The commercial market should move back to the top of the C-suite agenda for health insurers. As Medicare, Medicaid, and Affordable Care Act businesses grow more volatile from shifting reimbursement, regulation, and enrollment dynamics, commercial is again positioned to be a vital source of sustainable growth and margin. The strategies that drove growth over the last five years, however, are reaching their limits, and insurers need a new set of tactics to remain competitive in the years ahead.
The traditional playbook has relied on winning new business with unsustainably low — and often temporary — pricing, while rebuilding economics through shared savings, pharmacy, network fees, and margins from non-medical products. But those monetization levers are facing greater scrutiny from policymakers, regulators, and employers at the same time that administrative fees are under pricing pressure. Future margin growth will hinge on winning profitable share while lowering the cost to acquire and serve customers.
Payers must innovate not only to grow, but also to protect the core business. Employers are increasingly willing to carve out services, test alternative funding models, and buy from competitors promising lower costs, a better experience, or greater control. Here are five key actions payers can take to succeed in the commercial market.
Improve health plan member experience with personalization
Consumers rank healthcare first among the industries most in need of providing better-tailored products and services, according to an Oliver Wyman Forum survey that polled nearly 300,000 people globally over the past five years.
The pressure is especially intense in the commercial market, where members are demanding services such as GLP-1 weight-loss management, inclusive reproductive care, and better mental health coverage. More than one-third of employees surveyed by Mercer, for instance, said more comprehensive and accessible mental health benefits would be beneficial to them or their family if offered by their employer.
Payers have responded with variable cost-sharing models, health savings accounts (HSA), and greater benefit design flexibility. But this often comes at the cost of a less integrated experience, particularly when relying on a third-party administrator (TPA), and it still forces employers to create several product archetypes for members to select from rather than delivering true personalization.
The next-generation administrative services only (ASO) experience should combine the flexibility and responsiveness employers associate with TPAs with the scale and accountability only a payer can provide.
This requires three shifts:
- Give employers TPA-like flexibility through configurable plan design, funding, reporting, and service options.
- Deliver a funding model that lets employees buy up or down – and fund - based on their needs.
- Reduce friction in the moments that create escalations, including benefit setup, eligibility, authorizations, claims status, billing, provider access, and benefit questions.
How to compete more effectively in commercial health insurance
Commercial strategy can no longer be built around broad categories like large group, middle market, or public sector. Employer needs, buying behavior, broker dynamics, price sensitivity, and profitability vary considerably within those categories.
A winning strategy starts with a more granular view of the market, understanding share, competitive position, growth potential, profitability, and product fit at a more granular level. A public-sector strategy, for example, should distinguish not only K-12 school districts from municipalities, higher education, and other government employers, but also the demographic and psychographic differences within those sectors. A middle-market strategy should separate employers who want cost predictability and a strong benefit value proposition to drive retention from those willing to assume more risk and operate with more churn.
That level of segmentation should shape the full commercial model: product design, underwriting, sales motion, channel partnerships, service model, reporting, and operations. The goal is not infinite customization. It is knowing where variation matters and where standardization is still the better answer, but having the ability to configure segment-specific solution sets that offer targeted choice without exploding the number of variables needed for every customer.
Building the right health plan funding models for the future
Employer demand is moving beyond the traditional fully insured versus ASO choice. Level-funded products, captives, Individual Coverage Health Reimbursement Arrangement (ICHRA), stop-loss, and hybrid models are becoming more important parts of the commercial portfolio.
An estimated 400,000 to 800,000 people are enrolled in ICHRAs. Meanwhile, 38% of small employers — 200 or fewer employees — have transitioned to level-funding, which is just over half of the total that we estimate would benefit from this model.
These models raise the bar on underwriting. Payers must price competitively while avoiding adverse selection, understand which employers are best suited to each model, and manage the operational complexity that comes with more funding variation.
Finally, these models must be paired with funding vehicles that help employees pay for their benefits, such as HSAs, health reimbursement accounts (HRA), and lifestyle spending accounts (LSA).
