Health coverage from Blue Cross Shield of Michigan maintains a dominant hold in most markets across the state with the exception of Priority Health’s home base.
As a result, Michigan in 2016 ranked as the sixth least competitive state in the nation for health insurance, according to a recently-released annual report from the American Medical Association.
The report, which looked at health plan competition in 389 metro areas across the nation, found little difference in Michigan from previous years. That’s because Blue Cross Blue Shield of Michigan leads every metropolitan statistical area for all forms of coverage — HMO, PPO, point-of-service, and individual public exchange policies — with a nearly two-thirds market share.
In West Michigan, Blue Cross Blue Shield’s leading position ranges from a 76-percent market share overall in the Battle Creek area for all product lines, to a 53-percent share in Ottawa County, according to the AMA report.
The findings reinforce the view that Michigan “is not a very competitive state when it comes to competition and choice for consumers of health insurers,” said Dominick Pallone, executive director of the Michigan Association of Health Plans that represents HMOs in Michigan.
“This is not something new. This is something that we’ve continued to be in the bottom 10 for as far back as I’m aware,” Pallone said. “This AMA study shows we’re not in a good place right now.”
A state’s standing in the AMA report matters from a choice, cost and product innovation perspective, according to Pallone. All three can “fall by the wayside” without a more competitive market, he said.
Across Michigan, Blue Cross Blue Shield in 2016 held 66 percent of the market for all forms of coverage. Priority Health, owned by Spectrum Health, ranked second at 9 percent but did lead in two West Michigan markets for HMO coverage, according to the AMA.
From a cost perspective, having a single insurer hold such a large market share disadvantages other carriers when they work out participating agreements with hospitals and other care providers, Pallone said.
“If you’re the dominant carrier in a marketplace, it gives you the ability to negotiate with providers from a little bit better perspective than others,” he said. “If you’re looking to purchase health insurance from one of those others that don’t have that dominant position and the ability to negotiate discounts because of size, it makes it a little difficult to be competitive on a price perspective.”
DOMINATION OR COMPETITION?
Pallone also notes that while a large number of insurers are licensed to do business in the state, the question comes down to how many of them actively compete in the marketplace and respond when employers bid out their employee health coverage.
“Just looking at who’s licensed doesn’t really bear the whole story,” he said. “It’s who’s competing, and this index really shows that because of the market saturation problem that exists for consumers, they truly don’t have a large amount of choice in who they want to go with. We believe consumers want a competitive marketplace because it can help drive down costs.”
While MAHP views the market dominance as a challenge, Blue Cross Blue Shield of Michigan says the marketplace is merely deciding between competitors.
Blue Cross Blue Shield of Michigan specifically cites West Michigan, where it leads overall and for PPO coverage, but trails rival Priority Health in the HMO market.
“We have robust competition in West Michigan,” said Helen Stojic, a spokesperson and director of corporate affairs for Blue Cross Blue Shield of Michigan. “We are gratified that our customers and members continue to choose Blue Cross as their health plan and we believe it is because we offer an array of good products and networks.”
Priority Health — which declined to comment for this report — in 2016 held a leading 61-percent share of the HMO market in Kent County, compared to 34 percent for Blue Cross Blue Shield’s HMO subsidiary, Blue Care Network. In neighboring Ottawa County, Priority Health led HMO coverage with a 64-percent share of the market, versus 34 percent for Blue Care Network.
In the Lansing area, the Sparrow Health System-owned Physicians Health Plan held 68 percent of the HMO market. Blue Care Network was second with 56 percent.
‘COULD BE WORSE’
Priority Health’s leadership for HMO coverage in Kent and Ottawa counties likely reflects the legacy from the 1992 merger of the former Butterworth HMO in Grand Rapids and Lakeshore HMO in Holland, said Bob Hughes, the principal of Advantage Benefits Group Inc. in Grand Rapids.
From that merger, Priority Health continues to hold a leading position within its hometown markets and has grown to become the second-largest health plan in Michigan and a viable competitor to Blue Cross Blue Shield, Hughes said.
“Priority’s DNA is as an HMO. That’s what they started as and that’s their most competitive model,” Hughes said.
Blue Cross Blue Shield’s grip on a large share of the health insurance market in Michigan could stem in part from its prior role as the insurer of last resort in the state, Hughes said.
Prior to the passage of the federal Affordable Care Act that imposed an issue guarantee on all insurance carriers, Blue Cross Blue Shield was legally required to accept all people seeking coverage, regardless of their health status.
“That’s what allowed them to get a foothold,” Hughes said.
Despite the contention that Michigan is an uncompetitive state, “it could be worse,” he said.
‘NOT A ONE-HORSE TOWN’
Unlike some states where a Blues plan is the only viable option, Priority Health and others such as Sparrow Health System’s PHP and Detroit-based Health Alliance Plan, owned by Henry Ford Health System, offer some degree of competition, according to Hughes. He doubts the current competitive state will change anytime soon, if ever.
“Yes, we absolutely need more carriers, but the cost for a new carrier to come in and develop a network and get enough volume to make it work is a difficult challenge,” Hughes said. “It’s great that we have two healthy competitors going head to head, or it’d be a big problem.”
In contrast to the state’s consistent ranking as one of the least competitive markets, Michigan has always compared favorably to other states for health premiums, he said.
Across the U.S., a family health plan cost an average of $18,764 in 2017, according to the Kaiser Family Foundation. A family HMO plan cost an average of $19,071, a PPO cost $19,481, and a high-deductible plan with a savings account was $17,581.
In West Michigan, an annual survey by The Employers’ Association placed the average cost of a family plan at $16,368 in 2017.
“It hasn’t gotten better, and it hasn’t gotten worse,” Hughes said. “We’re fortunate that Michigan’s costs are lower for whatever reason. It’s not the lack of competition and thank goodness we’re not a one-horse town in this state.”