This article was originally published by The Lund Report and is used with permission.
PacificSource may “reluctantly” stop serving more than 90,000 members enrolled in the Medicaid-funded Oregon Health Plan in Lane County on Jan. 1, 2026 unless state health officials and the Kotek administration take further steps to staunch the insurer’s massive losses there, The Lund Report has learned.
However, the Springfield-based insurer will continue overseeing care for low-income OHP members in Marion, Deschutes, Hood River, Polk, Wasco, Crook, Klamath and Jefferson counties.
With a key deadline falling later on Thursday, the possible pullout from Lane represents the biggest potential change known so far to how the state delivers care to 1.4 million low-income Oregonians. State health officials are facing what some consider the biggest challenge in years to the integrity of the Oregon Health Plan, once considered a model for other states. When a care organization pulls out, it means their provider networks can be affected, threatening patients’ access to care and continuity of care.
The deadline in question —for care organizations to notify the state whether they accept the rates being offered to provide care—has been closely watched. Unlike how commercial health insurance works, Oregon operates the Oregon Health Plan largely by granting contracts to coordinated care organizations to oversee networks in geographic regions. It is among the states most reliant on managed care entities or insurers to provide care.
The Oregon Health Authority asked state lawmakers to set aside $66 million to boost the care organizations' rates by 3.4% — despite cost trends of around 10% around the country and in Oregon. Then state health offiicals offered larger rate increases averaging 6.8%, sparking some of the care organization executives to say they would have to leave the program considering the massive losses they've been experiencing in recent years due to low payments from the state.
The state recently boosted the average hike to 10.2% and promised to make program changes to limit risk to the care organizations. Most care organizations are expected to accept the rates despite continued uncertainty over whether they'll continue to lose money.
State hires companies to manage care regionally
In all, 11 organizations operate 16 regional networks around the state. Most of them enjoy a regional monopoly, almost like a franchise. In Lane County, however, PacificSource is not the only care organization to oversee Oregon Health Plan operations. The other one, Trillium Community Health Plan, is owned by Centene, a national for-profit Medicaid insurer that has been experiencing major financial challenges of its own.
“We are continuing our discussions with OHA and hope to arrive at a solution that allows us to continue to serve Lane County,” said Erin Fair Taylor, the vice president for Medicaid at PacificSource Health Plans. “However, we reluctantly submitted a notice to the state indicating our intent not to renew the 2026 Lane County CCO contract under the current proposed terms and rates.”
Negotiations have been under way for months, with the state promising to make changes to the program to lower risks to the care organizations. It’s unclear whether the state will extend the deadline to reopen negotiations with PacificSource. Oregon Health Authority officials have not responded to a request for comment on what they will do if a care organization pulls out.
“We did not come to this decision lightly, and we are deeply disappointed that we have not yet reached a path forward,” Fair Taylor added. “Our priority has always been to provide Oregonians with access to high-quality care. Unfortunately, after extensive discussions, it became clear that continuing participation under current terms would undermine our ability to effectively serve the people who rely on us and put the long-term sustainability of our organization at risk.”
She added, “We know this decision affects the lives of many Oregonians and we remain committed to working with the Oregon Health Authority, state leaders, and our partners to ensure members experience as smooth a transition as possible.”
The insurer is also pulling out of Health Share of Oregon, the care organization serving Multnomah, Washington and Clackamas Counties that is essentially a collaborative dominated by health plans and Care Oregon. Though PacificSource oversees care for 20,000 people in the region for Health Share, they are unlikely to notice much of a change. That’s because PacificSource partners with Legacy Health and its delivery network, which will continue to be part of Health Share.
“We will be working diligently with Legacy and Health Share to ensure a smooth transition,” Fair Taylor said. “This transition should not disrupt any members’ provider relationships or continuity of care.”