MICHIGAN — An American Medical Association report that again ranks Michigan’s health-insurance market as one of the least competitive in the nation provides even more fodder for argument between Blue Cross Blue Shield of Michigan and its competitors.
The AMA overall ranks Michigan as the third-least competitive state for commercial health coverage as of 2010 — down from fourth in 2009 — behind Hawaii and Alabama. In virtually every market, a vast share of coverage is held by just two insurance carriers, often with the Blues in the lead position by a wide margin.
Michigan also ranks second-least competitive in the PPO market, above only Alabama, according to the AMA.
An AMA spokesman, in an email to MiBiz, directly tied the report’s findings for Michigan to what he called Blue Cross Blue Shield of Michigan’s “near monopoly” in many areas of the state. He did not respond to a request for further comment.
The results in the 2012 edition of the competition report are similar to the AMA’s findings in previous years. The report was released as state legislators weigh bills to transition Blue Cross Blue Shield to a not-for-profit mutual insurance company and bring the Blues, HMOs and commercial insurance carriers under the same regulations.
The report provides ammunition to critics who say the legislation needs to change to create a more competitive landscape in Michigan.
“That bill must be amended to encourage more competition, including a mandate that Blue Cross not use its massive market power to force providers to sign contracts limiting competition with other insurers, and a requirement that the company pay its fair share of shortfalls in Medicare and Medicaid,” said Rick Murdock, executive director of the Michigan Association of Health Plans that represents HMOs and commercial carriers.
“Failure to include these provisions will mean Michigan’s insurance market will be dominated by the Blue Cross monopoly for decades to come — forcing companies and individuals to pay higher insurance rates than if our market was competitive,” Murdock said.
In a September interview with MiBiz, Blue Cross Blue Shield of Michigan CEO Dan Loepp defended the insurer’s size. Blue Cross Blue Shield won much of its new business in the self-funded market for large employers through a bidding process, Loepp said.
“Do you tell any of the large West Michigan employers that they can’t buy Blue Cross … because they have too much market share?” he told MiBiz. “So this market-share argument, to me, is just ridiculous because we are in the open market. Every West Michigan 500-plus (employee) business that’s gone Blue, we earned the business on an RFP process. So how is that not competitive?
“That’s simply more hyperbole from those that don’t have a good answer. They say that, ‘Well, you’re too big.’ Yet time after time, businesses that employ people in Michigan are picking Blue.”
The AMA report shows that Blue Cross Blue Shield has a 69 percent statewide market share across all product lines.
Among the exceptions is West Michigan, where rival Priority Health holds dominant market shares of 81 percent in Kent County, 86 percent in Ottawa County and 66 percent in Muskegon County for HMO coverage.
Priority Health also leads the Ottawa County market across all health insurance products with a 49 percent share, versus Blue Cross Blue Shield’s 36 percent. Ottawa County is the only market in the state where Blue Cross Blue Shield lacks a leading overall market share, according to the AMA report.
The Grand Rapids-based Priority Health overall has a 9 percent statewide market share across all products and 24 percent for HMO coverage alone. Blue Care Network, the HMO subsidiary of Blue Cross Blue Shield, has a 44 percent statewide market share.
Blue Care Network holds a 93 percent share of the HMO market in Battle Creek and an 85 percent market share in the Kalamazoo-Portage area.
Across the state, Blue Cross Blue Shield of Michigan has market shares of more than 70 percent across all product lines in Ann Arbor, Battle Creek, Bay City, Flint, Jackson, Niles-Benton Harbor and Warren-Farmington Hills-Troy, according to the AMA report that annually looks at competition for health insurance in all 50 states.
Blue Cross Blue Shield also dominates PPO coverage statewide with an 85 percent market share. The nearest PPO competitor is Aetna Inc. at 7 percent, according to the AMA.
Andy Hetzel, vice president of corporate communication for Blue Cross Blue Shield of Michigan, notes the Michigan Office of Financial and Insurance Regulation consistently has declared a competitive marketplace for the small-group insurance market for employers with two to 49 employees.
“And the regulator knows the market here more than the AMA knows it,” Hetzel said.
The most recent OFIR competition report on the small-group market in Michigan, issued in 2011, found that Blue Cross Blue Shield of Michigan had a leading 37.6 percent share of the market as of the prior year. Blue Care Network had another 8.7 percent market share.
Priority Health was second in the small-group market with an 18.7 percent share as of 2010, according to OFIR.
Hetzel described the report as the AMA’s “30,000-foot view of the market.”
“It’s their annual attack on large Blues plans (across the country) and it doesn’t jibe with the reality on the ground in the market,” Hetzel said.
Nationally, the AMA says a majority of health insurance markets are highly concentrated and lack strong competition.
“These markets are ripe for the exercise of health insurer market power, which is detrimental to society. The results of this study should prompt federal and state antitrust authorities to more vigorously examine the anti-competitive effects of proposed mergers between health insurers,” the AMA report states.
A national trade association for health insurers, America’s Health Insurance Plans, called the AMA analysis “fatally flawed” and dismissed the findings that connect consolidation among health insurers across the country with higher costs.
“Families and employers in every state have multiple choices of both insurance plans and types of coverage. Moreover, research clearly demonstrates that provider consolidation — not concentration of health plan markets — is driving up health care costs for consumers and employers,” AHIP stated.