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How the end of the COVID-19 Public Health Emergency will impact payers

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Payers need to be prepared for shifts in membership dynamics, provider reimbursement rates, benefit design and cost sharing.

In brief
  • Medicaid redetermination efforts will likely drive a rapid shift in membership dynamics and introduce new sources of risk for most managed care organizations.
  • Anticipated increases in uninsured individuals and other challenges may also put financial pressure on health plans during negotiations with providers.
  • Nontraditional benefits that rose to prominence during the COVID-19 era are likely to continue into the foreseeable future.

The unprecedented COVID-19 public health crisis has fundamentally changed our society, including the health care ecosystem. In response to the pandemic, the federal government implemented critical policies to mitigate challenges related to care delivery, financing and acute staffing constraints. These interventions alleviated a significant amount of strain on the health care system and accelerated positive change. However, given that the federal government ended the COVID-19 Public Health Emergency (PHE) in May 2023 and continues to advance policies intended to drive recovery, health plans need a strategic approach as they navigate the significant downstream impacts of these changes on their business.

At a minimum, health plans must seriously analyze the impact of the changing regulatory landscape on their current operations and business models and develop enterprise-wide strategies to mitigate the significant operational, financial and compliance-related risks that are likely in the months to come.

For payer organizations that are well positioned to mitigate these new sources of risk and operate effectively in the post-pandemic era, the conclusion of the PHE presents a tremendous opportunity to drive value through membership growth.

Rapidly evolving membership dynamics

Given the conclusion of the COVID-19 PHE on May 11, 2023, payers may experience a significant increase in enrollment through both the Health Insurance Marketplace (the Marketplace) and employer-sponsored plans as Medicaid enrollees undergo the redetermination process for the first time in nearly three years. Many Americans will be faced with difficult choices to find alternative health care coverage, legacy Medicaid plans will need to evaluate their existing business models, and other payers must quickly assess the impact of these changes on their operational capabilities and financial outlook.

With the unwinding of the Medicaid continuous enrollment provision that was originally included in the Families First Coronavirus Response Act (FFCRA), an estimated 5 million to 14 million enrollees will lose their Medicaid Coverage,1 with one projection as high as 15 million.2 Multiple studies estimate that approximately 50%3 to 65%4 of the individuals and families who lose Medicaid eligibility through redetermination will enroll in employer-sponsored health plans. As such, payers must be prepared to adequately service both fully insured and self-funded customer groups that may see increasing numbers of enrollees in the coming months.

Despite these changes, many individuals and families who lose Medicaid eligibility without an employer-sponsored alternative may find Marketplace options as an attractive alternative as they seek other sources of health care coverage. Due to the Inflation Reduction Act’s continuation of Affordable Care Act (ACA) subsidies through 2025, initially passed in the American Rescue Plan Act, it is estimated that the number of people eligible for financial assistance in the Marketplace has increased by 20%.5 To facilitate the transition for individuals and families who choose to transition from Medicaid to Marketplace coverage, the Centers for Medicare & Medicaid Services has established a special enrollment period (SEP) on the health insurance exchanges from March 31, 2023 to July 31, 2024.6

Given that some states were free to resume Medicaid redeterminations as early as April 2023, health plans must very quickly assess whether they have the appropriate processes, technology, resources and operational capabilities to address rapidly changing membership dynamics, limit risk exposure and maximize financial performance resulting from this unprecedented SEP. Three primary objectives of this assessment are listed below:

Address operational capacity and compliance
Understand the population
Target key areas that drive financial performance

Get the basics right where it matters 

  • Eligibility and enrollment
  • ID cards and welcome kits
  • Call center
  • Network adequacy
  • Compliance and controls

Validate medical cost expectations as quickly as possible

  • Analytics
  • Forecasting of medical expenditures
  • Identification of high-risk enrollees 

Drive execution in those areas that really matter

  • Care Management
  • Billing
  • Risk adjustment

Through this exercise, there may be some health plans that decide to scale back their operations or conclude that an exit strategy is needed in certain markets where it no longer makes sense to operate due to operational, financial or regulatory challenges that would only be exacerbated by an increase in membership across ACA or commercial lines of business.

However, those health plans with robust operational capabilities and staffing levels in place should evaluate whether these market conditions present an opportunity to pursue membership growth through market entry or expansion, either organically or via M&A activity. This approach is especially important for legacy Medicaid managed plans that are likely to see a significant decrease in Medicaid enrollment and revenue over the next year or so. These payers may choose to intentionally scale up operations to defend against revenue losses and capitalize on growth opportunities for different lines of business, within existing or potentially new markets, across multiple benefit years. Further, health plans seeking post-pandemic growth opportunities should also consider their ability to develop products with attractive pricing structures and networks to achieve a sustainable level of success into the future, which may be challenging with ACA subsidies ending in 2025 and a financially constrained outlook on the immediate horizon.

Pressure on provider reimbursement rates


Regardless of payers’ operational readiness and growth strategy, the provider community will begin to feel significant financial strain as the number of uninsured individuals increases, pandemic relief funds run dry and pre-pandemic budgetary cuts resume. Further, impending changes to provider staffing and training requirements that were relaxed during the pandemic may also contribute to increased labor costs for the provider community, especially amid the ongoing health care staffing shortage.


As such, health plans must proactively anticipate and develop mitigation strategies for providers who may use upcoming negotiations to help offset financial losses stemming from the conclusion of PHE policies and pandemic-related financial support. Given the anticipated influx of Marketplace enrollment volume, this will be especially important for payers heading into the 2024 and 2025 application, bidding and filing seasons.


Redefine benefit design and cost sharing


One mitigation strategy against arbitrary provider rate increases may be to evaluate whether it makes sense for payers to continue to reimburse for nontraditional, cost-effective care delivery models to which consumers have grown accustomed and upon which providers have relied heavily for reimbursement during the pandemic. Developing product offerings that preserve many of the attractive pandemic-era benefits offered and cost-sharing strategies may help the provider community continue to receive valuable sources of revenue that would otherwise dry up.


Despite cost pressures, continuing COVID-19-era product designs popular with enrollees may also help payers protect valuable premium revenue in an increasingly competitive environment by retaining existing membership and support enterprise growth objectives by attracting new sources of membership moving forward. Examples of these product designs include waiving cost shares for select products and services, preserving telehealth benefits and continuing to allow patients to receive virtual or home-based care where clinically appropriate and where regulations allow.


Beyond COVID-19-era benefits, there’s another emerging opportunity for health plans to develop and offer products that leverage value-based insurance design (VBID) principles specifically tailored for enrollees with one or more chronic conditions to also address increasing medical spend. VBID plans are intended to reduce the financial barriers for members with chronic conditions to receive high-value preventative care services, minimize the incidence of uncontrolled medical events and drive long-term medical cost savings for both patients and payers. Given the anticipated influx in Marketplace coverage expected over the next 12 months, health plans that develop these innovative offerings may further find success with condition-specific, VBID-oriented products catered to enrollees who seek personalized coverage options that best meet their financial and clinical needs.


While the conclusion of the COVID-19 PHE may signal a return to normal for some, it is just the beginning of a new tidal wave of change to come for many health plans. Payer organizations that actively develop business strategies and readiness plans to mitigate the operational risk within their own four walls, while also proactively developing strategies to mitigate risk external to their organizations, including the upward financial pressure they’re likely to face from provider partners and increased consumer demand for innovative and affordable coverage options, will be best positioned to navigate this change.

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