Blues Manager Agent Has Grown Substantially

April 10, 2002
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GRAND RAPIDS — West Michigan’s largest independent managing agency for the Blues has become a much larger player in the health insurance industry.

Over the past two years, what was known as the Grotenhuis Group has undergone its third historic change of direction and now is officially known simply as Grotenhuis, an entity that has extended its reach to encompass all of West Michigan and the Upper Peninsula.

According to its 48-year-old chairman and president, Dana Sommers, the genesis of the change traces back 18 years to an innovation undertaken jointly by the Grotenhuis Group and the Grand Rapids Chamber of Commerce, with Blue Cross Blue Shield of Michigan (BCBS).

Sommers explained that in 1983, Grotenhuis worked with the two bodies to devise a way for the chamber’s member companies, many of them small businesses, to obtain the cost savings of large-group health insurance rates.

“Grotenhuis was the only manager agent program in this state for Blue Cross Blue Shield,” Sommers said.

“In fact,” he added, “we were the first manager agent, even though it didn’t officially become that until 1987.

“That’s when Blue Cross decided that manager agent programs would be a good way for them to penetrate the small group market — serving companies with one to 100 employees.”

Perhaps not so coincidentally, 1983 was the year that Sommers became president of the agency.

He explained that being a group manager agent means that Grotenhuis is a wholesaler of the BCBS products and further that the firm undertakes nearly every insurance function other than claims administration.

Sommers told the Business Journal that Grotenhuis employs no agents as such, but that it supports, licenses and trains agents — the retail insurance sales people who, working as independent contractors, sell BCBS group policies to their client firms.

Grotenhuis also markets several lines of group life and disability coverage.

Today, Sommers said, BCBS of Michigan has five manager agent programs: three in Detroit, one in Lansing, and Grotenhuis, which — until two years ago — was two entities, the Grotenhuis Group and Northern Benefits Network, headquartered in Traverse City. At the time, the Grand Rapids-based group also was deeply involved in the property and casualty insurance business.

“What happened,” Sommers said, “was that we no longer felt able to do all those different things. So Grotenhuis sold off its book of property and casualty insurance, while it redirected its focus to the health insurance industry and group life and disability.”

   

After that, he said, the group merged late in 2000 with Northern Benefits Network of Traverse City to become simply Grotenhuis.

Indirectly, Grotenhuis now serves about 10,000 businesses in the western half of the state and all of the UP. It operates from offices in Traverse City and Kalamazoo as well as its headquarters on Cascade Road just off East Beltline.

Sommers told the Business Journal that the late Frank Grotenhuis founded the agency in 1960 to work exclusively with auto dealers in selling credit life and disability insurance.

Later, he said, Grotenhius added auto insurance to the mix, and then, over time, purchased a number of property and casualty agencies, rapidly becoming one of the area’s major property and casualty players. And its growth has been even more rapid in the past few years.

“Since 1996,” Sommers said, “we’ve doubled our customer base. We’ve increased sales revenue by 30 percent a year, and we’ve gone from 30 associates to 55.” That employee increase, he explained, is a net number, reflecting both the sale of the company’s property and casualty business, and the merger with Northern Benefits.

The Journal asked Sommers why any firm would want to be involved in health insurance when it is such a tempestuous business and seems troubled by soaring rates.

“There’s no easy business to be in today,” he said. “Every industry has its set of challenges. They’re all going through tremendous changes.

“And if you think health insurance rates are going up rapidly,” he added, “you ought to see what’s happening with property and casualty rates.”

He also said that if the insurance industry is undergoing major challenges, there’s certainly no slackening of demand for health insurance itself. Too, he said, if one wants to sell health insurance, “Blue Cross probably offers a greater range of products than any carrier in the state.

“They have the whole spectrum, from the most restrictive — the HMOs — to the more managed traditional product which gives the most freedom to choose providers. They have point of service products and PPO products, and each of these products has their own network and discounts and so forth.

“The idea is, when an employer in this day and age is trying to have a competitive product for their employees and yet maintain some cost control, they can switch within that family and never leave Blue Cross and, therefore, have as many options as possible.”

He said that the dynamics of health insurance have caused a few employers to simply stop offering coverage.

“But I wouldn’t say that it’s been a large percentage,” he added. “It’s something we’re going to have to watch as a state.”

He said there’s no question that an increasing percentage of employers are being forced to pass along more of the cost of health insurance to their employees. But it’s not a wildfire change.

“I think particularly in western Michigan there’s long been a feeling on the part of employers that they want to take good care of their employees, and health insurance is a benefit that, if it’s at all possible financially, they want to provide that as much as they can.”

Even with the recent recession, he added, the labor environment is still somewhat competitive for West Michigan employers.

“And the unemployment rate still isn’t what it was in this area in the 80s, so you still see some pressure not to pass along any more of the cost than employers have to and still remain financially viable.”

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