Health plans today bear little resemblance to the health plans of a decade ago—and perhaps to how they will look five years from now. As the healthcare industry navigates a period of profound change, forward-looking health plans recognize the opportunities data, analytics and digital are unlocking. And just as they previously evolved from benefit administrators to health partners, health plans are again working to reinvent their business models and integrate cost-cutting capabilities ahead of significant market disruption.
Paradigm shifts are everywhere—from rising treatment costs, market consolidation with retail pharmacies, health plans and providers, and regulatory shifts. The U.S. population now includes six generations, each with widely varying needs, wants and expectations from their health and care.
So, how do health plans reinvent themselves today to meet the evolving needs of various customers within the ecosystem? A pragmatic approach would be to identify their strengths in data and analytics capabilities and scrutinize their investment roadmap. Are they focused on the “right” activities to generate operational insights?
We’re increasingly seeing health plans turn away from growth-at-any-cost tactics to more intentional, insights-led decision-making. This shift will help plans drive top- and bottom-line revenue growth and ensure high-quality coverage and care as they:
- Expand into new markets and offer new products. Predictive analytics and machine learning-based modeling allow health plans to simulate enrollments against the expected competition. They also can identify which geographies to enter and determine how to align plan designs with trends in those markets. This may involve creating customized supplemental benefit options that not only attract new healthcare consumers but also help improve health outcomes—especially in Medicare Advantage plans.
- Manage operational expenses and optimize medical spend. AI-led automation increasingly helps health plans improve efficiency and generate savings that boost financial performance. An emerging area is utilization management, where automation streamlines prior authorization processes and expedites decision-making. It eliminates manual tasks and ensures medical affairs policies are consistently applied. With provider networks, digital tools certify providers, manage provider contracts and data, and update network directories. These low-value-but-essential tasks are ripe for automation to remove administrative burdens that add cost and reduce network efficiency.
- Provide condition-specific care and disease progression management. Investment in these initiatives helps plans use personalization to improve health outcomes and lower costs. Health plans with data analytics in place can identify at-risk and high-risk members and proactively direct them to the appropriate preventive services or wellness programs that minimize adverse events and expensive hospitalizations.
As health plans strengthen data quality and move toward full interoperability, predictive analytics will help accelerate the transition from fee-for-service (FFS) models to VBC. As VBC models gain traction, health plans will be better able to prioritize patient outcomes, respond to increased margin pressures and adapt to regulatory changes. A successful value strategy helps health plans lower costs, align provider incentives and facilitate evidence-based interventions as they manage:
- The transition to VBC. When moving away from FFS arrangements, health plans should collaborate closely with providers and other stakeholders. By engaging in shared decision-making processes, plans can develop reimbursement models that reward quality outcomes and patient satisfaction.
- Population health. Health plans can use AI-led analysis of member data to assess patient populations, identify high-cost areas and reveal variations in how care is delivered. By analyzing this data, plans can pinpoint opportunities to enhance coordination, reduce inefficiencies and eliminate fraud and unnecessary therapies. Data-driven approaches help plans close gaps in care, especially for healthcare consumers with chronic conditions and comorbidities.
- Provider networks. Analytics allow health plans to monitor and assess provider performance. With appropriate metrics and benchmarks in place, health plans can evaluate the efficiency and quality of care against patient outcomes. Plans also can identify high-performing providers to establish collaborative partnerships and align reimbursements to support care models that prioritize patient outcomes and control costs. Transparent reporting fosters trust, promotes accountability and offers provider incentives to deliver high-value care.
Given the critical role they play in optimizing healthcare services and care delivery, health plans should continue to invest in technology that facilitates more meaningful patient-provider engagement. These tools also help plans reduce operational expenses and improve member satisfaction. We’re increasingly seeing health plans:
- Connect the patient journey. Over the past several years, health plans invested in building digital front doors to facilitate engagement with patients and providers. The idea was to create parity between members’ digital and in-person experiences. Health plans now recognize that the end-to-end business process workflows weren’t integrated through mid-office functions, so they’re focused on closing these gaps to advance population health measures and fuel VBC arrangements. More savvy health plans also have begun leveraging data and analytics capabilities outside their ecosystem to improve the member experience and drive closer collaboration with providers and provider networks.
