Aetna, Sutter Health in contract dispute. Could some patients lose coverage?
Some Northern California patients may lose coverage at Sutter Health, if the hospital system fails to reach a new contract with Aetna in the coming weeks.
The health system and the insurance giant are in talks for a new agreement to cover a group of commercially insured patients. The current contract ends June 30. Aetna said in a statement that if the groups can’t reach a deal by then, most Sutter facilities and providers will be out of network for the insurer’s commercial health plan members.
Sutter estimated about 900 Sacramento-area HMO members would be affected.
Health systems and insurers regularly bargain for new contracts for groups of patients, but the negotiations only occasionally escalate into public view.
In such negotiations, both the insurer and the health system are under pressure to reach a deal before the deadline, said Ge Bai, a professor of accounting and health policy at Johns Hopkins University.
Commercial health insurance pays hospitals better than marketplace, Medicare and Medicaid plans — an incentive for the health system to try and keep those members. At the same time, patients will impose pressure on their insurer to continue covering their doctors.
“If the insurance company can communicate credibly to the members that: ‘If we kick this hospital out of the network, we’ll see a substantial reduction in your premiums,’ it might work,” Bai said. “But if the beneficiaries don’t see any upside, they will not be satisfied. And they will put pressure on the insurer.”
Sutter said, in a notice to patients, that Aetna has been sending letters to commercial HMO members, notifying them that if a new contract isn’t reached, they will be reassigned to non-Sutter doctors. Aetna advised a patient “Aetna Health of California Inc. no longer contracts with this group as of July 1, 2025,” in a letter obtained by the Bee.
In a statement to the Bee, Sutter characterized the patient letters as “part of (Aetna’s) negotiating tactics.”
“We are disappointed by this action, which we believe unnecessarily alarms patients,” the statement said.
Sutter leadership understand the frustration patients may feel, the statement said, and they are committed to reaching a new agreement.
The stakes may be higher than usual for both sides because of heightened financial pressure for insurers and hospitals alike, said Bai, the health policy expert.
Commercial premiums have been rising rapidly in most parts of the country, so plans have limited ability to absorb higher premiums now. At the same time, hospitals are under financial stress in the wake of the pandemic, and need to protect every dollar.
“So both sides are really energized to drive a hard bargain,” Bai said.
Aetna said in a statement that commercial HMO members will be assigned to a new doctor on July 1, but commercial PPO members are allowed a six-month transition period. They may continue receiving care at Sutter at their plan’s in-network benefit level during that time, though they may pay higher prices, Aetna said.
Commercial HMO members can request an exemption from Aetna, to continue receiving treatment from Sutter on a temporary basis. Members can call the phone number on their membership cards to get a “transition of care” request form.
This story was originally published May 21, 2025 at 12:43 PM.
