Health plans are operating in a fundamentally different financial environment. Financial sustainability increasingly depends on capital strength and the ability to influence medical trend.
HealthScape’s annual health plan financial performance report examines the financial health of the US health insurance industry across four dimensions: profitability, capital strength, revenue growth, and medical cost trend.*
This year’s analysis reveals that nearly three-quarters of health plans reported operating losses in 2025. Premium revenue continued to grow, but medical costs outpaced those gains.
Capital erosion is widening the gap between financially resilient and financially vulnerable health plans. Organizations with sufficient capital are strengthening reserves, investing in new capabilities, and expanding their strategic options. Meanwhile, organizations experiencing sustained losses and eroding capital positions are facing increasingly difficult choices, including retrenchment, affiliation, or market exits.
Our analysis points to a clear conclusion: Capital is no longer simply a measure of financial strength. It is increasingly becoming the foundation for long-term competitive advantage.
*Our 2026 analysis is based primarily on year-end 2025 statutory financial data, the most recent complete reporting year available. Although several large health plans reported improving quarterly results during the first half of 2026, this assessment provides a consistent, year-over-year view of the industry’s underlying financial performance.
The health plan industry remains under sustained financial strain, with a widening separation between organizations that are adapting and those that are not.
Nearly three-quarters of health plans reported operating losses in 2025, underscoring the persistence of the industry’s financial challenges and many organizations’ struggles to adapt.
National carriers continue to benefit from scale, diversified revenue streams, and greater strategic flexibility, enabling them to continue investing through market cycles while other organizations increasingly focus on preserving capital. While national health plans still face financial pressures, their capability investments give them more strategic options to respond.
The sustained and growing losses in 2025 underscore that health plans’ challenges are not merely cyclical but also structural. Elevated medical costs, shifting government program economics, and growing affordability constraints continue to bear down on health plans of all sizes. More health plans, including some nationals, are experiencing multiyear losses—evidence that the environment has changed.
The number of health plans with 3 or more years of losses has increased year over year—extending beyond a traditional underwriting cycle.
Many organizations face a structural shift: The operating environment of just a few years ago no longer exists. Capital trends reinforce this conclusion.
The health plan industry remains under sustained financial strain, with a widening separation between organizations that are adapting and those that are not.
Nearly three-quarters of health plans reported operating losses in 2025, underscoring the persistence of the industry’s financial challenges and many organizations’ struggles to adapt.
National carriers continue to benefit from scale, diversified revenue streams, and greater strategic flexibility, enabling them to continue investing through market cycles while other organizations increasingly focus on preserving capital. While national health plans still face financial pressures, their capability investments give them more strategic options to respond.
The sustained and growing losses in 2025 underscore that health plans’ challenges are not merely cyclical but also structural. Elevated medical costs, shifting government program economics, and growing affordability constraints continue to bear down on health plans of all sizes. More health plans, including some nationals, are experiencing multiyear losses—evidence that the environment has changed.
The number of health plans with 3 or more years of losses has increased year over year—extending beyond a traditional underwriting cycle.
Many organizations face a structural shift: The operating environment of just a few years ago no longer exists. Capital trends reinforce this conclusion.
The health plan industry remains under sustained financial strain, with a widening separation between organizations that are adapting and those that are not.
Nearly three-quarters of health plans reported operating losses in 2025, underscoring the persistence of the industry’s financial challenges and many organizations’ struggles to adapt.
National carriers continue to benefit from scale, diversified revenue streams, and greater strategic flexibility, enabling them to continue investing through market cycles while other organizations increasingly focus on preserving capital. While national health plans still face financial pressures, their capability investments give them more strategic options to respond.
The sustained and growing losses in 2025 underscore that health plans’ challenges are not merely cyclical but also structural. Elevated medical costs, shifting government program economics, and growing affordability constraints continue to bear down on health plans of all sizes. More health plans, including some nationals, are experiencing multiyear losses—evidence that the environment has changed.
The number of health plans with 3 or more years of losses has increased year over year—extending beyond a traditional underwriting cycle.
Many organizations face a structural shift: The operating environment of just a few years ago no longer exists. Capital trends reinforce this conclusion.
The distribution of capital strength has shifted materially. Increasing numbers of health plans have constrained capital positions, while fewer health plans have strong ones.
Strong capital positions provide flexibility to absorb volatility, invest in new capabilities, and pursue growth opportunities. Constrained capital positions limit options and increase the likelihood of difficult strategic decisions.
Capital strength diverges sharply by cohort. Strong capital positions are most common among Blues plans, while constrained capital positions tend to occur among regional not-for-profit plans. The regional cohort also highlights an increasingly pronounced separation between financially resilient and financially vulnerable organizations.
The organizations best positioned to adapt have sufficient capital to continue investing in capabilities that influence medical trend and strengthen long-term competitiveness.
Preliminary analysis suggests revenue growth has remained strong across most lines of business on a per-member-per-month (PMPM) basis. This reflects health plans’ substantial pricing actions to keep pace with rising costs over the past several years.
But relying on future rate increases isn’t a long-term solution—especially as employers, individuals, and government purchasers face increasing affordability constraints.
Administrative expenses are often cited as a primary cause of financial underperformance. The data suggest a more nuanced reality: Except for Medicaid (where enrollment losses are increasing fixed-cost burden at 7% year over year), administrative expenses appear relatively stable.
Medical costs, however, have been far from stable. Medical cost growth was significant across every line of business and cohort. It remains the primary challenge facing health plans. Several factors contribute to this growth:
Many health plans have increased revenue in recent years, but medical cost growth has consumed those gains. The divergence between resilient and vulnerable organizations is increasingly a function of how effectively health plans manage medical trend. That ability depends on whether they possess the capital and focus required to adapt.
