Average annual premiums for single health coverage
A grouped column chart comparing average annual premiums for single coverage from 2018 to 2025 for ACA benchmark plans and employer-sponsored plans. Both plan types have increased in cost since 2018. In 2024, ACA benchmark plans were $5.7k annually while employer-sponsored plans were almost $9k on average. No data is available for employer-sponsored plans in 2025.
Something big isbeing missed in the congressional showdown over enhanced Affordable Care Act subsidies: Health insurance premiums are eye-wateringly expensive for the average person without some kind of subsidy.
Why it matters:
Health care in the U.S. is expensive, we know, we’ve all heard it a million times. But most of us don’t really feel its full expense, which removes a lot of the urgency to truly address health care costs.
Whether it’s through government tax credits or employer premium assistance, most Americans with private health insurance don’t pay the entirety of their premium.
But we’re all paying the freight one way or another, either through taxes or paycheck deductions.
State of play:
The past few weeks have been full of dire warnings from Democrats and their allies about what will happen if the enhanced ACA subsidies from the pandemic era are allowed to expire at year’s end.
The gist is that millions of Americans will have sticker shock when they’re exposed to more or all of the premium cost, and many will ultimately opt out of buying coverage. That’s all probably true.
Of course, allowing the enhanced subsidies to expire would just make the law’s structure revert to its original state.
And that’s why some savvy Republican-aligned commenters are asking if that means the ACA is broken, or if the original version was unworkable.
Reality check:
Premiums have gone up — a lot, in some cases. But that’s not unique to the ACA marketplace, and premiums are even pricier in the employer market.
By the numbers:
This year, the average premium for a benchmark ACA plan is $497 a month, or nearly $6,000 a year, according to KFF.
The average employer-employee premium for single coverage was $8,951 last year, also according to KFF.
The average premium for family coverage was a whopping $25,572.
Let’s do some math.
Without any form of subsidization, a single person making $60,000 would spend 10% of pretax income on an ACA plan, and 15% on an employer plan.
Now let’s say that $60,000 income is supporting a family of four. The average premium without subsidies would cost that family 43% of its pretax income.
The median U.S. family income, according to the Census Bureau, was $83,730 in 2024. Health insurance premiums would be 31% of pretax income.
Between the lines:
The definition of “affordable” is obviously very subjective, but it seems safe to say that some of these numbers — especially for families — aren’t meeting it.
What we’re watching:
Open enrollment is coming, and people with ACA coverage aren’t the only ones facing premium increases.
Health benefit costs are expected to increase 6.5% per employee in 2026, according to Mercer. Many employers are planning to limit premium increases by raising out-of-pocket costs for employees.
On average, ACA marketplace plans are raising premiums about 20% in 2026, according to KFF.
How much of that increase gets passed on to enrollees will depend on whether the enhanced subsidies are extended, but the premium increases are partially due to insurers having accounted for the subsidy expiration.
The bottom line:
Policymakers have two broad options: They can keep fighting over who pays for what, or they can do bigger, systemwide reform.
If you’re waiting for the latter, don’t hold your breath!
The U.S. health industry revolves around a flawed presumption: individuals and families are dependent on the health system to make health decisions on their behalf. It’s as basic as baseball and apple pie in our collective world view.
It’s understandable. Consumers think the system is complex. They believe the science on which diagnostics and therapeutics are based requires specialized training to grasp. They think health insurance is a hedge against unforeseen bills that can wipe them out. And they think everything in healthcare is inexplicably expensive.
This view justifies the majority of capital investments, policy changes and competitive strategies by organizations geared to protecting traditional roles and profits. It justifies guardianship of scope of practice limits controlled by medical societies because patients trust doctors more than others. It justifies pushback by hospitals, insurers and drug companies against pro-price transparency regulations arguing out-of-pocket costs matter more. It justifies mainstream media inattention to the how the health system operates preferring sensationalism (medical errors, price sticker shock, fraud) over more complicated issues. And it justifies large and growing disparities in healthcare workforce compensation ranging from hourly workers who can’t afford their own healthcare to clinicians and executives who enjoy high six figure base compensation and rich benefits awarded by board compensation committees.
It’s a flawed presumption. It’s the unintended consequence of a system designed around sick care for the elderly that working age populations are obliged to fund. Healthcare organizations should pivot because this view is a relic of healthcare’s past. Consider:
Most consumers think the health system is fundamentally flawed because it prioritizes its business interests above their concerns and problems.
