Patients Are Caught in Contract Crossfire Between Hospitals and Insurers

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While Penelope Gatlin was checking in her 13-year-old son for his doctor’s appointment in Chapel Hill in December, a UNC Health receptionist told her she needed to pay $450 before he could be seen.

Her son, Rowan Newman, was born with an ultrarare genetic disorder. Last summer, he was hospitalized for 56 days, and he has required IV infusions every few weeks since. 

Gatlin plunked down her credit card.

“I don’t have any other choice,” she said. “It’s not as though I can just call another rheumatologist in town and go right over with a case like his.”

Her insurance provider, Cigna, was in the midst of a contract duel with UNC Health, one of the state’s largest hospital networks. In addition to her monthly premiums, Gatlin had already spent $1,750, the cap for her health plan’s out-of-pocket spending, on Rowan’s medical expenses for the year. Any extra medical costs in Cigna’s network should have been absorbed by the insurer. But UNC dropped Cigna in early December, leaving 65,000 patients without coverage. 

During the brief insurance breakup, Gatlin said a UNC Health scheduling representative told her they couldn’t book an appointment with her son’s neurologist because the system was “deprioritizing” out-of-network patients. 

“My kid’s having seizures,” she said she told the scheduling representative. “What am I supposed to do?”

Rowan was among thousands of patients in the state, and millions across the country, whose care has been threatened, delayed, or interrupted by contract disputes between hospital systems and insurance agencies. 

The contracts determine the discounted prices insurance companies pay hospitals for services and are often inked in multiyear terms. That’s why expenses for the same service at a hospital can vary depending on what type of insurance someone has.

Prices and stipulations in the contracts are secret, but in recent years the parties have beckoned the public to participate in their fights. 

Last year, Duke Health went on offense with letters, a webpage, and radio ads urging patients to contact Aetna so it would agree to pay higher prices. United Healthcare is in the midst of a campaign chastising ECU Health for asking for a nearly 60% rate increase over three years, a request the insurer calls “egregious” but the medical network says is reasonable. 

Some defend the media blitzes, which have been undertaken by both insurers and hospitals, as transparency that gives patients enough time to prepare. Others condemn the tactics for stoking fear. 

Negotiations are normal, and most are settled behind the scenes. But the number of public clashes has increased as both insurers and hospitals have consolidated market power and the stakes have risen.

Gatlin had already used up all 12 weeks of her unpaid family medical leave, and her savings had dried up. She couldn’t get a different insurance plan through the Affordable Care Act marketplace; federal regulations prevented it because her private employer offered a plan with better benefits.

“Patients are at the mercy of whatever health system has a monopoly in their area and which insurance is offered by their employer,” Gatlin said. 

Progress in negotiations tends to happen in the last 48 hours before a contract expires, often leaving patients little time to shop for alternatives. Patients have no way of knowing if their insurance agencies and providers are just taking a break or if they’ve split up for good. 

Fortunately for Rowan, who had come to rely on UNC specialists for his complex care, Cigna’s out-of-network period was short-lived. Twelve days after the contract expired, UNC and Cigna reached a new deal. 

That fight was among 83 public contract disputes across the nation this winter, the most in one quarter since 2022, when the business advisory firm FTI Consulting began tallying them. 

Jason Buxbaum, a Brown University School of Public Health assistant professor and researcher, has tracked the rise in the rifts since the pandemic. Between mid-2021 and mid-2025, Buxbaum has identified about 1,000 instances of public brinkmanship, according to preliminary findings. About one-third of the conflicts resulted in contracts actually expiring, with patients losing access to care. 

Patient distress serves as leverage in these standoffs, Buxbaum said, until one party buckles to make a deal. “If patients weren’t affected, it wouldn’t work,” he said. 

Patients as Pawns

Runaway medical costs are driving the insurance impasses, where all of the health care system’s failures seem to collide. 

In a survey of 800 registered North Carolina voters conducted last month by the nonpartisan nonprofit Healthier United, nearly three in four respondents said health care costs are too high. One in six said they skipped care altogether because it was too expensive. 

Health care costs have far outstripped the pace of inflation and wage growth in the U.S. Between 1999 and 2024, employee premiums and contributions rose more than 300% while inflation rose 64%.

Annual family premiums averaged nearly $27,000 for plans subsidized by employers last year, according to survey data from the nonprofit Kaiser Family Foundation. In this type of health plan—the most common in the nation and state—workers contribute close to $7,000 through paycheck deductions, and employers shoulder the remainder. These figures do not include out-of-pocket costs, which exceed about $1,500 per person.

“Patients are at the mercy of whatever health system has a monopoly in their area and which insurance is offered by their employer.”

Penelope Gatlin, mother of a patient

Hospital systems point to various pressures that make care more expensive: inflation, investments in technological advancements, and rising labor and infrastructure costs. 

