Even before Spectrum Health acquired Lakeland Health in St. Joseph, the Spectrum-owned Priority Health was making inroads in Southwest Michigan.
That’s an area where the Grand Rapids-based Priority Health historically never had enough concentration of members to show up in an annual market share report issued by the American Medical Association that ranks the top two health plans in 382 markets across the U.S.
The latest edition of the AMA’s Competition in Health Insurance report marked a change in that trend.
Now that Lakeland Health has been part of Spectrum Health for more than a year, executives expect Priority Health only to build further momentum and pick up additional market share.
“Employers have been really responsive to the competition coming down there,” said Megan Schmidt, vice president of sales and client services at Priority Health. “I look to see us continuing to grow in that geographic marketplace.”
In the 2019 AMA report that came out earlier this fall, Priority Health’s HMO business held a 17-percent share in the Niles-Benton Harbor metropolitan statistical area. Priority Health’s point-of-service (POS) plan for self-funded employers held a 15-percent share of the market.
Blue Cross Blue Shield by far leads the Niles-Benton Harbor MSA with an 82-percent market share for HMO coverage and 85 percent in POS plans.
Those percentages are as of January 2018, months before Spectrum Health and Lakeland Health even closed their deal, and prior to the transition earlier this year of Lakeland’s more than 4,000 employees to Priority Health coverage.
Surely, Blue Cross Blue Shield dominates the Niles-Benton Harbor health insurance market, as it does in most markets across Michigan. In fact, across all health plans — HMO, PPO, POS and individual policies sold on the public health exchange — Blue Cross Blue Shield’s overall market share grew to 66 percent as of 2018 in Southwest Michigan, an increase of six percentage points from the prior year.
Even so, the AMA report affirms that Southwest Michigan has become the latest turf where Blue Cross Blue Shield and Priority Health directly compete, furthering Priority’s more than two-decade rise as a major, statewide provider of employee health benefits.
Better positioning Priority Health in the Southwest Michigan market was viewed as one of the peripheral benefits of the Lakeland acquisition for Spectrum Health, which owns 93.9 percent of the health plan. The notion was that as the local health system, employers may have a greater interest in contracting with Priority Health for insurance.
The Spectrum-Lakeland merger represented a “great opportunity for us to expand our brand in Southwest Michigan, and in having Lakeland Health’s addition to the Spectrum Health family, we were able to bring that proposition of an integrated health system down there,” Schmidt said.
“Market prospecting was well underway (in Southwest Michigan) even before we entered into a conversation with Lakeland Health, but I think it certainly strengthened the position as affiliation talks started to happen early on in the year,” she said. “When you’re in those communities, it only strengthens your position and the understanding of how you can come to the table in partnership.”
As of 2015, Priority Health had about 15,000 members in Southwest Michigan. That grew steadily to about 21,000 by the end of 2018 and has since increased to nearly 28,000.
Also helping Priority Health’s cause in the market is a deal signed in May 2018 with national commercial health insurance carrier Cigna Corp., according to Schmidt. Under the agreement with Cigna Payer Solutions, Priority Health members outside of Michigan can use Cigna’s U.S. PPO care network, which includes nearly 1 million care providers and 6,300 hospitals.
The partnership opens Priority Health as a coverage option for employers in Southwestern Michigan who have employees that live on both sides of the Michigan-Indiana state line.
“It has just given us some great opportunity with both the Spectrum Health footprint, combined with our portfolio offering and combined with the Cigna relationship, to be able to play in that area,” Schmidt said. “Being on that border was really an important area where we needed a strong network solution. In the last year, that partnership with Cigna Payer Solutions really helped us become more viable.”
Across Michigan and all forms of coverage, Blue Cross Blue Shield held two-thirds of the market as of 2018. Priority Health was second with 9 percent. The Blues led the statewide HMO market over Priority Health, 56 percent to 21 percent, and the POS plan market with 83 percent to Priority’s 15 percent, according to the AMA report.
As it has done for years, the AMA ranked Michigan as the sixth least competitive health insurance market in the country, and noted that its findings show a worsening trend in competition across the U.S. from 2014 to 2018.