Healthcare Brew covers pharmaceutical developments, health startups, the latest tech, and how it impacts hospitals and providers to keep administrators and providers informed.

Healthcare Brew

Will Peischel

Healthcare Brew delivers the latest news and trends in healthcare.

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Coffee cup paired with a clock striking midnight

How the two-midnight rule influences Medicare coverage

A whole lot goes into whether a physician admits a beneficiary.

Quinn Sental

The US government opens probe into Change cyberattack

Among its goals, the Department of Health aims to ascertain if “protected health information” was breached.

Shannon Young

Biden admin: Short-term health plans must be ‘truly short-term’

New federal rules will restrict short-term health insurance policies to months, not years.

Dollar bill icon denoting healthcare payers

Payers

illustrated headshot of caroline catherman, healthcare brew reporter

Caroline Catherman

It’s been a bleak Q2 for the insurance industry.

 have fallen short of expectations or lowered their 2025 predictions, blaming rocketing medical costs amid a sicker-than-expected pool of members across their health plans over the last few quarters. They’ve pointed to the 

 (ACA) marketplace and Medicaid in particular.

The issues have largely been attributed to increased utilization, providers coding for more conditions, and a continued 

 between state Medicaid reimbursement rates and member acuity.

 could make it more expensive and difficult to enroll in government plans, driving away healthy people and creating an even sicker Medicaid and ACA pool, execs said in Q2 earnings calls.

Insurers are reassuring investors that they will 

 unprofitable markets to make up for this. But Hal Andrews, president and CEO of data science, analytics, and market research firm Trilliant Health, told Healthcare Brew it isn’t that simple.

Andrews feels perhaps the biggest issue contributing to earnings misses isn’t being emphasized enough in payers’ calls.

“They’re not talking about the fundamental larger issue, which is specialty pharmacy,” he said.

A July 16 report by professional services network PwC shares that insurers’ medical costs rose 8.5% for the group market and 7.5% for the individual market in 2025—a trend that’s expected to stay the same in 2026. UnitedHealth, for instance, expects medical costs for the year to be $6.5 billion more than predicted. It has recorded $152 billion in medical costs from Jan. 1 to June 30.

Yet drug spending seems to be increasing even more than that. The PwC report found that industrywide it increased by 11.4% ($50 billion) to reach $487 billion in 2024 at net manufacturer prices, according to the report.

 are the usual suspects when it comes to high drug spend in recent years, but there are also quite a few pricey specialty drugs to treat chronic illness and genetic disorders.

There are other issues insurers emphasized that Andrews agrees are big factors. For instance, upcoding.

 by independent actuarial firm Wakely said an initial review found there was an increase in the number of members coding with more than two conditions.

Payers like Elevance, Centene, and UnitedHealth called out “aggressive” coding in their calls. 

Andrews pointed out that national hospital chains like Nashville, Tennessee-headquartered HCA Healthcare and Dallas, Texas-headquartered Tenet Healthcare have not reported substantially increased admissions (in fact, Tenet’s decreased) in their recent earnings calls, suggesting it’s not that patients have used much more care but that providers are charging for more things.

 (AI) is now sometimes used for coding, Andrews added. In recent years, AI programs 

from patient medical records and even to automate claim submissions.

“It doesn’t have to mean that coding intensity is a bad thing. It could just be that the machines are more consistent at coding than the humans are,” Andrews said.

 beat the slump that seemed to plague everyone else, topping Wall Street predictions and even raising their full-year earnings guidance for their companies by $2 billion and $9 billion, respectively. Both have 

, and execs attributed this “transformation” to concerted turnaround efforts.

 this success could be because it’s gotten out of the government insurance game, selling off its Medicare business 

. Plus, though it still faced high medical costs, Cigna’s Evernorth healthcare services unit, which includes its pharmacy benefit management business, rose 17% to $57.83 billion.

pill bottle with money and pills falling out on bright green background

Medical costs are hitting payers hard in Q2

Experts suggest specialty drugs and upcoding could be fueling the issue.

An individual coverage health reimbursement arrangement (ICHRA) is an atypical way to cover health costs with a bold pitch.

Instead of offering a traditional group plan, employers give workers money before tax to buy whatever insurance plan works for them on the individual market, paying more or less depending on what they need. Think health insurance à la carte.