Most think technologies—monitoring devices, AI, et al– will enable them to own their medical records, self-diagnose and monitor their health independently.
And most –especially young and middle age consumers—think their healthcare spending should be predictable and prices transparent.
In response, most organizations in healthcare take cautious approaches i.e. “affordability” is opined as a concern but defined explicitly by few if any. “Value” is promised but left to vague, self-serving context and conditions. “Quality” is about affiliations, capabilities and processes for which compliance can be measured but results (outcomes, diagnostic accuracy, efficacy, savings, coverage adequacy, et al) — hardly accessible. And so on.
For starters, the industry must address its prices, costs and affordability in the broader context of household discretionary spending. Healthcare’s insiders are prone to mistaken notions that the household healthcare spend is somehow insulated from outside forces: that’s wrong. Household healthcare expenditures constitute 8.3% of the monthly consumer price index (CPI); housing is 35.4%, food is 13.6% and energy is 6.4%. In the last 12 months, the overall CPI increased 2.9%, healthcare services increased 4.2%, housing increased 3.6%, food increased 3.2% and energy costs increased only 0.2%. In that same period, private industry wages increased 1.0% and government wages increased 1.2%. Household financial pressures are real and pervasive. Thus, healthcare services costs are complicit in mounting household financial anxiety.
The pending loss of marketplace subsidies and escalating insurance premiums means households will be expected to spend more for healthcare. Housing market instability that hits younger and lower-middle income households hardest poses an even larger threat to household financial security and looms large in coming months. Utilization of healthcare products and services in households during economic downturns shrinks some, but discretionary spending for health services—visits, procedures, tests, premiums, OTC et al—shrinks substantially as those bills take a back seat to groceries, fuel, car payments, student loan debt, rent/mortgage payments and utilities in most households.
Healthcare organizations must rethink their orientations to patients, enrollees and users. All must embrace consumer-facing technologies that empower individuals and households to shop for healthcare products and services deliberately. In this regard, some insurers and employers seem more inclined than providers and suppliers, but solutions are not widely available. And incentives to stimulate households to choose “high value” options are illusory. Data show carrots to make prudent choices work some, but sticks seem to stimulate shopping for most preference-sensitive products and services.
The point is this: the U.S. economy is slowing. Inflation is a concern and prices for household goods and necessary services are going up. The U.S. health industry can ill-afford to take a business-as-usual approach to how our prices are set and communicated, consumer debt collection (aka “rev cycle”) is managed and how capital and programmatic priorities are evaluated.
Net Promoter Scores, Top 100 Recognition and Star Ratings matter: how organizations address household financial pressures impacts these directly and quickly. And, as never before, consumer sentiment toward healthcare’s responsiveness to their financial pressures is at an all-time low. It’s the imperative that can’t be neglected.
September 2025 marks a significant shift in U.S. health policy, especially its approach to the public’s health.
On September 9, the Make America Healthy Again (MAHA) Commission issued its first report pursuant to Executive Order 1421 which included 128 recommendations focused on reducing childhood chronic disease prevalence involving nutrition, chemical exposure, “over-medicalization” in pediatric care and more.
On September 19, the newly-appointed CDC Advisory Committee on Immunization Practices (ACIP) issued new guidance on MMRV, Hep B and Covid vaccines for the coming season.
On September 22, the FDA announced label updates for acetaminophen (Tylenol) during pregnancy urging caution. In response, the Blue Cross Blue Shield Association (BCBSA) and America’s Health Insurance Plans (AHIP) said they would not modify their coverage from prior guidance.
On September 26, HHS and the Food and Drug Administration (FDA) announced enforcement actions against misleading DTC prescription drug advertisements aimed at protecting consumers by increasing transparency and accuracy in drug marketing.
All these as Congress faces a federal government shutdown Tuesday where debate centers on the President’s proposed FY2026 budget that cuts CDC funding by 53% compared to FY2024, eliminates over 100 public health programs and elevates readiness risks for outbreaks (e.g., measles) and more. Neither side wants a shutdown. Both see political advantage in staying their courses:
Republicans enjoy strong MAGA support for federal spending cuts.
