 |
Twice-Weekly Briefing
Friday, July 17, 2026
Issue 260717-48
|
|
|
The MOC Brief
Health policy, priced and translated for self-funded plan sponsors
|
|
In This Edition
Five developments from the past 48 to 72 hours, and what each one costs you.
| 1. |
CMS proposes a 1.68 percent Medicare physician pay cut for 2027 |
| 2. |
Alignment and SCAN sue CMS over Medicare Advantage star ratings |
| 3. |
HHS warns 519 hospitals over price transparency failures |
| 4. |
PwC projects a 9 percent 2027 medical cost trend |
| 5. |
New Jersey advances PBM reform bill A1502 |
|
|
| 1 · Medicare · July 14, 2026 |
| CMS Proposes a 1.68 Percent Medicare Physician Pay Cut for 2027 |
| On July 14, CMS released the CY 2027 Medicare Physician Fee Schedule proposed rule, CMS-1848-P. It sets the nonqualifying APM conversion factor at $32.84, a 1.68 percent cut, and the qualifying APM factor at $33.17, a 1.19 percent cut. The rule also proposes paying 100 percent for the most expensive service and 50 percent for any additional E/M visit or surgical procedure the same physician furnishes on the same day as a 0-, 10-, or 90-day global procedure. Public comments are due by mid-September 2026. |
|
MOC Perspective
A Medicare rate cut is the ceiling that pushes commercial billing pressure back into your plan. Physician groups losing 1.68 percent on Medicare will accelerate their 2027 commercial rate negotiations, and same-day E/M consolidation will shift charge patterns toward unbundled visits and separate procedure days on the commercial side.
What to do now
| ▪ |
Benchmark your 2027 physician contracts at Medicare plus 130 to 150 percent for primary care and Medicare plus 175 to 200 percent for specialty. |
| ▪ |
Add a same-day service consolidation clause to any 2027 renewal that mirrors the CMS 50 percent reduction logic. |
| ▪ |
Audit your Q3 2026 claims for early evidence of visit-splitting before it becomes the new baseline. |
|
|
| Source: CMS Newsroom |
|
|
| 2 · Medicare Advantage · July 10, 2026 |
| Alignment and SCAN Sue CMS Over Medicare Advantage Star Ratings |
| On July 10, Alignment Healthcare filed suit in the U.S. District Court for the District of Columbia, alleging CMS wrongly kept 10 measures in its June star ratings recalculation that a judge in the Clover Health case ruled were not properly vetted. Alignment argues three of its 4.0 contracts should be 4.5, worth about $50 million in bonus payments. SCAN Health Plan filed a parallel suit on similar grounds. The two join Elevance Health's earlier action seeking $115 million, putting more than a quarter-billion dollars of MA bonus payments in dispute. |
|
MOC Perspective
The growing pile of star ratings lawsuits signals that Medicare Advantage benchmark payments are now legally unstable, and that changes the math on your group MA retiree strategy. If Alignment, SCAN, and Elevance all win, CMS pays out more than $270 million in additional bonuses, which tightens federal pressure on 2028 MA rates and rebate structures.
What to do now
| ▪ |
Model a 4 to 7 percent 2028 group MA premium bump against the Clover-line scenarios if you carry retiree MA obligations. |
| ▪ |
Insert a star ratings recalculation adjuster into any 2027 group MA contract. |
| ▪ |
Reopen the direct-contract EGWP versus MA analysis for any retiree population above 5,000 lives. |
|
|
| Source: Healthcare Dive |
|
|
| 3 · Transparency · June 2026 |
| HHS Warns 519 Hospitals Over Price Transparency Failures |
| HHS and CMS issued 519 warning notices or Corrective Action Plan requests to hospitals between April and early June 2026 for price transparency deficiencies, covering every state except Alaska. Texas led with 42 flagged facilities, then California with 38, Indiana with 34, and Louisiana with 27. Warning notices carry a 90-day cure window and CAPs carry a 45-day window. Unresolved failures trigger civil monetary penalties up to $5,500 per day, or roughly $2 million a year per hospital. |
|
MOC Perspective
This enforcement wave is the data infrastructure self-funded plans have wanted since 2021. Every warned hospital is publishing corrected machine-readable files inside a 45- to 90-day window, which hands you clean comparison points on negotiated commercial rates that were opaque a year ago.