Ben Teicher, spokesperson for the American Hospital Association, said hospitals also report growing administrative burdens created by insurers, like midyear policy changes. These pressures “contribute to instability in hospital‑insurer relationships,” he said, while providers already face staffing and cost challenges.

Hospitals also have been hurt by a shifting federal funding landscape. New federal rules are trimming Medicaid plans that cover low-income Americans. Most hospitals, especially rural ones, depend on the revenue they receive from patients covered by government safety net programs. 

As the government has been reluctant to increase Medicaid rates, hospitals are more inclined to squeeze insurers with employer-sponsored plans. Patients covered by these payers can help boost bottom lines through high-margin elective surgeries. Hospitals have grown more reliant on the revenue these patients generate.

“Commercial negotiations have gotten a lot more tenuous,” said Tom Friedman, executive director of the State Health Plan, North Carolina’s largest employer plan that covers 748,000 public employees, their dependents, and retirees. 

Friedman would know: He’s sat on both sides of the negotiating table. He used to work for Duke Health; then in the fall, he represented state employees’ interests when the hospital system sparred with Aetna, which administers the State Health Plan. 

Friedman said plan members’ health has declined as providers raise their prices. “We haven’t been buying more health,” Friedman said. “So what are we buying?”

Peter Daniel, executive director of the North Carolina Association of Health Plans, a trade group that represents insurers, said hospitals are the biggest driver of rising premiums. Though insurance companies have also consolidated, some researchers argue hospitals’ market concentration has given them the upper hand. 

Most health care markets in North Carolina are considered highly concentrated or monopoly-level, according to a federal government measure. Since 2000, the state has seen 51 health care mergers, and the number of hospital owners has shrunk nearly in half, down to 39 entities, according to data from Yale’s Health Care Affordability Lab. 

“We haven’t been buying more health. So what are we buying?”

Tom Friedman, executive director of the N.C. State Health Plan

Federal regulators have occasionally intervened to block hospital mergers and make contracts less restrictive for insurers. The U.S. Department of Justice has alleged some hospitals are engaging in anticompetitive practices through contract stipulations that prevent insurers from steering their members to lower-cost rivals. In a 2018 settlement with regulators, Charlotte-based Atrium Health agreed to stop including these restrictions in its contracts with insurers.

Hospitals argue consolidation has helped improve efficiencies, but evidence shows the mergers tend to increase costs for patients. 

“When you’re stuck negotiating with one hospital or one system, of course they’re going to be able to name their price,” said state Sen. Benton Sawrey, a Republican representing Johnston County who chairs the Senate Standing Committee on Health and Human Services. 

Federal rules passed in 1974 mostly block states from regulating employer-sponsored plans. “Our piece of the health care puzzle is fairly limited,” Sawrey said. 

Empty Promise

North Carolina laws are supposed to protect certain medically vulnerable patients caught in the middle of business disputes between hospitals and insurance firms. 

For Gatlin, those requirements felt like an empty promise. 

She applied for Rowan to get an up to 90-day coverage extension exemption, called continuity of care, more than a month before the contract between Cigna and UNC Health expired. Both she and her husband spent several hours on the phone with Cigna representatives trying to get Rowan’s extension to see his doctors granted. 

She received her approval notice in the mail in mid-January, weeks after the parties had reached a new deal. By then, the approval was useless. A spokesperson for Cigna said the firm offers around-the-clock customer support, and it seeks to minimize disruptions to patients receiving treatment during complex business transitions.

The UNC Health billing department reimbursed Gatlin the $450 she paid out-of-pocket for Rowan to be seen by his rheumatologist seven weeks later, after she asked for the refund. UNC Health spokesperson Phil Bridges said it was identifying patients eligible for refunds and processing them when some patients, such as Gatlin, reached out. 

“When you’re stuck negotiating with one hospital or one system, of course they’re going to be able to name their price.”

State Sen. Benton Sawrey

The state has a handful of levers to protect patients and confront health care costs, but Sawrey had a sober view of legislators’ ability to make a dent. “There are things you can do that you think have a big impact, but in the overall tens of billions that we spend, it’s a drop in the bucket,” he said. 

Competition could help dampen costs, he said, but North Carolina has one of the strictest sets of rules in the country that force hospitals to seek permission from the state health department to expand. During this year’s legislative session, Sawrey hopes the House will take up a bill passed by the Senate last year that would make it easier for health care systems to build hospitals where and when they want. 

Opponents of the legislation argue the inverse: that duplicative facilities increase costs to patients because hospital expansions are expensive and beds go unused. 

In Sawrey’s district, UNC Health Johnston recently applied to add a combined 63 beds to its two hospitals. “Why in the world couldn’t my board of trustees at UNC Health and my CEO make the decision based on what he’s seeing on the ground in Johnston County?” he said.

Blaming the Bogeyman

Hospitals appear to be winning in the court of public opinion. 

