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Health Alliance Plan of Michigan wants slice of self-funded insurance business


DETROIT—Blue Cross Blue Shield of Michigan has a new competitor in the administrative services organization business line: Health Alliance Plan of Michigan.

HAP is in the final stages of signing a contract with Grand Rapids, Mich.-based Administration Systems Research Corp., which does business as ASR Health Benefits, a for-profit company, to conduct claims processing, billing and customer service. That will allow the Detroit-based health insurer to grow its self-insured business significantly, said Mary Ann Tournoux, HAP's chief marketing officer.

"We did an analysis, and there is a tremendous market need" in Southeast Michigan, Ms. Tournoux said. "In the nine-county area, 39% (of employees) are in self-funded programs."

Ms. Tournoux said HAP thinks health care reform is creating a greater incentive for companies with more than 100 employees to self-fund health benefit costs to save money, increase efficiency and allow more flexible plan designs. Companies self-fund their health benefit costs by paying for claims through a third-party administrator that processes the claims. These and other companies also sometimes contract with health maintenance organizations for health benefits for a set monthly fee under a fully insured arrangement.

Blue Cross controls more than 70% of the health insurance market in Michigan, with more than 4.35 million covered lives. That's down 100,000 from 2010, mostly a result of declines in group plans because of the economy. The Blues cover 5.6 million nationally.

Other health insurers that offer third-party administration contracts with employers include Aetna Inc., CIGNA Corp. and Priority Health, which has offices in Grand Rapids and Farmington Hills, Mich.

Jim Scoggin, co-owner, of Troy, Mich.-based Great Lakes Employee Benefit Services Inc., said a HAP-ASR combination will provide a strong alternative for businesses and much-needed competition for Blue Cross.

"We are excited about it. It opens up a very viable option for middle-market to large groups that want to self-fund," Mr. Scoggin said.

"As a consumer, I don't want to see this state evolve into a single-payer system, and that's what is happening with the Blues. We need competition, and HAP with ASR now offers a real strong option to the Blues."

Blue Cross declined to comment.

While HAP has only one client with 3,400 employees under a self-funded contract, Ms. Tournoux said several other companies have asked that HAP the past three years to offer administrative services contracts.

"We are not set up on a technology basis to do this on a large scale," Ms. Tournoux said. "The administrative services for self-funded clients are different than fully insured."

Ms. Tournoux said HAP had considered acquiring an existing third-party administration company or creating its own. But a 10-year relationship with ASR Health Benefits, with which both companies share regional provider networks, led to talks and the preliminary agreement.

Todd Stacy, ASR's president, said the contract with HAP will help ASR expand its business in southeast Michigan and help HAP expand its reach statewide. Formed in 1984, ASR has 100,000 members in Michigan, Indiana, Ohio and several other states.

"HAP has a top-provider network and a long history of medical and disease management," Mr. Stacy said.

Ms. Tournoux said HAP projects growth to more than 50,000 employees in its administrative services business over the next two years. She expects to contract with companies with 100 employees to more than 1,000.

"We will start sales this fall," said Mr. Stacy, who said the contract will become effective Jan. 1.

ASR could hire 15 to 20 workers in southeast Michigan over the next two years if HAP's growth projections are correct, he said.

While Ms. Tournoux said HAP expects to earn 2.5% profit margins from its partnership with ASR, she said HAP primarily hopes to expand its market share, give clients insurance options and provide business to Henry Ford Health System, its parent company.

Jay Greene is a reporter for Crain's Detroit Business, a sister publication of Business Insurance.