2025 is shaping up to be a rocky year for payers’ finances.
At least seven Blue Cross Blue Shield plans reported losses in 2024, which could persist into 2025. In April, UnitedHealth Group cut its earnings guidance for 2025, citing pressure in its Medicare Advantage and Optum Health businesses. The company saw its largest single-day stock price drop in decades.
A combination of factors is exerting pressure on payers’ financials, including rising medical utilization and the adoption of high cost drugs.
Here are five reasons why payers are struggling in 2025:
- Insurers have contended with rising medical costs in Medicare Advantage since at least early 2024. Executives pointed to several causes, including pent-up demand from the COVID-19 pandemic, rising rates of flu and respiratory illnesses, and physician and outpatient services. Insurers also blame low payment rates from CMS as they face rising costs.
In April, CMS finalized a 5.06% increase for Medicare Advantage plans in 2026. The increase is higher than in recent years, but insurers have said the increase will not offset lower payments from previous years.
On an April 22 earnings call, Elevance Health CFO Mark Kaye told investors the increase is “more reflective of actual trends, but doesn’t fully restore the impact of prior underfunding.” - Rising premiums could be increasing utilization in MA plans, according to UnitedHealth Group executives. On the company’s first-quarter earnings call, UnitedHealthcare CEO Tim Noel told investors utilization increased significantly among group Medicare Advantage customers. Group MA members saw the highest monthly premium increases in 2025, according to Mr. Noel, in some cases more than $150 a month. The rising costs could be driving members to engage more with their benefits.
- Many insurers have also pointed to the high cost of GLP-1 drugs as a major factor behind financial losses. One insurer, BCBS Massachusetts, reported a $400 million loss in 2024, citing GLP-1 drugs as a major cause. The insurer later announced it would no longer cover GLP-1 drugs for weight loss in some plans.
BCBS Michigan made a similar decision regarding GLP-1 drug coverage for weight loss alone in its commercial self-insured plans, beginning in 2025. - Alongside GLP-1s, insurers have also pointed to high-cost specialty medications as another contributor to financial pain.
On an April 25 earnings call, Drew Asher, CFO of Centene, said the company is keeping a close eye on high-cost specialty therapies, like Elevidys, a single-dose gene therapy priced at $3.2 million.
“If we’re all trying to keep healthcare affordable, that seems quite extreme for the cost of a single treatment for a newly approved drug,” Mr. Asher said. “That’s one area of uptick that is on the back of the federal and state government and us as a payer.” - In the Medicaid business, insurers have said payments from states are not keeping up with changes in membership following Medicaid redeterminations. More than 25 million people were disenrolled from Medicaid after continuous coverage requirements in place during the COVID-19 pandemic ended, according to KFF. The beneficiaries that remained enrolled in the program tend to have higher health spending, insurers have said.
The discrepancy between state payment rates and healthcare utilization is beginning to resolve, insurers said on first-quarter earnings calls.
“We’re also encouraged by the updated Medicaid rates so far in 2025 that more closely align with underlying member acuity, but funding remains insufficient to meet the health needs of patients,” UnitedHealth Group CFO John Rex said.
