Sick of Fighting Insurers, Hospitals Offer Their Own Medicare Advantage Plans

Ever since Larry Wilkewitz retired over 20 years ago from a wood products company, he has been enrolled in a commercial Medicare Advantage plan from the insurer Humana.

However, two years ago, he learned about Peak Health, a new Advantage plan initiated by the West Virginia University Health System, where his doctors practice. This plan was not only more affordable but also offered personalized attention and additional benefits, such as an allowance for over-the-counter pharmacy items. These perks have become increasingly important to him as he undergoes cancer treatment.

“I decided to give it a shot,” said Wilkewitz, 79. “If I didn’t like it, I could go back to Humana or whatever after a year.”

He has chosen to stick with Peak Health. Members of Medicare Advantage plans, which serve as a privately run alternative to the government’s Medicare program, can switch plans until the end of March.

Now entering its third year, Peak Health has seen its enrollment triple since last year, reaching “north of 10,000,” according to Amos Ross, its president. The plan has expanded from 20 counties to 49 and has entered parts of western Pennsylvania for the first time.

While hospital-owned plans represent only a small fraction of the Medicare Advantage market, their enrollment is on the rise, mirroring the overall growth in Advantage members. Of the 62.8 million Medicare beneficiaries eligible for Advantage plans, 54% signed up last year, according to KFF, a health information nonprofit that includes KFF Health News. Although the number of Advantage plans owned by hospital systems remains relatively stable, organizations like Mass General Brigham in Boston are expanding their service areas and plan offerings.

Health systems have explored the insurance business for years, but it’s not a fit for everyone. MedStar Health, which serves the greater Washington, D.C., area, closed its Medicare Advantage plan at the end of 2018 due to financial losses.

“It’s a ton of work,” said Ross, who has over a decade of experience in the commercial health insurance industry.

Like any health insurer, hospitals entering this space require a robust back-office infrastructure to enroll patients, sign up providers, fill prescriptions, process claims, hire staff, and, crucially, assure state regulators that they have sufficient reserves to pay claims. After obtaining a state insurance license, they also need approval from the federal Centers for Medicare & Medicaid Services to sell Medicare Advantage policies. Some systems partner with or create an insurance subsidiary, while others manage most operations independently.

Kaiser Permanente, the nation’s largest nonprofit health system by revenue, initiated an experimental Medicare plan in 1981 and now has nearly 2 million enrollees in various Advantage plans across eight states and the District of Columbia. Recently, the Justice Department announced that KP had agreed to pay $556 million to settle allegations of fraudulent billing to the government for about $1 billion over a nine-year period.

Last year, UCLA Health launched two Medicare Advantage plans in Los Angeles County, the most populous county in the United States. Other new hospital-owned plans have emerged in less profitable rural areas.

“These are communities that have been very hard for insurers to penetrate,” said Molly Smith, group vice president for public policy at the American Hospital Association.

However, Advantage plans offered by hospitals carry a familiar, trusted name. They don’t need to establish a presence in the community, as their owners—the hospitals—have always been there.

Bad Breakups

Medicare Advantage plans typically limit their members to a network of doctors, hospitals, and other clinicians that have contracts with the plans. However, if hospitals and plans fail to renew these contracts or if disputes arise—often due to payment delays, denials, or cumbersome prior authorization rules—healthcare providers may exit the network.

These disruptions, along with planned terminations and service area reductions, forced over 3.7 million Medicare Advantage enrollees to make a difficult choice last year: find new insurance for 2026 that their doctors accept or, if possible, retain their plan but switch doctors.

Approximately 1 million of these affected patients were covered by UnitedHealthcare, the largest health insurer in the country. In a July earnings update, CFO John Rex attributed the company’s retreat to hospitals, where “most encounters are intensifying in services and costing more.”

The turbulence in the commercial insurance market has unsettled both patients and providers. Contract disputes have sometimes played out publicly, leaving anxious patients caught in the middle, receiving warnings from both sides blaming each other for the impending loss of coverage.

