Following a $2.67 billion antitrust settlement, Blue Cross Blue Shield Association (BCBSA) plans in certain markets are facing competition from other Blues plans for the first time, Harold Brubaker writes for the Philadelphia Inquirer. While this will drive increased competition, Advisory Board's Mallory Kirby and Max Hakanson highlight the two post-settlement trends they'll be watching closely.

How health insurers are reinventing themselves

Why we're seeing competition between Blues plans

Last year, a federal judge approved a settlement in a years-long antitrust lawsuit brought against BCBSA on behalf of employers and individual policyholders. 

 The lawsuit argued that the BCBS companies violated antitrust laws by entering into an agreement not to compete with each other and to limit competition in selling health insurance and administrative services.

Under the settlement, the insurers were required to pay $2.67 billion and change certain practices that plaintiffs argued limit competition.

The settlement left us with a lot of wait-and-see moments that are coming to bear in 2023. Chief among them was to what degree individual Blues plans would expand their business into new geographic regions — namely, in competition with other Blues plans. 

In 2023, Independence Blue Cross is facing competition from another Pennsylvania-based BCBS company for the first time. In January, Highmark announced that it will sell plans that offer coverage in Southeastern Pennsylvania starting next year.

However, benefits experts do not expect Highmark's presence to have a significant impact right away.

"I think it's going to be a kick-the-tires year," said Tom Cox, principal at benefits consulting firm iSolutions. However, Cox anticipates that Highmark could start gaining more customers in the Philadelphia area in 2025. 

Overall, Cox noted that the Blue Cross brand remains strong among Philadelphia-area employers — but benefits experts will be carefully watching to see how much of that Blue Cross business will transition from Independence to Highmark. 

Currently, Independence is also dominant in the Affordable Care Act (ACA) market. However, Independence will face competition for these customers as Highmark enters the ACA exchange business in Southeastern Pennsylvania.

Lauren Stuart, an EVP at Tycor Benefit Administrators, is watching to see whether Highmark's premiums will be low enough to drive customers to change insurers.

"Right now we're all in a watch, wait, and see mode," Stuart said. (Brubaker, Philadelphia Inquirer, 7/10) 

2 trends that could reshape the BCBSA environment 

By Mallory Kirby and Max Hakanson

The competition between Highmark and Independence provides an early, tangible example of how Blues plans are competing in the wake of the antitrust settlement. Many Blues already feel the strain of increased competition from large national health plans, big tech, and large retailers entering their markets. 

Now, Blues must prepare to contend with Blue-on-Blue competition, particularly in areas where multiple Blues plans already operate. Blues plans should evaluate how much of their value proposition is baked into Blue affiliation and local identity — and determine if that can stand up if and when another Blue moves in. 

However, increased Blue-on-Blue competition isn't the only thing that stands out in post-settlement market dynamics — we're keeping an eye on two additional trends that have the potential to reshape the Blues environment:

1. Increased partnerships, affiliations, and consolidation  

Following the antitrust settlement, we have seen an increase in partnerships, affiliations, and consolidation between Blues plans. 

For example, Blue Cross Blue Shield of Michigan (BCBSM) and Blue Cross Blue Shield of Vermont (BCBSV) announced a May 2023 affiliation that transfers Vermont's BCBSA license to BCBSM while keeping local branding and administration.  

This move demonstrates the potential for symbiotic relationships between differently sized or skilled Blues that aim to preserve competitive advantages on both sides. Smaller or less mature Blues gain access to expanded health plan expertise, better data and technology assets, and increased innovation while offering larger Blues an avenue for additional growth and diversification. 

Earlier this year, Elevance Health announced their acquisition of Blue Cross Blue Shield of Louisiana. This pursuit of national growth — freed by the antitrust settlement from non-branded profit caps for Blues — is not limited to Elevance.

We expect to see continued consolidation from larger Blues affiliates or holding companies as they grow market dominance and move into previously untapped geographies.  

2. Continued business restructuring

Horizon Blue Cross, Blue Cross and Blue Shield of North Carolina, and many other Blues plans have responded to market pressures by establishing holding companies that enable them to access capital to diversify their investments. 

Horizon's VP of health and network solutions, Jennifer Velez, told the New Jersey Department of Banking and Insurance that "[b]y reorganizing, Horizon will be able to invest more in non-insurance services, such as home health, and face a lower tax burden." 

This continued push to revamp Blues' corporate structures directly relates to a rule change the BCBSA instituted in the wake of their 2022 antitrust settlement. Under the agreement, BCBS companies no longer need to generate at least two-thirds of revenue from Blue-branded businesses, which gives them the opportunity to diversify their investments beyond health insurance. (Tepper, Modern Healthcare, 6/29; Diamond, Fierce Healthcare, 6/30)

New policies and heightened competition are making payers re-consider their identities and roles in the health care industry.

Radio Advisory's Rachel Woods sat down with health plan experts  Mallory Kirby and  Sally Kim to talk about why payers are positioning themselves as health solutions companies, the strategic moves in play, and why diversification may be necessary for survival. Read a lightly edited excerpt from the interview  and download the episode for the full conversation.