More Health Care Choices For Employers

July 13, 2008
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LANSING — Priority Health and Blue Care Network are in a close heat statewide in the shrinking small employer health insurance market, according to a recent report from Michigan’s insurance commissioner.

Office of Financial and Insurance Regulation Commissioner Ken Ross concluded in the report that after four years of small market reform, competition is robust across Michigan.

“The data indicate that no single carrier controls the Michigan small employer group health benefit plan insurance market, and there appears to be no lack of carriers operating in the small employer group market and many, many benefit options from which to choose,” Ross’ report stated. “Competition exists in the small employer health benefit plan market statewide.”

The market of employers with two to 50 workers is dominated by Blue Cross Blue Shield of Michigan, which commanded a 46.8 percent market share in 2007, according to the annual report. Blue Care Network, a BCBSM-owned health maintenance organization, blossomed from an 8 percent share in 2006 to 12.8 percent in 2007, giving the Blues a total 59.6 percent of the market. Priority Health ranked next, at 11.8 percent. Other players in the market held market shares under 4 percent each.

David Bilardello, Priority Health’s executive director of commercial products, noted that a single company — the nonprofit BCBSM, including its BCN subsidiary — controls 62 percent of small market premiums.

“If an entity is five times larger than the next largest, and then if you go to the fourth place carrier, and it’s 17 times larger than that, the conclusion could be questioned,” Bilardello said.

BCN President & CEO Jeanne Carlson said the purchase of M-Care on the last day of 2006 boosted the HMO in the small employer market for 2007, as did the introduction of its Healthy Blue Living product in October 2006.

“We introduced a new product really aimed toward the small group market. It really caught on in 2007. We are currently sitting here with over 70,000 members in the product,” Carlson said.

Jon Snead, vice president at benefits consultant AON in Grand Rapids, said his health benefits business reflects BCBSM’s decline in market share from 59.1 percent in 2003 to a low of 42.8 percent in 2006 before bouncing back in 2007.

“It did lead to more opportunities for other carriers, but the Blues still have more of a robust block of business than other carriers do,” Snead said. “Most employers are looking for more and more competition and more and more options.”

In some rural areas of Michigan, such as the Upper Peninsula, BCBSM is the only carrier, Snead said. Urban areas tend to have more choice, and in West Michigan, the Blues and Priority Health are close competitors.

“Here in West Michigan, we do have more competition, because there is Priority Health,” Bilardello added. “There are markets in Michigan where there is virtually no competition. Those would be outstate markets.”

Carlson said she considers several carriers to be among BCN’s top competitors, even though they did not rank as among those covering 80 percent of the market. That includes Health Alliance Plan, which has been in the automotive sector’s larger companies. HAP ranked eighth in 2007 with 2.6 percent of the small employer market, slipping from 3.5 percent in 2003, prior to market reform legislations.

“We go head-to-head with them on a lot of the bids we go after,” Carlson said, adding that BCBSM handles marketing duties for BCN.

She also pointed to the emergence of commercial carriers such as Aetna and United Healthcare, which have only recently made inroads in Michigan. Aetna, Humana and Principal Life are among the top six carriers covering 80 percent of the market.

Carlson said small employers make up a large portion of BCN’s groups, but a smaller portion of members. “They are growing for us as we see a decline in the automotive markets with all the buy-outs. Our members in total this year has grown slightly as a result of the small group market. It’s an important market to us,” Carlson said.

Bilardello said the Blues are Priority Health’s main competition. “You can’t compete in Michigan without going toe-to-toe with the big dog. That is our main competition,” he said. Small groups comprise 27 percent of Priority Health’s commercial lines, he added.

The report also revealed a 25.8 percent decline in member months in the small employer market, from 13.63 million 2003 to 10.1 million in 2007. Bilardello estimated that translates into 300,000 fewer people covered through small business than prior to market reform.

“To be fair, the economy has struggled here, and that could be the reason there’s less small business being insured,” he said. “You can almost turn that completely around: If small business health care was more affordable in Michigan than in other states, would we even have this bad economy?”

It’s all about the economy, Carlson said. “Small groups are the first ones to drop health care coverage totally. We’re also seeing them trying to downsize to remain viable in the marketplace, so the group may still have coverage, but fewer people are being covered with health care.” Other employers are handing out stipends so workers can buy individual insurance.

Among other points in Ross’ report:

Six carriers provided 80 percent of small market coverage in 2007, compared to five in 2003, prior to market reform. In 2006, seven carriers were at the top, but Priority Health purchased Care Choices.

Three carriers, Aetna, Humana and Principal Life Insurance, were not in the top market share in 2003. Combined, those three held 9.1 percent of the market in 2007. That’s compared to 2.9 percent in 2003 for one lone commercial insurer which no longer participates.

In 2003, 43 carriers were in the small employer market. In 2007, 54 carriers offered hundreds of plans.

Immediately following reform legislation, average monthly premiums sank 21.4 percent to $205 in 2004. By 2007, the average premium had crept up to $287.

In 2003, BCBSM and BCN’s market share was 66.3 percent. In 2007, it was 59.2 percent.

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