The final yr was an enormous one for payers, with a number of main M&A offers, in accordance with a latest report from KPMG. This consists of CVS Well being’s $8 billion buy of Signify Well being and $10.6 billion buy of Oak Road Well being, in addition to UnitedHealth Group’s Optum’s $3.3 billion acquisition of Amedisys. In 2024, payers “will turn into ever extra vital within the U.S. healthcare system,” KPMG mentioned.
However there are a number of challenges forward as effectively, comparable to regulatory pressures towards Medicare Benefit and pharmacy profit managers.
Listed here are KPMG’s 5 tailwinds and 5 headwinds for payers in 2024:
Tailwinds
1. Diminished recession worries: KPMG anticipates slower financial development in the midst of 2024, however it will enhance within the third and fourth quarters with “no recession and no new rate of interest hikes by the Fed.”
2. Premium will increase: Premiums are anticipated to rise “sharply” for some insurance coverage members.
3. Margin pressures: Each giant and small suppliers are anticipated to expertise margin pressures. This can result in some being acquired.
4. Asset integration: There’ll probably be a rise in “vertical integrations of acquired supplier property,” in accordance with KPMG.
5. Insurance coverage entry: Because of continued excessive employment charges, industrial enrollment will probably be “maximized,” KPMG mentioned.
Headwinds
1. Lending worries: Rates of interest will probably keep excessive, resulting in lenders being extra cautious.
2. Antitrust scrutiny: Federal antitrust enforcement will proceed to be strict. This can finish or delay some offers, and lift the prices of some offers.
3. Expertise: “First-rate technical expertise” might be difficult to recruit and retain.
“Firms that innovate to create superior worker worth propositions might achieve vital aggressive benefits and create virtuous circles of profitable innovation and recruiting,” KPMG acknowledged.
4. Medicare Benefit woes: Margin pressures are anticipated to rise for Medicare Benefit plans. This might be on account of slower development and reimbursement challenges from rising scrutiny from the Facilities for Medicare and Medicaid Companies. As well as, Cigna just lately agreed to pay $172 million to settle claims that it despatched inaccurate MA diagnostic codes to extend reimbursement.
KPMG added that in October, consultants testified to Congress “that whereas some MA plans supply vital companies not obtainable in conventional Medicare, many seniors have bother navigating greater than 100 choices, a number of problems, and deceptive and even fraudulent advertising and marketing.”
5. Crackdown on pharmacy profit managers: KPMG cited a September report from the American Medical Affiliation that discovered that vertical and horizontal consolidation of PBMs lowers competitors. This in flip hurts sufferers, self-insured employers and insurers not partnered with PBMs.
“Regulators and legislators might look extra intently at PBMs’ position within the drug provide chain,” KPMG mentioned.
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