The Future of Commercial Health Insurance: Trends, Models, and Strategic Shifts

EY, one of the Big Four accounting firms, recently released a research report presenting a predictive analysis of the U.S. commercial health insurance market. This report is not mere science-fiction speculation; rather, it is grounded in the reality that all industries are facing significant disruption in the internet era. Arguing that commercial health insurance is “inescapable” from these forces, EY has provided a targeted analytical guide replete with earnest and practical recommendations, which we believe offer considerable reference value.



The report indicates that there will be four new models of health insurance in the United States in the future: private health insurance, non-private health insurance, group health insurance, and health insurance for self-employed individuals.First, the U.S. healthcare industry is experiencing explosive growth, driven by two factors: strict government control over medical costs and the rapid development of internet-based healthcare.

As the payers of medical expenses, health insurance companies appear to hold the reins of the healthcare industry’s development. However, like other players in the sector, they actually face the risk of disruption. Their essence is that of an intermediary navigating among patients, pharmaceutical and medical device manufacturers, and healthcare institutions. In the internet era, this intermediary role appears particularly awkward and redundant. Moreover, since the services they offer are largely homogeneous, they are easily replaceable and may even be pushed out of the game entirely.

Although the highly touted big data analytics has, to some extent, driven growth in the insurance business, at the current stage, insurance carriers have rarely leveraged the vast amounts of data they have accumulated over many years to achieve tangible outcomes; in other words, big data remains largely underutilized.

With the rise of e-commerce and social media, patient expectations continue to escalate. Patients are increasingly demanding greater transparency in services and pricing from healthcare institutions, a demand that will soon extend to insurers. In this landscape, startups and non-traditional enterprises are often better positioned to respond swiftly and proactively.

For example, Oscar, a startup based in New York, is a new type of insurance provider characterized by rewarding users for healthy behaviors, engaging in clear and straightforward communication with members, offering free telephone consultations with physicians, and enhancing business transparency.

Another startup, SimplyInsured, specializes in designing health insurance plans for small businesses. It disrupts the traditional health insurance landscape by offering group-purchase rates, enabling employers to clearly forecast their actual costs.

While these remain isolated cases for now, more examples will continue to emerge in the future. The opportunity for enterprises lies in swiftly integrating nascent business models into their existing, mature operational systems. The immediate priority is to position oneself as a health insurance company with differentiated capabilities.

The report posits that future commercial health insurance will inevitably transition from short-term, one-off transactions to long-term, collaborative partnerships. Driven by core data and technology, commercial health insurers will shift from merely pricing risk to actively controlling and mitigating it. The exponential growth of user data will enable these insurers to gain a deeper and more comprehensive understanding of each individual policyholder.

Healthcare Business Models Are Being Disrupted—Are Insurance Companies Next?

Six Major Healthcare Industry Trends Redefined:
1. The Crisis of Chronic Disease Management
Chronic diseases, while not as terrifying as infectious diseases, remain at the forefront of public health concerns. Conditions such as heart disease and type 2 diabetes are chronic illnesses that incur enormous medical costs, accounting for 75% of total healthcare expenditures in the United States. Meanwhile, trends such as population aging are becoming increasingly pronounced in both developed industrialized nations and China.

Given that chronic diseases are characterized by complex influencing factors and require lifelong patient management, few individuals currently dedicate effort to long-term health management for patients. The primary reason is the lack of incentive mechanisms; insurance companies rarely have the patience to monitor long-term management outcomes. Although healthcare reform is shifting from process-oriented fee-for-service to value-based payment models, this transition is proceeding slowly and is being implemented only on a limited scale. Consequently, while focusing on chronic disease management yields significant long-term benefits, such as reduced medical costs, the short-sighted behavior of commercial insurance companies—prioritizing immediate gains—has turned chronic disease management into an invisible ticking time bomb, destined to explode eventually.

Reflections: How Startup Teams Can Deliver Truly Great Products from Day One, Leverage Incentive Mechanisms to Shape User Behavior, and Foster Long-Term Health Management.