The idea is to give workers more freedom and give employers more predictable healthcare costs.

“It gets [employers] out of a one-size-fits-all mentality of picking a plan or a set of plans for all employees,” Zachary Sherman, managing director at public healthcare-focused research and consulting firm Health Management Associates, told us.

The concept first soft-launched to employers with 50 or fewer workers in 2017 with qualified small employer health reimbursement arrangements (QSEHRAs). ICHRAs then stretched health reimbursement arrangements to employers of all sizes in 2020 after an executive order by President Donald Trump.

While there’s no comprehensive public enrollment data, employers reportedly offered ICHRAs to 200,000+ employees and their dependents in 2025, according to data from 15 ICHRA/QSEHRA service providers 

 trade and advocacy organization the HRA Council. Uptake hasn’t been explosive, but the data shows it’s risen 19% overall since 2020 and 34% among large employers (50+ employees).

“It felt like, if one big employer took a leap, others might follow. But we hadn’t reached that point,” JoAnn Volk, co-director of Georgetown University’s Center on Health Insurance Reforms, told us.

Now some experts say health reimbursement arrangements might be about to hit a new set of speed bumps, just as the race against group plans was getting interesting. 

“The whole premise of an HRA is based on having a robust, healthy individual market, and that’s no longer assured. It’s very much at risk,” Volk said.

Experts told us changes proposed in July’s One Big Beautiful Bill Act and June’s Marketplace Integrity and Affordability Final Rule might make it more expensive and difficult to sign up for individual coverage, potentially keeping ICHRAs from living up to the hype.

People with lower medical costs may decide individual insurance isn’t worth the hassle, Volk said.

“The people who will persevere are the ones who say ‘I need this coverage no matter what it costs me, and no matter how many hoops I have to jump through,’” Volk said.

If those who choose to keep their health insurance coverage are sicker and use their coverage more, payers may raise premiums or cut everyone’s benefits to compensate.

 from nonpartisan health policy research group KFF predicts the average out-of-pocket payment will rise 75% for people who use Healthcare.gov or state-based 

. Enrollment is currently at a record 24 million, though that number could drop by more than 11 million based on actuarial group Wakely’s analysis of an earlier version of July’s bill. Among the changes:

Automatic re-enrollment ends starting in plan year 2028.

The open enrollment window shortens by two weeks beginning in plan year 2027.

Stricter eligibility verification requirements for the premium tax credit will be effective in plan year 2028.

, which are set to expire at the end of the year.

The minimum percent ACA-regulated plans must contribute toward patients’ costs lowers beginning in plan year 2026 (aka more cost-sharing for patients).

For ICHRAs to work, “there needs to be a healthy, robust, and vibrant individual market of ACA plans. And so, any actions that move us away from that don’t further that goal,” Josh Schultz, strategic engagement manager of Softheon, a healthcare technology company that provides enrollment, billing, and payment solutions to health plans and government agencies, told us.

The final version of the One Big Beautiful Bill also removed an earlier provision that would have codified ICHRAs and given $100 monthly tax credits to participating small employers.

Volk specifically pointed to one clause buried in the June marketplace rule that lowers the share of patient costs an ACA-regulated plan must cover, effective 2026.

This matters for ICHRAs because it has long been law that large employers must contribute a minimum to their employees’ health reimbursement arrangements in order for coverage to be considered “affordable”—otherwise, they’re fined. That minimum is calculated for each employee using, in part, the cost of the lowest-cost standard silver-tier plan on the marketplace that year.

So if silver plans cover less, employers can contribute less, which shifts more of the financial burden of premiums and out-of-pocket costs to employees.The rule’s text argues this could increase ICHRA adoption, making large employers more willing to get on board because it would be cheaper for them.

Alan Silver, president of Centene’s ICHRA offering, said he views this model as “the future of employer-sponsored healthcare” in a statement to Healthcare Brew, echoing a similar remark by Centene CEO Sarah London in a February earnings call. As of March 31, Centene touts nearly 28 million managed care members, of which people in ICHRAs make up a small portion.

Louis DeStefano, SVP of growth at insurer Oscar Health—which, according to DeStefano, has just under 2 million members primarily in the individual exchange marketplace—said he hopes Oscar can become “one of the leaders” in the ICHRA market.

