Earlier this month, after months of negotiations, Providence Health and Aetna reached an agreement on a three-year contract to keep the insurance carrier in-network in Northern California and two other regions in the state.

The contract took effect Sept. 1 and was retroactive to July 1, according to Providence. The agreement also includes Orange County and the High Desert, which is San Bernardino County.

At one point during negotiations, Providence sent a letter to its members notifying them that Aetna would become an out-of-network insurance provider as of Sept. 1, according to Norman Sheehan, of Norman Sheehan Insurance Agency LLC, in Santa Rosa. He said a client forwarded him the letter on Aug. 19. It is not known when the letter was sent to Providence members.

“There was a sigh of relief when the cancellation of the contract was reversed,” Sheehan said.

He said in his 20 years selling health insurance, he’d never seen the rescinding of a cancellation between a health care system and an insurance company.

“A new contract was negotiated prior to termination of the existing contract, which was Sept. 1, 2024,” Hannah Baker, vice president, contracting, Providence South Division (California), said in an email statement. “This is not an uncommon practice.”

In a blog post earlier this year, Providence was more forthcoming. However, a spokesperson did not answer when asked for a specific date the information was posted.

The health care system stated post-pandemic monetary losses and other challenges are affecting its negotiations with insurance companies. They include the “impacts of inflation, the worst health care labor shortage in decades and global supply chain disruptions.”

Revenue and reimbursement challenges, Providence noted, are not keeping pace with the heightened costs of caring for patients.

“These costs increased 19% between 2020 and 2022, and have only continued to rise,” according to Providence. “As part of our critical payer strategy, we are actively reviewing, and in many cases renegotiating, the majority of our commercial contracts with insurers.”

To that point, Aetna is not the sole insurance company Providence has bargained with this year.

Another is Blue Shield of California. In an April 4 news release, it stated it couldn’t reach a new agreement with Providence ahead of its in-network contract that was set to end June 1.

“At this time, the gap between what Providence is requesting and what Blue Shield can afford is too large to overcome,” Tracy Barnes, Blue Shield’s vice president of provider partnerships and network management, stated in the April release. “We recognize the challenges of the rising cost of health care, and we negotiate on behalf of our members and clients to achieve a mutual goal of reasonably priced health coverage.” Blue Shield of California also stated it “voluntarily caps its net income at 2%.”

Blue Shield issued a subsequent release May 1, stating an agreement with Providence had been reached on a new contract that would keep members in-network.

For Aetna’s part in the Providence Health agreement, it provided a statement dated Sept. 3, which it said was on behalf of both parties.

“Providence and Aetna, a CVS Health business, are pleased to announce that we have reached a multiyear agreement that keeps hospitals and doctors in the Providence family of organizations in Washington and California in network for all Aetna members,” according to the statement.

Providence’s hospitals in the North Bay include Santa Rosa Memorial Hospital, Petaluma Valley Hospital, Healdsburg Hospital and Queen of the Valley Medical Center in Napa.