The new contract with Sparrow Health System provides an opportunity for Priority health to establish a much larger presence in the Lansing-area market, though growth may not come easily.
Michigan Blue Cross Blue Shield holds a dominant market share for health coverage in the Lansing metropolitan statistical area, according to an American Medical Association annual report on health plan market shares across the US.
With Blue Cross Blue Shield deeply entrenched in the market, the rates offered to employers and the discounts Sparrow Health offers under the contract could drive how well Priority Health builds business in the Lansing area, said Amy McCulloch, a strategic consultant for benefits and solutions for to the people in the Grand Rapids office of The Lockton Companieswho works with middle and large market employers.
“Everybody will be open to seeing it because it’s exciting and there’s a competitive option that can be viable and can put employers and employees in a better place than they are now, but it’s a strong area supported by the Blues,” said McCulloch. . “Employers will not switch from the Blues Network or Blue Care to Priority Health to pay more money. They will want competitive numbers.”
Finally signed Sparrow Health after years of talks, fills the last glaring gap in the Priority Health care network in the Lower Peninsula. The state’s second-largest health plan previously had only one contract in Lansing McLaren Health. Effective since 2017, the McLaren contract gave Priority Health an entry into the market.
The 1.2 million-member Priority Health currently 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.
The addition of Sparrow to the care network, in addition to McLaren, gives Priority Health greater stability in the market as an option for employers to consider for employee health benefits.
“The competitive dynamic in Lasing is challenging, so we know there’s definitely opportunity there,” Jasperson said. “It takes time and effort to embed yourself in a market and get to know all the players and develop relationships.”
Jasperson believes part of the opportunity for Priority Health will come from an increased willingness of employers to offer their health benefits after nearly three years since the start of the COVID-19 pandemic.
Employers during the pandemic have been largely hesitant to change health insurance carriers.
“The mindset was, ‘We’d better stay put,'” Jasperson said.
However, this is now changing.
“I think people just wanted to stay out, just given the dramatic uncertainty and, unfortunately, that was 2020, spilled over into 2021 and even continued somewhat into 2022. But we’ve seen a lot more movement in buying on the sideline market than we saw in 2020 and 2021,” Jasperson said. “I think you’re going to see more. You’re going to see interest in looking at other options.”
Processing a contract
The new contract – which followed but is unrelated to Sparrow Health’s proposed merger in University of Michigan Health — begins Jan. 1 and covers all of Priority Health’s lines of business: group commercial, Medicare, Medicaid and individual coverage. All Sparrow Health facilities and 500 affiliated physicians will become in-network care providers for Priority Health, which previously had only one Medicare contract with the health system for in-network coverage.
Priority Health also has had a “loose employment relationship for select employers” that are located elsewhere but have employees in Lansing, Jasperson said. In those cases, they would draft an agreement specific to those employers, he said.
Over time, the Medicare contract and other agreements contributed to the conclusion of a contract, Jasperson said.
“We have continually developed a relationship with Sparrow over time and understanding that we are all together in terms of wanting to bring additional competition to the market and developing trust in the sense that we are a reasonable carrier to work with. 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 a big dent in the Lansing-area market with employers renewing their health benefits on Jan. 1.
“The biggest opportunity will start in 2023,” Jasperson said.
Sparrow Health System owns and operates six hospitals in Ionia, Ingham, Clinton, Eaton and Montcalm counties. Health system this month announced an agreement to merge into University of Michigan Health that could close in the first half of 2023, pending regulatory approval.
Increased competition
Providing a comprehensive network of care in the Lansing area could potentially benefit Priority Health out of the market.
The Sparrow signing better enables Priority Health to appeal to employers based elsewhere that have an office and employees in the Lansing area, McCulloch said.
“I think it’s going to be a big deal,” she said. “For employers that have locations around the state where Priority Health is a viable option for them, but that a location in Lansing has prevented 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 AMA’s 2022 Health Plan Market Share Report. 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.
Nationwide 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 could increase competition, “time will tell whether or not we’ll see” those come to fruition, wrote Jerry Konal, senior director of health and benefits in the Willis Towers Watson office. plc in the Detroit area. email at MiBiz.
“It’s always a plus to bring a 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 ahead, and I’m sure we all agree that healthy competition benefits us all, with the end game focused on improving the health and well-being 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 that 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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