2025 Opportunities in Healthcare: Navigating the Perfect Storm

What Every Provider and Innovator Must Know Going into 2025:

The health insurance industry is facing a perfect storm characterized by rising healthcare costs, increased patient demand, and intense scrutiny from lawmakers. As we move into 2025, the challenges confronting Medicare Advantage plans, once considered the crown jewel of insurer profitability, are becoming increasingly apparent.

Industry giants like Humana and UnitedHealth are grappling with significant pressures that could redefine managed care. However, amidst this turmoil, there are opportunities for healthcare providers and entrepreneurs to innovate and adapt. By focusing on high-cost patient areas and exploring innovative contracts, stakeholders can position themselves to thrive in this evolving landscape.

This episode delves into the tumultuous state of the health insurance industry as it faces unprecedented challenges heading into 2025. Rising healthcare costs, increased patient demand, and government scrutiny are converging to create a 'perfect storm' for insurers, particularly in the Medicare Advantage sector. This segment highlights how traditional revenue models are being tested as utilization rates rebound post-COVID, with many patients returning for procedures they deferred during the pandemic.

Insurers are grappling with higher medical loss ratios (MLR), which are squeezing their profit margins and forcing a reevaluation of their operational strategies. Industry giants like Humana and UnitedHealth Group are highlighted as they navigate this challenging landscape, revealing how their dependence on Medicare Advantage has made them particularly vulnerable amidst shifting policies and scrutiny from lawmakers.

The discussion emphasizes the urgent need for healthcare providers and entrepreneurs to identify innovative solutions that can not only alleviate cost pressures but also enhance patient care, suggesting that these turbulent times may present new opportunities for growth and transformation within the industry.

Takeaways:

• The health insurance industry is facing significant challenges due to rising costs and increased scrutiny.
• Medicare Advantage plans are experiencing financial strain from surging patient demand and utilization rates.
• As healthcare providers, understanding your patient population is crucial for identifying high-cost areas.
• The medical loss ratio is a key metric that impacts insurers' profitability and operational strategies.
• Entrepreneurs should focus on innovative solutions that reduce waste and improve healthcare delivery efficiency.
• The evolving healthcare landscape presents opportunities for proactive adaptation and strategic partnerships.

Companies mentioned in this episode:

• Humana
• UnitedHealth
• CVS
• Aetna
• Morgan Stanley

Research Links:

• There's uncertainty ahead for the health insurance industry in 2025
• Hearing: Hacking America’s Health Care: Assessing the Change Healthcare Cyber Attack and What’s Next | The United States Senate Committee on Finance

Episode Transcript

(00:00):
The health insurance industryis navigating a perfect storm. Rising
health care cost, surgingpatient demand, and scrutiny from
lawmakers. Perfect storm as weopen 2025, the question isn't if
disruption will strike, buthow deeply its ripples will be felt.
Medicare Advantage, once thecrown jewel of insurer profitability,

(00:24):
is showing cracks under thepressure of mounting utilization
and shifting policies.Industry giants like Humana and UnitedHealth
are grappling with challengesthat could redefine managed care
as we know it. But here's thething. Uncertainty breeds opportunity.
And if you're an entrepreneuror a healthcare provider, you're
going to want to stay tuned tothis episode. I'm Alex Yarijanian,

(00:49):
and on today's episode of theValue Based Care Advisory Podcast,
we'll uncover the forcesdriving these changes, reveal opportunities
hidden in the chaos, and shareactionable strategies to help you
navigate through thisuncertain time and evolving landscape.
Listen Post I got a deal toshare Healthcare changing with a

(01:11):
mighty Flare Value Based CareI'm on the rise, Breaking chains,
Lifting high the skies, the.
Health insurance industry isentering uncharted territory. Reporting
from Anjuli Kamlani at Yahoo.Finance highlights a sobering reality.
Insurers are ending 2024 on alow note and aren't starting 2025

(01:35):
much higher. With Congressaiming to rein in costs and increased
utilization squeezing theseprofits, the stakes for 2025 really
couldn't be much higher. Youall remember during COVID 19, utilization
dropped significantly. But nowthe pendulum has swung back. Deferred
procedures and postponed carehave created a surgeon claims. For

(02:00):
example, imagine a senior whodelayed knee replacement surgery
in 2020. Now that same seniorpatient is back in the system. They
require more intensive care,and it's at a higher cost. This trend
is upending financial modelsacross the board. Morgan Stanley's
recent analysis addsperspective here. Managed care stocks

