A member-segmented approach to MA product development

By Michael Cohen, managing director, Deloitte Consulting LLP

This is the second blog in a multi-part series on actions payers can take related to the recent Advance Rate Notice. (See Part 1: What If the Advance Rate Notice is just the beginning of change?) Our analysis shows that in 15 years, the US could save $500B annually for those covered under Medicare, with appropriate investments in the early detection and prevention of disease.

Since going into effect in 2006ⁱ , Medicare Advantage (MA) has been largely funded by Baby Boomers aging into Medicare. Rate increases generally tracked medical inflation, and financial flexibility supported expanded benefits and care coordination.ⁱⁱ However, it appears the industry is undergoing a transformation in response to higher utilization rates, lower rate increases from the Centers for Medicare & Medicaid Services (CMS), and evolving regulatory requirements.ⁱⁱⁱ

The 2027 Final Rate Notice, which was released April 6, did not meaningfully ease ongoing margin pressure with an Overall Expected Average Change of 2.48%.^iv For health plans, that level of increase is unlikely to fully offset continued utilization, operational, and compliance pressures. Many health plans are making progress on margin repair, but this will likely be a multi-year journey rather than a quick fix. Margin repair starts with the annual bid process and the development of a multi-year strategy. In parallel to addressing margin pressures, plans must continue to support the health and wellness needs of their members and deliver clear value. The need to advance both financial sustainability and member outcomes is reshaping the direction of the industry.

Over the past couple of MA product bid cycles, it appears the center of gravity has shifted from membership growth to margin preservation.^v Some health plans are rationalizing products and benefits and are reassessing service areas to reinforce price discipline and align to a more sustainable, normalized growth profile. This shift is helping to drive increased focus on the products and geographies where health plans have a demonstrated value proposition and a defensible right to win.

From one-size-fits-many to member-segmented design

A member-segmented design approach takes a closer look at the health plan’s MA offerings to build a portfolio of sustainable products. This might involve tough choices to realign portfolios and service areas.

Four questions can help guide the shift:

1. What customer segments exist in our markets and where do we have a competitive advantage?
2. What does each segment value across medical, pharmacy, and supplemental benefits?
3. Which health and wellness investments matter most by segment?
4. Where should we invest in benefits to deliver on organizational objectives (e.g., margin, retention, Stars, targeted growth)?

Consider using quantitative and qualitative research to identify the customer segments in a market—based on how people engage with the health care system and what they prefer in plan design.

Many organizations develop a working taxonomy when segmenting the market. They then refine it to their market and capabilities. Segments might include:

• Healthy and active
• Budget seeker
• Chronic care seeker
• Sick and high care needs
• Low resource and complex needs

Health plans will likely leverage some variation of these segments based on who is in their market, their unique needs, and their behaviors. Then they might compare each segment’s needs to the existing portfolio. Understanding portfolio strengths (e.g., network position, benefit design) can give health plans a useful perspective on whether needs are being met.

Which benefits does each customer segment value most?

Health plans should consider design implications and tradeoffs across:

• Price and affordability
• Provider choice and network breadth
• Core medical benefits
• Supplemental benefits
• Pharmacy formulary and cost sharing
• Convenience and brand

The first step might be to separate table-stakes benefits (e.g., vision, dental, hearing) from ones that are true differentiators (e.g., acupuncture, transportation) for each segment. That can help avoid over-investing in benefits that do not move decisions and under-investing in benefits that could move the needle. Then translate those choices into intentional plan design and positioning. Each benefit design should be tailored for the targeted segment. The benefits should be simply articulated to help members choose the plan that best fits their needs.

Consider these examples for two segments:

• Healthy and active members often respond to supplemental benefits that reinforce prevention and health maintenance (e.g., fitness, dental, vision).
• Chronic care seekers may place more value on lower medical-cost-sharing that reduces obstacles to routine and specialty care.

When a market has meaningful concentration of a specific condition, a Chronic Condition Special Needs Plan (C-SNP) can create additional room to tailor benefits and support. Health plans can align benefits, care management, and provider pathways to the condition (e.g., congestive heart failure, diabetes), improve adherence, reduce avoidable emergency department (ED)/inpatient events, and create tighter care transitions. It also can enable tailored supplemental benefits.

