Editor’s Note: This story originally appeared on KFF Health News.
Ever since Larry Wilkewitz retired more than 20 years ago from a wood products company, he’s had a commercial Medicare Advantage plan from the insurer Humana.
But two years ago, he heard about Peak Health, a new Advantage plan started by the West Virginia University Health System, where his doctors practice. It was cheaper and offered more personal attention, plus extras such as an allowance for over-the-counter pharmacy items. Those benefits are more important than ever, he said, as he’s treated for cancer.
“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’s sticking with Peak Health. Members of Medicare Advantage plans, a privately run alternative to the government’s Medicare program, can change plans through the end of March.
Now entering its third year, Peak Health has tripled its enrollment since last year, to “north of 10,000,” said Amos Ross, its president. It expanded from 20 counties to 49, he said, and moved into parts of western Pennsylvania for the first time.
Although hospital-owned plans are only a sliver of the Medicare Advantage market, their enrollment continues to grow, reflecting the overall increase in Advantage members. Of the 62.8 million Medicare beneficiaries eligible to join Advantage plans, 54% signed up last year, according to KFF, the health information nonprofit that includes KFF Health News.
While the number of Advantage plans owned by hospital systems is relatively stable, Mass General Brigham in Boston and others are expanding their service areas and types of plan offerings.
Health systems have dabbled in the insurance business for years, but it’s not for everyone. MedStar Health, serving the greater Washington, D.C., area, said it closed its Medicare Advantage plan at the end of 2018, citing financial losses.
“It’s a ton of work,” said Ross, who spent more than a decade in the commercial health insurance industry.
Like any other health insurer, hospitals entering the business need a back-office infrastructure to enroll patients, sign up providers, fill prescriptions, process claims, hire staff, and — most importantly — assure state regulators they have a reserve of money to pay claims.
Once they get a state insurance license, they need approval from the federal Centers for Medicare & Medicaid Services to sell Medicare Advantage policies. Some systems affiliate with or create an insurance subsidiary, and others do most of the job themselves.
Kaiser Permanente, the nation’s largest nonprofit health system by revenue, started an experimental Medicare plan in 1981 and now has nearly 2 million people enrolled in dozens of Advantage plans in eight states and the District of Columbia. The Justice Department announced Jan. 14 that KP had agreed to pay $556 million to settle accusations that its Advantage plans fraudulently billed the government for about $1 billion over a nine-year period.
Last year, UCLA Health introduced two Medicare Advantage plans in Los Angeles County, the most populous county in the United States. Other new hospital-owned plans have cropped up in less profitable rural areas.
“These are communities that have been very hard for insurers to move into,” said Molly Smith, group vice president for public policy at the American Hospital Association.
But Advantage plans offered by hospitals have a familiar, trusted name. They don’t have to move into town, because their owners — the hospitals — never left.
Bad Breakups
Medicare Advantage plans usually restrict their members to a network of doctors, hospitals, and other clinicians that have contracts with the plans to serve them. But if hospitals and plans can’t agree to renew those contracts, or when disputes flare up — often spurred by payment delays, denials, or burdensome prior authorization rules — the health care providers can drop out.
These breakups, plus planned terminations and service area cuts, forced more than 3.7 million Medicare Advantage enrollees to make a tough choice last year: find new insurance for 2026 that their doctors accept or, if possible, keep their plan but find new doctors.
About 1 million of these stranded patients had coverage from UnitedHealthcare, the country’s largest health insurer. In a July earnings update for financial analysts, chief financial officer John Rex blamed the company’s retreat on hospitals, where “most encounters are intensifying in services and costing more.”
The turbulence in the commercial insurance market has upset patients as well as their providers. Sometimes contract disputes have been fought out in the open, with anxious patients in the middle receiving warnings from each side blaming the other for the imminent end to coverage.
When Fred Neary, 88, learned his doctors in the Baylor Scott & White Health system in central and northern Texas would be leaving his Medicare Advantage plan, he was afraid the same thing could happen again if he joined a plan from another commercial insurer. Then he discovered that the 53-hospital system had its own Medicare Advantage plan. He enrolled in 2025 and is keeping the plan 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, said hospital systems’ Medicare Advantage plans offer “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 said.
A Health Affairs study that Rich co-authored in July found that enrollment in Advantage plans owned by hospital systems grew faster than traditional Medicare enrollment for the first time in 2023, though not as rapidly as the overall rise in sign-ups for all Advantage plans.
The massive UCLA Health system introduced its two Medicare Advantage plans in Los Angeles County in January 2025, even though patients already had a list of more than 70 Advantage plans to choose from. Before rolling out the plan, the University of California Board of Regents discussed its merits at a November 2024 meeting. The meeting minutes offer rare insight into a conversation that private hospital systems would usually hold behind closed doors.
“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 read, summarizing comments by David Rubin, executive vice president of UC Health.
The minutes also describe comments 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,” the minutes read. “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 remain with UCLA Health.”
Costs to Taxpayers
CMS pays Advantage plans a monthly fixed amount to care for each enrollee based on the member’s health condition and location. In 2024, the federal government paid Advantage plans an estimated $494 billion to care for patients, according to the Medicare Payment Advisory Commission, which monitors the program for Congress.
The commission said this month that it projects insurers in 2026 will be paid 14%, or about $76 billion, more than it would have cost government-run Medicare to care for similar patients.
Many Democratic lawmakers have criticized overpayments to Medicare Advantage insurers, though the program has bipartisan congressional support because of its increasing popularity with Medicare beneficiaries, who are often attracted by dental care and other coverage unavailable through traditional Medicare.
Whenever Congress threatens cuts, insurers claim these generous federal payments are essential to keep Medicare Advantage plans afloat. UCLA Health’s Advantage plans will need at least 15,000 members to be financially sustainable, according to the meeting minutes. 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 who had major surgery with those covered by Medicare Advantage plans owned by their hospital. The latter group had fewer complications, said co-author Thomas Tsai, an associate professor in the Department of Health Policy and Management at the Harvard T.H. Chan School of Public Health.
Smith, of the American Hospital Association, isn’t surprised. When insurers and hospitals are not on opposite sides, she said, care delivery can be smoother. “There’s more flexibility to manage premium dollars to cover services that maybe wouldn’t otherwise be covered,” Smith said.
But Tsai warns seniors that hospital-owned Medicare Advantage plans operate under the same rules as those run by commercial health insurance companies. He said patients should consider whether the extra benefits of Advantage plans “are worth the trade-off of potentially narrow provider networks and more utilization management than they would get from traditional Medicare.”
In Texas, Neary hopes the closer relationship between his doctors and his insurance plan means there’s less of a chance that bills for his medical care will be kicked back.
“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.
KFF Health News is a national newsroom that produces in-depth journalism about health issues and is one of the core operating programs at KFF—an independent source of health policy research, polling, and journalism. Learn more about KFF.
