A contract dispute between Premera Blue Cross and MultiCare Health System is putting thousands of Spokane-area workers and employers on notice for risk of higher health care costs, or potential disruptions in care, if the two sides fail to reach an agreement by the end of May.

At the center of the negotiations is a divide over cost and affordability. Premera Blue Cross has signaled that MultiCare’s proposed rate increases, ranging from about 20% to as high as 90% for some services, are unsustainable for employers and members, while MultiCare contends that Premera’s current reimbursement rates are among the lowest and haven’t kept pace with rising labor, supply, and infrastructure costs.

As part of the negotiation process, MultiCare has issued a termination notice to Premera, effective May 31. The contracts MultiCare has chosen to terminate — if an agreement cannot be met — include all MultiCare clinics, hospitals, and providers. The negotiations do not impact Premera members with Medicare Supplement Coverage.

David Condon, vice president of Mountlake Terrace, Washington-based Premera Blue Cross, places an emphasis on the importance of affordability. Hospital prices are the largest contributor to health care costs, he says, adding that 90% of Premera’s premiums go toward claims and health care costs. Increases could potentially raise the cost of childbirth by up to $7,000 and a knee replacement by approximately $17,000, he claims.

One key stance that Premera wants to negotiate is pricing that reflects regional economic communities. Condon claims that MultiCare is requesting Seattle/Puget Sound-level pricing for Eastern Washington markets. The cost of living in Spokane is about 30% less than the Seattle area, he says, adding that Inland Northwest employers and members cannot sustain Seattle-level reimbursement rates.

Premera’s Spokane offices are located in the Wonder Building, at 835 N. Post. As of October, there were 235,752 Eastern Washington members enrolled, according to the Journal’s annual list of Health Care Plans. In Spokane, Premera has 64,000 members, Condon says.

Many of Premera's members in Spokane have employer-sponsored plans, with a significant number of self-insured employers in which employers directly pay health care costs. Condon notes that only the members who receive services at MultiCare will be impacted if negotiations fail.

“We’re committed to making sure that MultiCare is fairly compensated for the care they provide our members, but it also has to be within reason,” Condon says. “Their current proposal on the table is just not reasonable for our members.”

In a statement, MultiCare says it's focused on securing systemwide agreement with Premera to ensure continued care for Premera members, as well as financial support for doctors, nurses, and care teams. Reimbursement rates from Premera are among the lowest rates for the health system and have not kept pace with the rate of inflation and other health care-related costs, according to a statement from the hospital.

“Premera is one of the largest commercial insurers, but its reimbursement rates for hospital and clinician services are among the lowest,” the hospital's statement says. “Those rates have not kept pace with rising costs driven by inflation, workforce needs, and investments necessary to preserve services and ensure long-term stability for the communities we serve.”

MultiCare Deaconess and MultiCare Valley hospitals are two of the largest health care providers in Spokane County. As reported by the Journal of Business, the organization had projected a full-year 2025 operating loss of about $33.9 million, which is an improvement from the previous year's operating loss of $39 million.

“Like most health care organizations, MultiCare continues to face financial challenges,” Wade Hunt, president of MultiCare Deaconess and Valley hospitals, told the Journal in December.

“One of the primary factors in our financial challenges includes our payer-patient mix. Often, insurance companies do not pay the full price of our services,” he says.

Health care costs also are rising at a much higher rates in 2026 than they have previously, as previously reported by the Journal. Specialty drug inflation, chronic disease care, later-stage diagnoses, provider shortages, and delayed care are attributed to rising coverage costs.

Employer health care coverage cost increases have previously ranged between 6% and 7%, but are now climbing to 8% to 15%. Some employers are experiencing renewal increases as high as 60%, says Melissa Koontz, senior vice president of employee benefits at the Spokane office of Alliant Insurance Services Inc.

“The highest renewal we had this year was 60%, which is absolutely outrageous,” Koontz told the Journal in December 2025. “It is completely not sustainable for employers. The hardest part is that everybody would like for somebody to be to blame for those massive increases in costs. But we’re facing all of these really hard realities of health not getting better. And these miracle treatments that are coming out cost a lot of money, and people are living longer.”