Democrats enjoy voter majority support for extending ACA subsidies and maintaining health programs like SNAP with eligibility/program improvements.
But neither party is trusted by the majority of voters. The public’s distaste for the political system is palpable. Confidence in Congress is at an all-time low (Gallup), and trust in the Centers for Disease Control has plummeted:
“KFF polls have shown a steady decline in the share of the public saying they trust the CDC to provide reliable information about vaccines and other topics, from a high of 85% at the onset of the COVID-19 pandemic to 57% in our latest poll in July. This drop was largely driven by Republicans, among whom the share trusting the CDC dropped from 90% in March 2020 to 40% in September 2023 before rebounding somewhat following President Trump’s 2024 election victory and Kennedy’s appointment as HHS Secretary. While trust among Democrats remained high throughout Joe Biden’s presidency, it began to decline in President Trump’s second term just as Republicans showed signs of increasing trust. As of July, Democrats remained more trusting of the CDC than Republicans, but it’s unclear how recent events might affect trust among partisans going forward.”
In June 2024, Jonathan Samet, Colorado School of Public Health) and Ross C. Brownson (Washington University) offered this view:
“Public health system” is an optimistic misnomer in the United States, as it is used in reference to a fragmented and loosely connected set of entities. Moreover, the public health system, which is itself not readily delimited, is part of a system of systems that encompasses at least governmental public health; community-based organizations; the health care sector; and the education, training, and research of the academic public health and medical enterprises. The organization, policies, and politics of public health in the United States present opportunities and challenges. In the current decentralized model of public health, governance and are distributed across more than3,300 state and local health departments. “
My take:
Public health is a vital part of the U.S. health system but a stepchild to its major players. In reality, the U.S. operates a dual system: one that serves those with insurance (public and private) and another for those without. Public health programs like SNAP, HeadStart, Federally Qualified Health Centers et. al., serve lower income and under-insured populations and integrate with local delivery systems emergency services and during mass-events like pandemics, mass-casualties and disease outbreaks. Funding for public health programs is 2-5% of total health spending shared between local, state and federal governments.
Studies show food, housing and income insecurity—areas targeted by public health– correlate to chronic disease prevalence and health costs. Unlike most developed systems of the world which operate at a lower cost and produce better population-health outcomes, our system perpetuates a structural divide between healthcare and public health. Integrating the two is a necessary strategy for system transformation, but a difficult task given entrenched animosity toward “the system” held by public health leaders and funding pressures. The bridge between public health and the healthcare delivery systems is a two-lane road with lots of potholes at the federal level, and sometimes better in local communities. But funding seems to be an afterthought unless local communities deem it vital.
Public health is an opportunity for industry leaders to demonstrate pursuit of the greater good. Most public health programs are under-funded and dependent on a patchwork of local, state and federal appropriations (sometimes augmented by philanthropy) to keep their doors open. A particular opportunity exists for not-for-profit hospitals and health systems who enjoy tax exemptions to pursue integration as the core community benefits strategy, offering community leaders a sensible basis for eliminating duplicative services, expanding preventive health services and reducing demand for unnecessary hospitalizations resulted from uncoordinated care.
As the federal shutdown is addressed this week in DC, public health officials will be watching closely. As noted on the American’s Public Health Association website (www.apha.org) “The health care industry treats people who are sick, while public health aims to prevent people from getting sick or injured in the first place. Public health also focuses on entire populations, while health care focuses on individual patients.” Both are necessary but responsibility and funding for the public’s health seems in limbo.
The Trump administration’s rollback of a policy that prohibited immigration enforcement in hospitals is sparking fear and confusion in exam rooms and emergency departments amid a surge in ICE arrests.
Why it matters:
Health care workers say stepped-up enforcement is interfering with care in some instances, and lawyers say it has created enough privacy concerns that some are erasing whiteboards on patient floors and concealing medical records.
Many hospitals don’t have clear protocols, Sandy Reding, president of the California Nurses Association and vice president for National Nurses United told Axios.
That’s put nurses and other health workers in situations in which they have to confront ICE agents carrying warrants in unauthorized areas.
State of play:
A Homeland Security Department directive in January rescinded a Biden administration policy that designated hospitals, schools and churches “sensitive locations” that were off limits to immigration enforcement.
That had the effect of giving Immigration Customs and Enforcement more leeway to detain individuals in hospitals. They are also able to closely monitor people in their custody who are brought in for medical care.
