US Healthcare Payer Market Segmentation
Since starting the healthlaunchpad blog, the most viewed post by far has been my explanation of The US Healthcare Provider Market Segmentation and healthcare payer market size. So much so, in fact, that it’s become the top-ranked page in Google when you search for “healthcare market segmentation.” Since so many people have found this type of industry overview helpful, I’ve decided to expand beyond the provider market and take a deeper dive into another critical piece of the US healthcare landscape: Payer market segmentation.
Like any segment of the healthcare industry, the payer market is complex and multifaceted. In this post, I’ll share a high-level overview of the payer market, then drill down on payer market segmentation to help you understand how the segment, as a whole, functions.
I hope that after reading this, you will have a basic orientation to the US healthcare payer market.
US Healthcare Payer Market Segmentation – Payer Market Overview
The healthcare payer market plays a critical role in the overall healthcare system. It’s made up of both private and public institutions that provide healthcare coverage and pay for healthcare services on behalf of their members.
While providers offer healthcare services to patients, payers are the organizations responsible for setting service rates, collecting payments, processing claims, and paying providers. This means the payer market provides payment for some or all patient’s procedures, supplies, and medications.
The size of the US healthcare payer services market was $61.9 billion in 2022. Between 2022 and 2030, this market is estimated to grow at a rate of 7.7% annually. As you’ll see below, the US healthcare payer market segmentation includes private insurance companies, government-funded programs such as Medicare and Medicaid, and self-funded employer-sponsored health plans.
US Healthcare Payer Market Segmentation – Payer Markets
Here’s a quick look at payer market segmentation based on the geographic areas they serve.
- National Health Plans: Large national health plans represent the largest payer firms in the country. Although there are more than 350 health plans in the United States, the top 10 national plans represent 65% of the total market. These large national firms include UnitedHealthcare, CVS Health (formerly Aetna), Centene, Elevance (formerly Anthem), and Humana.
- State and Local Plans: Of the 350 health plans in the US, 44 are state-regulated health plans. The most notable state plans are “blues” plans – which carry the Blue Cross Blue Shield branding and offer access to the national blue network. Almost all of these plans are non-profit organizations – meaning they don’t have a responsibility to pay shareholders. State health plans are regulated by the insurance committee of each state where they are sold.
- Large Regional Plans: These types of health plans often serve a large region of the US, but do not offer the same type of broad, nationwide coverage as a national health plan. As a result, they offer smaller provider networks that are limited to a specific geographic area. Regional health plans primarily focus on serving large employers in the area, as well as Medicare recipients.
- Provider-Sponsored Plans: About 150 of the health plans in the US are provider-sponsored plans. These insurance plans are connected to a specific hospital or health system, which functions as the plan’s primary network. Since plans are owned by a specific health system, they typically focus on serving large employers in the area or large Medicare populations.
- State Medicaid Plans: Many states also offer their own Medicaid services for low-income families. These health plans serve large populations but also require third-party companies to go through an RFP process – since any work is considered a government contract.
- Third-Party Associations: Additional types of payers, commonly referred to as third-party associations, serve a specific subset of the healthcare payer market. They include plans that offer supplemental dental, vision, or pharmacy services for health insurance companies. While many of these companies are small in comparison to other types of payers, they’re also nimble and have access to large coverage areas. Third-party associations are also the most likely to outsource needed services.
US Healthcare Payer Market Segmentation – Lines of Business
Below is a brief overview of the payer market, based on the lines of business they sell.
- Commercial Insurance Plans: Commercial plans are offered by private insurance companies to provide healthcare coverage for employers. In this market, employers choose the benefits package that is offered to their employees. Payers compete with one another based on factors such as premiums, benefit design, and provider networks.
- Individual and Family Insurance Plans: These types of health insurance plans are similar to commercial insurance, but they include policies purchased directly by individuals and families. The primary market for individual and family plans are people who are not employed by a company, including the self-employed and small business owners.
- Medicare and Medicare Advantage Plans: Medicare is a Federal health insurance program that provides coverage for seniors who are 65 years old or older, as well as some younger people with disabilities. Medicare has several parts, including Part A, which covers hospital stays and inpatient care, Part B, which covers doctor visits and outpatient services, and Part D, which covers prescription drugs. Medicare Advantage plans, sometimes called “Part C,” serve as a type of private health insurance that can be purchased by seniors in place of Original Medicare (Parts A and B). Many seniors opt to purchase a Medicare Advantage plan to help reduce out-of-pocket costs and coverage gaps, which can be especially helpful when living on a fixed income. With Federal funding and more than 12,000 people aging into Medicare every day, Medicare Advantage plans represent the most profitable type of coverage for payers.
- Medicaid or State Insurance Plans: Each state government offers Medicaid services to provide insurance coverage for low-income individuals and families. To control costs and improve the quality of care for Medicaid beneficiaries, states frequently contract with a managed care organization (MCO) to provide healthcare services to enrollees. The MCO then contracts with healthcare providers to create a network of providers who are responsible for delivering care to Medicaid beneficiaries.
- ACA (Affordable Care Act) Insurance Plans: Also known as “Obamacare” plans, ACA plans are individual and family plans that are offered by payers through a state’s health insurance marketplace. Enrollment in these plans is only offered once a year during an open enrollment period, and financial assistance in the form of premium tax credits and cost-sharing reductions may be available based on income.
Marketing to the US Healthcare Payer Market
I hope this brief overview of the US Healthcare Payer Market Segmentation has been helpful. In order to paint the current picture, I’ve endeavored to use up-to-date and accurate information.
My aim is to make this the kind of article I would have found valuable when I started my journey in healthcare a decade ago. You can read a bit about my story here.
If you are thinking about marketing to the US healthcare payer market, we can help. How? Through account-based Marketing (ABM).
Healthcare is one of the hardest markets to build a business in. I know this from first-hand experience. Sales cycles are longer than most other industries and the buyer collective is often very large. On the positive side, it is a highly addressable market and there are many sources of data to help you with targeting. Frankly, it is much harder to be successful in healthcare without using ABM.
To learn how we can help you use ABM to reach the healthcare payer market, check out our ABM Acceleration Process.