MICHIGAN — Michigan’s health-insurance market remains one of the least competitive in the nation, according to an annual nationwide analysis by the American Medical Association.
The AMA overall ranks Michigan as the third-least competitive state for commercial health coverage as of 2010, down from fourth in 2009 and right behind Hawaii and Alabama.
Michigan also ranks second-least competitive in the PPO market, above only Alabama, according to the AMA.
The report shows Blue Cross Blue Shield of Michigan’s dominance in many markets across the state with 69 percent statewide market share across all product lines. Among the exceptions is West Michigan, where rival Priority Health holds dominant market share 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 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.
The results in the 2012 edition of the report are similar to the AMA’s findings in previous years and come 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 AMA 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.
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.
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.”
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.
He described the report as the AMA’s “annual attack on large Blues plans (across the country) and it doesn’t jibe with the reality on the ground in the market.”
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.