(02:21):
underperformed quitesignificantly in 2024. Again, Morgan
Stanley cites policyheadwinds, higher utilization, industry
scrutiny as factors thatcaused underperformance of these
stocks. Humana, the largestMedicare Advantage provider, has
been particularly hard hit. Nosurprise there, since its reliance

(02:45):
on Medicare Advantage for 30%of its insurance revenues underscores
just how vulnerable even someof the strongest players can be.
So what is the core issuehere? Let's first look at Medicare
Advantage. At its core,Medicare Advantage plans offer additional
perks, like Humana'sSilverSneakers gym program, such

(03:05):
perks that traditionalMedicare doesn't offer. Over the
past five years, MedicareAdvantage enrollment has grown from
30% to now nearly 50% ofeligible seniors. That's a huge jump
for insurers. This has been agolden ticket, and it's been driven
by aging population andincreased government funding. But

(03:27):
here's the catch. It'sexpensive. It's expensive. Studies
show that Medicare pays 300more per enrollee in Medicare Advantage
plans than for traditionalMedicare. That's $300 per enrollee
annually, which adds up fastacross millions of members. And when
utilization spikes, as it hasrecently, insurers are left holding

(03:49):
the bag. Now there's anotherlayer to this story. Patients often
switch from Medicare Advantageback to traditional Medicare, where
their health care costs becomemore complex. When their healthcare
needs become more complex,these high utilizers go from Medicare
Advantage back to traditionalMedicare. So these high utilizers

(04:14):
increase costs across theboard, creating what I call a double
whammy. MA plans lose revenueand the broader system absorbs higher
costs. Now, let's talk aboutnumbers. Let's talk numbers because
they tell a compelling story.The key metric here is what's called
the medical loss ratio, or MLRfor short. This ratio represents

(04:36):
how much insurers spend onmedical care versus how much they
collect in premiums byregulation. By law, insurers must
spend at least 80 to 85% ofpremium dollars on care. Anything
above that 80 to 85% cutsdirectly into their profits. Think
of it like this. For everydollar insurers collect, 85 cents

(04:59):
must go to health care costsby law. But if they spend more than
that, their profits start toshrink, because anything over that
85% they could get topotentially keep. Right. If they
don't spend on medical care.For example, Humana's MLR jumped

(05:20):
from 86% in 2022 to nearly 90%in 2024. CVS Aetna CVS, another major
player, reported a staggering95.2% medical loss ratio in quarter
three of 2024. These trendsshow how rising utilization is squeezing

(05:41):
insurers margins and forcingthem to rethink their strategies.
Okay, over the past decade,we've seen health insurance revenues
really skyrocket. Forinstance, look at UnitedHealth Group,
who reported $372 billion inrevenues in 2023 compared to 123
billion in 2013. But profitmargins haven't kept pace. That's

(06:06):
their pain point. Despitegrowth, managing costs for each new
member has kept margins razorthin. And these companies are huge.
To conceptualize just how bigthey are, here is Dan diamond, national
reporter for the WashingtonPost, teeing it up for us.
They're owned by UnitedHealthwhich has its fingers all over healthcare

(06:30):
right now. And that issomething that government officials
that I've talked to this weekhave been thinking about as well.
There is an antitrust probeinto United through the Justice Department
preceded this. But there is areal question about what are the
risks if so much of healthcare is concentrated in just a few
hands.
The policy environment isadding fuel to the fire. From owning

(06:50):
the largest network of doctorsto controlling pharmacy benefits,
United Health sprawlinginfluences under the microscope.
Add to that the JusticeDepartment's ongoing antitrust probe
and it's clear the industry isat an inflection point. Senator Elizabeth
Warren, during a Senatefinance committee hearing mid-2024,

(07:12):
questioned UnitedHealthGroup's practices, highlighting antitrust
concerns and the company'sdominance across healthcare verticals.
Because UnitedHealth hasbrought up every, bought up every
link in the healthcare chain,you are now in a position to jack
up prices, squeezecompetitors, hide revenues, and pressure

(07:35):
doctors to put profits aheadof patients. UnitedHealth is a monopoly
on steroids. The opportunitiesfor price gouging are everywhere.
For example, UnitedHealth isthe biggest participant in Medicare
Advantage, the governmentprogram that pays private insurers
to administer Medicare benefits.