When Fred Neary, 88, discovered that his doctors in the Baylor Scott & White Health system in central and northern Texas would be leaving his Medicare Advantage plan, he feared a similar situation could arise if he switched to another commercial insurer. Fortunately, he found out that the 53-hospital system had its own Medicare Advantage plan. He enrolled in 2025 and plans to keep it this year.

“It was very important to me that I would never have to worry about switching over to another plan because they would not accept my Baylor Scott & White doctors,” he said.

Eugene Rich, a senior fellow at Mathematica, a health policy research group, noted that hospital systems’ Medicare Advantage plans provide “a lot of stability for patients.”

“You’re not suddenly going to discover that your primary care physician or your cardiologist are no longer in the plan,” he explained.

A Health Affairs study co-authored by Rich in July found that enrollment in Advantage plans owned by hospital systems grew faster than traditional Medicare enrollment for the first time in 2023, although not as rapidly as the overall increase in sign-ups for all Advantage plans.

The expansive UCLA Health system introduced its two Medicare Advantage plans in Los Angeles County in January 2025, despite patients already having access to over 70 Advantage plans. Before launching the plan, the University of California Board of Regents discussed its merits during a November 2024 meeting. The meeting minutes provide rare insight into a conversation that private hospital systems typically keep confidential.

“As increasing numbers of Medicare-enrolled patients turn to new Medicare Advantage plans, UC Health’s experience with these new plans has not been good, either for patients or providers,” the minutes noted, summarizing comments from David Rubin, executive vice president of UC Health.

The minutes also captured remarks from Jonathon Arrington, CFO of UCLA Health. “Over the years, in order to care for Medicare Advantage patients, UCLA has entered numerous contracts with other payers, and these contracts have generally not worked out well,” he stated. “Every two or three years, UCLA has found itself terminating a contract and signing a new one. Patients have remained loyal to UCLA, some going through three iterations of cancelled contracts in order to stay with UCLA Health.”

Costs to Taxpayers

The Centers for Medicare & Medicaid Services (CMS) pays Advantage plans a fixed monthly amount to care for each enrollee based on the member’s health condition and location. In 2024, the federal government is projected to pay Advantage plans an estimated $494 billion to care for patients, according to the Medicare Payment Advisory Commission, which oversees the program for Congress.

The commission recently projected that insurers in 2026 will receive 14% more—approximately $76 billion—than it would have cost government-run Medicare to care for similar patients.

Many Democratic lawmakers have criticized these overpayments to Medicare Advantage insurers, although the program enjoys bipartisan support in Congress due to its growing popularity among Medicare beneficiaries, who are often drawn to additional benefits like dental care that are not available through traditional Medicare.

Whenever Congress threatens cuts, insurers argue that these generous federal payments are crucial for maintaining Medicare Advantage plans. UCLA Health’s Advantage plans will require at least 15,000 members to be financially sustainable, according to the meeting minutes, while CMS data indicates that 7,337 patients signed up in 2025.

A study published in JAMA Surgery in August compared patients in commercial Medicare Advantage plans who underwent major surgery with those covered by Medicare Advantage plans owned by their hospital. The latter group experienced fewer complications, according to co-author Thomas Tsai, an associate professor in the Department of Health Policy and Management at the Harvard T.H. Chan School of Public Health.

Smith, from the American Hospital Association, is not surprised by these findings. When insurers and hospitals collaborate rather than compete, she noted, care delivery tends to be more efficient. “There’s more flexibility to manage premium dollars to cover services that might not otherwise be included,” Smith explained.

However, Tsai cautions seniors that hospital-owned Medicare Advantage plans operate under the same regulations as those run by commercial health insurance companies. He advises patients to weigh whether the additional benefits of Advantage plans “are worth the trade-off of potentially narrow provider networks and more utilization management than they would experience with traditional Medicare.”

In Texas, Neary remains hopeful that the closer relationship between his doctors and his insurance plan will reduce the likelihood of having his medical care bills rejected.

“I don’t think I would run into a situation where they would not provide coverage if one of their own doctors recommended something,” he said.