What to do now
| ▪ |
Pull the corrected machine-readable files from every in-network hospital in the top four noncompliance states. |
| ▪ |
Benchmark your DRG and outpatient APC rates against the median in-market commercial rate. |
| ▪ |
Use any variance above 15 percent as the anchor for a 2027 rate reset or a center-of-excellence carve-out. |
|
|
| Source: Fierce Healthcare |
|
|
| 4 · Cost Trend · July 2026 |
| PwC Projects a 9 Percent 2027 Medical Cost Trend, the Highest in Nearly 20 Years |
| PwC's Behind the Numbers report and the Business Group on Health 2027 employer survey both land on a 9 percent group medical cost trend for 2027, with individual trend at 8.5 percent. Named drivers include provider adoption of AI-enabled revenue optimization tools, sustained behavioral health growth, escalating out-of-network disputes under the No Surprises Act, and specialty pharmacy including GLP-1s and gene therapies. Prescription drug spend alone is projected to grow 9 percent in 2026 and hold that pace into 2027. |
|
MOC Perspective
Nine percent is the point where the 60-year insurance-carrier operating model stops working for the average self-funded plan. An $18,500 per-employee base compounding at 9 percent reaches $20,200 in 2027 and $22,000 in 2028, absorbing your wage growth twice over.
What to do now
| ▪ |
Force your 2027 renewal into a component-level trend disclosure: unit cost, utilization, specialty drug, behavioral, and out-of-network IDR. |
| ▪ |
Tie 2 to 4 percent of admin fees to documented trend mitigation. |
| ▪ |
Commit 15 percent of your 2027 plan-design budget to direct-contract primary care and GLP-1 stewardship, the two levers with a track record of pulling a 9 percent trend down to 6. |
|
|
| Source: PwC |
|
|
| 5 · PBM Reform · July 6, 2026 |
| New Jersey Advances PBM Reform Bill A1502 |
| On July 6, the New Jersey Assembly advanced Assembly Bill 1502, a PBM reform measure requiring 100 percent rebate pass-through to plan sponsors, mandatory disclosure of spread pricing, pharmacy reimbursement floors tied to NADAC, and a ban on affiliated pharmacy steering. The bill sits on top of the federal 2026 Consolidated Appropriations Act PBM provisions that take effect for ERISA self-funded plan years beginning on or after July 1, 2026. New Jersey joins Illinois, Tennessee, and 14 other states with active 2026 PBM statutes. |
|
MOC Perspective
Every new state PBM statute is leverage for self-funded plans, even where ERISA preemption applies to your plan design. State transparency standards give you a live benchmark for what unaffiliated pharmacies actually pay for the same NDC, which exposes the spread margins PBMs have buried in bundled admin fees.
What to do now
| ▪ |
Demand a NADAC-plus-dispensing-fee floor on all 2027 PBM contracts. |
| ▪ |
Require quarterly rebate reconciliation tied to the federal 90-day pass-through deadline. |
| ▪ |
Rerun your 2026 mail-order versus retail total cost of ownership using the New Jersey and Illinois disclosures as the benchmark. |
|
|
| Source: NJBIZ |
|
|
The Bottom Line
Four of these five stories land on the same line of your 2027 renewal. Provider pay pressure and a 9 percent trend push cost up, while the hospital transparency wave and state PBM reform hand you the benchmarks to push back. Every one of those shifts is negotiable if you raise it before the renewal letter arrives, and fixed for a year if you raise it after.
|
|
|
Jude Odu
Founder and Principal, Model Optimal Care
Author of Model Optimal Care: End U.S. Healthcare Waste, One Health Plan at a Time
|
|
|
|
