Health insurance markets are about to get something they've never had before: competition among some of the most powerful companies in the business.
A tentative $2.7 billion settlement of an antitrust case would free Blue Cross plans to invade each other's markets. Under the deal, the Blue Cross Blue Shield Association agreed to loosen a rule that barred such competition.
That would create big opportunities for Chicago-based Health Care Service Corp., which has been struggling to rev up growth in recent years. The nation's second-largest Blues operator—which owns Blue Cross plans in Illinois, Montana, New Mexico, Oklahoma and Texas—would be free to enter markets across the country as a fully national insurer on par with non-Blue rivals like Humana, CVS Health and Cigna. The proposed settlement also lifts a revenue cap on non-Blue business lines and restraints on acquisitions, opening up new growth pathways for the insurer.
With new opportunities, however, come potential threats. Just as HCSC would be free to enter the strongholds of other Blues plans, it could encounter more competition on its own turf. In theory, that could lead to face-offs with Blues behemoth Anthem.
"If Anthem, for whatever reason, really wanted to go in and dislodge Health Care Service Corp., and that's something the employer wanted to happen, there's definitely a greater potential for that going forward than before," says James Sung, an associate director at S&P Global.
The more likely scenario, experts agree, involves bigger Blues like Anthem and HCSC swiping customers from their smaller brethren. Large national employers that currently work with smaller Blues might now look to an HCSC or Anthem for a broader national plan.
"They could win more business in some of those areas where the smaller plans have been able to keep some of those legacy contracts," says Morningstar analyst Julie Utterback.
Freedom to enter more markets also potentially strengthens big Blues against non-Blue insurers. Such plans have had an advantage in the competition for national employer accounts because, historically, it has been easier for them to create large, multistate networks, Utterback says. But now employers might be more willing to work with large Blue companies—especially if those plans can offer lower prices.
Utterback notes that Blues plans "tend to have very low pricing in general."
If the settlement leads more plans to enter into new markets, premiums in those markets could fall. But it's unclear whether increased competition will affect the ability of insurers to extract large discounts from hospitals and health systems, says Amanda Starc, an associate professor at Northwestern University's Kellogg School of Management.