Health systems have been seeking legal advice and stepping up training for employees about what’s permissible in public and private spaces.
“The judicial warrant needs to be specific as to the place and who you’re looking for. It’s not going to say you can just walk into the ICU and check everybody,” Douglas Grimm, head of ArentFox Schiff’s national health care practice and a former hospital administrator, told Axios.
Zoom in:
The legal gray areas were driven home by physicians at a Los Angeles hospital who told LAist that ICE personnel interfered with the care of a detainee. Medical personnel were not able to call the patient’s family, even to find out health history, and agents refused to leave during confidential medical conversations.
Adventist Health White Memorial, in a statement, said it provides the same level of care to patients who come in while in government custody. “Our guidelines for caring for patients who are in custody are based on legal requirements. Our primary goal is to ensure the health and safety of our patients, staff and visitors,” the hospital operator said.
Elsewhere, a UCLA emergency nurse said she was blocked from assessing a screaming patient by an ICE agent,the Guardian reported.
And a Chicago alderwoman was arrested by ICE agents while checking on detainee at hospital in Humboldt Park,CBS reported.
Between the lines:
Distinguishing which areas are public and which are private is the first order of business, said Maria Kallmeyer of Quarles & Brady. So is laying out a protocol, including a phone tree with whom to call if ICE agents arrive, for front desk receptionists.
Staff are generally told to inform ICE that they don’t have the authority to grant access and should keep them in the lobby until they are able to reach a supervisor, she said.
Agents can access private areas like patient rooms if they have a judicial warrant or if they brought the patient in for care while in ICE custody.
In such scenarios, Grimm said, he advises health facilities to have a plan for wiping whiteboards and ensuring that all medical records on paper or on screens are put away.
Grimm noted past instances in which one officer enters a patient’s room while a second wanders the halls. In those scenarios, it’s up to the nurse manager or compliance manager to orally point out the officer is not authorized to be anywhere but with the specific patient.
“If the officer keeps walking, you have to take the next step, which is just try and record that. But don’t try and impede their progress,” Grimm said.
The other side:
ICE did not respond to requests for comment from Axios.
A spokeswoman previously told LAist the agency “is not denying any illegal alien access to proper medical care or medications” and that it’s “longstanding practice to provide comprehensive medical care from the moment an alien enters ICE custody.”
Yes, but:
Reading of the California Nurses Association said she received an Instagram video from some of her union members this summer showing ICE agents with large guns sitting behind a hospital reception desk. She learned they were there because they had brought a patient in custody to the facility.
It was intimidating for visitors and staff alike, and also created a clear potential privacy violation for any patient entering and being asked to provide personal information as they enter the building, she said.
“The nurses couldn’t do their work unencumbered because they were worried about the ICE agents,” she said. “There was one [agent] that was found in another unit which was off limits. They had to ask that person to leave because they weren’t supposed to be in patient care areas. So it became very clear that we need some rules.”
California Gov. Gavin Newsom (D) recently signed into law a requirement that hospitals have protocols prohibiting health providers from giving immigration authorities access to non-public areas unless there’s a warrant or court order. It also expanded the definition of protected “medical information” to immigration status.
It’s an important step toward setting some ground rules, but certain health facilities are still seeing dramatic drops in caseloads as patients forgo care.
“It is creating an atmosphere of fear,” Céline Gounder, clinical professor at NYU, told CBS Mornings about her experience in New York. “My colleagues and I have had numerous patients tell us that they hesitated or waited too long to come in for health care.”
Medicare Advantage Majority and Better Medicare Alliance are flooding the zone with attacks against bipartisan legislation aimed at curbing health insurers’ “upcoding” maneuver.
HEALTH CARE un-covered readers were the first to tip me off to television attack ads against the bipartisan No UPCODE Act, sponsored by Senators Bill Cassidy (R-LA) and Jeff Merkley (D-OR). The ads in question, airing in the Washington D.C. media market, were paid for byMedicare Advantage Majority (MAM), which bills itself as a patient and provider coalition but has all the markings of a front group funded by the nation’s largest health insurers.
After a quick search through MAM’s YouTube channel, I think I found the ad I was tipped about. Titled “Voices,” the video features six seniors fawning over their Medicare Advantage plans – and it ends with a desperate plea to “oppose the No UPCODE Act” and “protect Medicare Advantage.”
