As healthcare costs continue to rise and margins tighten across the industry, providers are increasingly looking beyond traditional reimbursement models to gain greater control over financial performance and patient outcomes.
What was once considered an exception to the payer-dominated insurance model is now being selectively revisited in certain markets as providers reassess how they manage risk, reimbursement, and care delivery.1 A strategy with renewed evaluation in specific circumstances is the formation of provider-owned health plans, where health systems assume responsibility not only for care delivery but also for insurance risk.
Provider-owned health plans, often referred to as “provider-sponsored” or “provider-led” plans, allow health systems to participate in insurance functions (e.g., premium, claims risk, and benefit design) rather than relying solely on reimbursement from third-party payers.1
While provider-sponsored plans are not new, recent market dynamics, including the expansion of value-based care, growth in Medicaid managed care, and pressure on commercial margins, are reshaping the structure of these models and where they are gaining traction. For payers and managed care organizations, the evolution of provider-owned health plans presents both competitive disruption and opportunities for collaboration.
At the same time, many provider-led plans have been closed, sold, or unwound as health systems reevaluate capital requirements, regulatory burden, and whether insurance operations align with core business priorities.2 As a result, provider-owned plans are not expanding uniformly but persisting primarily where market structure, scale, and Medicaid dynamics support long-term viability.2
Take a closer look at emerging business models, risk-sharing strategies, and key considerations for payers.
Why Some Provider-Owned Health Plans Continue to Operate
Provider-owned health plans are often formed to align incentives more tightly between care delivery and financing. By owning the insurance function, providers can directly benefit from improved care coordination, reduced unnecessary utilization, and stronger population health management.
In markets where provider-owned plans continue to operate or are being reconsidered, common factors include:
- Continued pressure on fee-for-service margins
- Expansion of value-based reimbursement arrangements
- Greater provider comfort with actuarial and financial risk
- Medicaid and Medicare Advantage growth creating scale opportunities
This shift toward alternative models is not limited to providers alone. Among employers, 44% of large organizations (50,000+ employees) already use direct contracting arrangements, compared to just 20% of small employers, highlighting how scale enables more sophisticated approaches to managing healthcare cost and risk.3 As large purchasers seek greater control over care delivery, pricing, and outcomes, providers are adopting similar strategies, rethinking their role in insurance markets rather than remaining solely downstream recipients of payer decisions.
Rather than operating as purely clinical organizations, health systems are increasingly positioning themselves as integrated healthcare enterprises, blending payer and provider functions to better manage total cost of care.
Emerging Business Models in Provider-Sponsored Plans
Not all provider-owned health plans look the same. Health systems are adopting various ownership and operating structures, depending on capital availability, risk tolerance, and market conditions.
Fully Integrated Provider-Payer Models
In this structure, the provider owns and operates the health plan directly, assuming full insurance risk. These models offer the greatest degree of control but require significant infrastructure, including actuarial capabilities, regulatory compliance, and claims administration.
Though capital-intensive, fully integrated models allow providers to tightly align benefit design, network strategy, and clinical pathways, which often results in stronger cost management over time. However, early performance volatility, particularly in medical loss ratios, is common for organizations that underestimate the operational complexity of insurance risk.
In addition to analytics and care management, these models require disciplined capital planning and regulatory readiness, including licensure, solvency/reserve expectations, and state-specific oversight.
Joint Ventures & Strategic Partnerships
Some providers enter the insurance market through joint ventures with established payers or managed care organizations. These arrangements allow providers to share risk while leveraging an existing payer’s administrative capabilities.
Joint ventures can lower barriers to entry, particularly for mid-sized systems, while still enabling providers to influence care management strategies and population health initiatives. For payers, these partnerships can serve as a way to preserve relevance while participating in provider-led growth rather than competing against it outright.
Narrow Network & Plan Sponsorship Models
Other provider-owned health plans operate with narrower networks focused primarily on the sponsoring health system. These models can be effective in markets where the provider has strong brand recognition and a loyal patient base.
However, narrow networks require careful design to ensure access adequacy, regulatory compliance, and member satisfaction, particularly in Medicaid and ACA markets. Misalignment between network design and member expectations can quickly erode plan performance and retention.
Risk-Sharing Strategies: Balancing Opportunity & Exposure
Assuming insurance risk introduces new challenges for providers accustomed to operating primarily under reimbursement contracts. Successful provider-owned health plans tend to invest early in risk management capabilities, including:
- Advanced data analytics and actuarial modeling
- Care management programs targeting high-risk populations
- Provider alignment around utilization management and quality metrics
- Stop-loss arrangements to mitigate catastrophic risk
Rather than treating risk as a purely financial function, leading provider-sponsored plans integrate clinical leadership into risk strategy, ensuring care delivery decisions are informed by cost and quality data. For example, plans that fail to align utilization management protocols with frontline clinicians often experience avoidable cost escalation and inconsistent quality outcomes in early years.