Ever since Larry Wilkewitz retired over 20 years ago from a wood products company, he has been enrolled in a commercial Medicare Advantage plan from the insurer Humana.

However, two years ago, he learned about Peak Health, a new Advantage plan initiated by the West Virginia University Health System, where his doctors practice. This plan was not only more affordable but also offered personalized attention and additional benefits, such as an allowance for over-the-counter pharmacy items. These perks have become increasingly important to him as he undergoes cancer treatment.

“I decided to give it a shot,” said Wilkewitz, 79. “If I didn’t like it, I could go back to Humana or whatever after a year.”

He has chosen to stick with Peak Health. Members of Medicare Advantage plans, which serve as a privately run alternative to the government’s Medicare program, can switch plans until the end of March.

Now entering its third year, Peak Health has seen its enrollment triple since last year, reaching “north of 10,000,” according to Amos Ross, its president. The plan has expanded from 20 counties to 49 and has entered parts of western Pennsylvania for the first time.

While hospital-owned plans represent only a small fraction of the Medicare Advantage market, their enrollment is on the rise, mirroring the overall growth in Advantage members. Of the 62.8 million Medicare beneficiaries eligible for Advantage plans, 54% signed up last year, according to KFF, a health information nonprofit that includes KFF Health News. Although the number of Advantage plans owned by hospital systems remains relatively stable, organizations like Mass General Brigham in Boston are expanding their service areas and plan offerings.

Health systems have explored the insurance business for years, but it’s not a fit for everyone. MedStar Health, which serves the greater Washington, D.C., area, closed its Medicare Advantage plan at the end of 2018 due to financial losses.

“It’s a ton of work,” said Ross, who has over a decade of experience in the commercial health insurance industry.

Like any health insurer, hospitals entering this space require a robust back-office infrastructure to enroll patients, sign up providers, fill prescriptions, process claims, hire staff, and, crucially, assure state regulators that they have sufficient reserves to pay claims. After obtaining a state insurance license, they also need approval from the federal Centers for Medicare & Medicaid Services to sell Medicare Advantage policies. Some systems partner with or create an insurance subsidiary, while others manage most operations independently.

Kaiser Permanente, the nation’s largest nonprofit health system by revenue, initiated an experimental Medicare plan in 1981 and now has nearly 2 million enrollees in various Advantage plans across eight states and the District of Columbia. Recently, the Justice Department announced that KP had agreed to pay $556 million to settle allegations of fraudulent billing to the government for about $1 billion over a nine-year period.

Last year, UCLA Health launched two Medicare Advantage plans in Los Angeles County, the most populous county in the United States. Other new hospital-owned plans have emerged in less profitable rural areas.

“These are communities that have been very hard for insurers to penetrate,” said Molly Smith, group vice president for public policy at the American Hospital Association.

However, Advantage plans offered by hospitals carry a familiar, trusted name. They don’t need to establish a presence in the community, as their owners—the hospitals—have always been there.

Bad Breakups

Medicare Advantage plans typically limit their members to a network of doctors, hospitals, and other clinicians that have contracts with the plans. However, if hospitals and plans fail to renew these contracts or if disputes arise—often due to payment delays, denials, or cumbersome prior authorization rules—healthcare providers may exit the network.

These disruptions, along with planned terminations and service area reductions, forced over 3.7 million Medicare Advantage enrollees to make a difficult choice last year: find new insurance for 2026 that their doctors accept or, if possible, retain their plan but switch doctors.

Approximately 1 million of these affected patients were covered by UnitedHealthcare, the largest health insurer in the country. In a July earnings update, CFO John Rex attributed the company’s retreat to hospitals, where “most encounters are intensifying in services and costing more.”

The turbulence in the commercial insurance market has unsettled both patients and providers. Contract disputes have sometimes played out publicly, leaving anxious patients caught in the middle, receiving warnings from both sides blaming each other for the impending loss of coverage.

