Small employers who contract with Priority Health for their employee health benefits could pay slightly less for coverage next year.
In a filing with state regulators, the Grand Rapids-based Priority Health proposes to trim rates for its small-group HMO product by a statewide average of 0.8 percent. Rates for PPO and point-of-service plans sold by Priority Health Insurance Co. would dip 1.6 percent on average, according to a rate filing with the Michigan Department of Insurance and Financial Services.
The policy renewal rate filings for the first quarter of 2020 mark the second year in a row that Priority Health proposed small average decreases in premiums for small employers with 50 or fewer employees. While the proposed decreases are small, they continue a period of rate stabilization that stands in marked contrast to the often sizeable premium increases that small employers faced just a few years ago.
Diane Wolfenden, Priority Health’s vice president for east Michigan who oversees the small group market across the entire state, attributes the rate stabilization in part to better care management for members with high-cost chronic medical conditions such as diabetes, cardiovascular disease, asthma and depression.
“We have some really aggressive programs in-house to tackle emerging trends,” Wolfenden said. “To the extent we’re more successful in all of those programs, it keeps our (medical claims) trends lower than what you’re seeing across the industry.”
A dispensing rate above 90 percent for lower-cost generic drugs and a transparency tool the health plan offers members to look up the cost of diagnostic tests or medical procedures at competing providers also contribute to rate stabilization, Wolfenden said.
While the use of transparency tools nationally hovers around 3 percent, more than 10 percent of Priority Health’s members have looked up estimated costs before making a decision on where to have a test or procedure performed.
“People are taking more participation in their health care spending. When you have those high-deductible programs, I think there’s more thought that goes into what’s going on and maybe more questions asked,” Wolfenden said. “It’s still not as great as we’d like it to be, but we continue to see some growth in those tools and we think it’s having a positive impact on payouts as well.”
Rates for larger employers with more than 50 employees are experiencing “similar trends” to the small group market, Wolfenden said. Priority Health has yet to file a proposal for the large group market, although Wolfenden expects 2020 rate adjustments in the “very low single digits.”
“Our large-group market is performing well, too,” she said.
Priority Health’s rate proposals for 2020 somewhat contrast to average proposed rates for most of the 18 health insurance carriers that serve Michigan’s small group market.
Statewide, rates for small group coverage in Michigan would increase an average of 3.6 percent across all carriers and products for 2020 policy renewals, according to a summary from the Department of Insurance and Financial Services.
The rate adjustments are an average across the state. Actual rate changes will vary by employers based on a number of factors.
Filings to state regulators range from a proposed average increase of 13.1 percent for Humana Insurance Co., which has just a handful of enrollees in Michigan’s small group market, to PHP Insurance Co.’s 2.7-percent decrease.
Lansing-based PHP Insurance Co., which has fewer than 1,000 small group members, was one of three small group carriers, including Priority Health, to propose lower rates for 2020. Detroit-based Total Health Care USA Inc., with more than 5,400 people enrolled presently in small group coverage, proposed an average 0.2-percent decrease.
Blue Cross Blue Shield of Michigan, by far the largest small group carrier with more than 201,000 enrollees, proposed to raise rates 3.7 percent for 2020. HMO subsidiary Blue Care Network, with nearly 100,000 small group enrollees, proposed an increase of 5 percent for next year.
The 2020 rate proposals follow a five-year period in which annual rates from Blue Cross Blue Shield declined an average of 0.4 percent, said Jeff Connolly, senior vice president and president of the West Michigan and Upper Peninsula markets. He attributes that trend to partnerships with hospitals and care providers to contain costs and improve quality, particularly through value-based contracting that bases reimbursements more on outcomes as opposed to volume.
Connolly terms the proposed 2020 rates as “moderate” increases and a reflection of their cyclical nature and trends that “inherently tick up and down” over the long term.
“It’s a moderate increase, but we’re still working hard to keep those costs down,” he said. “We’ve been very proud of what we’ve done the last five years in the small group space.”
Carriers in the small group insurance market in Michigan provide health coverage for more than 426,000 people who work at small businesses across the state.
Statewide, enrollment in the small group market grew nearly 3 percent in 2019, or by more than 12,000 people from 2018.
Connolly attributes that growth to Michigan’s strong economy.
“Clearly, the small group economy has been growing and that’s been very favorable for us as well as others,” he said, noting that the resulting tight labor market has more small employers offering health benefits as an attraction and retention tool.
“The feedback we get from small employers (who are) recruiting talent, especially in a good economy, is providing good health coverage is critical,” Connolly said. “Small employers recognize that it’s difficult to afford, but in competing with large companies for talent, they need to provide that benefit.”
The rates proposals for 2020 come as an annual survey pegs the average cost at $17,472 this year for a family health plan in West Michigan.
A two-person plan in West Michigan costs an average of $13,752 for the year, and a one-person plan averaged $5,988, according to the 2019 survey of employer health costs by The Employers’ Association in Grand Rapids.
The average premium costs for 2019 are across all product lines: HMOs, PPOs and point-of-service plans.
This year’s survey by The Employers’ Association generated responses from 130 employers of all sizes across the region. Nearly half of the employers responding to the survey employed 99 or fewer people, and another 33 percent had between 100 and 299 employees.
As in prior years, the survey results show that respondents generally did not make significant changes in their benefits. Maggie McPhee, director of information services at The Employers’ Association, attributed that in part to the tight labor market in which qualified talent remains in short supply, “and it’s not getting any better any time soon.”
The tight labor market has many employers holding the line on health benefits. Many already have shifted to high-deductible plans in recent years and are unable or reluctant to shift much more of the cost of coverage to employees, McPhee said.
“You can’t make too many changes because then you’re going to have attraction and retention issues,” she said.
Across all product lines, the average employee contribution to the annual premium was 23 percent for a family plan, 22 percent for a two-person plan, and 21 percent for a one-person policy, according to The Employers’ Association.
More than four in 10 employers responding to this year’s survey reported having a deductible of $1,000 to $3,000 for in-network care under a family plan. Another 29 percent had deductibles of $3,001 to $5,000 for a family plan, and 15 percent had annual deductibles of $5,001 or more.
In the individual health insurance market for 2020, the 11 participating insurance carriers proposed rate adjustments that average out to a 2.5-percent decline, according to a summary from the Department of Insurance and Financial Services. Carriers in Michigan’s individual market cover nearly 333,000 people who buy their own health insurance.
Blue Cross Blue Shield, with more than 50,000 individual market enrollees, proposed the largest rate decline, at an average of 7.7 percent. Blue Care Network, with more than 157,000 members in the individual market, proposed an average rate decrease of 1.2 percent.
“Over the last couple years, we’ve been pleased to see a slow trend of stabilization in the individual market that’s now made it possible for us to offer members lower rates,” said Terry Burke, vice president of individual business for Blue Cross Blue Shield of Michigan.
Priority Health, with more than 77,000 individual enrollees, proposed a slight rate decrease of 0.1 percent for 2020, according to the Department of Insurance and Financial Services, which expects to decide on all rate proposals prior to the beginning of open enrollment on Nov. 1.
“Making sure our members can make smart choices is crucial, and to do that we need to ensure we are offering affordable options,” said Stacey Harrington, vice president for individual markets at Priority Health.