When it enters the West Michigan commercial health insurance market in 2021, the state’s third largest health plan will offer both large group and small group policies.
Detroit-based Health Alliance Plan initially planned to launch only with health coverage for small employers. However, the Henry Ford Health System-owned company scaled up its plans after it was able to establish a care network “faster than we thought we could,” said Margaret Anderson, senior vice president and chief sales and marketing officer for HAP.
HAP first moved into the West Michigan market this year after forming a Medicare Advantage plan with Mercy Health that enrolled 1,700 people in its first year in Kent, Ottawa, Muskegon and Oceana counties.
The health plan is preparing for an Aug. 1 “soft launch” of large group plans in the same four-county area for two types of policies: preferred provider organization (PPO) and exclusive provider organization (EPO), which uses a PPO care network but lacks an out-of-network benefit, Anderson said.
With coverage for small and large group policies starting Jan. 1, HAP would provide employers another viable option to examine for employee health insurance in a region that’s long been dominated by Blue Cross Blue Shield of Michigan and Priority Health, according to an annual report by the American Medical Association.
In the first quarter of 2021, HAP also intends to request approval from state regulators to introduce HMO coverage to large employers in West Michigan, Anderson said.
“When we go to West Michigan, we want to make sure it’s a really positive experience and that we have everything really thoughtfully planned out,” she said, explaining why HAP intends to wait to introduce a large group HMO plan. “But for PPO and EPO, we can stand that up pretty well.”
The PPO and EPO products in West Michigan will use HAP’s existing care network and the network of Grand Rapids-based ASR Health Benefits, a HAP-owned third-party administrator for employers that self-fund their health benefits.
In pursuing commercial business with large and small employers on this side of the state, HAP looks to build on ASR’s market presence for the fully insured products. ASR administers self-funded plans that cover about 120,000 people.
“We have some knowledge certainly in the market, and definitely also relationships,” said Anderson, citing ASR’s ability to control medical costs for employers.
ASR Health Benefits operates as a wholly-owned subsidiary of HAP, which first acquired a 67-percent stake in the company in 2011 and bought out the remaining third last year, according to the health plan’s 2019 financial statement filed with state regulators.
“How do we leverage what they know about the market?” Anderson said. “We’re looking at kind of unique ways on how we can really think about managing medical costs in a different way for the fully insured market in West Michigan.”
Hub and spoke
The move into the Grand Rapids area provides a base for HAP to extend into other markets, Anderson said. In 2022, HAP will look to take large group commercial coverage to seven counties in Southwest Michigan, an area that includes the cities of Kalamazoo, Battle Creek and St. Joseph.
“We have a roadmap for expansion. We right now are in the process of prioritizing where we want to go next,” Anderson said. “We’re definitely looking significantly to think about hub and spoke. If we’re in and around the Grand Rapids region, where do we go next from there? Probably Southwest Michigan would be our next play and thinking around that market.”
HAP covers about 570,000 people in Michigan across six product lines: group, commercial, individual, Medicare, and self-funded policies, as well as network leasing.
The company looks to lead its West Michigan market entry for small employer coverage with its HMO product.
However, the move will come with one void in the HMO’s care network. Spectrum Health and HAP have a contract for PPO coverage, but not for the HMO for both small and large employer groups, Anderson said.
HAP hopes to work out an HMO contract with Spectrum Health, the largest care provider in the market, although that probably won’t occur in time for 2021.
“We’re talking to them,” she said. “We’re in negotiations.”
Even without Spectrum Health as part of the HMO network, “I still think we have an opportunity to introduce some competition and introduce unique product offerings,” Anderson said.
“It’s a good opportunity for us to get out there and start leveraging the HAP brand,” she said.
In 2019, HAP’s 181,000-member HMO business recorded total revenue of $1.49 billion with net income of $26.1 million, according to a financial statement filed with state regulators. HAP Empowerment Health Plan, a 17,000-member Medicare and Medicaid plan, had $38.5 million in total revenue with a $6.4 million net loss for 2019.
HAP recently filed 2021 rates that proposed an average 0.1-percent decline for small group policy premiums.
The health plan comes to a market that insurance brokers and agents have said could use another competitor.
The AMA annual report shows that across all health plans — HMO, PPO, point-of-service, and individual policies sold on the public health exchange — Blue Cross Blue Shield led Priority Health 57 percent to 26 percent in the Grand Rapids metropolitan statistical area as of 2018. Blue Cross Blue Shield also led Priority Health 65 percent to 20 percent in the Muskegon MSA.
In HMO coverage market share in 2018, Priority Health led Blue Cross Blue Shield in the Grand Rapids MSA (66 percent to 34 percent) and Muskegon MSA (54 percent to 46 percent), according to last year’s AMA report.
Priority Health President and CEO Joan Budden views HAP’s entry into the West Michigan commercial health insurer market with the perspective that “come on in the pool, the water’s fine.”
“Competition makes us all stronger,” Budden said. “We need more competition in Michigan.”