The healthcare reality check of 2025

Nayya, a leading benefits personalization and engagement platform, shares its focus and the greatest challenges for healthcare will face for 2025.

NEW YORK, Jan. 9, 2025 /PRNewswire/ -- It is the start to a fresh year. There are, it seems, endless possibilities to grow, to improve, to learn, and to share.

2024 was a fascinating year with respect to "trust." President Trump and new European Leaders were re-elected (e.g. a lack of trust in incumbent politicians), Bitcoin ended up north of 138% (a lack of trust in incumbent central banks), the 2024 Edelman Trust Barometer showed social media is the least trusted industry (with Australia implementing the first age-related ban for social media), and upon the killing of a health insurance executive in New York City, there was an outpouring of public angst towards the healthcare and insurance industries.

Sunlight can indeed be a phenomenal disinfectant. In order to effectuate positive change, we first must shine transparency onto the status quo. At Nayya, we are firmly committed to human thriving across health and wealth. We believe we can help transform healthcare and financial services to become stronger consumer markets. The first step is continuing to tell the story of what 2024 uncovered: through data, through objectivity, and through truth.

There are 5 realities in healthcare that we are firmly focused on for 2025. These aren't necessarily the most common issues, but rather issues where we believe that we have unique knowledge to help solve for everyday people everywhere. We will keep score: in December we will look back and see how we did. We know it won't be easy, but we are optimistic that this year will be the inflection point. We firmly believe that trust will be rebuilt.

1. The Supplemental Health Insurance Industry will begin to disinfect in the sun.

There is absolutely nothing structurally wrong with supplemental health insurance (disclaimer: I buy it for myself/family). With healthcare costs skyrocketing and deductibles rising in parallel, nearly anyone in the United States can benefit from supplemental health insurance (sometimes called "gap insurance") to help cover unexpected, out-of-pocket expenses. Unfortunately, a lack of integration with "core" health insurance claims as well as poor regulation has the "industry" (not the products) failing consumers. Supplemental health insurance, often sold as a "voluntary benefit," largely pays the bonuses of insurance brokers and insurance carriers. Proof: whereas traditional health insurance policies have "loss ratios" of 80%+ (meaning that $0.80+ of every $1 is paid out in claims), supplemental health insurance most often has a "loss ratio" of less than 40%! $0.60+ of every $1 is going to pay broker commissions, insurance company net income, etc. One independent study claims that only 1 of every 3 eligible claims ever goes filed. Why? Two reasons: (1) Typically, when you are going through a critical illness or a massive hospitalization, one does not always think of the hospital indemnity policy they may have purchased through their employer 3 years ago. (2) The process for filing a claim is almost as painful as the malady itself. To give a sense: you might have to find out which "ICU Room Number" you were in while you were hospitalized in the previous month. If it sounds bonkers to you, it should. The products are not the problem, but the experiences around the products leave everyday consumers out to dry. And worse: they are not always aware. Think of someone you love, paying for a product every month for years, going through a difficult time, and that money going unclaimed into corporate coffers. We are very pro-capitalism at Nayya. This is not capitalism.

We predict that 2025 is the year that sunlight will begin to shine on the experiences in this industry. I was inspired in Q4 of 2024 when one of the largest benefits consulting firms in the world came to us with a simple mandate: "More claims need to be paid on these products. Immediately." As they prepare to transform an industry for their clients, this industry leader will make the world a better place - even during the darkest of times. They are at the water's edge of a new consumer, populist movement in supplemental health.

Secondly, the plaintiff bar has begun to take notice in Q4 2024 - with attorneys asking us questions to learn more about the issue. We expect that 2025 will be the first year that an employer will be sued for curating voluntary benefits with loss ratios below 50% to their most vulnerable employees: at a time when less than 40% of Americans have $1,000 in their checking account to cover an unexpected medical expense (the $1,000, one might claim, was paid out in the supplemental health premiums).

2. The Pharmacy Benefit Management industry will begin to disinfect in the sun.

The stats in employer-provided pharmacy management shock the conscience. As of 2024, over of every $1 spent goes to middle-men: pharmacy benefit managers, health insurers, and others. This comes at a time when Americans are paying over double the cost for the same prescriptions as the rest of the world. "Pharmacy benefit managers" essentially process and pay prescription drug claims, contract with pharmacies, and negotiate discounts with drug manufacturers. They also create "formularies", which determine which drugs are covered by a plan and the associated costs. Seems fine, except they are ripping everyone (including you if you are reading this) off. A New York Times story in June 2024 had the headline, "Pharmacy benefit managers are driving up drug costs for millions of people, employers and the government." The title of the Federal Trade Commission's interim staff report released on July 9, 2024 named PBMs "The Powerful Middlemen Inflating Drug Costs and Squeezing Main Street Pharmacies." A report from the House Committee on Oversight and Accountability issued on July 23, 2024, said that PBMs "inflate prescription drug costs and interfere with patient care for their own financial benefit."

A lot of this is the fault of Congress (more on safe harbor provisions later in the year). The net-net of it all is that a prescription drug company (e.g. AbbVie) charges a higher "list price" for a drug - let's say $1,000 - then pays a PBM (e.g. CareMark) a higher "rebate" - let's say $600 - to convince CareMark to put AbbVie's drug within a more desirable "tier" of drugs at the pharmacy. We have no idea how much CareMark is pocketing of the $600 and how much of that is going to the consumer (who as we covered above, is already hurting). Three companies controlled 79% of U.S. pharmacy benefit management in 2022, according to the data platform Statista: CVS Caremark with 33%, Express Scripts (Cigna) at 24%, and OptumRx (UnitedHealthcare) owns 22% of the market.

