Sick of Fighting Insurers, Hospitals Offer Their Own Medicare Advantage Plans
Since Larry Wilkewitz retired more than 20 years ago from a wood products company, he has had a commercial Medicare Advantage plan from insurer Humana.
But two years ago, he learned about Peak Health, a new Advantage plan launched by the West Virginia University Health System, where his doctors practice. It was cheaper and offered more personal attention, as well as extras such as an allowance for over-the-counter pharmaceuticals. Those benefits are more important than ever, he said, as he is being treated for cancer.
“I decided to give it a shot,” Wilkewitz, 79, said. “If I didn’t like it, I could go back to Humana or something after a year.”
He sticks to Peak Health. Members of Medicare Advantage plans, a private alternative to the government Medicare program, can change plans until the end of March.
Now entering its third year, Peak Health has tripled its enrollment since last year, to “north of 10,000,” said Amos Ross, its president. It grew from 20 counties to 49, he said, and extended to parts of western Pennsylvania for the first time.
Although hospital plans represent only part of the Medicare Advantage market, their enrollment continues to grow, reflecting the overall increase in Advantage members. Of the 62.8 million Medicare beneficiaries eligible to enroll in Advantage plans, 54% signed up last year, according to KFF, the nonprofit health news organization that includes KFF Health News. While the number of Advantage plans held by hospital systems is relatively stable, Mass General Brigham in Boston and others are expanding their service areas and types of plan offerings.
Health systems have been dabbling in the insurance business for years, but it’s not for everyone. MedStar Health, which serves the greater Washington, D.C., area, said it closed its Medicare Advantage plan at the end of 2018, citing financial losses.
“It’s a ton of work,” said Ross, who spent more than a decade in the commercial health insurance industry.
Like any other health insurer, hospitals entering the business need a back-office infrastructure to enroll patients, enroll providers, fill prescriptions, process claims, hire staff and, most importantly, assure state regulators that they have a reserve of cash to pay claims. Once they obtain a state insurance license, they need approval from the federal Centers for Medicare & Medicaid Services to sell Medicare Advantage policies. Some systems affiliate or create an insurance subsidiary, while others do most of the work themselves.
Kaiser Permanente, the nation’s largest nonprofit health system by revenue, launched an experimental Medicare plan in 1981 and now has nearly 2 million people enrolled in dozens of Advantage plans in eight states and the District of Columbia. The Justice Department announced Jan. 14 that KP agreed to pay $556 million to settle charges that its Advantage plans fraudulently billed the government about $1 billion over a nine-year period.
Last year, UCLA Health introduced two Medicare Advantage plans in Los Angeles County, the most populous county in the United States. Other new hospital-owned plans have appeared in less profitable rural areas.
“These are communities that have been very difficult for insurers to get into,” said Molly Smith, group vice president for public policy at the American Hospital Association.
But the Advantage plans offered by hospitals have a familiar and reliable name. They don’t have to move to the city because their owners – the hospitals – never left.
Bad breakups
Medicare Advantage plans generally limit their members to a network of doctors, hospitals and other clinicians who contract with the plans to serve them. But if hospitals and plans can’t agree on renewing these contracts, or when disputes arise — often caused by payment delays, denials or burdensome prior authorization rules — health care providers can give up.
These disruptions, along with planned layoffs and service area reductions, forced more than 3.7 million Medicare Advantage enrollees last year to make a difficult choice: find new insurance for 2026 that their doctors accept or, if possible, keep their plan but find new doctors.
About a million of those stranded patients were covered by UnitedHealthcare, the nation’s largest health insurer. In a July earnings update to financial analysts, Chief Financial Officer John Rex blamed the company’s retreat on hospitals, where “most encounters are escalating in services and costing more.”
The turmoil in the commercial insurance market has upset patients and their providers alike. At times, contract disputes played out openly, with anxious patients in the middle receiving warnings from each side, blaming the other for the impending end of coverage.