The funding strategy is two-fold: health plans need to help employers select the right funding model based on their risk-taking and risk-sharing appetite and help employers shape their own employee value proposition — how to help employees cover out-of-pocket expenses based on their broader well-being needs, benefit choices, and tax considerations. It's not just about whether and how much to contribute to an HSA, but also whether to offer an HRA or LSA, or contribute toward caregiving expenses.
Rebuild networks and navigation for the AI era
Total cost of care continues to be the top issue for employers. Employers and payers are utilizing approaches that can meaningfully bend the trend, including tiered networks, variable cost share, reference-based pricing. But lack of navigation and understanding of benefits often results in a poor member experience.
AI offers a unique opportunity to change this, as members are already turning to it to find and understand care: Oliver Wyman Forum’s 300,000 Voices research found that 65% of respondents have used AI in healthcare — 55% for everyday health questions and 47% for specific conditions. Meanwhile, AI is radically transforming how payers can administer benefits, from product design to steerage and navigation.
Payers that proactively build the new, AI-native front door to care, with supporting network and product design, will have a meaningful advantage in total cost of care. They can also deliver a more personalized member experience and healthcare journey. This requires:
- Building AI agents that explain benefits, compare cost and quality, and help members choose preferred providers, while proactively engaging high-need members and high utilizers.
- Using product and network design to make preferred care options clearer and more attractive.
- Redesigning the workflow of core medical management functions to use AI for payment integrity and coding accuracy, precision care management, and automated utilization management. Payers can build AI into their own tools, or partner with commercial large language model platforms to meet members where they are already going to access AI insights.
Use AI to modernize health plan operations and lower costs
As health plans add funding models, configurable benefits, network options, service levels, and partner arrangements, the traditional response has been to add people and processes. That raises costs, creates operational risk, and slows the organization down. Today’s environment necessitates that plans are able to launch, learn, and adapt quickly, without waiting for multi-year platform releases or adding another layer of manual work.
AI can help, but it can’t simply be added on top of legacy workflows. Plans need to rethink the work itself: pull recurring variation out of the core and manage it through configurable rules and modular services; automate high-volume, repeatable activities such as benefit setup, billing, claims pend and exception management, and reporting; and give employees intuitive, generative-AI-enabled tools that make information easier to find and exceptions faster to resolve.
Paired with modular technology and a product-oriented delivery model, these capabilities can shorten the time required to configure products, implement changes, and respond to new market opportunities. The payoff is not only a lower cost base, but a faster, more adaptable organization.
Technology and business process outsourcing partners will continue to play an important role in this modernized ecosystem, particularly where they can provide repeatable, non-differentiating services at a lower unit cost. Plans should nonetheless retain control of the capabilities that shape member experience, product economics, and speed to market. Done well, the combination of AI, modular technology, and strategic sourcing lets plans offer more choice and flexibility without letting cost and headcount rise at the same rate — the foundation for profitable commercial growth.
Contact centers illustrate the opportunity. In one engagement, we used AI to analyze more than 10,000 member and provider call transcripts, revealing repeat contacts, tasks better suited to digital channels, and time lost to information gathering. Those insights informed a broader redesign of self-service and agent support, with the potential to reduce call volume by up to 40%, handle time by up to 20%, and operating costs by roughly 40%.
Key questions for winning in the commercial health insurance market
The path forward should begin with a clear view of where the largest growth and margin opportunities sit. Payers must have answers to the following key questions to ensure they are positioned to win in the new commercial market:
- Sub-segment focus: Which sub-segments offer the strongest opportunities for profitable growth, and where is the retention risk highest?
- Offering design and member experience: How can I evolve my product portfolio and design to create advantages, incorporating new funding types and greater employer- and member-level personalization to meet different employer and member needs, and help people make better choices?
- Network design and navigation: What network strategy can improve affordability and quality, and how can AI help members navigate to the right care?
- Operating model and technology: How should my platform and operating model evolve to support greater flexibility, move faster, and lower administrative costs?
The next era of commercial competition will be won by payers that can serve different employer needs with greater precision, deliver the flexibility employers expect, and operate at a lower cost base.
That requires a different commercial model, not simply more AI pilots. Payers need deeper sub-segment insight, a broader and better-underwritten funding portfolio, a more configurable employer and member experience, and AI-enabled operations that can manage greater complexity without adding cost.