Michigan now ranks as the second-least competitive market in the nation for health coverage, a status that stems from Blue Cross Blue Shield of Michigan’s long-held position as the leading insurer in the state.
A report issued each fall by the American Medical Association (AMA) recently listed Blue Cross Blue Shield of Michigan as holding 68 percent of the Michigan market across all product categories in 2020. That’s up a single percentage point from last year’s AMA Competition in Health Insurance report that ranks the top two health insurers in 384 markets across the U.S.
Michigan ranked sixth-least competitive a few years ago, and fourth-least competitive in 2019, in the AMA’s annual report.
A Blue Cross Blue Shield spokesperson says the company’s sizable market share results from employers’ choice, and that in Michigan, “All commercial segments enjoy strong competition among carriers — including one of the most robustly competitive individual markets in the nation.”
“The story on the ground here in Michigan is vastly different than the story told by national AMA lobbyists. Health care consumers want affordability and choice, and here in Michigan they are getting both,” Andy Hetzel, Blue Cross Blue Shield’s vice president of corporate communications, wrote in an email to MiBiz.
Hetzel cites a 2019 Rand Corp. analysis that ranked Michigan second-lowest in the nation for how much employers and insurance carriers paid hospitals for care from 2016 to 2018 compared to payments that hospitals received from Medicare in that time.
Conducted on behalf of the Employers’ Forum of Indiana, the analysis found self-insured employers and health insurers on average paid hospitals in Michigan 190.1 percent of the Medicare rate for inpatient and outpatient care. That compares to the national average of 247 percent of the Medicare rate.
Rand Corp.’s report cited Blue Cross Blue Shield’s dominant market position and ability to negotiate discounts with hospitals as part of the reason for Michigan’s comparatively favorable showing on costs, along with pressure from the auto industry and unions.
Dominant player
The 2021 AMA report lists Grand Rapids-based Priority Health as second statewide with a 10 percent market as share across all types of health policies.
The large market share that Blue Cross Blue Shield built over many years in Michigan “is concerning and it didn’t happen overnight,” said Dr. Bobby Mukkamala, immediate past president of the Michigan State Medical Society and current chairperson of the AMA’s board of trustees. Insurers that hold large market shares have the ability to exert too much influence over a market, Mukkamala argues.
“It’s concerning because, just like anything in this country, when a lot of influence and power exists in one entity, there are consequences to that that are not desirable. That’s kind of what we’re seeing and what we’re concerned about here,” said Mukkamala, a Flint-based otolaryngologist. “If this is a good thing, then why haven’t costs gone down?”
Holding such a large market share across the state also gives Blue Cross Blue Shield an edge in negotiating reimbursement contracts with physicians, particularly small and independent practices, he said.
The Michigan State Medical Society describes that as “a David and Goliath scenario” when small practices negotiate contracts with dominant health insurers.
“There’s really no negotiation. You take it or leave it. Unfortunately, that’s how it’s been,” Mukkamala said. “Competition is what this country is built on, and not having it in the health care marketplace is a problem.”
Legislative support
Advocates in Lansing touted the AMA data while pushing legislation to require health insurance carriers — when requested — to provide aggregate details on medical claims and utilization to certain employers that want to bid out their coverage.
Senate Bill 447 unanimously passed the Senate Insurance and Banking Committee on Oct. 28 and now awaits consideration in the full Senate.
Sen. Dan Lauwers, R-Brockway Township, reintroduced the legislation this year. He worked with Blue Cross Blue Shield and the Michigan Association of Health Plans (MAHP) to address their concerns over cherry-picking, privacy and protecting proprietary information, he said in a recent Senate committee meeting.
Christine Shearer, deputy director of legislation and advocacy for the MAHP, told lawmakers last month that the bill is a “common sense initiative that will allow for greater competition in the marketplace.” The MAHP represents 10 health plans covering more than 3.2 million people.
“The lack of competition in Michigan has contributed to employers in Michigan having high health insurance premiums” that are 19-percent above the national average, Shearer said.
S.B. 447 is similar to a law enacted in 2018 that requires insurance carriers to provide public schools with claims data so they could bid out employee health coverage, Shearer said. Since then, MAHP data show that 70 percent of public school districts “have received more competitive bids” on their health coverage, Shearer said.
“Private-sector employers deserve the benefits of such data transparency about claims and utilization as our public employee schools,” she said in a recent committee hearing on the bill. “MAHP members are declining to quote 50 percent of the opportunities they receive because employers do not have enough information about the prior claims and utilization history. As such, when employers shop, they aren’t shopping effectively because they are not armed with the correct data.”
The MAHP supports the bill as one way to potentially increase competition for health coverage, Executive Director Dominick Pallone said. On occasion, incumbent insurance carriers have taken the stance that claims data on a client “is my information, not your information,” Pallone said.
“We’re trying to look for opportunities and things that can help shed a little more transparency on claims experience data and empower employers to be a little bit better shoppers on who they’re going to work with to provide access to health care services to their employees,” Pallone said.
“For large employer groups — and they’re fully insured — we want to ensure that they’re empowered enough that they have the ability to say to their incumbent insurer, ‘No, that’s my data and I want it, and I want it at an aggregate level to release to other bidders so I can see some accurate bids,’” he said. “Our hope is that we can reduce some of the decline-to-quote percentages that are out there and enable more competition to actually submit competitive bids for health care insurance.”