Health plans with strong capital positions experienced substantially lower medical expense growth than health plans with constrained capital positions, suggesting that effectively managing medical trend is a defining characteristic of financial resilience.
Resilient plans tend to share several other defining characteristics, including:
Health plans that are cultivating provider alignment are creating additional opportunities to influence utilization, site-of-care decisions, and total cost of care. Their associated investments in capabilities for data sharing, performance measurement, incentive structures, and collaborative operating models have allowed them to work with providers to influence medical trend.
In so doing, resilient health plans can not only manage one of the most important drivers of long-term financial performance but also improve affordability, quality, and member outcomes.
Vulnerable health plans exhibit a different set of characteristics, including:
Medicaid-focused organizations face enrollment contraction as coverage changes from the One Big Beautiful Bill Act (OBBBA) take effect. Related challenges will squeeze margin further, including: deterioration in the remaining risk pool as healthier members lose coverage, administrative cost growth associated with eligibility and compliance requirements, and downward pressure on Medicaid rates and provider payment levels.
As capital positions become more constrained, strategic options narrow. Organizations with limited capital have reduced capacity to invest in new capabilities, absorb short-term volatility, or pursue growth opportunities.
Our analysis found that approximately one-quarter of health plans in the vulnerable cohort announced affiliations, acquisitions, partnerships, or market exits in 2024–2025. The pace of these activities is likely to continue.
On the opposite end of the spectrum, health plans with strong capital positions also continue to face significant financial challenges: 71% reported losses in 2025. But their capital has given them a greater capacity to absorb volatility, invest in capabilities that influence medical trend, and adapt to changing market conditions.
Accordingly, United, Elevance, and Highmark Health recently increased reserves and expanded reinsurance arrangements to help protect against the volatility they now expect to be the norm.1 This signals a fundamental shift: Capital preservation and balance-sheet strength are now strategic priorities, not just regulatory requirements.
The path to sustainability requires a multi-dimensional approach. Health plan leaders should focus on three priorities:
Capital’s greatest value is not simply absorbing volatility. It enables sustained investment in the capabilities that influence medical trend while providing the flexibility to reposition product portfolios, exit underperforming businesses, and pursue strategic opportunities from a position of strength.
Organizations with strong capital can continue investing through market cycles in provider partnerships, specialty pharmacy management, care management, analytics, and AI.
Organizations with constrained capital often have fewer alternatives, limiting their ability to invest precisely when new capabilities are needed most.
Health plan leaders should:
Health plans should prioritize initiatives that directly influence the largest contributors to medical cost growth. Organizations that consistently outperform do not rely on isolated cost-containment programs. They build coordinated capabilities that influence medical trend across multiple dimensions of the business.
Health plan leaders should focus on five capabilities:
Sustainable financial performance will depend on an organization’s ability to coordinate these capabilities as part of a comprehensive medical trend strategy rather than as standalone initiatives.
Provider relationships represent one of the most important levers health plans possess to influence medical cost trend.
Many payer-provider relationships consist primarily of transactional activities, such as contract negotiations, payment disputes, prior authorization, coding reviews, and appeals. These functions remain essential but do little to influence long-term medical trend.
Future success will require moving beyond a network strategy to a broader provider strategy.
Health plans should strengthen alignment with affiliated, contracted, and community providers. Avenues to do so include data sharing, collaborative performance measurement, operating models, incentive structures, and joint ventures. Such partnerships can improve payment accuracy while enabling both organizations to focus greater attention on utilization management, care delivery, and total cost of care.
Organizations best positioned for long-term success will evaluate provider partnerships by their ability to influence medical trend, not simply to negotiate contracts.
The health plan industry is entering a period of greater separation between financially resilient and financially vulnerable organizations. Capital strength and the ability to influence medical trend are becoming defining characteristics of sustainable performance.
As more health plans report sustained losses and constrained capital positions, the strategic options available to health plan leaders will increasingly depend on their ability to preserve and deploy capital effectively. Some organizations will continue to strengthen reserves, invest in new capabilities, deepen provider alignment, and expand their strategic options. Others will face difficult choices, including retrenchment, affiliation, consolidation, or exit from selected products and markets.
The organizations best positioned for long-term success will not treat capital allocation, medical trend management, and provider alignment as separate priorities. They will manage them as interconnected capabilities that reinforce one another. Health plans that allocate capital effectively, influence medical trend, and build stronger provider partnerships will be best positioned to adapt, compete, and grow.
HealthScape’s analysis is based primarily on statutory financial filings submitted to the National Association of Insurance Commissioners (NAIC). While these filings provide the most comprehensive and standardized source of health plan financial data available, they do not capture every organization in the market, including certain California-regulated HMOs, Taft-Hartley plans, and other entities that do not report to the NAIC.
Unless otherwise noted, results are presented using median values rather than averages. The study population consists of parent organizations rather than individual legal entities. Accordingly, affiliated organizations operating under common ownership, such as Independence Blue Cross and AmeriHealth Caritas, are evaluated as a single organization because they share a consolidated strategic and capital structure.
The composition of the study population may vary modestly from year to year as organizations merge, restructure, enter, or exit the market and as inclusion criteria are applied. We analyzed national publicly traded companies (Aetna, Centene, Cigna, Elevance, Humana, Molina, and United), Blues, and regional not-for-profit health plans. Other for-profit health plans, such as Oscar, Alignment, and Clover, were excluded because they represent approximately 3% of total membership.
We use operating margin rather than underwriting margin because it captures the full financial performance of a health plan, including both insurance operations and investment income.
