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Putting the Premium in Premium

October 21, 2025

Hello and welcome back 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! One programming note, we’ll be taking next week off, meaning you’ll have to wait until Tuesday November 4th for your next TrustWorks On Call. Don’t miss us too much while we’re gone!
 

This week, we go Beyond the Whiteboard with a graphic on the growing arms race for AI applications, and we’re Dialing In on the roadblocks health systems face in venture capital. But first, the news, starting with some breaking news (for Americans who don’t live/eat/breathe/sleep healthcare) that healthcare premiums are going to be very expensive next year:

Behind the Headlines

Unpacking the forces driving healthcare's biggest stories.

1. Expensive ACA premiums go live in a dozen states.

  • Ahead of the open enrollment period beginning November 1st, about a dozen state marketplaces are now previewing their Affordable Care Act (ACA) exchange plan premiums, allowing potential enrollees to see how rate increases and the loss of enhanced subsidies will impact their 2026 premiums.
  • While the average annual premium payment is projected to rise from $888 to $1904 without the enhanced subsidies, older couples in expensive markets will be hit especially hard: a 60-year-old couple in Kentucky making $85K could face a $23.7K increase for benchmark coverage, and a family of four in Maine making $130K could have to pay $16.1K more.
  • Even if Congress were to extend the enhanced ACA subsidies, state insurance officials are saying it may be too late to update next year’s rates.
TrustWorks Take: Medical cost trends alone would have driven up ACA premiums by about 8 percent in 2026, but that compounds with the loss of enhanced subsidies (along with newly added paperwork burdens), which contribute an additional 14 percent to rate growth, based on insurers’ assumptions that fewer healthier people will enroll in coverage. Although the government shutdown has likely raised the salience of the issue, most ACA enrollees were, as of late September, largely unaware that the enhanced subsidies were set to expire at the end of this year. 
 
ACA enrollees will now face a nasty sticker shock, which could cause an estimated 2M people to become uninsured rather than pay the higher premiums. A larger uninsured population, and its corresponding increase to uncompensated care costs, will have spillover effects for other commercial insurance markets. The ACA subsidies are the story for now, but employers are also facing a 9 percent increase in healthcare costs next year, meaning everyone will soon be feeling the squeeze.
 

2. Mayo Clinic joins systems dropping MA.

  • Starting next year, Mayo Clinic facilities in Minnesota, Wisconsin, and Iowa will be out of network for most Medicare Advantage (MA) plans offered by UnitedHealthcare or Humana, according to an announcement last week.
  • The system, which was already out-of-network with most national MA plans, will only accept MA plans from two Minnesota insurers next year, Blue Cross Blue Shield of Minnesota and Medica, down from five last year.
  • Mayo Clinic becomes the 33rd health system or affiliated medical group to drop some or all MA plans from its network for 2026.
TrustWorks Take: Contentious negotiations between health systems and MA plans have been ramping up for years, a trend that could be supercharged by MA payers’ collective pivot from membership growth to cost containment. According to Becker’s (unofficial) running list, this year has already surpassed last year’s total number of health systems exiting the network of at least one MA payer. As regulatory headwinds for MA payers grow, they’ll look to extract more concessions from providers via lower rate increases and more burdensome utilization management.
 
In response, health systems and medical groups have demonstrated increasing willingness to walk away from the table, but patients can get left in the lurch. In the case of Mayo Clinic, not only does this decision keep MA patients from accessing the quaternary care at the system’s storied Rochester complex, but it also presents real challenges to seniors on MA plans who live in more rural areas where a Mayo facility may be the only nearby option. These dynamics help illustrate why, for the first time since at least 2007, MA enrollment may decline slightly in 2026, as fewer plan options, supplemental benefits, and network choices have reduced the program’s appeal to seniors.
 

3. UPMC plans to buy CommonSpirit subsidiary.

  • Last week, UPMC signed a nonbinding letter of intent with CommonSpirit to acquire its subsidiary Trinity Health System, a three-hospital system based in Steubenville, OH.
  • In the six months ending in June 30, 2025, UPMC posted a $349M operating income, whereas CommonSpirit recorded a full-year operating loss of $225M.
TrustWorks Take: On its face, this is a classic story of a dispersed, national system (CommonSpirit) rationalizing its geographies by offloading a few hospitals to a regional player (UPMC) looking to expand into an adjacent service market and bring its health plan across state lines. If all goes well, it could be a win-win-win for both systems and Steubenville’s residents, who live just across the state line from Pittsburgh and could benefit from better access to UPMC’s flagship facilities and care coordination.
 
This story is perhaps more notable for what it represents. Hospital M&A transactions ground to a halt in the first half of 2025, with only 13 deals announced. While activity has ticked up in Q3, a majority of those deals have been divestitures of financially distressed assets. After many systems put major strategic decisions on hold while the Trump administration’s healthcare policy took shape, there’s now enough information for systems to turn strategy into action again.
 

Beyond the Whiteboard

Visualizing key trends from the healthcare industry

Providers and Payers Deploying AI Against Each Other
According a recently released Bain and KLAS report, both providers and payers are focusing on the AI investments “most likely to improve profit margins.” Profit generation is only one way to judge AI tools, which are already being used to reduce clinician burnout and improve health outcomes. These kinds of applications will surely help providers’ bottom lines, but it might take a while for the financial impact to be measurable. Revenue cycle management, which is the top AI priority for providers this year, offers “hard-dollar ROI” more directly. Meanwhile, payers’ top priority is to automate utilization management and member care coordination. These efforts will often work against each other.
 
Providers want to use AI to generate cleaner claims and fewer denials. Payers want to manage medical spend by automating prior authorizations and steering patients toward high-value care. Whichever side develops the best AI applications the fastest will generate some portion of its profits at the other’s expense. Given that payers tend to have an edge on providers in terms of scale and technological sophistication, their AI tools may prove more effective at rationalizing care than providers’ tools at billing for care. However, the real winners of the payer-provider AI arms race could end up being the AI developers and tech platforms that get to sell their services to both sides.

Dialing In

Sharing insights from our work with clients

To Venture or Not to Venture?
“Should we be doing what other health systems are doing in venture capital?” The board member who asked this question said he’d seen an uptick in mid-sized systems engaging with venture funds and startups, or even starting their own funds. “It was a few quiet years for everyone, but it’s not just the big systems talking to VCs right now.” To date, the system had been uninvolved in VC investing, and this board member wanted to make sure they weren’t missing out on something important.
 
Venture funds with a healthcare focus can benefit from partnerships with health systems, whose physicians can lend their expertise on clinical relevance and applicability to care models. However, health system boards interested in entering the world of venture capital first need to be honest with themselves about their capabilities and goals. Do they have the talent to evaluate good investments, ones that have the potential to be not just clinically useful but highly profitable? And are they trying to maximize access to innovative technology and partnerships, or just support their investment portfolio with diversified and profitable ventures? These questions are important for health system boards to consider because they come down to matters of governance and fiduciary stewardship, where there’s wisdom in recognizing your own limitations. Rather than reinventing the wheel by handling this all in-house, most mid-sized systems are better off partnering with a fund to whom they can outsource most of the decision-making. Just like how venture capitalists may not be the most suited to running a health system (we’ll see how Summa Health fares), health system boards are less equipped to run a venture fund than the professionals who devote their lives to it.