Expect more strain between hospitals and insurers in 2026

With hospitals and insurance companies facing a challenging operating environment, analysts expect more conflict between payers and providers in the coming year.

Hospitals are facing the prospect of seeing more uninsured patients and are navigating changes in federal policy and funding. Commercial insurance companies are also seeing greater utilization of healthcare services from an aging population and growing demand for behavioral health services. Analysts with Fitch Ratings offered a look at the healthcare landscape in 2026 during a webinar Thursday.

Kevin Holloran, senior director of nonprofit healthcare and higher education for Fitch Ratings, says the environment between health systems and insurers is “contentious,” a term he has used for years.

Holloran says he routinely asks healthcare leaders if they have seen any improvement in their relationships with insurers. Aside from financial terms, Holloran asks if the two sides are getting along or having positive conversations.

“I bet in the last 200 times I've asked that, 198 have said, ‘No, it's absolutely not getting any better,’” Holloran says.

• Read more: Insurers must approve care more quickly, but providers aren’t overly optimistic

‘Dynamics will remain strained’

Brad Ellis, a senior director and head of the North American health insurance sector for Fitch Ratings, points to growing friction between hospitals and Medicare Advantage plans, which now cover more than half of all Medicare beneficiaries.

Medicare Advantage plans are seeing higher costs and utilization, while hospitals have said those plans are delaying and denying more approvals for services.

“You're seeing providers increasingly frustrated with MA reimbursement, and some markets stepping away from MA networks altogether,” Ellis says.

“My expectation is that provider-payer dynamics will remain strained throughout 2026,” Ellis says. “Providers will continue to push for higher rates to keep up with their cost structure, while payers work to balance affordability and margin in the face of higher utilization and regulatory uncertainty. I expect more intense negotiations, more threats of network termination and more strategic recalibration, especially as both sides prepare for a healthcare environment with increasing financial complexity.”

Health insurance providers are facing greater headwinds, says Ellis. Fitch revised its outlook for health insurance companies to “deteriorating” last June.

“We're seeing upward pressure across nearly every major line of business,” Ellis says. “That's everything from commercial to Medicare Advantage to Medicaid and the ACA (Affordable Care Act) exchange market. These trends are persistent.”

Members are visiting healthcare providers more, and insurers are seeing higher costs per visit, which Ellis says is just significant as the uptick in volume. Health systems are having more success in capturing revenue.

“Providers have made some major strides in revenue capture, including more advanced coding and billing practices, greater sophistication in identifying and documenting complexity, stronger negotiating leverage due to health system consolidation and inflationary pressures that have pushed hospital-physician operating costs materially higher,” Ellis says. “All that contributes to higher cost per encounter.”

Insurers still saw a growth in absolute dollars, as Fitch expects U.S. insurers to have generated $1.5 trillion in 2025, when the final figures are tallied.

Both insurers and health systems are seeing more problems with the expiration of tax credits for the Affordable Care Act. The subsidies expired Dec. 31, and millions of Americans may end up dropping coverage because they can’t afford higher premiums.

“These subsidies have played a significant role in keeping ACA coverage affordable and stable,” Ellis says. “Their non-renewal is causing meaningful disruptions, including enrollment churn, premium volatility, shifts in carrier participation, and it led to a lot of uncertainty leading into the 2026 pricing cycles.”

Headwinds for hospitals

Holloran says hospitals are facing more operating pressures, with higher supply and labor costs.

Health systems are also bracing for cuts in Medicaid programs in the coming years, and more people losing coverage starting in 2027. Some hospitals and health systems are already looking at expenses and the services they provide as they prepare for less Medicaid funding and more people losing Medicaid coverage.

But he says in 2026, some hospitals may actually see a modest improvement in performance. Some hospitals have seen some gains, but most remain below “pre-pandemic” levels.

There continues to be a distinct separation between those that are enjoying strong financial performance, those that are breaking even and hospitals that are struggling mightily, Holloran says.

Fitch revised its outlook for the nonprofit hospital sector from “deteriorating” to “neutral” in 2026. Fitch previously used the term “stable,” but Holloran says “neutral” is a more apt description.

“I think that really is a better word right now,” Holloran says. “I have a hard time looking at the healthcare sector, and specifically, the provider sector, and saying, yes, it's really stable. We all, in our sort of heart of hearts, know it's unstable on some level. But it's not negative right now, and certainly over the next one to two years, it's kind of neutral.”

Now, Holloran says he sees glimmers of hope in provider-payer interactions. He has heard from a few voices describing more productive discussions.

He sees more of a focus in conversations between providers and insurers on “the structure of the contract versus the dollar amount of the contract.”

More talks involve streamlining the claims process, as providers seek fewer delays and denials in payments for services. Holloran says providers are focusing more on such questions as, “Will you pay them quickly? Will you stop denying everything automatically?”

Holloran says the shifting focus is leading to a bit more thawing in the relationships with providers and insurers.

“Do I think we've reached Nirvana stage, and everyone's going to say this is awesome? Nope. Not at all,” Holloran says. “It’s subtly, very subtly …. getting a little bit better.”