- Add value for providers and patients. Health plans need to continue to deepen trust with both providers and patients because the confidence factor is not where it should be. Providers perceive a lack of incentives alignment with reimbursements, and members mostly hear from health plans only when a claim is filed. Health plans that integrate personal healthcare histories and social drivers of health data into electronic medical records equip providers with a comprehensive view of their patients beyond point-in-time care episodes. These capabilities will bring the healthcare industry closer to the whole-person care model we all want. This is an area where health plans can be very helpful to providers and patients—identifying members with higher risks and then managing ongoing care plans leveraging outcome-based agreements through alternate payment models.
- Embrace interoperability. With Payer-to-Payer Data Exchange rules taking effect in 2026, employer-sponsored health plans will have access to members’ longitudinal healthcare information with employment and carrier changes. A better understanding of individual health histories helps predict future risk, leading to better risk assessment, risk adjustment and risk profiling. Leveraging this measure can take cost out of the operating structure by automating and digitalizing administrative burdens. It also helps health plans shift resources toward managing chronic conditions and comorbidities—and making healthcare better.
Across the payer spectrum, we see health plans experiment with new business and reimbursement models. Regardless of the path they choose, they’ll need to build capacity to accelerate their transformation in a modular way and operate with a mindset of continuous innovation and continuous improvement to stay ahead. The health plans that thrive will be those that can anticipate the market and prepare for the future.
To learn more about how health plans can reinvent themselves, we spoke with several ZS leaders who are healthcare experts with real-world insights on where organizations should begin.
ZS: How do health plans effectively balance growth and profitability while adapting to shifts in the provider landscape and evolving healthcare consumer preferences?
Kelly Tsaur: The key to balance is carefully picking which capabilities are material to driving real, sustainable scale in growth. Some plans will double down on creating stronger provider enablement, engagement and collaboration to create an efficient product and effective cost-quality equation—but perhaps be more measured in how they invest in digital experiences. Other plans may start with the voice of the customer, investing in the consumer experience as the health and wellness front door and the concierge for the journey. They will effectively own consumer trust and mindshare and use that position to leverage provider relations and optimize the supply-side ecosystem. In either scenario, health plans can only succeed if they develop a new core competency of insights, analytics, integration, interoperability and operational efficiency. This foundation is a true no-regrets investment and unlocks the balance. Being clear on how you will win and aligning your investments accordingly is the key to maintaining balance.
Harbinder Raina: For Medicare Advantage, there are a few focus areas that health plans need to invest in more to balance growth and profitability. One is staff quality improvement and the second is risk adjustment. The third area is population health management, which is broader than Medicare Advantage and applies to other lines of business as well. There have been a lot of investments in related analytics and data. Health plans need to think of their roadmap and of advancing their capabilities, specifically using insights to nudge members to take appropriate healthcare actions and make more cost-effective choices.
ZS: How should health plans think about transparency to help build trust and improve health outcomes?
KT: The market has always been ripe for disruption, and transparency unlocks the requisite data and insights. However, transparency by itself is a double-edged sword. It can drive productive conversations on truly being member- and outcome-centric. At the same time, it can be used to create more divisiveness and siloed optimization. The key for health plans is to be clear on the type of value they can create with transparency and ensuring their stakeholders see it the same way upfront. This discipline can be the fundamental difference between success and failure. It builds a foundation of trust, and it ensures alignment on the outcomes we’re collectively striving for. It sets expectations for the participation in and adoption of the insights created.
Jonas Puente: Friction and transparency are inextricably linked. Yet friction is inevitable, and health plans must be prepared to deal with it. Not getting in front of friction (e.g., member or provider) can quickly shift the narrative and bring unneeded attention in ways that are counterproductive to the payer remit—enabling great health. Providers and patients want to make informed choices whether navigating clinical options, comparing coverage choices or understanding their network construct. By having effective strategies to deal with friction, payers can build trust, enable transparency and educate through literacy. Trust plus literacy equals change. To improve health outcomes is to enable the right behavior change.
Vikas Garg: Health plans understand providers have the better relationship with members, so they want to work with providers to create that trust and leverage that channel to share data. Health plans also know providers don’t know the full spectrum of a patient’s journey, so they are willing to share data with the providers, especially in VBC arrangements where providers take on risk. Providers also are willing to work with health plans to send data so the outreach the payer sends can be more meaningful. Providers often do not have resources to manage members in between office visits, but the payer does. Payer care management teams can benefit from the clinical data providers have.
