Mark Sanchez: This is a story as the saying goes, a story that just keeps on giving and is going to continue giving because we're in a period here of these large premium increases. Year to year annually for folks are here to stay perhaps for a few years. And this is a story Crain’s Grand Rapids Business did last week, looking at mid-year rate filings, which don't always occur. Usually health insurers for small businesses, they file their rate plans in May for the following year based on what they see happening and insurance rates are based on medical claims trends. And those claims trends keep rising and rising. And this story was about Priority Health and Blue Cross Blue Shield. They got approval for an 11.2% average statewide increase for all insurers for the small group in Michigan. 11.2% statewide average increases, but now Blue Cross and Priority Health filed mid-year rate proposals for small businesses that renew their health insurance policies in the third and fourth quarter. And basically, Priority Health asked for about a 13% increase, which is actually down just a tick from what it was approved for, for 2025. And then Blue Cross Blue Shield is seeking a 12.1% rate increase for PPO policies that renew July 1 or October 1. And for 2025, Blue Cross Blue Shield had gotten an 11.2% increase approved by the regulators. And both of them in talking to folks, said they're just seeing these steady increases in the use of specialty drugs that cost a lot, the high cost GLP-1 drugs for diabetes and weight loss. They're seeing higher utilization rates with higher acuity, as in people are sicker when they're coming in and they're hospitalized. We're an aging population. We also have high incidence rates of chronic disease in this state. And just other factors are all coming together. You know, we had a period of moderation for insurance rates for a while. And then a couple of years ago, we started seeing these large increases. And now here we are. All these factors have come together. They're pushing up those medical claims that the health insurers are paying out. And a lot of this is a pass through. So, you've got these large rate increases that are coming for July 1, October 1 policy renewals. If you're a small business and you use Priority Health or Blue Cross Blue Shield. And then we'll see come May, what happens for 2026 rates. The insurers typically each May, early June, file their rate proposals for the next year. And there's a lot of expectations that these types of large double-digit increases will continue for a while.
Patrick Center: You mentioned double digit. Have you seen in the two plus decades that you've been following health insurance, anything like this? And if you have, what have the impacts been?
Mark Sanchez: Yeah, it's happened before. Like I said, we had a period of about four or five years where the increases were much more moderate. Before that, again, you've had 10%, 12%, 15% or more percent. One of the brokers I talked to out there said he's got clients getting 20%, 25% rate increases based on their claims trends. Years ago, the marketplace started going to high deductible plans. You know, and pretty much everybody's in a high deductible health plan now, $5,000, $6,000, $7,000, sometimes more for a family health policy. We have HSAs and basically out of pocket costs are higher, deductibles are higher, co-pays are higher. An employee now pays about 20% to 25% of the cost of that premium. You know, back early in my workdays when I was a much younger individual, you know, employers pretty much paid everything. You had $5 co-pays for prescription drugs, brand name prescription drugs. That's virtually unheard of these days. So, over the course of the last 20 years, 20 to 30 years, you've seen employers pushing these costs across the table onto the employees, more sharing in the premiums, higher co-pays, higher deductibles. And the situation is they're at a limit on how much they can push across the table now. Even with the economy a little uncertain right now, we still have relatively low unemployment, though those rates have ticked up over the last several months, and employers don't want to lose people. So how do you balance that? This is a huge cost item on the balance sheet. Most employers want to do well for their employees and do the right thing. But how do you absorb these higher costs on top of everything else going on in the economy right now? How do you absorb these higher costs and get this under control? Nobody's got that magic bullet. And the expectations again, that these large rate increases are here for the foreseeable future.
Patrick Center: You and colleague Dustin Walsh wrote a piece called “Michigan Hospitals Clash with Insurers Over Out of Control Costs.” How are hospitals negotiating with the insurers?
Mark Sanchez: Well, we'll find out won't we in the coming months because three very large health systems right now are renegotiating their reimbursement contracts with Blue Cross Blue Shield of Michigan, which covers about two thirds of the population in this state. And that's Corwell Health, Henry Ford Health, and Michigan Medicine, which is the health system for the University of Michigan and U of M Health. And they were working out new reimbursement contracts. And there's always been a natural tension between those who provide the care, i.e. the medical practices, hospitals, health systems, and those who pay for the care. Insurance companies, and i.e. employers, two thirds of the people in America still get their health insurance through their employer. So, there's always been a natural tension. Now, coming out of the pandemic, when hospitals and health systems got hit really hard in the pandemic. And they've also had higher costs. Inflation has hit everybody. You've had the cost of labor going up. There's some serious pressure there. And now what we're hearing is the health systems, they're asking for higher reimbursements from the health insurers and the health insurers, for obvious reasons, would rather not do that because they're trying to control costs too, as we just talked about with these large rate increases. So, this tension between the payers and the providers, as they're called, is rising. And we will see where it goes. I would expect sometime in the next few months, we may hear more about this issue.
Patrick Center: We're talking with Crain's Grand Rapids Business staff writer, Mark Sanchez. We'll switch gears, Venture Capital. There's a medical device firm that has secured a deal with a West Michigan VC.
Mark Sanchez: Yeah, this is, this is an outfit here in Grand Rapids. Shoulder Innovations, an interesting company. It's held by an outfit called Genesis Innovation Group here in town. They developed a whole new, kind of a new generation shoulder implant, orthopedic implant that promises it's easier to put in surgically and it's just a lower cost device, quicker procedure, and there's a lot of benefits to it. And this has been on the market for some time. And looking at the first quarter of venture capital data that came out this week, which we track Shoulder Innovations raised $40 million. It was a later stage Series E capital round that closed in March and really accounted for about one quarter of the venture capital invested in West Michigan-based companies in the first three months of the year. So, its capital, this will help the company further commercialize this, what’s called the InSet implant system for people with traumatic shoulder injuries. Will help them further commercialize this and advance the commercialization, then new product development and just general corporate purposes. So, it's an interesting company that's brought a real innovation to market. And that capital round for the company was just one of a number of companies here in West Michigan. And statewide venture capital did okay. You know, we're hearing some about how tariffs will affect the marketplace, but you saw statewide about 41 venture capital deals in Michigan during the first quarter, $160.3 million. That compares to $119.7 million across 51 deals. So, the number of deals was down a little bit, but the amount invested was up, which is kind of an indication that you had some more later stage larger capital rounds going on. That said, the first quarter numbers look okay. Nationally, it was down a chunk, but it looks okay for Michigan. And in this report, that Pitch Book in the National Venture Capital Association put out each quarter, it really had a warning about the president's tariffs and the resulting trade war, the stock market volatility and economic uncertainty. And that could really take a toll on venture capital investing nationally during the rest of the year. There's some uncertainty out there and we'll see how the deal flow goes. But for now, in Michigan, the venture investing in these startup companies held up pretty well in the first quarter.
Patrick Center: Crain's Grand Rapids Business staff writer, Mark Sanchez. Thank you so much for your time.
Mark Sanchez: Thank you, Patrick.