Blue Cross Blue Shield of Michigan credits closer ties with doctors and hospitals to drive efficiency and quality improvements with leading to lower rates for small businesses.
Under a proposal before state regulators, Blue Cross Blue Shield wants to reduce rates for employers with 50 or fewer employees by a statewide average of 1.3 percent for PPO policies and an average of 3.2 percent for its Blue Care Network HMO, said Jeff Connolly, West Michigan president and senior vice president of group business for Blue Cross Blue Shield.
The lower rates would start for employers renewing policies in the third and fourth quarters and affect coverage for some 261,000 people employed at 15,000 small businesses across Michigan.
The proposals to the state for the second half of this year continue a trend of rate moderation that’s partly a product of Blue Cross Blue Shield’s move to value-based contracts with many care providers. More than 85 percent of medical claims by the state’s largest health insurer are now paid under value-based contracting, which is replacing the traditional fee-for-service reimbursement model and rewards care providers for improved cost and quality.
“That’s really helped change the dynamic of how patients are treated,” Connolly said. “It’s not just about how many times a patient is treated, but how well a patient is treated. We’re rewarding for that and the bottom line of that is a savings that is not insignificant.”
About 70 percent of Blue Cross Blue Shield’s small-group members are enrolled in PPOs, and the remaining 30 percent are in HMO policies.
From 2014 to 2017, rates for PPO policy renewals statewide increased an average of about 2 percent, Connolly said. HMO rates increased 3 percent on average or “slightly less” over the three-year period, he said.
Rates for PPO policy renewals from 2014 to 2017 in the Grand Rapids area trended higher by 1 percent or less, and 2 percent or less for Blue Care Network, Connolly said.
“Over the past several years, we have really mitigated the inflationary costs to our employer base, and as we roll into 2017, that trend continues,” Connolly said. “Michigan has been very favorable in the small group space the last several years.”
The rate trend for the small group market is far different from several years ago, when small employers commonly received rate increases that hit double-digits in some cases.
Prior to the passage of the federal Affordable Care Act in 2010, Blue Cross Blue Shield was the sole “insurer of last resort” in Michigan that had to accept everybody who sought coverage, regardless of their health status. That often left the insurer with a subscriber base that was the costliest to insure.
The ACA changed that by prohibiting delays in coverage for people with pre-existing medical conditions and requiring all insurance carriers to accept anyone seeking coverage. As a result, Blue Cross Blue Shield no longer gets hit with what’s known as adverse selection in its member base.
“We can hold the barometer of those that are lower risk to balance off those that are higher risk,” Connolly said. “Out of the gate, we were in a very different spot than many other carriers. We went from an uneven playing field with a pretty significant market share to a level playing field with a significant market share with upsides. That has benefitted us.”