ZS: Why do members continue to report fragmented experiences and not the connected ones we all want?
JP: The issue with healthcare is that it’s been intermittent for too long. That intermittency is what data and technology is hoping to solve—the intermittency of care delivery and the intermittency of data and data points about the individual, the provider, the treatment experience, the claim and the outcome. That’s the crux of what we’re trying to solve and what we can solve with data and technology.
ZS: How can health plans best use digital tools to improve the member experience?
Shreesh Tiwari: The industry has moved to a point where individual members are switching plans every year depending on their past experiences. In the Medicare Advantage annual enrollment period, health plans are gaining or losing up to 20% of their member base. That's where the nationals are a lot more aggressive—investing and driving innovation in creating end-to-end digital experience and focusing on member retention to lower the cost of care and improve the quality of care. Regional and state health plans need to further accelerate their digital transformation. Having a digital strategy is not a competitive play, it's table stakes now, and health plans need a digital-first mindset. The competitive differentiator is how quickly you move forward and start creating better digital experiences with your members and with your providers.
ZS: We’ve seen insurtechs struggle. What are the lessons for traditional health plans?
HR: I think it’s disappointing that many insurtechs didn’t do well, because they were bringing focus to technology and customer experience. I think they probably got lost somewhere in the basic insurance fundamentals. When these companies entered the market, they seemed a threat to the bigger players. And then these bigger players also started investing in innovation, customer experience and customer service. Plans need to stay closer to the insurance fundamentals. They need to identify the right risks and then manage those risks.
ZS: What does it mean for health plans to think of themselves as analytics companies?
JP: Data has become relatively inexpensive to store, and our systems have the computing power to analyze a tremendous amount of data. Where healthcare experiences have been lacking, the culprit has been not enough data to get ahead of it and do something different. We’ve solved that challenge. Data is cheaper. It’s persistent. It’s pervasive in its volume, voracity and variability. Now we just have to be able to act on it in a timely manner. Analytics will inform the decisions on when is the right time for care, what is the appropriate channel for care and who is the appropriate provider to deliver care. Analytics don't get tired or need a break. They can always be on. They can always be informing to always unlock value.
KT: Every so often, the health plan sector goes through a redefinition of its purpose and value within the healthcare ecosystem. We’ve seen the evolution from the paternalistic HMO model that essentially prescribed a combination of closed networks and services to the empowering PPO model that focuses on giving more flexibility and choice by disaggregating its closed model. These shifts did not happen on their own. They were a direct response to the market around them—what employers and members wanted and how the provider landscape changed. This history resulted in a shift in a health plan’s core competency from network and member services, as they facilitated the journey, to administrative orchestration, as they processed transactions. In the past decade, we have seen further deconstructing of the health plan value chain as the pace of change accelerated. In a world that’s heavily consumer-driven, digitally connected and tech-scaled, the health plan’s core competency needs to shift even more aggressively to add value based in ways only a health plan can. Enter analytics. Health plans are the only players with most of the member data and the economic levers to create value from that data.
ZS: What is the one thing you’d recommend health plans do to stay ahead of the market and advance their business models?
VG: As the world has moved, a lot of groups haven’t changed their operations as much. Population health management for large health plans still looks the way it did five years ago. Programs haven’t been rationalized or the utilization management has stayed the same, as has how they manage Star Ratings and risk adjustments. I think one thing they can do is look at their operations and make sure they’re still relevant for the threats they’re seeing in the market and how the population mix has changed over time.
JP: As we think about VBC arrangements and alternative payment models, health plans are shifting a considerable amount of risk to providers. I’m not confident providers are fully aware of how to size that risk appropriately. When you’re shifting risk around, it becomes troublesome. And health plans need to have a strategy for the risk they’re offloading to providers. What’s reasonable relative to our estimation of what they can handle—and at what point is it too much? At what point do we have to change how payments are handled, how reimbursements are made and how care is delivered?
HR: Health plans should design member journeys with customer experience in mind. Customer experience improves trust. Customer experience helps you influence behavior and nudge members to the right care. I think if every touchpoint is centered around customer experience, health plans can achieve a lot of things with quality and cost of care for their customers. In fact, that’s the reason a lot of the Blues do well.