2. Incentive Measures Focused on Outcomes and Value
As the burden of chronic diseases intensifies and healthcare costs surge, the healthcare industry should be improved through multiple economic incentives and effective mechanisms that implement outcome-based payment models, penalize providers engaging in overtreatment or those focused solely on processes, and promote advancements via drug research and development or novel therapeutic approaches.
Reflections: Can a product be designed that not only experiments with pay-for-performance but also serves as the cornerstone for reforming the entire health insurance system?

3. Internet-based medical technologies, such as social media platforms, mobile apps, and smart sensors, are continuously blurring the boundaries between mobile phones and medical devices, enabling real-time information sharing and interactive connectivity between physicians and patients. While these revolutionary technologies appear appealing and promise significant cost reductions, their integration with insurers remains limited. This is primarily because such methods have not yet been incorporated into the medical insurance reimbursement system, and consequently, habitual adoption by both physicians and patients has not been established.
Reflections: Can internet technologies be leveraged to influence the behaviors of more patients and help them form habits?

4. Big Data Reform
Despite the hype surrounding big data, much of it remains siloed and subject to various limitations, such as privacy and security concerns. Furthermore, data fragmentation prevents the formation of a comprehensive patient profile. Numerous healthcare service providers, medical institutions, and pharmaceutical companies have failed to integrate their data. Consequently, information available to health insurers is incomplete or asymmetric. Moreover, policies may restrict insurers from leveraging personal genomic sequencing data to understand patients, which undoubtedly exacerbates this information asymmetry.
Reflections: Make big data a core element of insurance, provide comprehensive data analysis of patients, and based on this, more accurately control disease risk.

5. Customers are provided with greater transparency and more freedom of choice, prompting many enterprises to become increasingly customer-centric in their efforts to satisfy users. Many insurance agencies act as intermediaries between insurance providers and policyholders; these companies often attempt to conceal information to prevent customers from gaining insight into pricing structures.
Reflections: Can we develop truly customer-centric products that leverage deep data to gain insights into patients, and utilize internet technologies to guide and intervene in customer behavior?

6. For the insurance industry, as returns from core investment operations decline, cost containment in premium expenditures has become a pressing priority.
Reflections: Can the health and medical insurance business discover new profit channels to supplement its existing insurance operations?




Exploring New Models of U.S. Health Insurance

The following business models for medical insurance also take into account factors such as policy risks:
I.Non-Private Health Insurance
It is the mainstream core model, which seeks to establish long-term cooperation from traditional one-year contracts. The usual value proposition is that once this type of insurance is chosen, the customer becomes a lifelong client, gaining timely access to the latest apps, technologies, equipment, and health management services. Therefore, becoming a long-term customer can save more money.
However, it also presents a mix of advantages and disadvantages. For instance, the benefit lies in the financial incentive of tax refund checks, while the drawback is the obligation to remain bound to the contract for many years; early termination incurs penalties. A key feature of this model is the slow growth of insurance premiums, which is favorable for users.

To achieve the aforementioned objectives, commercial health insurance companies should integrate resources and ensure the availability of the following elements:

1. Traditional Insurance Company Business Modules
2. Establish extensive collaborations with healthcare service providers
For example, through collaboration with hospital chains: in this model, insurance companies assume a greater role in disease prevention by promptly intervening in patients’ daily behavioral habits. The key lies in the early identification of individuals at risk of developing diseases.
3. Establishing Patient Organizations
Organizations that can represent or reflect the voices of patients are indispensable, as they facilitate trust-building among other users, generate word-of-mouth effects, and attract or influence potential users to become members.
4. Big Data Integration
Collaborating with other institutions to consolidate and integrate data information requires robust technical support.
5. Technology Vendor
Provision of physical equipment, including data storage and cloud storage
6. Government Endorsement
Collaborating with one or more government agencies yields significant positive effects that should not be underestimated.

Other resources include hardware device manufacturers and app developers or service providers, which can track and monitor user behaviors and intervene in such behaviors.

Gym chains and supermarket chains are also potential partners, as they can provide tangible incentives or rewards to encourage healthy customer behaviors. For example, customers may be rewarded with discounted gym memberships or healthy, green food products. The outcome of such comprehensive interventions is that, in the long term, they will positively impact patients’ health and help reduce healthcare costs.

