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Under what it says is increasing financial strain, CareOregon, the Oregon Health Plan’s largest insurer, recently added McKinsey & Company to its roster of consultants.
A nonprofit, CareOregon provides mostly Medicaid-funded health insurance to hundreds of thousands of Oregonians, with a particular concentration in the Portland area. It says per-person payments it gets from the state are not covering the actual cost of care—especially when it comes to behavioral health. It seeks far better funding rates from the state.
It’s also looking to make some adjustments internally.
“We have no choice but to rethink our approach to everything we do, from staffing to network policies,” CareOregon tells WW in a statement.
The decision to bring in McKinsey, a high-powered management consultancy, is likely to raise eyebrows. CareOregon did not answer questions about how much the firm would get paid and what specific work it would do, but it says the impulse to seek out third-party expertise is no great novelty. “Like other health plans and insurers,” it says, “we seek advice from a variety of outside consultants and firms who are able to offer advanced analytics, data on national trends and other insights.”
CareOregon has already made some changes. Earlier this summer, it says, it entered into voluntary separation agreements with 73 employees, laid off 80 more, and eliminated 70 vacant positions. It announced on July 31 that it would stop paying for out-of-network behavioral health services in two months—a timeline numerous therapists said they found outrageously fast as they scrambled to refer out their patients.
All this comes as the Oregon Health Authority sets the per person “capitation” rates it will pay Medicaid insurers like CareOregon in 2026. Given rising costs, the insurers argue the 6.8% average rate hike the state recently proposed is woefully inadequate. The combined 7.5% per-person rate increase offered to CareOregon entities would, according to an internal CareOregon document obtained by WW, be “less than half of what we need to breakeven.”
Skyrocketing healthcare costs are hitting many sectors. New data last week showed big Oregon hospitals had their worst collective first quarter operating margins in at least a decade. On the payer side, insurers for individuals and small businesses in the state are seeking to raise rates by a median 10%, even after getting approved last year to raise prices by a similar margin.
In contrast, Oregon’s Medicaid insurers, known as coordinated care organizations, got a 3.1% per-member pay bump from the Oregon Health Authority in the last contract cycle—meaning the CCOs on average are this year receiving an average of $530 per member per month, funded jointly by the state and the federal government.
The health authority said at the time that the rate reflected “state funding constraints.” And close observers tell WW that CCOs, on the basis of this rate, have struggled to balance their own budgets.
For CareOregon, among others, such struggles predate 2025. Its early 2024 returns were “not positive,” one internal document said, setting in motion some of the organizational changes that ensued. For that year, the nonprofit reports a consolidated operating loss of $230 million—largely a result of behavioral and mental health care expenses. (For context, it reported more than $1 billion in reserves in its latest available tax filings.)
Beyond overall rising costs, insurers say another dynamic is that more people are taking advantage of their benefits, and behavioral health services like therapy in particular. From a certain perspective this is not a bad thing, but it does cost money. CareOregon faces unique financial exposure in this regard, because it generally funds behavioral health services for members of Health Share of Oregon, a major Portland area CCO, even where its members are otherwise part of a separate Medicaid plan.
CareOregon seems increasingly wary of this state of affairs. In the internal document, the nonprofit said it has informed Health Share of Oregon that, at current rates, it is “unwilling to take behavioral health risk for hospital partners.”
As for its own operations, CareOregon described a strategic plan oriented, among other things, around administrative efficiency, rate advocacy, and changes to its provider network.
One in three Oregonians receive health insurance through Medicaid. Oregon Health Authority Director Dr. Sejal Hathi has told CCOs the agency will strive to provide them with an “adjusted contract package and/or rates as early as possible prior to Sept. 18th,” a state spokesperson says.
CareOregon emphasizes the need to act fast. It casts its financial challenges as part of a slow-building crisis that will accelerate quickly when key elements of Trump’s Medicaid-slashing Big Beautiful Bill kick in.
“We are working with the state to seek solutions—including adequate rates for 2026—to ensure we can continue serving our members with access to high quality, vital health care they deserve,” the insurer says. It adds, “Our state has a history of innovation and investment to serve Oregonians. We need to tap into that entrepreneurial spirit and come together now to find bold, long-term solutions and reimagine what Medicaid can and should be in Oregon.”
