Blue Cross Blue Shield of Michigan has created a new division as part of its restructuring plan to sell management and consulting services to up to 20 smaller Blues plans in other states.
With millions of baby boomers retiring every year, health insurers like Blue Cross and Health Alliance Plan have been targeting growth in Medicare Advantage — a federal program that contracts with private insurers to offer managed care services to seniors — as a profitable business.
Last month, the board of the Michigan Blue Cross approved a plan to create an emerging markets division that would coordinate new and enhanced business lines like Medicare Advantage. Besides helping fellow Blues plans, the idea is to boost revenue and profits to help Michigan Blue Cross subsidize other operations.
As part of that new plan, Blue Cross now is managing claims and offering various support services to two smaller Midwest Blue Cross plans for their Medicare Advantage products, said Elizabeth Haar, Blue Cross' new president of the emerging markets division.
Haar declined to name the two smaller Blues plans under contract for Medicare services. The total membership Michigan's Blues are managing this year in the two states is 23,000, said Haar, the former CEO of the Accident Fund group who also is now senior vice president for subsidiary operations.
The emerging markets division now includes the Accident Fund, Medicare Advantage, Medigap (Medicare supplemental insurance) and two unnamed departments that will handle functions such as claims processing and quality improvement services for Medicare products.
Like Blue Cross, HAP also is looking at opportunities for growth in the Medicare Advantage market.
Mark Hall, HAP's vice president of business development and sales, said HAP has received approval from Medicare to expand its Medicare Advantage offerings from nine counties into 22 adjacent counties. It still must receive federal approval for its proposed pricing for Medicare Advantage products.
HAP's region will extend south from Monroe County, west to Jackson County and north through Saginaw County to Iosco County. It encompasses the Thumb-area counties that include Huron, Sanilac and Lapeer. The expanded region also covers the markets held by newly acquired Allegiance Health in Jackson and HealthPlus of Michigan in Flint.
Hall said HAP's Medicare Advantage membership now stands at about 65,000. He said he expects 5 percent to 10 percent growth over the next two years. He expects some growth in HAP's Medigap product line as Blue Cross is ending its subsidy program for low-income seniors this year per its agreement with the state.
Over the past five years, since the Affordable Care Act of 2010 cut rates by 15 percent and required plans to improve quality to receive bonus payments, many of the smaller Blues plans in the nation have been unable tap into this lucrative market or score high margins because they have lacked necessary skills and infrastructure support, Michigan Blues executives told Crain's.
Michigan Blue Cross, the nation's largest single-state Medicare Advantage provider, has been steadily adding Medicare Advantage members, growing to 468,964 in May from 170,567 in December 2010.
Under CEO Dan Loepp, Blue Cross has been diversifying its business lines to help subsidize its commercial individual and Medicare supplemental insurance lines, which have lost hundreds of millions of dollars in recent years. Overall, Blue Cross operates at a very small profit margin for its core health insurance product lines.
For example, in 2011 Michigan Blue Cross paid $215 million for a minority interest in AmeriHealth Caritas, a profitable 15-state Medicaid HMO, which it now co-owns with Independence Health of Philadelphia. Blue Cross Complete is now a for-profit member of AmeriHealth Caritas.
Blue Cross also has acquired or founded several companies the past 10 years, including Brighton-based LifeSecure Insurance Co. and ikaSystems Corp., a Southborough, Mass.-based information technology vendor, to primarily help it manage its Medicare plans and as a revenue generator. In 2014, Blue Cross obtained a 40 percent interest in Data Driven Delivery Systems Inc., which helps physicians manage risk contracts.
To become more competitive, Blue Cross last fall began a restructuring project intended to cut administrative costs by $300 million over three years and boost revenue in growth areas like Medicare. Blue Cross reported it lost $68 million in net income on its overall operations in 2015.
Julie Smith, senior vice president for senior health services, said many smaller Blues plans haven't had the staff or time to fully adjust to changes under the Affordable Care Act to be rewarded for quality.
"Our intent is to support their core services," Smith said.
Haar said about 20 Blues plans either have less than 50,000 members in Medicare Advantage or don't offer a product at all.
"BCBS to sell services to smaller Blues plans" originally appeared in Crain's Detroit Business.