Four out of five people report trusting their doctors, yet only one in three say the same of their health insurance company, according to survey data by Undue Medical Debt, a firm that buys medical debt. President Donald Trump has called insurers “BIG, BAD” and “money sucking.” 

Some critics argue insurers have earned their reputation: An estimated 20% of medical claims are denied. 

Tanner Aliff, a health policy analyst who has worked for several conservative think tanks, said insurers are fighting against real issues, such as hospitals’ high prices and appetite for growth. 

Federal rules mandate insurers offer members access to hospital networks, but providers aren’t similarly required to participate in insurers’ plans. Health plans “are stuck with no leverage, and they kind of just eat it,” he said. “It’s a recipe for gouging.”

Insurers may get vilified—perhaps deservedly so, Aliff said. “But they’re not wrong.”

“It’s a recipe for gouging.”

Tanner Aliff, health policy analyst

Cigna’s former corporate communications officer is less gracious. Wendell Potter led the insurance giant’s communications strategy from 1999 to 2008 but quit after having to defend the firm’s denial of a liver transfer for a 17-year-old leukemia patient who died hours after Cigna reversed its decision following public outcry. 

“I can assure you that the C-suite of big insurance companies paid more attention to shareholders’ needs than anybody else’s,” he said. 

New public pricing data could have exacerbated the already adversarial relationships, according to Buxbaum, the Brown University researcher. The Trump administration imposed price transparency rules that took effect in 2021 and 2022 and were intended to allow patients to compare services. While many hospitals are still not disclosing all of their prices, insurers say providers have used the newly posted prices to extract higher rates when they see their rivals charge more. 

Sending Signals

Public fights are one way for insurers to signal to the bulk of their clients—private employers—that they’re trying to keep costs down. Employers end up absorbing the bulk of rate increases.  

UnitedHealthcare estimates 10 employers would see their costs increase by $1 million each if it meets ECU Health’s demands.

Nearly half of North Carolinians get health insurance through their jobs, whereas about one in three receive coverage through Medicaid and Medicare. Commercial plans in North Carolina pay about three times as much as Medicaid for the same hospital services. 

In ECU Health’s 29-county service area, though, about 70% of patients depend on Medicaid and Medicare, according to the system’s CEO, Michael Waldrum. “We just don’t have the offsetting revenue from commercial payers,” he said. 

Last month, UnitedHealthcare criticized the hospital system for “excessive price hikes” as several of its contracts wind down, with the potential to impact about 37,000 members who were seen by ECU Health last year. 

“They decided to go public and shoot first,” Waldrum said. The first of a few contracts expires on April 29. Both commercial and Medicaid patients could lose coverage.

ECU Health is already paid more than its academic peers, UnitedHealthcare says, and within two years, meeting its demands would make giving birth “a luxury service” costing $24,000 more than the average state medical center. “We will remain at the negotiating table as long as it takes,” Laurie Mandell, UnitedHealthcare’s North Carolina CEO, said in a statement. 

On its webpage, the insurer argues ECU Health is wielding its considerable market power in the region to use its most vulnerable patients as leverage. 

Waldrum says that’s ludicrous. The health system has acquired hospitals facing bankruptcy and imminent closure, he said, and delivering rural health care is inherently more expensive. Hospitals also must provide emergency care to anyone who needs it.  

Still, just 0.5% of overall health care spending in the U.S. went toward insurers’ profits in 2023, according to a spokesperson for America’s Health Insurance Plans, a national insurers’ trade group. 

‘Your Brain Is on Fire’

At 7 years old, Rowan was the 50th person in the world diagnosed with Okur-Chung Neurodevelopmental Syndrome in 2019. The condition is characterized by developmental delays and requires highly specialized care. 

Last year, Rowan also developed autoimmune encephalitis, or brain swelling, prompting his two-month hospital stay at UNC. “It feels like your brain is on fire,” Gatlin said. In January, he was rehospitalized.

Though he’s on a slower growth path than others, Rowan was making strides with each developmental milestone before last summer, according to Gatlin. “Now we’ve just gone way back,” she said. He tires quicker, she said, and he has a harder time withstanding high temperatures.

A lover of spooky things, critters under rocks, and hugging the neighborhood goats, Rowan is adjusting to new physical setbacks. For his 14th birthday last month, he visited the North Carolina Zoo, a place he used to walk through without issue. This time, he saw the animals from his new special needs stroller—one that insurance “actually paid for,” Gatlin said. 

Thanks to a nonprofit, Rowan recently got his first adaptive tricycle. He quickly gets exhausted pedaling, but he finds his newfound freedom thrilling. 

Gatlin knows it’s all fragile. In a few years—the parties won’t say how many—Cigna and UNC Health’s contract will be up for renegotiation. 

“Tomorrow, my company could change insurance,” she said. “I’m under no illusion that I am safe.”