When Fred Neary, 88, learned that his doctors at the Baylor Scott & White Health System in central and north Texas were going to leave his Medicare Advantage plan, he feared the same thing would happen again if he joined a plan with another commercial insurer. He then discovered that the 53-hospital system had its own Medicare Advantage plan. He signed up for 2025 and is keeping the plan this year.
“It was very important to me to never have to worry about switching to another diet because they wouldn’t accept my Baylor Scott & White doctors,” he said.
Eugene Rich, a senior researcher at Mathematica, a health policy research group, said hospital systems’ Medicare Advantage plans provide “a lot of stability for patients.”
“You’re not going to suddenly find out that your primary care doctor or your cardiologist is no longer part of the plan,” he said.
A Health Affairs study Rich co-authored in July found that enrollment in Advantage plans owned by hospital systems grew faster than traditional Medicare enrollment for the first time in 2023, but not as fast as the overall increase in enrollment in all Advantage plans.
The massive UCLA Health System introduced its two Medicare Advantage plans to Los Angeles County in January 2025, even though patients already had a list of more than 70 Advantage plans to choose from. Before rolling out the plan, the University of California Board of Regents discussed its merits at a meeting in November 2024. The meeting minutes offer a rare glimpse into a conversation that private hospital systems typically hold behind closed doors.
“As an increasing number of Medicare patients are switching to new Medicare Advantage plans, UC Health’s experience with these new plans has not been good for either patients or providers,” the minutes read, summarizing comments from David Rubin, executive vice president of UC Health.
The minutes also outline comments from Jonathon Arrington, chief financial officer of UCLA Health. “Over the years, in order to support Medicare Advantage patients, UCLA has entered into numerous contracts with other payers, and these contracts have generally not performed well,” the minutes state. “Every two or three years, UCLA finds itself terminating a contract and signing a new one. Patients have remained loyal to UCLA, with some going through three iterations of canceled contracts in order to remain with UCLA Health.”
Costs to taxpayers
CMS pays Advantage plans a fixed monthly amount to care for each enrollee based on the member’s health status and location. In 2024, the federal government paid Advantage plans about $494 billion to care for patients, according to the Medicare Payment Advisory Commission, which monitors the program for Congress.
The commission said this month that it projects insurers will be paid in 2026 14 percent, or about $76 billion, more than it would have cost government-run Medicare to treat similar patients.
Many Democratic lawmakers have criticized overpayments to Medicare Advantage insurers, although the program has bipartisan support in Congress because of its growing popularity among Medicare beneficiaries, who are often attracted to dental care and other coverages not available through traditional Medicare.
Every time Congress threatens to cut spending, insurers claim that these generous federal payments are essential to keeping Medicare Advantage plans afloat. UCLA Health’s Advantage plans will need at least 15,000 members to be financially viable, according to meeting minutes. CMS data indicates 7,337 patients enrolled in 2025.
A study published in JAMA Surgery in August compared patients in the commercial Medicare Advantage program who underwent major surgery with those covered by Medicare Advantage plans owned by their hospital. The latter group had fewer complications, said co-author Thomas Tsai, an associate professor in the Department of Health Policy and Management at the Harvard TH Chan School of Public Health.
Smith, of the American Hospital Association, isn’t surprised. When insurers and hospitals are not on opposing sides, she said, care delivery can be smoother. “There is more flexibility to manage premiums to cover services that might not otherwise be covered,” Smith said.
But Tsai cautions seniors that hospital-owned Medicare Advantage plans operate under the same rules as those run by commercial health insurance companies. He said patients should consider whether the added benefits of Advantage plans “are worth the tradeoff between potentially narrow provider networks and better utilization management than they would get from traditional Medicare.”
In Texas, Neary hopes the closer relationship between her doctors and her insurance plan means there’s less chance her medical bills will be reduced.
“I don’t think I would find myself in a situation where they wouldn’t provide coverage if one of their own doctors recommended something,” he said.
