Dive Brief:
- Memorial Hermann has become the latest integrated health system to shrink its insurance business amid financial difficulties.
- Memorial Hermann Health Plan, a subsidiary of the Houston-based hospital operator, plans to start winding down its commercial coverage for employers this year, the company said in a fact sheet posted on its website. If a plan is scheduled to end before the end of 2026, the customer will have the option to renew for one additional year — but the business should be fully terminated by the end of 2027.
- Memorial Hermann said it made the decision after determining its plans would not be able to grow to meet member needs while remaining solvent amid industry-wide headwinds facing insurers.
Dive Insight:
Memorial Hermann is one of the largest nonprofit systems in southeast Texas, operating 14 hospitals in the region and affiliating with another three. The system operated at a loss of $250 million in its most recent fiscal year, amid steep costs from implementing a new Epic electronic health record and reimbursement challenges.
Memorial Hermann’s premium revenue rose to $193.5 million in the 2025 fiscal year, up from $140.5 million in 2024. But costs also crept higher, with the company’s spending on its members’ care and other insurance expenses reaching $163.5 million, up from $125.5 million the year prior.
Memorial Hermann’s health plans have operated at a loss this year, hindering the system’s efforts to boost its earnings, according to credit ratings agency S&P Global Ratings.
Memorial Hermann launched a margin improvement plan earlier this year, which executives said would improve efficiency and deliver greater value over the next two and a half years.
“Future health plan operations are also being evaluated by management,” S&P Global wrote in May.
After that review, Memorial Hermann is now electing to wind down its commercial insurance plans: Memorial Hermann Commercial Health Plan, a health maintenance organization; Memorial Hermann Health Insurance Company, a preferred provider organization; and Memorial Hermann Health Solutions, an administrator for self-insured plans.
“In light of the sustained headwinds facing the health insurance industry, it has become clear it will be difficult for the MH Commercial Health Plans to achieve the scale required to sustainably provide value for enrollees,” the fact sheet reads.
Memorial Hermann will continue offering its Medicare Advantage plan, which covers about 14,000 members as of January, according to CMS data.
Memorial Hermann does not publicly disclose the number of members in its commercial insurance business. However, on its website the company says its health plans cover almost 50,000 members, implying about 36,000 people in its employer plans.
Health systems generally operate health plans as a strategic hedge against declining volumes or insufficient reimbursement in their core care delivery operations, and as a mechanism to nudge more patients into their hospitals and outpatient sites.
However, some are considering winding down the plans amid challenges. Americans — including the generally younger, healthier individuals in job-based plans — are getting sicker, and their care is becoming more expensive to cover as hospitals raise prices and high-cost drugs enter the market. Insurers have raised premiums as a result, though the price hikes aren’t always sufficient to cover higher spending.
A number of integrated health systems have thrown in the towel on most of their offerings this year, including Providence and Baylor Scott & White.
Insurers have particularly been wary about their Affordable Care Act businesses, after the loss of more generous federal subsidies for the plans sent members fleeing from the exchanges.
CVS’ Aetna and Cigna have both bowed out of the ACA exchanges, beginning in 2026 and 2027, respectively. And just in the past two months, Centene announced plans to leave its ACA business in New Hampshire, Elevance said it was exiting the small group exchanges in Ohio, CareSource said it would exit Indiana’s ACA marketplace and Medica said it was discontinuing individual ACA plans in three states.
