Michigan’s two largest health insurers each proposed double-digit rate increases for employee health coverage in 2025 that would affect small employers, the highest increase at least since the pandemic.
Executives at blue cross blue shield of michigan and priority health — which together hold about 86% of the market for small group health coverage in michigan — say the rate proposals reflect billions of dollars more in claims involving medical care, behavioral health and high-cost drugs.
“we have just seen our overall claims cost increase, when we looked at even ’22 to ’23, pretty significantly,” said sandra fester, vice president of michigan business for blue cross blue shield.
Blue cross blue shield of michigan proposes to increase rates for small businesses with 50 or fewer employees by an 11.5% statewide average for ppo health plans that renew jan. 1, 2025, according to a rate proposal submitted to state regulators.
Hmo subsidiary blue care network submitted a rate proposal to the michigan department of insurance and financial services requesting an average 11.2% increase.
At priority health, small group rates would increase by a statewide 13.2% average for hmo policies, if regulators approve the proposal as submitted. Priority health insurance co. Proposed a 12.3% statewide average increase for ppo policies.
Fester added that the growing cost from claims has “been consistent. It has not been going down.”
In 2023, blue cross blue shield spent $1.4 billion more than the prior year on claims for medical care, especially for surgeries, drugs administered at hospitals, imaging, and diagnostic services.
Outpatient surgery claims increased by 13%, or $360 million, from a combination of higher cost and intensity of procedures for cardiac care, cancer surgeries and treating musculoskeletal issues. Utilization rates in each of those areas have been steadily growing, according to blue cross blue shield.
Claims for medical imaging — ct, mri and pet scans and x-rays — also increased 10%.
On the pharmacy side, blue cross blue shield paid $1.8 billion more in claims in 2023. Specialty drugs for medical issues such as for autoimmune disease alone accounted for $750 million of the increase. Claims for three weight-loss drugs — mounjaro, wegovy and ozempic — known as glp-1s that also are prescribed for type 2 diabetes increased $320 million across blue cross blue shield’s medicare and commercial business.
“people are getting the care that they need. So, in many ways it’s a good thing, and we’ve put a lot of effort around those programs to make sure that we have the right access,” fester said. “but there’s a cost that’s associated with that, too. It’s not only an increase in the care, but it’s the cost of the care that goes with it.”
Steve andrzejewski, priority health’s vice president of commercial sales and distribution, also attributes higher rates to the growing use of specialty and glp-1 drugs, higher care utilization, and “rather significant changes in both severity as well as the mix of services that are being used by our membership today.”
Utilization of mental health care particularly has been growing as “the stigma around that area is dramatically starting to drop, and that’s good news,” andrzejewski said. “over the long term, what we see is we’re able then to get people to the right care at the right time once we’re better able to address those behavioral health challenges.”
However, “as increases in utilization go up, obviously, we see an increase in spend” that affects the rates that employers pay, he said.
Priority health’s behavioral health utilization trends this year have been running at 21% annual increase. Trends for pharmacy drugs have been 15% for the year, with the use of glp-1 increasing at 29%.
The 2025 rate proposals follow a period of several years where health insurers sought and received regulatory approval for comparatively moderate increases.
State regulators last year approved a 6.7% increase for blue cross blue shield small group policies and 5.8% for blue network. Priority health received approval for a 6.7% increase as well, and priority health insurance co. Got the ok for a 6.3% increase.
Statewide, small group health insurance rate increased an average of 7% in 2024 for the small group market for nearly 430,000 enrollees employed at small businesses across michigan.
The blue cross blue shield and priority health rate requests also contrast what smaller competitors proposed for 2025 policy renewals after they implemented double-digit hikes for 2024.
Detroit-based health alliance plan proposed a nearly 5.8% average rate increase for 2025. The rate plan for next year comes after state regulators last fall approved an 11.1% average rate increase for 2024 policy renewals for health alliance plan.
East lansing-based physicians health plan seeks a nearly 4.9% average rate increase for next year for hmo policies after securing regulatory approval in the fall for a 10.4% increase for 2024. Php insurance co. Filed for a 6.18% rate increase for 2025 for ppo policies after a 10.6% for 2024.