MAM appears to have been propped up fairly recently – with their earliest ad (that I can find) from October 2024. All of their ads support Medicare Advantage. Some appear nonpartisan, while others are more overtly political, like the ad “Biden’s Playbook.” Here is a transcription of that ad:
“President Trump kept his promise to protect Medicare benefits for millions of American seniors. But now some in Congress want to take a page out of Joe Biden’s playbook and cut Medicare. These cuts threaten primary and preventative care that help keep millions of seniors healthy while also raising costs.
It’s a betrayal. It’s why people don’t trust Washington. Don’t let the politicians cut Medicare. Tell Congress to stand with President Trump and protect America’s seniors.”
None of MAM’s ads mention the expensive hidden fees, narrow networks of doctors and life-threatening prior-authorization hurdles often associated with private Medicare Advantage plans. Nor does it even hint at why Sen. Cassidy, a doctor and senior Republican leader and committee chair, introduced the No UPCODE Act in the first place: to reduce the tens of billions of dollars in overpayments to Medicare Advantage insurers and keep the Medicare Trust Fund solvent for years longer. Those overpayments – at least $84 billion this yearalone – is a leading reason why the Medicare Trust Fund is being depleted.
But Medicare Advantage Majority is not the only insurance industry front group flooding the zone.
I kid you not, while I was writing this very article I got a text from a different Big Insurance-funded group fear-mongering the same “cuts” to Medicare Advantage. As I’m typing away on my laptop, my phone dings… The first words in the text read: “ATTENTION NEEDED:”. The message had all the hallmarks of a cookie-cutter political blast that was cooked up by some DNC-alum or K Street PR strategist.
When I followed the prompt and clicked on the link, it took me to one of the industry’s most trusted hands in the Medicare Advantage fight, the Better Medicare Alliance (BMA) – one of my former colleagues’ most essential propaganda shops these days.
BMA is a slickly branded PR and lobbying shop that presents itself as a coalition of “advocates” working to protect seniors’ care, but it’s heavily funded by private insurers in the MA business who reap billions in those overpayments from taxpayers each year. BMA’s board has been stacked with Humana and UnitedHealth representatives and allies tied to medical schools like Emory and Meharry Medical College. For years, they’ve spent millions lobbying and propagating to protect MA insurers’ profits. This includes rallying against the No UPCODE Act since July; opposing CMS’ risk adjustment model in 2024 (which should help reduce some of the overpayments); and objecting vigorously to any Medicare Advantage plan payment reductions, year in and year out.
In short, BMA and MAM are both 501(c)(4) “social welfare” nonprofits used by Big Insurance as part policy shop, part lobbying arm, and part attack dog. Together, they make up a strategy for insurers that want to keep their MA cash cows gorging on your money.
None of this is new, though. It’s the same PR crap I used to fling back in the old days when I was an industry executive and had to peddle Medicare Advantage plans. (Its deliciously ironic that MAM had the audacity to use the term “playbook” in one of its ads. In my old job I used to help write the industry’s playbook.) Each fall we’d work with AHIP (formerly America’s Health Insurance Plans) to host “Granny Fly-Ins” in Washington, D.C. Industry money (actually, taxpayer money) would cover the fly-in expenses, and the seniors would trot around Capitol Hill to extol the supposed benefits of Medicare Advantage plans and dare lawmakers to tamper with it. And that tactic worked for years. Of course, this was all before texting existed.
The squeal tells the story
For years, MA insurers have exaggerated how sick their patients are on paper (making them seem sicker so they can get a bigger taxpayer-funded handout). Hence the term “upcoding.” And the sick joke is – unfortunately – the same insurers who profit most from this upcoding scheme are using their taxpayer loot to stop this bill from gaining traction.
I think the industry’s squeal tells the story.
Let’s be real: Big Insurance wouldn’t be running this PR and lobbying blitz unless this legislation really would do some major good for Americans. The No UPCODE Act is a strong, bipartisan step toward ending wasteful, fraudulent practices that funnel taxpayer money into the pockets of industry executives and Wall Street shareholders. This one bill could save taxpayers as much as $124 billion over the next decade and keep the Medicare Trust Fund solvent for years longer.
