The last year was a big one for payers, with several major M&A deals, according to a recent report from KPMG. This includes CVS Health’s $8 billion purchase of Signify Health and $10.6 billion purchase of Oak Street Health, as well as UnitedHealth Group’s Optum’s $3.3 billion acquisition of Amedisys. In 2024, payers “will become ever more important in the U.S. healthcare system,” KPMG said.

But there are several challenges ahead as well, such as regulatory pressures against Medicare Advantage and pharmacy benefit managers.

Here are KPMG’s five tailwinds and five headwinds for payers in 2024:

Tailwinds

1. Reduced recession worries: KPMG anticipates slower economic growth in the middle of 2024, but this will improve in the third and fourth quarters with “no recession and no new interest rate hikes by the Fed.”

2. Premium increases: Premiums are expected to rise “sharply” for some insurance members.

3. Margin pressures: Both large and small providers are expected to experience margin pressures. This will lead to some being acquired.

4. Asset integration: There will likely be an increase in “vertical integrations of acquired provider assets,” according to KPMG.

5. Insurance access: Due to continued high employment rates, commercial enrollment will likely be “maximized,” KPMG said.

Headwinds

1. Lending worries: Interest rates will likely stay high, leading to lenders being more wary.

2. Antitrust scrutiny: Federal antitrust enforcement will continue to be strict. This will end or delay some deals, and raise the costs of some deals.

3. Talent: “First-rate technical talent” will be challenging to recruit and retain.

“Companies that innovate to create superior employee value propositions may gain important competitive advantages and create virtuous circles of successful innovation and recruiting,” KPMG stated.

4. Medicare Advantage woes: Margin pressures are expected to rise for Medicare Advantage plans. This will be due to slower growth and reimbursement challenges from rising scrutiny from the Centers for Medicare and Medicaid Services. In addition, Cigna recently agreed to pay $172 million to settle claims that it sent inaccurate MA diagnostic codes to increase reimbursement.

KPMG added that in October, experts testified to Congress “that while some MA plans offer important services not available in traditional Medicare, many seniors have trouble navigating more than a hundred options, multiple complications, and misleading and even fraudulent marketing.”

5. Crackdown on pharmacy benefit managers: KPMG cited a September report from the American Medical Association that found that vertical and horizontal consolidation of PBMs lowers competition. This in turn hurts patients, self-insured employers and insurers not partnered with PBMs.

“Regulators and legislators may look more closely at PBMs’ role in the drug supply chain,” KPMG said.

Photo: VectorInspiration, Getty Images