider negotiations and ongoing consolidation are key drivers of rising reimbursement rates and network instability. When providers and carriers can’t reach agreement, it can lead to hospitals or physician groups leaving the network, directly affecting employee access. These pressures don’t happen in isolation. Inflation, rising labor costs, and financial strain across health systems all feed into negotiations, influencing the pace and direction of pricing changes. For employers, it reinforces the need to develop proactive strategies that plan for transitions, help maintain access, and support employees through periods of disruption.
In this environment, the traditional levers for managing cost lose traction, and employers, providers, and carriers alike must rethink cost management and operational efficiency on a broader scale. From hospital consolidation to rising reimbursement rates, each factor reinforces the next, driving the need for innovative thinking.
How can employers address high costs?
For employers, understanding which parts of the healthcare cost ecosystem are within control and which aren’t allows employers to target the areas and key solutions that can help move the needle.
While macro-level issues rooted in how the system operates can be influenced in some ways but are largely outside of an employer’s control, plan sponsors can be intentional in pulling the right levers in key areas of higher leverage.
Where can employers make an impact?
OUTSIDE EMPLOYERS' CONTROL
- General inflation
- Regulatory changes
- Medicare and Medicaid changes
- Contracting and billing practices
- Medical advancements
- Hospital consolidation
WITHIN EMPLOYERS' CONTROL
Purchasing efficiently
- Ensure carriers, administrators, and PBMs are effectively incorporating your plan; ask questions to have confidence that they are managing evolving market practices such as AI upcoding; consider a payment integrity audit
- Ensure they have competitive network pricing and fees; evaluate all fees beyond the direct administrative fee
- Review funding strategy
- Assess non-traditional plan strategies (e.g., ICHRA, RBP, variable copay plans)
Managing the health of your population
- Promote preventive care
- Drive access to quality care through network and navigation
- Drive engagement in care management programs to encourage positive behavior change
Determining eligibility and cost-share philosophies
- Decide whom your plan should cover and with what subsidy
- Evaluate cost-share parameters through the lens of competitiveness and affordability