You can be sure, though, that people on Capitol Hill and the administration already know ads like these are industry-funded. They see them for what they really are — part of a well-financed intimidation campaign. A game. Running ads like these is the industry’s way of flaunting its power and a reminder that big money can and will be spent in Congressional campaigns — and possibly (again) even during the Super Bowl — to mislead voters.
So remember, when you see an ad or get a text from an organization like MAM or BMA – know that these organizations have a lot to lose if legislation like the No UPCODE Act becomes law. And spending your premium and tax dollars on text blasts and TV spots are well worth the investment – to them, anyway.
Recent analysis of spending data from five states with health care cost growth targets—Connecticut, Delaware, Massachusetts, Oregon, and Rhode Island—revealed an unexpected trend in 2023: Spending grew sharply in service categories that have historically increased more slowly. The most notable increase was in non-claims payments—payments made through financial arrangements between providers and health insurers that are not tied to individual claims. These payments rose by an average of 40.4 percent across the five states, driven largely by increases in Medicare Advantage non-claims spending.
Increases in non-claims payments are often seen as a positive sign. They suggest a shift away from fee-for-service payments toward alternative payment methods (APMs)—value-based payment models that incentivize care coordination, efficiency, and a focus on outcomes. However, it’s unclear what is included in these non-claims payments. A closer examination of this issue revealed a less visible but important concern: the role of insurer-provider vertical integration in potentially weakening the effectiveness of Medical Loss Ratio (MLR) requirements for insurers.
MLR Requirements
Medical Loss Ratio is a measure of the percentage of premium dollars that a health insurer spends on medical care and quality improvement activities—as opposed to administration, marketing, or profit. Since 2011, the Affordable Care Act has required insurers to maintain an MLR of at least 80 percent in the individual and small group markets, and 85 percent in the large group market. That is, for every dollar spent by an insurer, 80 cents or 85 cents—depending on the market—must go toward actual care and improvement. Insurers that don’t meet these required thresholds must pay a rebate to consumers for the premium dollars that were not spent on health care, less taxes, fees, and adjustments. In 2014, the Centers for Medicare and Medicaid Services instituted a requirement for Medicare Advantage and Part D plans; they must maintain an MLR of at least 85 percent or rebate any excess revenues to the federal government.
These MLR requirements aim to ensure that the majority of premium revenue is used to deliver or improve care. However, a significant loophole allows insurers that have “vertically integrated” with providers to inflate reported medical spending. This reduces their rebate liability while increasing held profits. Since the MLR provisions took effect in 2012, an estimated $13 billion in rebates have been issued—highlighting the strong incentive insurers have to minimize these payouts.
The MLR Loophole
A company is vertically integrated when it owns or controls more than one entity in the supply chain. For insurers, this means acquiring physician practices, outpatient clinics, and even entire health systems. As a result of this vertical integration, payments to these affiliated providers count as medical spending when calculating an MLR for the insurer. However, there is no MLR requirement for providers. This creates an incentive for the insurer to direct spending to these affiliated provider entities, which may charge inflated prices, allowing the insurer to increase its reported MLR without delivering more care or improving quality.
Consider a hypothetical scenario: Company X owns Health Insurer A and Clinic Y. There’s another health insurer, B, in the market, but it is not owned by Company X. It costs Clinic Y $300 to deliver a particular service.
When a patient covered by Health Insurer B receives this service at Clinic Y, Insurer B pays the clinic $300 for delivering the service. But when another patient covered instead by Health Insurer A receives the same particular service at Clinic Y, Health insurer A pays the clinic a lot more: $500. The full $500 is counted as medical spending in Health Insurer A’s MLR calculation, even though the additional $200 didn’t buy any more services or any better care. It just represents internal profit for the vertically integrated entity, Company X, that is captured on the provider side of the business, and not true care delivery (see exhibit 1 below).
Exhibit 1: Incentives for vertically integrated insurers to direct spending to these affiliated provider entities
Source: Authors’ analysis.
The structure of APMs exacerbates this problem by making it easier to mask price increases. In fee-for-service systems, a price increase shows up directly. However, in APM payments that are per capitation or per episode, providers receive lump-sum payments for a group of services or a population. There is no service breakdown for these APMs. These lump-sum payments can facilitate investment in population health improvement, but if vertically integrated entities are exploiting the MLR loophole by increasing internal payment rates, the use of APMs make such profit maximization easier to conceal.