He argues ICHRA is attractive because of its ability to really individualize insurance—the insurer has plans specifically for people with diabetes, for instance.

DeStefano added it’s possible that Trump or Congress might eventually extend premium tax credits or take other actions to otherwise incentivize ICHRA growth.

“The administration remains supportive of ICHRAs as a means to efficiently strengthen the individual market and expand employee insurance choices for small businesses. President Trump made meaningful progress during his first term to expand ICHRAs, and we are committed to building off that progress,” White House spokesperson Kush Desai told us.

A hand reaching out to medical crosses on a store shelf, with all different price points.

How recent policy could impact ICHRAs

A recent marketplace integrity rule could halt ICHRA momentum.

Medicare codes for digital mental health treatments were used for 99 patients across 184 visits in Q1 2025, according to a new report on this multibillion-dollar industry.

The report—shared exclusively with Healthcare Brew by analytics firm Komodo Health—analyzed deidentified data from more than 330 million patients, looking at the use of three new codes introduced on Jan. 1. The codes allow providers to bill Medicare for the cost of supplying and treating a patient with one of seven FDA-cleared 

 (DTx) for conditions like anxiety and depression.

This is the first year Medicare has offered coverage, and experts previously 

 the DTx industry’s success hinges on whether providers use it. If they do, other payers may also 

 Without widespread payer coverage, device makers are struggling to profit off their products. Insurance denials fueled the 2023 

 of DTx company Pear Therapeutics, its CEO said on 

 at the time. That same year, digital medicine company Akili Interactive switched from a prescription to 

 model following its own failed battle for payer coverage.

The good news is that while uptake may seem low, it’s growing.

The number of visits associated with the codes jumped from 48 in January to 85 in March, Evan Woodward, MD and senior clinical product manager at Komodo Health, told us.

“The limited uptake likely reflects ongoing confusion around code applicability and reimbursement pathways—common barriers we see with new digital tools in clinical practice,” Woodward said.

Andy Molnar, head of digital health at the American Telemedicine Association’s advocacy organization ATA Action, told us this is a promising start. 

“We continue to be excited about the movement,” Molnar said.

David Cooper, executive director of professional group Therapists in Tech, told us he wishes uptake was higher, though he noted that, like all new concepts, there’s a learning curve. Most of this software requires prescriptions from people not used to prescribing, like psychologists or social workers.

Cooper added these codes also use a “buy-and-bill” model, meaning providers pay up front and are reimbursed only after submitting a claim to Medicare.

Medicare hasn’t set one national rate for these devices yet. The rate is decided by Medicare’s local contractors in each region, meaning providers in different parts of the country may be reimbursed at different rates or may not know what they’ll be paid at all when they submit codes.

If Medicare eventually sets a generous national rate, Cooper expects DTx to “boom.” If not, he expects more companies to declare bankruptcy or choose not to go the DTx route at all.

“The reimbursement piece is the make-or-break for digital therapeutics,” he said. “Why would a company go through all of the extra work of FDA [clearance] if there is not equivalent reward for that?”

Mashup of a phone, brain, sky, pill, and healthcare symbol

Data shows growing use of new Medicare codes for digital therapeutics

New billing codes drew 184 claims in Q1 2025, data shows.

Investors lost an adjusted 16 cents a share in Q2, a huge fall from last quarter’s adjusted gain of $2.90 per share. The company also gave a new projection for earnings per share in 2025: $1.75. The Wall Street Journal 

 this is far less than the previously projected $7.25+.

Centene, which focuses on government subsidized plans, 

 its revenue guidance on July 1 following a report from actuarial firm Wakely suggesting fewer people would get marketplace coverage than expected, and those who did would need more expensive care.

Centene CEO Sarah London said the company is adjusting 2026 pricing for its marketplace plans, which have nearly 5.9 million members as of the end of Q2.

“We continue to believe that we will be able to reprice the 2026 portfolio to account for a substantial majority of our marketplace membership, and our goal is to reprice 100% of the book,” London said.

Though marketplace plans have been getting most of the attention, Friday’s call also shed light on another major pressure point: the company’s 12.8 million Medicaid members.