Today, the price of every drug can change every day at every pharmacy in the United States. We believe 2025 will be a year when Americans say "enough is enough" on PBMs - especially as bi-partisan pressure is picking up.

3. Price Transparency will finally shed sunlight on health insurance networks.

Check out the below chart from Health Cost Labs. It shows the price of an emergency room visit in Texas. If you have "Blue Cross Blue Shield Preferred PPO" (in theory, an amazing plan), you pay $3,220 for an ER visit. If you say "self-pay" (or if you said you have no insurance), you would pay $729. Imagine that for a family of 4 on a $5,000 deductible.

The Centers for Medicare & Medicaid Services (CMS) enacted a rule requiring hospitals to publicly post their standard charges for services, including negotiated prices with insurance companies. This rule, effective in January 2021, aims to give patients better insights into the costs they could face for healthcare services. There were (purposeful) delays and lawsuits, but by 2023 most health systems were compliant. Under the Insurer Transparency Rule (2022), health insurers are also required to disclose pricing information, including out-of-network rates, to help individuals estimate the costs of care. This rule, enforced by the Department of Labor, started in July 2022. There were also delays, but by the start of 2024, most health insurers were compliant. Even if they dumped it on the CMS website in a way that was almost impossible to decipher, a small industry of technology and AI firms have been parsing the data now for 2 solid years.

As a result, the price of almost any procedure in the United States is now public. What did we learn? Incredibly often, paying for health insurance in the United States leads to paying MORE for healthcare. We pay more for the right to pay more. This is hurting consumers, it is anti-American for employers, and brings sunlight to the practices of health systems/hospitals and health insurers.

By 2021, almost 20% of Americans have medical debt. The Johns Hopkins Bloomberg School of Public Health conducted a study in 2022. On average across the 70 common services studied, for nearly half of these services—47 percent—the cash prices were lower than or the same as the median insurance-paid prices for the same procedure in the same hospital and service setting.

We have now had 2+ full years of compliant price transparency in healthcare, we believe 2025 will be the year that many start to take notice.

4. The realities of outsourced Benefit Administration will become clearer under the sun.

For over two decades now, the trend of outsourcing benefits administration has formed into somewhat of a status quo exercise in certain markets. Arguably, the high watermark was in 2013, when the 13-year old BenefitFocus held an IPO, briefly touching above a $1 billion market capitalization. 9 years later, the company was acquired by Voya for $570M. And so too has gone the Benefits Administration "industry." Alight, the largest/publicly-traded benefits administration system has a market cap of approximately $3.71B as of the time of writing. Despite an incredible number of stock sales by the company's former CEO (in excess of $50 million), the stock is down 26% since its initial public offering. This is while the S&P 500 is up approximately 48% over the same period.

For all of the "pitches" of outsourcing benefits administration, costs have not gone down. Complexity has not gone down. Confusion has not gone down. Very little has improved. These companies essentially had three choices: (1) become platforms by curating the best-in-breed across the market, (2) invest deeply into modernizing recordkeeping, or (3) drive towards the development of point solutions to transform the employee experience. Many of these companies chose #3 (as opposed to objectively #1 or arguably #2), and today their growth rates are hurting and their value proposition is equally so.

Already, "platformed" providers like HCMs (ADP, Dayforce, UKG, Paychex, isolved) and ERPs (Oracle, Workday, SAP) are investing in carrier connections, benefits rules engines, and more. Employers prefer a consolidated, easier to administer approach (e.g. one solution). We see 2025 as a year when benefits administration systems will have to have the existential conversations with themselves to understand why they exist and the impact they wish to have on US healthcare.

5. Enrollment Firms will begin to disinfect in the sun.

Enrollment firms are often hired to help employees through picking their benefits, providing one-on-one consultations. The dark truth is that very few outside of the industry know how these firms are compensated. Oftentimes, these firms take 50% of the "non-major medical" or non-core health insurance commission in exchange for facilitating the on-site enrollments. As a result of the opaque compensation model, an enrollment firm may push employees toward certain benefit plans or insurance options that are financially advantageous to the firm but not the best fit for the employee. For instance, the firm might encourage employees to select a high deductible health insurance plan so there is more money available for voluntary and ancillary benefits. Or, they may push high-cost insurance plans with features consumers don't need or could easily avoid, such as excessive life insurance coverage or expensive dental plans, simply to earn higher commissions.

Some enrollment firms charge additional fees to employers for their services, without adequately disclosing these fees to employees. These hidden fees are often built into the plan costs or are passed down to the employer as part of the enrollment process, leading to higher premiums or administrative costs. Employees might not even be aware that a portion of their benefits are being spent on enrollment-related fees.

None of this is transparent in many cases. It certainly doesn't sound like a fiduciary relationship where the best interests of the employees come first. And very few employees are aware of who is guiding them or how they are getting paid. It can be a tough reality to digest.

Conclusion: 2025 will be a pivotal year. It will be a year when we shine sunlight on so many dark healthcare practices. Over the long-term, the consumer will win. Already, society is beginning to push back against insurance practices and healthcare practices that privilege the few at the expense of the many. At Nayya, we believe we can accelerate this sunlight - for tens of millions of people across the country. We look forward to an amazing year.

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SOURCE Nayya