University of Michigan Health Plans has announced it will discontinue its U-M Health Plan, including all Medicare Advantage coverage, by December 31, 2025, affecting approximately 8,612 Medicare beneficiaries across Michigan.
The decision ends the health plan operations Michigan Medicine inherited through its acquisition of Sparrow Health System.
Here’s what you need to know.
What’s Happening
University of Michigan Health Plans will completely exit the health insurance market by the end of 2025. The U-M Health Plan operates Michigan Care and Michigan Care Advantage plans, serving members primarily in the Ann Arbor and Lansing areas.
Coverage for current Medicare Advantage members will end December 31, 2025. Michigan Medicine will continue to provide coverage for claims filed until that date and will process payments continuing into 2026. Members will need to select new coverage during Medicare’s Annual Enrollment Period (AEP), which runs from October 15th to December 7th.
According to enrollment data, approximately 8,612 Medicare Advantage members will be affected by this market exit. The discontinuation will also lead to employee layoffs, though Michigan Medicine is working to reassign displaced workers and provide severance and career counseling.
Why It Matters
The U-M Health Plan’s exit highlights the challenges academic medical centers face in operating health insurance businesses alongside their core missions of patient care, education, and research. The plan originally operated as Sparrow Health Plan before Michigan Medicine acquired the Sparrow Health system in April 2024.
The company joins a growing list of insurers scaling back coverage, including UnitedHealthcare, Humana, Samaritan Health Plans, and UCare.
Michigan Medicine spokesperson Mary Masson cited multiple factors behind the decision:
- Michigan’s increasingly competitive health insurance landscape
- Changes to Medicare Advantage programs from the Centers for Medicare & Medicaid Services (CMS)
- Financial sustainability challenges
- Evolving market trends and member needs
“Despite significant efforts to maintain the plan, the increasingly competitive health insurance landscape and CMS changes to Medicare Advantage plans have made it unsustainable to continue offering the high level of service our members deserve,” Masson said.
What Are Medicare Advantage Plans?
Medicare Advantage (also called Medicare Part C) plans are an alternative to Original Medicare, offered by private insurers approved by Medicare. These plans often bundle:
- Hospital coverage (Part A)
- Medical coverage (Part B)
- Prescription drug coverage (Part D)
- Potential additional benefits such as dental, vision, or hearing
With Medicare Advantage, your coverage is administered by a private insurer rather than directly through the government. These companies receive payments from Medicare to provide your benefits.
It’s important to know that most Medicare Advantage plans operate with networks of doctors and hospitals, and some may require referrals to see specialists. However, they can offer lower monthly premiums and additional benefits that Original Medicare doesn’t include.
Medicare Advantage has grown significantly in popularity, with over 32 million beneficiaries enrolled in 2024, making up roughly 54% of all Medicare participants.
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