Medicaid State-Specific Dynamics
Medicaid is an entry point for provider-owned health plans in certain states, though sustainability varies widely based on program design, competition, and scale. Medicaid’s scale, combined with state-level flexibility in managed care design, can create a platform for provider-led entrants. Still, it also heightens the importance of meeting access, quality, and oversight expectations that differ by state.
Texas
Texas operates a large and diverse Medicaid managed care market, with multiple programs serving different populations. Provider-sponsored plans in Texas often focus on regional markets, where health systems have strong relationships with local communities and provider networks.
Opportunities exist for provider-owned health plans to enhance care coordination for complex populations; however, intense competition and the need for scale are crucial for sustainability.
Arizona
Arizona’s Medicaid program has long emphasized managed care, making it a more mature environment for provider-sponsored plans. Health systems entering this market must demonstrate operational sophistication and the ability to manage risk effectively.
Provider-owned health plans in Arizona often benefit from closer collaboration with state agencies and a clearer framework for value-based care arrangements.
California
California’s Medicaid environment is complex, with county-level variation and a strong emphasis on managed care. Provider-owned health plans often operate in highly competitive markets and must navigate intricate regulatory requirements while managing complex Medicaid programs in California.
While barriers to entry can be higher, California also offers opportunities for innovative models that focus on integrated care, behavioral health, and the social determinants of health.
States with intense competition, limited rates, or insufficient enrollment scale have also seen provider-sponsored plans exit the market, reinforcing the importance of market-specific viability.
Market Disruption & Competitive Implications for Payers
The rise of provider-owned health plans challenges traditional payer roles in several ways. Providers that control both care delivery and insurance functions may compete directly for enrollment, particularly in Medicaid and Medicare Advantage markets.
These models create opportunities for collaboration. Established payers can partner with providers through joint ventures, administrative services agreements, or risk-sharing arrangements that leverage each party’s strengths.
For managed care organizations, the key strategic question is not whether provider-owned health plans will grow, but how to position effectively as competitors, partners, or enablers in this evolving landscape.
Additional implications payers should evaluate include:
- Network strategy pressure as provider-led plans use benefit design, steerage, and care pathways to reduce leakage and reinforce in-network utilization
- Risk pool dynamics in Medicaid and Medicare Advantage, where integrated care management capabilities may become a differentiator alongside price and network breadth
- “Coopetition” opportunities, as some provider-led entrants pursue administrative services partnerships or shared infrastructure rather than building fully independent payer operations
What Payers Should Consider Going Forward
As provider-sponsored plans continue to evolve, payers should assess several strategic considerations:
- Where provider-owned plans are gaining traction geographically
- Which provider systems have the scale and sophistication to manage risk
- Opportunities to support providers through infrastructure or administrative services
- Regulatory and compliance implications across different state Medicaid programs
Understanding these dynamics early can help payers anticipate disruption and identify partnership opportunities before market positions become entrenched.
Looking Ahead
Provider-owned health plans represent an ongoing experiment in how providers and payers allocate risk, rather than a one-size-fits-all model for the industry. As more health systems maintain or selectively re-enter the insurance market, particularly within Medicaid, traditional payers face new competitive pressures, evolving partnership opportunities, and increased operational complexity.
These models raise important questions around risk management, care coordination, regulatory compliance, and market positioning. Health plans must proactively assess where provider-sponsored plans are gaining traction and how those models intersect with state-specific Medicaid dynamics in markets like Texas, Arizona, and California.
For payers, the most resilient strategies will combine competitive preparedness with selective partnerships, especially in markets where provider systems have the scale to manage risk.
Clearlink Partners supports health plans in navigating these changes by helping organizations evaluate market impact, strengthen operational readiness, and develop strategies to compete or collaborate as provider-owned health plans continue to change.
Contact us to assess your exposure, refine your Medicaid and managed care strategy, and position your organization for success as provider-sponsored models reshape the market.
Sources:
1. The Provider-Sponsored & Provider-Owned Health Plan Market: Opportunities & Challenges, A&M
2. Provider-Owned Health Plans: Strategic Questions for Leaders, Oliver Wyman
3. Employers Turn to Direct Contracting as Hospital Costs Continue to Rise, HFMA