(07:57):
And here is Senator ThomTillis during the same Senate Finance
Committee hearing addressingthe CEO of UnitedHealth Group while
pulling out a book on hackingfor Dummies as he's grilling the
UnitedHealth Group CEO on thechange healthcare hack. Listen to
this.
Well, I brought, you know, Iactually brought in, I used to bring
this to when I was on SenateArmed Services. I had to give up

(08:20):
Senate Armed Services to geton finance. But I always brought
this book in when we had cyberattacks. It's called Hacking for
Dummies. This is the fifthedition. It doesn't include the nature
of the breach that you alldevelop, but this is some basic stuff
that was missed. So shame oninternal audit, external audit, and
your systems foes tasked withredundancy. They're not doing their

(08:41):
job. And as a result, we havea data breach. Where I've said in
Judiciary Committee, this isthe first meeting I've had where
we're talking about dataprivacy, data breach, since I've
been on finance. But I reallydo believe it's your problem to fix.
And the damage to theconsumer's data is you gotta, you
gotta keep them whole. Thatenterprise, your entire enterprise

(09:04):
is based on the movement ofdata, movement and exchange of data.
That's how you create value.My health records, the health records
and people that are moving. Sowhen you have a breach. It's gotta
be your problem, not my problem.
Then there's the Trumpadministration's potential policy
shifts, which could upend theAffordable Care act while maintaining
support for MedicareAdvantage. This resulting uncertainty

(09:28):
will ripple through everyaspect of the insurance landscape.
Mark my words, every aspect ofthe insurance landscape. But with
uncertainty comes opportunity.Now, earlier in this episode, I indicated
I hinted that healthcareproviders and entrepreneurs should
be particularly tuned intothis discussion here. So for healthcare

(09:51):
providers Question have youevaluated your patient population
to identify high cost areaswhere you can make a difference?
Have you thought aboutapproaching plans health plans, with
a concrete proposal that showshow you can reduce costs while improving
outcomes for entrepreneurs?What innovative solution can you

(10:12):
offer to reduce waste andimprove care quality? I encourage
entrepreneurs to think aboutsomething beyond technology. Start
thinking beyond technology toprocess improvement and or partnerships.
What small change Think Thinkthrough this what small changes in
care delivery couldsignificantly lower costs? If you're

(10:36):
a healthcare provider, now isthe time to engage your health plan
partners. Now is the time.Start conversations about value based
care and explore risk sharingagreements. Position yourself as
a solution to their rising MLRproblem by doing the following three
things. Step 1 Analyze yourpopulation. Identify high cost, high
need patients and craft carepathways that address their specific

(11:00):
needs. 2. Propose innovativecontracts. Advocate for shared savings,
risk adjustments and qualityincentives in your agreement so that
you can make sure you'repicking up some of those dollars
you're saving the health plan.3. Demonstrate ROI. Show how your
approach can provide a returnon investment by reducing costs while

(11:24):
improving outcomes. Forentrepreneurs, this moment is ripe
for innovation. Gaps in theinsurance market, particularly in
technologies aimed at reducingmedical loss ratio, are prime targets.
Think about AI tools forpredictive analytics, streamlined
care management platforms orsolutions that enhance transparency

(11:46):
and efficacy in claimsprocessing, not to mention efficiency.
For example, in 2021, a smallstartup partnered with a regional
health plan to launch a remotepatient monitoring solution reducing
MLR by 5%. That's a goldennugget. The healthcare system is
standing on the edge oftransformation. Rising costs, surging

(12:10):
patient need and policypressures are reshaping the industry.
As we get into full swing of2025, the question isn't just how
we'll navigate these changes,but who will rise to lead them. As
the healthcare landscapeevolves, proactive adaptation will
separate those who thrive fromthose who merely survive. And whether

(12:32):
you're a healthcare provider,a payer or an innovator, the decisions
you make today will define thefuture of healthcare for years to
come. So congratulations. I'mAlex Yarijanian and this has been
the Value Based Care advisorypodcast. We don't just report on
the changes in healthcare. Wechallenge you to think differently,

(12:54):
act boldly and lead withpurpose. Until next time, stay sharp,
stay informed and stay ready.
You'll care your life. Let'smake an ideal. Oh yeah. Vbca, it's
all surreal your healthjourney. Let's seal the deal. Vbca,

(13:16):
we're here to stay Informanthearts leading the way Healthcare
truth every day value come oneday it.