This dynamic reveals a limitation of the MLR rules. When the insurer is also the provider, there is less transparency into how health care dollars are actually allocated. The vertically integrated insurer and provider entity can also artificially inflate prices for medical services, worsening the nation’s health care affordability problem.
Potential Impact
Currently, there is no standardized way to assess the extent to which insurers that own or are otherwise affiliated with clinics and health systems are taking advantage of this loophole, or how much the practice contributes to high health care prices. However, with the growing trend toward insurer-provider vertical integration, the potential cost implications are significant.
Insurers That Own Providers Capture A Significant Share Of Commercial And Medicare Advantage Enrollment
In the large-group commercial market, the three largest insurers—Kaiser Permanente, UnitedHealthcare, and Elevance—held a combined 39 percent of the national market share in 2023. In the Medicare Advantage market, the top five plans—UnitedHealthcare, Humana, CVS Health/Aetna, Elevance, and Centene—accounted for 68 percent of total enrollment in 2023.All of these insurers operate within larger parent companies that own or control a range of health care provider entities.
For example, UnitedHealth Group, UnitedHealthcare’s parent company, also owns OptumHealth, which employs or manages more than 90,000 physicians across the country. The recently released Sunlight Report on UnitedHealth Group shows that it grew more than 10 times its size over the past decade, and the company now consists of nearly 3,000 distinct legal entities.
UnitedHealth Group is not the only insurer pursuing this strategy of vertical integration. Elevance Health (formerly Anthem, Inc.) owns Carelon, a health services provider that claims to serve one in three people in the US. CVS Health encompasses retail pharmacy storefronts (CVS Pharmacy), a pharmacy benefits manager (CVS Caremark), a health insurer (Aetna), in-store clinics (MinuteClinic), and provider groups such as Oak Street Health and Signify Health. This high level of consolidation gives these companies significant control over how care is delivered, priced, and reported.
Transactions Between Insurers And Their Affiliated Provider Entities Are Substantial And Growing
A 2022 analysis by the Brookings Institution suggests that in Medicare Advantage plans, internal transactions between affiliated insurers and providers can account for spending that ranges from about 20 percent to as much as 71 percent of the total. Cost growth target states’ reports on 2023 spending growth appear to confirm these trends within the Medicare Advantage market. Upon examination of the drivers behind the sharp increases in non-claims payments, a clear pattern emerged. In Connecticut, UnitedHealthcare launched a program that paid its affiliated provider group, which was then called OptumCare Network, a fixed percentage of Medicare Advantage premiums to cover care and care coordination. Oregon reported that the rise in Medicare Advantage non-claims payments was largely due to UnitedHealthcare shifting a significant share of its claims payments into non-claims spending through Optum.
These trends are not limited to Medicare Advantage, however. UnitedHealth and other major insurers such as Elevance and Aetna operate across multiple markets, raising concerns about similar dynamics in the commercial market. A recent analysis by Seth Glickman, a physician and former insurance executive, shows that in the past five years, UnitedHealth Group’s reported corporate “eliminations”—intercompany revenues reported in its consolidated financial statements that represent all books of business—more than doubled, increasing from $58.5 billion to $136.4 billion. At the same time, the share of Optum’s revenue derived from UnitedHealthcare, as opposed to unaffiliated entities, increased by nearly 50 percent.
Prices Of Health Care Services From Vertically Integrated Insurers And Providers Are Higher Than Prevailing Market Prices
Growing evidence also suggests that insurers are paying more for services provided through their affiliated entities than for those delivered by non-affiliated entities. A STAT News investigation revealed that UnitedHealth Group reimburses its own physician groups considerably more than other providers in the same markets for the same set of services. Similarly, a Wall Street Journal investigation showed how certain insurers and pharmacy benefit managers are generating substantial profits by overcharging for generic drugs within their own networks. The analysis found that for a selection of specialty generic drugs, Cigna and CVS’s prices were at least 24 times higher, on average, than the drug manufacturers’ prices.