When Fred Neary, 88, discovered that his doctors in the Baylor Scott & White Health system in central and northern Texas would be leaving his Medicare Advantage plan, he feared a similar situation could arise if he switched to another commercial insurer. Fortunately, he found out that the 53-hospital system had its own Medicare Advantage plan. He enrolled in 2025 and plans to keep it this year.

“It was very important to me that I would never have to worry about switching over to another plan because they would not accept my Baylor Scott & White doctors,” he said.

Eugene Rich, a senior fellow at Mathematica, a health policy research group, noted that hospital systems’ Medicare Advantage plans provide “a lot of stability for patients.”

“You’re not suddenly going to discover that your primary care physician or your cardiologist are no longer in the plan,” he explained.

A Health Affairs study co-authored by Rich in July found that enrollment in Advantage plans owned by hospital systems grew faster than traditional Medicare enrollment for the first time in 2023, although not as rapidly as the overall increase in sign-ups for all Advantage plans.

The expansive UCLA Health system introduced its two Medicare Advantage plans in Los Angeles County in January 2025, despite patients already having access to over 70 Advantage plans. Before launching the plan, the University of California Board of Regents discussed its merits during a November 2024 meeting. The meeting minutes provide rare insight into a conversation that private hospital systems typically keep confidential.

“As increasing numbers of Medicare-enrolled patients turn to new Medicare Advantage plans, UC Health’s experience with these new plans has not been good, either for patients or providers,” the minutes noted, summarizing comments from David Rubin, executive vice president of UC Health.

The minutes also captured remarks from Jonathon Arrington, CFO of UCLA Health. “Over the years, in order to care for Medicare Advantage patients, UCLA has entered numerous contracts with other payers, and these contracts have generally not worked out well,” he stated. “Every two or three years, UCLA has found itself terminating a contract and signing a new one. Patients have remained loyal to UCLA, some going through three iterations of cancelled contracts in order to stay with UCLA Health.”

Costs to Taxpayers

The Centers for Medicare & Medicaid Services (CMS) pays Advantage plans a fixed monthly amount to care for each enrollee based on the member’s health condition and location. In 2024, the federal government is projected to pay Advantage plans an estimated $494 billion to care for patients, according to the Medicare Payment Advisory Commission, which oversees the program for Congress.

The commission recently projected that insurers in 2026 will receive 14% more—approximately $76 billion—than it would have cost government-run Medicare to care for similar patients.

Many Democratic lawmakers have criticized these overpayments to Medicare Advantage insurers, although the program enjoys bipartisan support in Congress due to its growing popularity among Medicare beneficiaries, who are often drawn to additional benefits like dental care that are not available through traditional Medicare.

Whenever Congress threatens cuts, insurers argue that these generous federal payments are crucial for maintaining Medicare Advantage plans. UCLA Health’s Advantage plans will require at least 15,000 members to be financially sustainable, according to the meeting minutes, while CMS data indicates that 7,337 patients signed up in 2025.

A study published in JAMA Surgery in August compared patients in commercial Medicare Advantage plans who underwent major surgery with those covered by Medicare Advantage plans owned by their hospital. The latter group experienced fewer complications, according to co-author Thomas Tsai, an associate professor in the Department of Health Policy and Management at the Harvard T.H. Chan School of Public Health.

Smith, from the American Hospital Association, is not surprised by these findings. When insurers and hospitals collaborate rather than compete, she noted, care delivery tends to be more efficient. “There’s more flexibility to manage premium dollars to cover services that might not otherwise be included,” Smith explained.

However, Tsai cautions seniors that hospital-owned Medicare Advantage plans operate under the same regulations as those run by commercial health insurance companies. He advises patients to weigh whether the additional benefits of Advantage plans “are worth the trade-off of potentially narrow provider networks and more utilization management than they would experience with traditional Medicare.”

In Texas, Neary remains hopeful that the closer relationship between his doctors and his insurance plan will reduce the likelihood of having his medical care bills rejected.

“I don’t think I would run into a situation where they would not provide coverage if one of their own doctors recommended something,” he said.