Health Net’s Group Healthcare Exit and Rising Costs

Employers that use Health Net for group health coverage will need to find a new health plan. According to Becker’s, Health Net recently announced that it is leaving the commercial employer group market in Oregon and California. Existing commercial group policies will terminate on Feb. 28, 2027, so employers will need to secure new coverage effective March 1.

About Health Net

Health Net is a subsidiary of Centene that provides health plans for individuals, families and businesses. It currently services more than 3 million members in California through its Medi-Cal, Medicare Advantage, individual, family and employer group plans. Health Net has provided health plan options in California for more than 45 years.

The Health Net Exit

According to Becker’s, a spokesperson for Health Net said, “Health Net has made the decision to exit the traditional commercial group business in California and Oregon in order to focus on government sponsored healthcare.” Although the insurer is exiting the commercial group health market, its ACA Marketplace, Medi-Cal/Medicaid and Medicare lines of business will not be affected.

Separately, Health Net recently announced that it was cutting assisted living benefits to approximately 3,500 low-income seniors receiving its Medi-Cal coverage. According to Cal Matters, assisted living benefits are optional under Medi-Cal, and plans decide whether or not to offer coverage.

The Bigger Picture

The Health Net announcement comes amid multiple stories of similar health plan market exits.

• Several insurers are leaving the ACA Marketplace starting in 2027. According to org, exits include Cigna, PacificSource and Providence Health Plan, among others.
• Multiple insurers are also leaving the Medicare Advantage market. According to Becker’s, at least five insurers are exiting Medicare Advantage markets for at least some states or products, including Molina Healthcare, Humana, Clear Spring Health, Providence Health Plan and Presbyterian Health Plan.
• Providence Health Plan is also transitioning out of most of its health insurance lines beginning in 2027, including employer group/commercial plans.

Although carriers cite a variety of reasons for their market decisions, these exits are occurring against a backdrop of sharply rising health care costs. The UnitedHealthcare 2026 Health Trends Report found that medical spending grew by 8.5% and pharmacy costs grew by 11%.

Rising healthcare costs are affecting everyone, including carriers, employers and plan members. According to Bloomberg News, a growing number of U.S. employers are moving away from group health insurance in favor of other strategies, such as health reimbursement arrangements (HRAs).

What Do Employers Need to Do?

For employers that rely on Health Net for employee health benefits, the market exit may come as a frustrating surprise. However, there is time to create a new strategy.

1. Confirm your plan’s sunset date. Health Net’s commercial group policies are expected to end on Feb. 28, 2027. However, some plans may have different end dates depending on the contract and any applicable regulations. Employer groups will receive notification that includes their exact policy termination date, so employers should watch for this notice.
2. Explore your health plan options. Employer groups that are losing Health Net coverage may decide to switch to another group health plan carrier. Your benefits broker can help you compare plan options. This may also be a good time to consider alternative employee benefits options, such as group captive insurance, self-funding or an individual coverage health reimbursement arrangement (ICHRA).
3. Plan for a smooth transition. Once you’ve settled on your new health coverage strategy, it’s time to plan the transition. Consider the timing. Many employer health plans renew Jan. 1, but Health Net coverage will continue through Feb. 28. This date may work for you, but it may not be ideal. If employer groups want to terminate coverage early, they may be able to do so. They should reach out to Health Net as soon as possible to provide timely notice.

Beyond the timing, think about how changes in coverage and costs will affect your employees and their families. This year’s open enrollment may require additional outreach and education to help plan members understand their health plan. Think about the in-person meetings, digital tools, infographics and other materials that you’ll need.

Carrier exits can be very disruptive for employers, but they also present a good opportunity to assess your current strategies.

Heffernan Insurance Brokers can help you review all your options, including traditional group health plans as well as alternative employee benefit choices. Learn more about how our benefit and advisory services can support your business.