Centene’s overall health benefits ratio—the percent of premium dollars spent on medical care—jumped from 87.5% to 93% between quarters. London said its Medicaid health benefits ratio reached “an unanticipated and unacceptable” 94.9%.

London said behavioral health was the biggest factor in Q2’s “step up” in medical costs, followed by home health and high-cost drugs. Elevance also called out increased use of behavioral health and emergency room services in its July 17 earnings call.

But one specific service in particular is hitting Centene hard.

London said applied behavioral analysis (ABA)—a therapy for people with autism and other developmental disabilities that provides positive reinforcement for desired social behaviors—was a growing contributor to the spike in care costs in multiple states, especially Florida.

Florida Medicaid previously covered ABA therapy on a fee-for-service basis, but on Feb. 1, started requiring the service be provided through Medicaid managed care plans.

Centene oversees one of the state’s nine managed care plans called the Children’s Medical Services Health Plan, which serves people under 20 on Medicaid with special healthcare needs. This program served nearly 123,000 people in 2024, according to state data.

London said this population “transitioned with inadequate rates” and Centene is seeking future and retroactive rate adjustments.

It’s not clear how much Centene will pay for ABA services, but the state expects to spend $2.6 billion on them in the current year, according to 

London went on to allege “fraud, waste, and abuse” is spiking in behavioral health, “partly because of the fragmented provider base.”

She said the company has formed behavioral task forces to push for behavioral health rate adjustments and educate state partners on how to ensure behavioral health treatments are quality and evidence-based.

Centene posts Q2 loss, spiking Medicaid costs

The company’s CEO identified this pain point in its Q2 earnings call.

Medicare wants to allow about 1,730 procedures currently only reimbursed in inpatient settings to also be reimbursed in outpatient settings.

 suggests getting rid of the inpatient-only (IPO) list, established in 2000, which dictates a list of procedures Medicare will only reimburse if performed in inpatient settings.

The list would be phased out over three years starting in 2026 with 285 mostly musculoskeletal procedures. These services have already started to shift from inpatient to outpatient setting, thanks to advancements in technology and medicine, the rule notes.

CMS says in the rule it has received public comments over the years that physicians should be trusted to decide where to perform each procedure for their patients, but others, like the American Hospital Association (AHA), have defended its importance. 

“As medical practice continues to develop, we believe that the difference between the need for inpatient care and the appropriateness of outpatient care will continue to be less and less distinct for many services. Therefore, we believe that the IPO list is no longer necessary to identify services that require inpatient care,” CMS writes in the rule.

 of more than 6 million patients found those who get outpatient procedures fare better in terms of mortality and morbidity than those who get the same procedure inpatient, though outpatients were generally healthier to start.

Centers for Medicare and Medicaid Services (CMS) tried to do this once before under the first Trump administration, to be effective in 2021. But the Biden-era CMS 

 the IPO list in its final 2022 calendar year rule.

This proposal was one of many ideas buried within CMS’s 2026 Hospital Outpatient Prospective Payment System (OPPS) and Ambulatory Surgical Center Proposed Rule.

The 2026 OPPS rule also proposes adding more site-neutral payments, meaning Medicare would pay the same amount regardless of where care is performed.

Right now, the program typically reimburses different amounts for outpatient care depending on if it’s performed in a hospital outpatient department, ambulatory surgical center, or freestanding physician’s office.

“We oppose the proposal to expand ‘site-neutral’ cuts and eliminate the inpatient-only list, as both policies fail to account for the real and crucial differences between hospital outpatient departments and other sites of care,” Ashley Thompson, AHA SVP of public policy analysis and development, said in a statement.

Centers for Medicare & Medicaid Services (CMS) logo is seen displayed on a smartphone and on the background of its website.

Medicare plans to stop limiting procedures to inpatient-only care

Medicare’s 2026 payment system update proposes a lot of changes. 

On July 17, a US District Court for the Northern District of Texas judge dismissed the company’s lawsuit against the Centers for Medicare and Medicaid Services (CMS) and Department of Health and Human Services over its 2025 star ratings.

Then, not even a week later on July 22, Humana filed a new suit against CMS, once again contesting its 2025 

, a Medicare Advantage (MA) plan quality metric tied to 

In an 8-K filed Oct. 2, 2024, Humana said it was left with 

—or 1.6 million of its members—in plans with ratings above 4 stars in 2025. In 2024, for comparison, 94% were in 4+ star plans.

