Why some provider-sponsored health plans weren’t as successful as expected

Recently, health systems have been dropping their insurance arms like a bad habit.

In April, Dallas, Texas-based Baylor Scott & White Health announced plans to stop offering Medicaid coverage by the end of August as well as individual plans on the Affordable Care Act (ACA) marketplace by 2027. Then in May, Renton, Washington-based Providence Health shared it would stop offering most of its health insurance options in 2027, too.

Provider-sponsored plans rose in popularity in the 2010s as a way to align hospital and insurance incentives and encourage value-based care, which bases providers’ reimbursements on how well they keep their patients healthy. But recent years have tested that theory.

High utilization, medical costs, turbulent federal policy, and the expiration of expanded ACA marketplace subsidies have rocked the health insurance market over the last couple years, prompting even major for-profit companies like Cigna and CVS’s Aetna to leave the marketplace or shrink Medicare Advantage (MA) offerings. The retraction of payviders isn’t a death blow to the concept, but experts say it suggests plans need to be very big—or very careful—to survive.

“There was a period of time when, broadly speaking, [payers] saw growth, but for the most part, other than the largest provider-sponsored health plans, they’ve been really challenged to grow,” Thom Bales, US health services sector lead at consultancy PwC, told us.

History lesson

Provider sponsored-plans once seemed like a lucrative idea for hospital systems.

For one, they thought it could help smooth their revenues, Bales said. In a risky business (wink) like running a hospital, the hope was having insurance built in could provide some stability. Provider-sponsored health plans also, in theory, motivate both the hospital and insurance arms to keep prices low and align with the industry’s shift away from fee-for-service to value-based care, he said.

“We want to get rewarded for keeping people healthy, and if you’re a fee-for-service-only provider, you only get paid when people are sick,” Chuck Lehn, president of Phoenix, Arizona-based Banner Health’s Banner Plans and Networks, told us.

Banner started its insurance arm in 2011, and it made up about $3.5 billion of Banner Health’s $16 billion in revenue last year, Lehn added.

(Un)successful

But in some cases, these ideas didn’t work out as planned. The last few years saw rising medical costs that challenged all health plans, not just provider-sponsored ones.

Amid current headwinds, Lehn said Banner has added more care management programs to its ACA marketplace small group insurance plans and, like many other payers, cut MA plans down to “the counties where we have our strongest provider networks that can perform the best.” A commercial plan that Banner co-founded with Aetna in 2017 no longer offers individual marketplace insurance after Aetna left the ACA exchanges in 2026, but Banner still offers small group ACA insurance, Lehn said.

Total insurance membership has fallen from about 1 million members at the end of 2025 to 627,000 as of April 2026, comprising 224,000 Medicaid members, 19,000 Medicare members, and 384,000 members in the Banner Aetna plan, per spokesperson Jen Fenter.

“Even larger regional, multiregional health plans in the US are losing money,” Bales said. “And they come with a membership base, a set of capabilities that are greater, for the most part, than the provider-sponsored health plans.”

The winners, Bales added, are the bigger players. Though these larger provider-sponsored health plans are still much smaller than the UnitedHealth Groups and Humanas of the world.

Why is it so hard?

Payviders face different struggles compared to the average insurer.

For example, if there’s debate within health systems about where money should go, it can be difficult to justify spending to hospital financialists on insurance versus other needs like supplies, Bales said. Second, the expected synergy between care, population health management, and overall patient experience hasn’t always panned out.

“There are some bright spots that you do see in terms of how they manage certain diseases and the overall consumer experience, but the reality is…the health systems themselves are having a tough time,” Bale said.

Provider-sponsored health plans can’t use some of the tactics that larger insurers implement to control costs because those might hurt the health system, Joe Mangrum, a partner specializing in payers at healthcare consulting firm ECG Management Consultants, told Healthcare Brew.

“When you look at some of those national payers, they can really push aggressively on unit cost or utilization without worrying about the hospital revenue,” he said. “The provider-sponsored plan has to manage both sides of the equation.”

How to succeed

Provider-sponsored plans do have some potential strengths compared to Goliath for-profit healthcare companies, though.

For one, they can potentially operate at a lower margin, Mangrum said. They might even be able to have a negative margin and still benefit the whole enterprise’s bottom line because they ultimately bring more patients to the health system, he explained.

If the federal government continues to push value-based care and cracks down on the health insurance industry through actions like reforming MA risk adjustment, payviders might adapt better than large insurance companies, Mangrum added.

“I think if anybody’s asking ‘Are these types of models still viable?’—absolutely,” he said.