“Time will tell” whether Sparrow’s new contract increases Priority Health’s Lansing market share

The new contract with Sparrow Health System provides an opportunity for Priority health to build a much larger market presence in the Lansing area, although growth may not come easily.

Blue Cross Blue Shield of Michigan holds a dominant market share for health coverage in the Lansing Metropolitan Statistical Area, according to the American Medical Association’s annual report on US health plan market shares

Because Blue Cross Blue Shield is deeply entrenched in the market, the prices offered to employers and the discounts Sparrow Health provides under the contract could determine how well Priority Health builds business in the Lansing area, said Amy McCulloch, strategic benefits consultant and people solutions in the Grand Rapids office Lockton Companieswhich works with medium and large employers.

“Everybody will be open to looking at it because it’s exciting and there’s a competitive option that can be viable and can put employers and employees in a better position than they are at the moment, but it’s a very blues-backed area.” McCulloch said. “Employers will not switch from Blues or Blue Care Network to Priority Health to pay more money. They will want competitive numbers.

Finally, the signing of Sparrow Health after years of talks fills the notable last gap in Priority Health’s care network in the Lower Peninsula. The state’s second-largest health plan previously only contracted with Lansing McLaren Health. Effective in 2017, the McLaren contract gave Priority Health access to the market.

Priority Health, with 1.2 million members, currently has more than 3,000 Medicare Advantage and more than 3,000 trade group members in the Lansing 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 market viability as an option for employers to consider for employee health benefits.

“The competitive dynamic in Lasing is challenging, so we know there are definitely opportunities there,” Jasperson said. “It takes time and effort to establish yourself in the market and know all the players and develop relationships.”

Jasperson believes part of the opportunity for Priority Health will come from employers’ increased willingness to offer their health benefits nearly three years after the start of the COVID-19 pandemic.

Employers during the pandemic have been largely hesitant to switch health insurance carriers.

“The thinking was, ‘We’d better stay put,'” Jasperson said.

However, that is changing now.

“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 the buying of market in the country group than we saw in 2020 and 2021,” Jasperson said. “I think you’ll see more. You will see interest in looking at other options.”

Contract development

The new contract — which follows but is not related to the proposed merger of Sparrow Health in University of Michigan Health — begins Jan. 1 and covers all Priority Health lines of business: group advertising, Medicare, Medicaid and individual coverage. All of Sparrow Health’s facilities and 500 affiliated physicians will become in-network care providers for Priority Health, which previously had only a Medicare contract with the in-network health system for coverage.

Priority Health also has “loose employment relationships for select” employers that are based elsewhere but have employees in Lansing, Jasperson said. In those cases, they will work out an arrangement specific to those employers, he said.

Over time, the Medicare contract and other arrangements contributed to finally crafting a contract, Jasperson said.

“We’ve just consistently over time developed a relationship with Sparrow and understanding that we’re all in this together in terms of wanting to create additional competition in the market and building trust in terms of being a reasonable carrier to work with,” said he. “We’re trying to be a good partner.”

The deal came too late in the 2022 open enrollment period for Priority Health to make much of the Lansing market with employers renewing their health benefits on Jan. 1.

“The bigger opportunity will start in 2023,” Jasperson said.

Sparrow Health System owns and operates six hospitals in Ionia, Ingham, Clinton, Eaton and Montcalm counties. This month, the health system announced a merger deal with University of Michigan Health that could close in the first half of 2023, pending regulatory approval.

Increasing competition

Offering a full network of care in the Lansing area could potentially benefit Priority Health outside of the market.

Signing Sparrow better allows Priority Health to appeal to employers based elsewhere who 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 in the state where Priority Health is a viable option for them, but that one 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.

As for PPO coverage, Blue Cross Blue Shield had 90 percent of the Lansing area market, compared to CVS Health’s 3 percent, according to the AMA.

Statewide 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” that will materialize, it said in an email to MiBiz.

“It’s always a plus to include a respected health system and provider community in a carrier network for the benefit of plan members,” Conall said. “I predict that Priority Health is excited about the opportunities that lie 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 views the potential for increased competition in the Lansing-area market, a Blue Cross Blue Shield spokesperson said, “We believe that access to in-network care is a good thing for health insurance members. That’s why we’ve been offering it for decades in every zip code in America.

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