Therefore, this places stringent demands on insurance companies, requiring the establishment of a real-time, dynamic patient information database. Such a database arguably does not yet exist, as it encompasses an exceptionally broad range of data—including health status, behavioral data, medical test results, genomic sequencing information, and medication records—rather than merely periodic data entries. The availability of such data will also attract more allied enterprises to join the ecosystem. Thus, the commercial value of these data is self-evident and undoubtedly profitable.

In new forms of insurance business, customers will also fill out authorization consent forms, explicitly indicating their agreement to share their information with other partner merchants or to share it in anonymized form with non-member enterprises. Of course, the significance of data usage will also be communicated to customers, such as improving medical services and accelerating the research and development of next-generation life-saving drugs.

Beyond data commercialization, there are other avenues that are more appealing than traditional commercial insurance: overall improvement in population health; disease control; effective interventions that lead to permanent changes in daily behaviors; real-time medical services; and predictive analytics services.

Similarly, insurance companies have the opportunity to build brand influence, provided they are capable of achieving the following:
Tackling Investment Challenges in the Healthcare Sector: Breaking Through Dilemmas; Adopting a Long-Term Perspective to Pursue Sustained Returns; Emphasizing Innovation and Collaboration; Meanwhile, Building Capacity to Mitigate Brand Risks, Such as Negative Publicity Arising from Privacy Breaches or the Monetization of Customer Data; Furthermore, the U.S. Affordable Care Act (ACA) prohibits insurers from generating excessive profits from low-risk patient populations.

If a user is in good health, aggressively persuading them to purchase insurance is prohibited under the Affordable Care Act (ACA). Furthermore, the ACA mandates that insurers must rebate at least 80% of premiums to policyholders, effectively capping their profit margin at 20%. Consequently, if health management initiatives are effectively implemented and lead to improved customer health outcomes, commercial medical insurance providers will face reduced revenues, thereby ceding market share to competitors.

II.U.S. Private Health Insurance
Constrained by the Affordable Care Act (ACA), such insurers have traditionally targeted older adults. However, in reality, their emerging business lines—featuring wearable devices and mobile apps—are more appealing to younger demographics, suggesting that their customer base may ultimately shift toward younger groups.
III.Group Medical Insurance
Under this model, insurers do not explicitly target a younger demographic but primarily serve employers. Tech companies, in particular, tend to have a younger workforce. Employers place greater emphasis on employee health management, implementing behavioral interventions for disease prevention. Big data analytics services can also be appropriately deployed.
IV.Health Insurance for Self-Employed Individuals
Similar to Model 3, health insurers have expanded their scope from traditional quantitative operations and disease risk pricing to active risk reduction. This still requires partnering with technology firms and enhancing big data capabilities to enable insurers to gain a deep understanding of users’ health status.

Having Clarified the Direction and Goals, How Do We Take the First Step?

As traditional enterprises have already been significantly impacted, external pressures are forcing internal transformation. Consequently, senior management must continually consider how to initiate this process as swiftly as possible. Harvard professors have defined this type of “disruptive” innovation: for companies, it is often a painful metamorphosis, as it is clear that profitability will not be immediate and current users are often unreceptive. This is primarily because the services offered may not address urgent, essential needs at present, making it difficult for companies to foresee the substantial future value with sufficient foresight.

This is disruptive innovation, so it inevitably requires a process. Pioneers always reap the greatest rewards; latecomers, who rush into the market only after recognizing potential exponential growth, are already too late, ultimately missing the opportunity or ending in failure. Therefore, when faced with disruptive innovation, it is inappropriate for leadership to evaluate the value of new changes using old standards, as disruptive innovation is unprecedented and represents an abnormal shift.

So, what exactly should be done? The following recommendations are provided:

1. Adopt the Correct Measurement Scale
Consider what competitors would do, then adjust your own strategy. Shift from focusing on immediate gains to genuinely addressing user needs and pursuing long-term interests.
2. Conduct pilot programs and small-scale trial operations
For instance, start with small-scale investments to test the market. The key is to assess risk. If successful, proceed with large-scale expansion and replication.
3. Establish a Learning Map
Directly and completely rejecting existing business models carries risk, as disruptive innovations are inherently unpredictable and lack prior benchmarks. Therefore, viable innovation proposals should be listed first, with areas of uncertainty clearly noted. These uncertainties can then be gradually addressed during subsequent market validation, enabling learning through practice.