Mark Sanchez: Yeah, these things that we're talking about are association health plans. Now let's set this up. As I always like to begin these conversations with people, show of hands of everybody that just absolutely loves the status quo of the American healthcare system. Okay, I don't see any hands out there. Yeah, I know it's radio. You know, healthcare costs have just been rising and rising and rising for many years. In the last few years, they're just really going out of sight. If you're a small employer of 50 people or less awaiting state regulators to act on the rate proposals for 2026 for January 1 (2026) policy renewals, and if you are in the small group of 50 and under, you're looking at an average 11.1% increase in your premiums for 2026. That's the statewide average. Some are bigger, some are lower. I've heard cases where people are 25%, 30% or more in their insurance renewals. And for the individual market, without these tax credits that we've been reading a lot about the last couple of weeks, you're looking at about a 16.8% increase.
So, the idea was pitched last week by the Michigan Association of Health Plans. This represents 10 health plans of the state, mostly HMOs, that cover about 4.1 million people, so they have a little bit of market heft to them. Pitched an idea, it has a concept paper out with a dozen ideas dealing with the affordability of healthcare. These are not things that are going to provide immediate relief, but we didn't get into this situation overnight, so it's going to take time to maybe get some fixes.
And one of the ideas that MAHP pitched was association health plans. Maybe some state legislation to make it easier for groups to form an association health plans. Now, what is this? This is where employers come together, mostly small businesses, and they pool their workforces. That creates a much larger risk pool for insurance. If you have maybe a dozen companies coming together, they get maybe three, four hundred employees altogether into a risk pool, they then qualify for the large group.
That's important because under the large group, under the federal law, the large group employers do not have to meet the coverage mandates under the Affordable Care Act. What that allows them to do is craft a benefit package and craft a health plan that perhaps is a little more affordable and customized exactly to their workforce.
So, the association health plans are allowed under federal law, mostly to common economic sectors such as manufacturing or geography.
In 2018, under President Trump's first term, there was a rule issue that broadened the eligibility. That was challenged and struck down by the courts that said it went a little too far into the federal law known as ERISA. So now here we are in 2025, there's a wide expectation that the Trump administration is going to issue a new rule. Again, extending eligibility requirements and making it easier for groups to come together for small businesses to unite to form an association health plan.
So, what the Michigan Association of Health Plans is doing is putting this issue out there in front of the state lawmakers and they pitched this idea talking last week to a state senate committee on enhanced tax credits for individual policies. But the executive director, Dominick Pallone, took the opportunity to offer a few other ideas. What the association is saying, if indeed this rule comes down in the next year or so from the feds, the association would like to see the state legislature codify that rule into state law and open up a greater flexibility for small employers to unite with one another to form these association health plans to lower costs.
The association health plans also suggested an idea of perhaps the state forming an association health plan, a state run plan that small businesses could join.
So right now, these are just concepts, but it's a situation where again, I'll go back to the issue of anybody out there really want to maintain the status quo of healthcare in America? So, what you're seeing people just saying this is it. We're at the end businesses and I don't know how employers, especially small businesses continue to do this. They're getting hit with these big increases every single year now.
There's not a lot of hope for it mitigating any time in the near future as you know your health insurers and your hospitals and health systems are talking about these expensive specialty drugs, higher utilization rates, higher acuity, meaning people are sicker when they're coming in. We have an aging population that requires more care, and the boomers are getting a lot of hip and knee replacements. So, we're seeing all these factors gang up to drive these costs. Again, 11.1% next year for small group in Michigan.
The drawback is association health plans don't really get to the root cause of what's pushing up these healthcare costs at such an alarming rate, but it is an option for small employers to consider and coming together and perhaps getting coverage for their employees at a little bit of a lower cost.
Patrick Center: At all levels, the impacts are being felt and you're seeing Blue Cross making a deal with Corewell to reward better care and lower costs.
Mark Sanchez: This is a contract Blue Cross Blue Shield signed with Corwell Health here in Grand Rapids. This term value-based care. You're going to start hearing this more and more. You've been hearing it for a decade plus now. But what exactly is value-based care?
