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Published in Health Care
Priority Health’s corporate headquarters in Grand Rapids. Priority Health’s corporate headquarters in Grand Rapids. COURTESY PHOTO

‘Time will tell’ whether new Sparrow contract boosts Priority Health’s Lansing market share

BY Thursday, December 22, 2022 10:20am

The new contract with Sparrow Health System provides an opportunity for Priority Health to carve out a much larger presence in the Lansing-area market, although growth may not come easily.

Blue Cross Blue Shield of Michigan holds a dominant market share for health coverage in the Lansing metropolitan statistical area, according to an annual American Medical Association report on health plan market shares across the U.S.

With Blue Cross Blue Shield deeply entrenched in the market, rates offered to employers and discounts Sparrow Health provides under the contract may drive how well Priority Health builds the business in the Lansing area, said Amy McCulloch, a strategic consultant for benefits and people solutions at the Grand Rapids office of Lockton Companies, who works with mid- and large-market employers.

“Everyone’s going to be open to looking at it because it’s exciting and there’s a competitive option that could be viable and could put employers and employees in a better spot than they are right now, but that’s a heavy Blues-supported area,” McCulloch said. “Employers are not going to move from the Blues or Blue Care Network to Priority Health to pay more money. They’re going to want competitive numbers.”

Finally signing Sparrow Health after years of talks fills the notable last void in Priority Health’s care network in the Lower Peninsula. The state’s second-largest health plan previously only had a contract in Lansing with McLaren Health. In place since 2017, the McLaren contract gave Priority Health an entry into the market.

The 1.2 million-member Priority Health presently has more than 3,000 Medicare Advantage and more than 3,000 commercial group members in the Lansing-area market, said Mike Jasperson, Priority Health’s senior vice president of provider network and health plan operations.

Adding Sparrow to the care network, in addition to McLaren, gives Priority Health greater viability in the market as an option for employers to consider for employee health benefits.

“The competitive dynamic in Lansing is challenging, so we know there’s definitely opportunity there,” Jasperson said. “It takes time and effort to entrench yourself in a market and know all of the players and develop relationships.”

Jasperson believes part of the opportunity for Priority Health will come from an increased willingness by employers to bid out their health benefits after nearly three years since the COVID-19 pandemic’s onset.

Employers through the pandemic have been largely hesitant to change health insurance carriers. 

“The mindset was: ‘We’d better stay put,’” Jasperson said. 

However, that’s now changing.

“I think that folks just wanted to stay out, just given the dramatic uncertainty and, unfortunately, that was 2020, spilled into 2021 and even persisted somewhat in 2022. But we have seen much more movement in shopping around in the marketplace on the group side than we saw in 2020 and 2021,” Jasperson said. “I do think you’ll see more. You’ll see interest in looking at other options.”

Working out a contract

The new contract — which followed, but is unrelated to Sparrow Health’s proposed merger into University of Michigan Health — starts Jan. 1 and covers all of Priority Health’s lines of business: group commercial, Medicare, Medicaid and individual coverage. All of Sparrow Health’s facilities and 500 affiliated physicians will become in-network care providers for Priority Health, which previously only had a Medicare contract with the health system for in-network coverage.

Priority Health also has had a “loose working relationship for select” employers who are based elsewhere but have employees in Lansing, Jasperson said. In those instances, they would work out an arrangement specific for those employers, he said.

Over time, the Medicare contract and other arrangements contributed to finally working out a contract, Jasperson said.

“We just consistently over the course of time developed a relationship with Sparrow, and understanding that we’re all in this together in terms of wanting to bring about additional competition to the marketplace and developing trust in terms of us being a reasonable carrier to work with,” he said. “We try to be a good partner.”

The deal came too late in the 2022 open-enrollment period for Priority Health to make much of a dent in the Lansing-area market with employers who renew their health benefits Jan. 1.

“The bigger opportunity will begin in 2023,” Jasperson said.

Sparrow Health System owns and operates six hospitals in Ionia, Ingham, Clinton, Eaton and Montcalm counties. The health system this month announced a deal to merge into University of Michigan Health that could close in the first half of 2023, pending regulatory approval.

Boosting competition

Offering a full care network in the Lansing area could potentially benefit Priority Health outside of the market.

Signing Sparrow better enables Priority Health to appeal to employers based elsewhere that have an office and employees in the Lansing area, McCulloch said.

“I think that’s going to be a big deal,” she said. “For employers who have locations around the state where Priority Health is a viable option for them, but that one location in Lansing has prohibited them from really moving, those employers will come into play.”

Lansing has long been one of the least competitive markets for health coverage in Michigan, which is the second-least competitive state in the nation.

As of 2021, Blue Cross Shield of Michigan held a dominant 74-percent market share for health coverage in the Lansing metropolitan statistical area across all plan types, according to the 2022 AMA report on health plan market shares. The Sparrow Health-owned Physicians Health Plan held a 17-percent market share in the Lansing area.

For PPO coverage, Blue Cross Blue Shield had 90 percent of the Lansing-area market, to CVS Health’s 3 percent, according to the AMA. 

Statewide as of January 2021, Blue Cross Blue Shield of Michigan held a 68-percent market share across all policy types to Priority Health’s 12 percent.

While Priority Health’s improved viability with the Sparrow contract can increase competition, “time will tell whether or not we see” that come to fruition, Jerry Konal, senior director for health and benefits at Willis Towers Watson plc’s Detroit-area office, wrote in an email to MiBiz.

“It’s always a plus to bring a well-respected health system and provider community into a carrier network for the benefit of plan members,” Konal said. “I anticipate that Priority Health is excited about the opportunities that lie ahead, and I am sure we all agree that healthy competition benefits us all, with the end game focused on improving the health and wellbeing of all plan members.”

Asked how he viewed the potential for increased competition in the Lansing-area market, a Blue Cross Blue Shield spokesperson responded that “we believe access to in-network care is a good thing for health insurance members. That’s why we’ve offered it for decades in every zip code in America.”

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Read 2748 times Last modified on Thursday, 22 December 2022 16:47
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