Stronger Oversight Is Needed
The potential impact of these trends is so significant that policy makers are beginning to take notice. In 2023, Senators Elizabeth Warren (D-MA) and Mike Braun (R-IN) requested that the Department of Health and Human Services Office of Inspector General evaluate the extent to which vertical integration is increasing costs and allowing insurers to bypass federal MLR requirements. Earlier this year, Representatives Lloyd Doggett (D-TX) and Greg Murphy (R-NC) submitted a bipartisan request to the Government Accountability Office—Congress’s independent, nonpartisan oversight agency—urging an investigation into the same issue in Medicare Advantage. It is unclear whether these investigations have been initiated.
Some states—understanding the role that market consolidation plays in driving up health care prices—have made efforts to strengthen oversight. In 2024, 22 states passed laws related to health system consolidation and competition. However, historically, these efforts have largely focused on promoting competition, preventing monopolies, and limiting dominant providers’ ability to charge prices well above competitive levels. Little attention has been given to the MLR loophole and the ability of vertically integrated insurers to report profits as medical care.
As states pursue policies to slow cost growth, they must apply greater scrutiny of vertical integration arrangements—especially around internal financial transactions between affiliated entities. States should require insurers to report detailed information on transactions between related parties, including non-claims-based APMs to affiliated providers and the pricing methodology used to develop these APMs. This reporting could be integrated into states’ premium rate review processes, allowing regulators to assess whether such transactions reflect actual medical costs. States could then modify or deny rate increases where evidence points to gaming of MLR rules.
Policy makers should also reassess whether, given these market dynamics, current regulatory tools such as the MLR are adequate. Addressing these issues will be essential for maintaining the integrity of cost containment efforts and ensuring that health care dollars are spent on delivering meaningful care.
Hospitals in rural and underserved areas could lose out on billions of dollars in federal funding if the government shutdown drags on.
Why it matters:
Many hospitals already run on tight margins and are bracing for fallout from Medicaid cuts and other changes in the One Big Beautiful Bill Act.
The big picture:
The immediate concern is health policies that expired when government funding lapsed at midnight Tuesday. Health providers and their lobbyists expect Congress will make providers whole in an eventual funding deal and reimburse claims made during the shutdown.
But that’s not a given. And uncertainty about how long the shutdown will go on is leaving some of the most financially vulnerable hospitals in limbo.
“There’s just that underlying fear of, oh my gosh, what if they can’t come together on any agreement to open the government again, and we all get looped into it,” said Kelly Lavin Delmore, health policy adviser and chair of government relations at Hooper Lundy Bookman.
State of play:
Safety-net hospitals face an $8 billion cut to Medicaid add-on payments in the absence of a government funding package.
The cuts to so-called disproportionate share hospital payments originate from the Affordable Care Act.
Congress has postponed the pay reductions more than a dozen times, but the most recent delay expired on Tuesday and Congress hasn’t signaled if or when it will step in.
The add-on payments are made quarterly, so hospitals may not feel immediate effects, even if Congress doesn’t further delay the cuts, according to the American Hospital Association. But state Medicaid agencies could let the cuts take place if they think lawmakers’ standoff will continue indeterminately, per AHA.
The uncertainty “really impacts that predictability and reliability as it relates to funding,” said Leonard Marquez, senior director of government relations and legislative advocacy at the Association of American Medical Colleges.
If the cuts do take effect, it would significantly hamper hospitals’ ability to care for their communities, Beth Feldpush, senior vice president of advocacy and policy at America’s Essential Hospitals, told Axios in a statement.
Additionally, two long-running programs that give pay bumps to rural hospitals expired on Wednesday.
One program adjusts Medicare payment upward for rural hospitals that discharge relatively few patients.
The other gives increased reimbursement rates to rural hospitals that have at least 60% of patients on Medicare.
They were designed to keep care available in communities that might otherwise not be able to support a hospital.
Both programs have expired in the past, only to be brought back to life with claims paid retroactively.
Zoom out:
Hospital industry groups have also been urging Congress to extend enhanced Affordable Care Act tax credits, which have become a flashpoint in the shutdown fight. Democrat lawmakers have so far refused to pass GOP-led funding proposals that don’t include a full extension of the subsidies.
What they’re saying:
AHA is urging Congress to find a bipartisan solution and reopen the government, a spokesperson told Axios.
“Patient care doesn’t go away with the loss of coverage and the loss of funding,” said Lisa Smith, vice president of advocacy and public policy for the Catholic Health Association.
“I just don’t know how long that’s going to be sustainable for our facilities that are really already operating on the margins.”
HENRY KOTULA 