Historically, traditionally, health care has gone by what's known as a fee-for-service model. You bring in x patient, you do x procedure, the insurance company pays you x amount. There's some thinking that that really breeds maybe an excess of care, too much care, too many procedures, too many medical imaging scans. So, there's been this effort for a long time now for many years to shift to value-based contracting between your health insurers and your doctors and hospitals and health systems.
And Blue Cross Blue Shield of Michigan and Corewell Health, which are the two biggest in Michigan for health insurance and health care. They signed a new contract this summer for value-based care that's going to run through 2030, and it could really serve as a template for the state's largest insurer to craft similar arrangements with other health systems in the state. Now, what does that mean, however?
There's not been a whole lot of definition put around value-based care because this is something that's hard to do. But what Corwell Health and Blue Cross are now trying to do is they've put out specific targets, and they won't specifically talk about actually those targets they're hoping to achieve, but there's some issues specifically to improve the care, such as if you go into a hospital, you have surgery, you have a complication. You get an infection. You get re-admitted to the hospital.
There's an effort under this contract to really reduce that because those hospital re-admissions are costly. About $11,000 to $12,000 per situation and there's about a 5% readmission rate. You have folks who slip and fall in hospitals. The patients may have limited mobility. For whatever reason, they fall. They break a hip, or they suffer a fracture. That's added cost, added time in the hospital. Those are just a couple of areas that proverbial low-hanging fruit, that Blue Cross Blue Shield and Core Well Health are going to try to really address and reduce those rates.
And the basic premise of value-based care is that those who perform the best, high quality, reduce complications, reduced incidents, they get higher reimbursements. They get higher payments. So, it's a whole different model for the health insurance and healthcare in America. It's been around a while, but it's been very slow moving and Blue Cross Blue Shield and Corewell Health through this new contract that runs through the end of the decade and into 2030. They're hoping to make some real progress in this area and create not only a better care model, but a better cost model for healthcare.
Patrick Center: We're talking with Crain’s Grand Rapids Business staff writer, Mark Sanchez, the West Michigan Whitecaps won their seventh Midwest League championship this year. And it comes at a time when the organization is renovating its ballpark and some of that renovation has stalled. What's the latest?
Mark Sanchez: Yeah, well, if you've been up to LMCU Ballpark in the last season or two, and congratulations to the Whitecaps on their championship this year, you've seen these stadium renovations, new terraces, new hospitality suites, a whole lot of improvements for the franchise to position the franchise for the next 30 years. This has taken a lot of money. There's a $35 million dollar cost to it. The Whitecaps have been, for the last year or so, doing a capital raise, finding investors. Because this is how the franchisers first formed 30 plus years ago. Instead of public money to build the stadium, they went and found private capital investors. Now the Whitecaps are back in the market looking for investors to do this next generation renovations and many have been complete.
They've had success on the field and off the field this year. They won the Midwest League Championship here last month. And then a couple of weeks later, Minor League Baseball, the umbrella organization for about 120 franchises across the U.S., named the Whitecaps Minor League Organization of the Year.
Underneath all that is continuing this capital campaign to raise money from investors to pay for these ballpark renovations. The Whitecaps recently retained an investment bank for the last year or so as it's done this campaign. It's been going to individual investors. Now it's pivoting a little bit. Want to start looking at more institutional investors to invest in the team. And this is something you're seeing really pick up in the U.S. the last few years is private equity becoming more involved in sports, your major sports leagues; NFL, NHL, Major League Baseball, NBA are allowing private equity investors to take equity stakes in the team. A few weeks ago, we saw the story come out about the Big Ten Conference in college football, perhaps selling some of their broadcast rights to private equity investors. So, there is a significant movement of private equity becoming involved in sports at the high levels and the minor league levels. It's a significant movement in the sports world.
Given the success of the season, both on and off the field, the Whitecaps are looking that that success can breed success in the capital campaign, which again, has now pivoted a little bit in going after the institutional investors to help pay for these upgrades to LMCU Ballpark.
Patrick Center: Crain’s Grand Rapids Business Staff Writer Mark Sanchez, thank you so much.
Mark Sanchez: Thank you, Patrick.