A health plan can justify and target benefits that directly address condition-specific obstacles (e.g., nutrition supports, home-based supports, monitoring, transportation tied to specialty visits). This can enhance the member’s value perception and use of high-value services. It can also enable more efficient spending (medical + supplemental). Targeting benefits and interventions to a narrower population can reduce benefit leakage (paying for add-ons that don’t have a demonstrative impact) and can improve return on investment (ROI) of supplemental benefits.

The goal is a purpose-built portfolio that matches the needs of the market, often with a small number of clearly differentiated plans, rather than many similar options in every market.

Which benefits can help improve each segment’s health and wellness?

Health plans should look for opportunities to align health and wellness investments to the challenges each segment might encounter. This strategy tends to be more effective than spreading rebate dollars evenly across broadly appealing perks. Consider the following segments:

• Budget seekers: Wellness is often closely tied to affordability and predictability, which focuses on lower premiums and/or clearer cost exposure (e.g., maximum out-of-pocket design), affordable primary care and generic drugs, and practical supports such as over-the-counter drug allowances.
• Chronic care seekers: Concentrate on reducing friction points through lower cost sharing for primary care and specialists, affordable condition-relevant pharmaceuticals, effective care management, reliable transportation, and targeted supplemental supports (e.g., nutrition, chronic supplies) that improve adherence and follow-up.
• Sick and high-need members: Prioritize benefits that prevent avoidable acute events. Help stabilize recovery through strong inpatient and skilled nursing facility cost protection, intensive case management and transitions-of-care, in-home supports, non-emergency medical transportation, post-discharge meals, durable medical equipment, and caregiver-oriented services.

Where health plans invest in benefits should be driven by a tight link between organizational objectives (e.g., margin preservation, retention, Stars (quality ratings) and health outcomes, and targeted growth. They also should consider which benefits might help address challenges for each customer segment. A segmented view of who is in each market can help health plans allocate rebate dollars to the levers that are most likely to impact enrollment and cost trajectories for priority segments, rather than spreading dollars too thinly across broadly appealing perks.

How have other industries made this transition?

Other mature markets have made a similar shift. Streaming services, for example, moved from a mantra of grow subscribers at all costs to introducing tiers of packages that appeal to different needs and budgets. The result has been a more segmented model where success is measured not just by the number of subscribers, but by how well customers are matched to the appropriate product and price.

Instead of relying primarily on headline subscriber additions, many streaming services now offer tiered options that align price to viewer preferences and price sensitivity, such as lower-cost, ad-supported plans for price-sensitive customers, premium tiers for households that value higher video quality or multiple simultaneous streams, and add-ons that let users pay for specific features.^vi This packaging strategy can reduce churn by allowing subscribers to upgrade or downgrade their service as their situation and preferences change.

MA is more regulated and complex than streaming services, but the same principle applies: design a smaller set of plans that are purpose-built for distinct member segments, rather than offering the same options to everyone.

MA remains an attractive option to the Medicare eligible population, but the effectiveness increasingly depends on scale, execution, and differentiated plans, rather than rapid expansion.^vii This transition appears to signal that MA is reaching maturity. Growth alone may no longer be the dominant driver, and strategic rigor may replace momentum. Many major health care organizations eventually reach a point where sustainability, outcomes, and efficiency replace growth as the central measure of effectiveness.

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Endnotes

ⁱThe history of Medicare Advantage, TechTarget, May 22, 2023
ⁱⁱACCESS technical FAQ, CMS
ⁱⁱⁱCMS proposes 2027 Medicare Advantage and Part D payment policies, CMS press release, January 26, 2026
^iv2027 Medicare Advantage and Part D Rate Announcement, CMS, April 6, 2026
^vMedicare Advantage prospects strong despite challenges, Healthcare Finance, December 18, 2024
^viNetflix to hike prices on standard and ad-supported streaming plans, January 22, 2025
^viiMedicare Advantage 2026 Spotlight: A first look at plan offerings, KFF, December 9, 2025

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