Blues Plan Blues
June 18, 2026
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Welcome to TrustWorks On Call, here with your healthcare business and strategy 411 for the week. If you enjoy our work, please consider forwarding it along to a friend and encouraging them to subscribe.
This week, we go Beyond the Whiteboard to spotlight Chris Klomp, the rising star of federal healthcare policy, before Dialing In on a new approach to payer-provider partnerships. But first the news, starting with some blue news for Blue Cross Blue Shield companies.
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Behind the Headlines
Unpacking the forces driving healthcare's biggest stories.
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1. Most Blues plans in the red for 2025.
- Blue Cross Blue Shield (BCBS) carriers collectively posted a -2.4 percent operating margin in 2025, with only seven of 29 publicly reporting BCBS companies earning a positive margin.
- National, for-profit plans are the only insurance segment to have achieved a collective profit in 2025, as non-BCBS regional and national nonprofits also posted net operating losses for the year.
TrustWorks Take: Operating success in today’s health insurance industry depends on scale and diversification, both of which most state-focused Blues plans lack. Philosophically, Blues companies tend to be more conservative, holding onto larger cash reserves and investment portfolios that can offset operating losses, while making them less likely to pursue alternative revenue strategies or fully embrace the Medicare Advantage business. Their nonprofit status can also subject them to more regulatory scrutiny, particularly at the state level. This has led to the abandonment of some proposed mergers, like for-profit Elevance’s deal with BCBS Louisiana from 2023.
Insurers are looking to turn the corner on a difficult 2025, which, according to their average medical loss ratio of 93.5 percent, was their worst in over a decade. Providers will experience that turnaround at least partially at their own expense, as plans take a more aggressive approach on utilization management, site-of-service strategies, network size, and provider rate negotiations. Whether utilization patterns continue to surpass expectations will also shape the relative fortunes of providers and insurers. That the medical costs of major insurers fell in Q1 2026 suggests the insurer turnaround is already successfully underway.
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2. OhioHealth settles DOJ antitrust lawsuit.
- On Tuesday, the Department of Justice (DOJ) reached a proposed settlement with OhioHealth, a 16-hospital system based in Columbus, resolving a lawsuit filed in February alleging OhioHealth was engaged in anticompetitive contracting practices.
- The settlement, which involves no financial penalties or admission of wrongdoing, forbids OhioHealth “imposing terms in its contracts with commercial health insurers that deter budget-conscious healthcare plans,” voids contracts with these problematic conditions, and requires the system to submit quarterly reports to a court-appointed monitor to ensure compliance.
TrustWorks Take: The speed at which this lawsuit was resolved comes as a surprise, but it is to both sides’ benefit. OhioHealth escapes without admitting wrongdoing, paying a monetary fine, or having to finance an expensive, drawn-out lawsuit. In exchange, the system will do away with contract provisions it claims are no longer relevant to today’s payer-provider landscape. NewYork-Presbyterian, which was hit with a similar DOJ suit one month after OhioHealth, would also likely be satisfied with an outcome like this.
Meanwhile, the DOJ gets to say that it is “bringing down healthcare costs for consumers and fighting the anti-competitive behavior that drove them up in the first place,” although it will be difficult to assess whether price growth is actually restrained as a result. OhioHealth's willingness to settle suggests that that the system sees the settlement as less of a material threat than the cost of continuing to fight it out in court. The DOJ could have chosen to make an example out of OhioHealth to discourage other health systems from certain contracting practices that limit tiered networks and steerage, and it may still yet with NewYork-Presbyterian. |
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3. HHS watchdog finds excessive post-acute denials in MA.
- The Department of Health and Human Services (HHS) Office of Inspector General released its June report detailing the unusually high rates at which certain Medicare Advantage (MA) plans deny prior authorization requests for post-acute care, based on data from June 2024.
- Requests for long-term care hospital (LTCH) admissions were denied 65 percent of the time, with the three largest MA carriers—UnitedHealth (71 percent), Humana (72 percent), and CVS (80 percent)—issuing denials even more frequently.
- Requests for inpatient rehabilitation facilities (IRFs) were denied 54 percent of the time, but 43 percent of denials were overturned upon appeal, including over 80 percent from CVS, Elevance, and BCBS Michigan.
TrustWorks Take: LTCH and IRF stays are very expensive, costing original Medicare an average of $49K and $24K respectively, so payers are strongly incentivized to limit admissions. The concern is that payers are ignoring medical criteria to make overtly financial decisions. The high success rate of appeals backs this up, as it suggests that payers are denying far more care than appropriate, knowing most patients will not bother to appeal.
These incentives have not changed with payers’ recent promises to roll back utilization management tactics. Based on some of our recent conversations with health plan execs, these promises may in fact be short-lived. MA payers have found themselves between a rock and a hard place. Persistently high utilization has hit their bottom lines hard and sent them looking for any lever they can pull to limit medical spend, but their overreliance on utilization management has proven very unpopular and exposes them to political scrutiny.
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Beyond the Whiteboard
Visualizing key trends from the healthcare industry
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Meet the COO of Federal Healthcare Policy
For over a year now, we have been hearing from our Beltway insider friends that Chris Klomp, a political outsider originally placed in charge of Medicare, was someone to watch in the Trump administration. This prediction was proven true when Klomp was elevated to Chief Counselor of HHS in February, and now he is being reported on as the de facto leader of HHS while Kennedy keeps his distance from the rank-and-file workforce. He has also ingratiated himself to President Trump, who refers to him as “my favorite Mormon,” after Klomp, who is a member of the Church of Latter-Day Saints, negotiated drug pricing deals with major pharmaceutical companies.
Beyond the standard report that paints him as an ambitious, competent, and detail-oriented leader, both his private sector experience and current policy focus underscore his deep interest in IT modernization. Back in 2019, when he was still CEO of a provider-focused data-sharing platform, Klomp said that “data silos are actually going to die,” and that clinical interoperability supported by AI is the future. Now, under his leadership, CMS just launched a new Office of Health Technology and Products that aims to position the federal government as a leader pushing the development of, among other things, AI and interoperability. This should be seen as a direct challenge to Epic, a company we have heard Klomp distrusts, and their hold on the provider industry’s data.
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Dialing In
Sharing insights from our work with clients
The Enemy of My Enemy is My Partner?
In our decades of doing this work, we cannot remember a time when relationships between health systems and insurers have been more tense. So, it has been surprising to see a recent uptick in questions about potential payer-provider partnerships. One health system CFO asked, “We know risk isn’t going to be it, but are you seeing payers wanting to partner with systems on other things, like prior auth or consumer experience?” And one regional health plan leader wondered if systems would be open to “discuss something radical.” His reasoning: if we’re both hurting and facing obstacles we cannot overcome alone, maybe the shared pain could be a catalyst.
Interest piqued with the announcement of a proposed health system-Blues plan merger between Honolulu-based Hawai’i Pacific Health and Hawai’i Medical Services Association. (Not all partnerships need this level of financial integration, but shared financial accountability can be powerful engine for change.) Both sides see an opportunity to band together against shared competitors under the (unspoken) logic, “We both hate United. Maybe the enemy of my enemy should be my friend here.” But, while there may be shared interest, neither payers nor providers seem to have an idea about the “what,” “where,” or “how” of working together. The absence of a framework makes launching productive conversations difficult. Interested parties should think about this a teachable moment and start a dialogue. Come together with a list of pain points and priorities, and most importantly, a willingness to shake off past grievances. For both regional plans and nonprofit health systems, the current business model is unsustainable, and we need to explore uncharted alternatives to think about what comes next.
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