A fact sheet from CMS contends star ratings are based on many performance and customer satisfaction measures and variations in star ratings from year to year are normal because each plan’s performance varies.

 because, the judge asserted, the payer “did not exhaust the administrative appeals process” before suing CMS in October over its low star ratings—i.e., Humana went running to court before it got an answer on an internal appeal to CMS.

Humana got a final decision on its internal appeal to CMS in April (CMS said no), but what matters is the payer hadn’t received that decision when it first filed the suit.

 The new filing alleges CMS didn’t properly test the company, dinging Humana’s star ratings “on the basis of just three phone calls that were handled by CMS in a manner inconsistent with the agency’s own regulations.”

 that has sued the US government over star ratings, though it saw the largest rating drop of any major insurer, according to consulting firm 

While Humana’s suit has dragged on, payers like 

 have won their star ratings court battles and gotten some of their plans’ ratings recalculated. 

 have either dropped or lost their suits.

The new suit requested a rating change before the annual open enrollment period, which starts Oct. 15.“Plaintiff Humana is already suffering reputational harms from the inaccurate 2025 star ratings, harms that will grow substantially once the annual enrollment period begins,” the suit reads.

The exterior of a building with a sign for Humana

Humana is suing CMS over star ratings—again

Quick, someone find Olivia Rodrigo! We’re getting déjà vu.

Amid regulatory uncertainties, high utilization, and changing marketplace rules, payers aren’t doing great right now.

 its prediction for its annual performance in May after Medicare Advantage utilization surpassed its highest expectations. Now, it’s Centene’s turn in the spotlight.

 Centene pulled its 2025 revenue guidance on July 1 after actuarial firm Wakely predicted fewer people would get Affordable Care Act (ACA) marketplace coverage than expected, and those who did would be sicker—and costlier.

Wakely’s analysis included 22 of Centene’s 29 marketplace states, making up about 72% of the company’s individual marketplace plan members. The company reported that as of March 31, it had 5.6 million marketplace members.

The company also shared that it saw a “step-up” in Medicaid costs, particularly in New York and Florida, where it’s a market leader.

Following this announcement, the company’s shares 

 nearly 40% from $56.65 to $33.78. The stock has since fallen further, dipping below $30 at time of publication amid policy changes in the past two weeks from the One Big Beautiful Bill Act, which could hurt profits in the future given that the majority of Centene’s business is government-sponsored healthcare.

“Current risks outweigh future opportunities,” Paige Meyer, an equity analyst for independent research group CFRA Research, wrote in a July 12 research note on Centene.

Centene declined to provide comment beyond its press release.

Centene said in its July 1 release it plans to refile its 2026 marketplace rates for some states, increasing them in order to reflect the higher member acuity.

But while Centene has a “meaningful path” to repricing its 2026 rates, it will also “be repricing at a time when the ACA exchange risk pools are potentially worsening, which could make the process more challenging,” JPMorgan analysts wrote in a July 2 research note.

The JPMorgan analysts pointed to several policy changes threatening the ACA marketplace risk pools.

For instance, on June 20, the federal government finalized the Marketplace Integrity and Affordability rule, which takes steps like “strengthening” income verification. On July 4, President Donald Trump signed a reconciliation bill that experts allege will make it 

 to enroll in the ACA marketplace due to factors like shorter open enrollment periods and the eventual end of automatic reenrollment.

 are set to expire at the end of the year, and the government hasn’t moved to extend them.

 these changes could raise the number of uninsured people by 16 million by 2034. Nearly 25 million people were uninsured in 2023, according to 

JPMorgan’s analysts added in a separate July 14 report that the Wakely analysis indicates the ACA marketplace member pool as a whole has “deteriorated” in 2025.

“This could be a pressure point for [managed care organizations],” they wrote.

Molina, a California insurer that specializes in Medicaid, Medicare, and ACA plans, 

 soon after Centene on July 7. The company reported 4.8 million Medicaid, 260,000 Medicare, and 662,000 ACA marketplace members as of March 31.

In this photo illustration, the Centene company logo is seen displayed on a smartphone screen.