Regional, nonprofit health plans are falling behind large national insurers, with 71% recording an operating loss in 2024 and more than half having two years or less before regulatory intervention is triggered, according to a Sept. 24 report from HealthScape Advisors.
“Executives and boards of directors now face the most important decision of their leadership tenures: How do we survive?” the report said.
Five notes:
1. Over the past three years, operating margins for regional payers have steadily declined as pricing pressures from employers and regulators intensify. Unlike their national peers, regionals have struggled to offset headwinds through diversification or scaling.
2. Regional and BCBS plans are reporting higher administrative loss ratios and medical loss ratios compared to national peers. They are facing steeper challenges funding digital infrastructure, analytics, and compliance initiatives. On the medical side, rising utilization, GLP‑1 drug usage, and longer hospital stays are exacerbating those burdens.
3. The One Big Beautiful Bill Act will drop around 7.5 million people from Medicaid eligibility. Because regional plans have a heavier reliance on Medicaid membership, that contraction will pose a disproportionate risk to their membership base in the near future.
4. Among the 111 regional plans analyzed, 80 were operating at a loss in 2024, and 51% have less than two years of runway before hitting a Company Action Level regulatory threshold, absent significant financial improvement or capital infusion. That stress is especially severe for those with fewer than 500,000 members.
5. To survive, regional health plans need to implement bold cost controls, reconfigure leadership, partner or merge with better‑capitalized organizations, or close after all options are exhausted.
