Health Plans Face Five Key Issues in 2025

U.S. health plans are navigating a landscape of significant challenges in 2025, impacting their financial viability and ability to provide quality care. A new analysis from Alvarez & Marsal identifies rising healthcare costs, particularly within Medicare Advantage (MA) plans, and ongoing Medicaid eligibility redeterminations as primary concerns.

The issue of premium deficiency, where collected premiums are insufficient to cover escalating medical expenses, is becoming acute. This is exacerbated by the increasing use of high-cost medications, such as GLP-1 drugs for diabetes and obesity. Additionally, the introduction of non-medical benefits, like food and housing assistance, adds to short-term cost burdens. Higher utilization of healthcare services, driven by an aging population and the prevalence of chronic conditions, further intensifies cost pressures.

The Medicaid redetermination process, which resumed after a pandemic-related pause, continues to cause instability. As millions lose coverage, health plans serving this population face membership fluctuations and increased costs associated with the remaining, often higher-need, members.

Alvarez & Marsal suggests that health plans must implement strategies to maintain financial sustainability while ensuring care quality. This includes investing in value-based care models, enhancing care coordination, and utilizing predictive analytics for cost management. Collaboration with state agencies and proactive member outreach are also critical for navigating these complex issues.