Dive Brief:
- Nonprofit health system Providence is throwing in the towel on the majority of its health insurance businesses, citing the difficulty of running a regional health plan amid regulatory pressures and rising costs.
- Starting next year, Providence, which covers about 440,000 people in a handful of western states, will no longer offer Medicaid, Affordable Care Act or employer-sponsored plans, the Renton, Washington-based system announced on Wednesday.
- The decision comes as Providence attempts to shore up its financial footing and refocus on delivering care. Still, the company plans to maintain its Medicare Advantage operations through a partnership with a national carrier, according to the release.
Dive Insight:
Providence, one of the largest nonprofit health systems in the U.S., has offered health insurance for decades through its Providence Health Plan and Providence Health Assurance subsidiaries.
But growing challenges in the sector, including burdensome regulatory overhead, skyrocketing medical spending and fierce competition from national carriers, have made that increasingly unsustainable, according to Providence CEO Erik Wexler.
“Changes in the healthcare environment — including state and federal regulation — have made it increasingly difficult for regional, not-for-profit health plans like PHP to thrive,” Wexler wrote in a bulletin to the company’s providers in Oregon shared with Healthcare Dive.
“It has become harder to support both running a health plan and delivering care,” Wexler added. “Meanwhile, the larger insurance companies have consolidated significantly, giving them the size and resources to operate more efficiently. This has left us in an untenable situation.”
Providence is working on finding a buyer for its Medicaid plans, with a final decision expected later this year. Meanwhile, the company plans to stop offering individual and family plans on the ACA exchanges for 2027, and not renew employer group plans as contracts come up for renegotiation, according to the release.
Providence hopes to maintain its MA business through a partnership with a national carrier, which would allow its current members to retain their coverage for 2027. The release didn’t share the name of the company, but said Providence is in the process of finalizing an agreement.
Providence first said it was exploring a sale of its insurance division in March as the nonprofit, which operates 51 hospitals in the western half of the U.S., looks to break an unprofitable streak. Providence hasn’t posted an annual profit in four fiscal years, facing staffing shortages and economic forces like tariffs and inflation driving up spending.
Providence’s health insurance division has also been a drag on its bottom line, losing more than $100 million in 2025, according to financial disclosures.
Though, in the system’s most recent quarter ended March 31, the insurance assets held for sale reported income of almost $35 million, helping boost Providence’s overall gain in the quarter. Providence has pointed to recent momentum as evidence that it’s righting the ship.
A Providence spokesperson did not respond to questions about how much the company expects to bring in from the sales or details on potential buyers. Final proceeds were undetermined as of May 11 when the system posted its most recent financial results.
Yet regional plans, which normally enjoy positive brand equity in their local markets, could be attractive to national carriers looking to nab new members while burnishing their reputations, experts told Healthcare Dive earlier this year.
In April, Baylor Scott & White, another integrated health system, also said it would exit its Medicaid and ACA businesses this year.
Large national carriers have also been affected by the maelstrom of higher spending and flatlining reimbursement hitting government programs. CVS’ Aetna left the ACA exchanges for 2026, while Cigna recently bowed out of both the ACA and MA markets.
