Rates that Blue Cross Blue Shield of Michigan charges small businesses for employee health coverage would increase modestly and in some cases decline for policies renewed in the second half of 2018.
Continuing the rate moderation that began in the latter half of 2015, Blue Cross Blue Shield seeks state regulatory approval for an average 2.5-percent increase in rates for small businesses using PPO coverage, and a slight 0.2-percent decrease for subscribers to HMO subsidiary Blue Care Network. The proposed rate changes are for small employers renewing policies in the third and fourth quarters.
“Small group is very important to us, and for us to be able, year over year, to have these moderate or pretty flat increases has been great,” said Sandra Fester, vice president for middle and small group business at Blue Cross Blue Shield.
The rate proposal to the state affects some 19,000 small businesses across Michigan and 293,000 people covered by Blue Cross Blue Shield of Michigan, which in the first quarter of 2018 increased PPO rates by 5 percent and decreased HMO rates by 3.1 percent. Second-quarter policy renewals will get the same rate adjustments.
About two-thirds of Blue Cross Blue Shield’s small business clients use the PPO product and one-third subscribe to the HMO.
As in past years, Blue Cross Blue Shield credits a combination of factors for the rate moderation, which is the result of a lower medical claims trend that directly influences rates.
Prior to the passage of the federal Affordable Care Act in 2010, Blue Cross Blue Shield was the only “insurer of last resort” in Michigan that had to accept everybody who sought coverage, regardless of health status. That often led to what’s known as adverse selection and left the insurer with a subscriber base that was the costliest to insure.
The move to value-based contracting that pays doctors and hospitals for quality and outcomes, rather than per procedure, has helped as well, Fester said. Value-based reimbursement contracts that provide incentives to care providers to raise quality, become more efficient and eliminate waste resulted in $427 million in cost savings over six years, Blue Cross Blue Shield estimates. They also contributed to a 19-percent reduction in adult ET visits.
“We’re starting to really see that pay off because we are having success coordinating with our physicians, and with that comes quality care for our members,” Fester said. “It has obviously had impacts on the trend.”
Whether the rate trend of the last few years will last into the future remains an unknown.
Predicting future medical claims trends is difficult, as is the potential impact of new medical technologies and pharmaceuticals that may come to market, Fester said.
Blue Cross Blue Shield is the largest health insurer in Michigan with 4.62 million people enrolled in various health plans at the end of 2017, up by nearly 55,000 from a year earlier. Enrollment by small employer groups alone increased more than 20,000 people.
The health insurer for 2017 recorded an operating margin of $385 million on revenue of $26.9 billion, a margin of 1.4 percent. The results include subsidiaries and gains from investments.
“Across the board, 2017 was a very strong year for our business,” said President and CEO Daniel Loepp said in a statement on the insurer’s financial performance. “Achieving membership gains speaks to the efforts we’ve made as a company to improve our customers’ experience and provide health insurance products that improve our members’ lives.”