Michigan Medicine announced the discontinuation of its U-M Health Plan to focus on direct patient care, education and research Nov. 27. Michigan Medicine will continue to provide coverage for claims filed until Dec. 31, 2025 and will pay these off continuing into the new year. The U-M Health Plan operates the Michigan Care and Michigan Care Advantage plans, whose members will be notified before the end of the year.
In an email to The Michigan Daily, Michigan Medicine spokesperson Mary Masson said the University decided to discontinue the U-M Health Plan after a comprehensive evaluation.
“After a thorough business and financial assessment, U-M Health has made the difficult decision to discontinue the U-M Health Plan,” Masson wrote. “This announcement comes after a comprehensive evaluation of the plan’s financial sustainability, market trends, and the evolving needs of our members.”
In an interview with The Daily, Allan Baumgarten, an independent analyst and consultant in health policy, said there should not be any major changes in benefits available to members despite the discontinuation.
“Currently U of M is providing all of the basic benefits that are described under the Affordable Care Act,” Baumgarten said. “So it should not affect which providers they have access to or what the benefits look like.”
Masson cited Michigan’s competitive health insurance landscape as a reason for the plan’s discontinuation, alongside developments in the Centers for Medicare and Medicaid Services programs.
“Despite significant efforts to maintain the plan, the increasingly competitive health insurance landscape and CMS changes to Medicare Advantage plans have made it unsustainable to continue offering the high level of service our members deserve,” Masson wrote.
Michigan Medicine said this change will likely lead to layoffs, but the hospital is working to help relocate employees. Masson addressed concerns about employee layoffs, emphasizing that the organization is committed to supporting affected workers through reassignment, severance and career counseling.
“Every effort will be made to reassign displaced employees and help them with alternative employment opportunities,” Masson wrote. “We are deeply appreciative of our employees and will be providing severance and career counseling to staff.”
Alternative comprehensive health insurance plans will also be offered to eligible faculty, staff and retirees. Other members, typically students, will have access to another U-M health insurance plan which will go into effect next January.
In an interview with The Daily, Richard Hirth, S.J. Axelrod Collegiate Professor of Health Management and Policy, provided an interpretation of what the discontinuation means for consumers.
“It was really kind of similar to the U-M premier plan, just a little bit lower premium and a little more restrictive network,” Hirth said. “But otherwise, my perception as an employee — looking at my options — it was a pretty similar offering. So it’s probably not going to be that big of a deal locally, but I think in Lansing it may be a bigger deal.”
In April of last year, U-M Health acquired the Sparrow Health system to expand care to Michiganders statewide. The U-M Health Plan originated at Sparrow Health, and was originally called the Sparrow Health Plan, according to Hirth.
“The area where I think (the U-M Health Plan is) sort of fairly big is the Lansing area, because that’s kind of where it started,” Hirth said. “The University got it by buying the Sparrow Hospital in Lansing. So we kind of inherited it with that purchase.”
Baumgarten said he felt the magnitude of the Sparrow Health Plan contributed to the cancellation.
“I think that when Michigan Medicine made the acquisition of the Sparrow Hospitals, the health insurance company, physicians health or PHP, was just an incidental add-on that they added at the same time,” Baumgarten said. “They sold it to Blue Cross Blue Shield, which is the largest health insurance company in the state, and exited the health insurance business. So I don’t know that they ever had any intent of continuing to operate the Sparrow health plan.”
Baumgarten said he believes U-M Health’s move from running a health plan to reallocating its time and resources to other priorities is happening primarily for economic reasons.
“Michigan has a long history of owning and operating health insurance companies but many of them have said we don’t want to be in that business anymore,” Baumgarten said. “They lost more than $32 million in 2023 — that in itself is one good reason to exit that business. They say we’re losing money, or we’re not making enough money, and we could benefit from contracting with any of the major health insurers in the state.”
Daily News Contributors Anjali Budhram and Sarah Palushi can be reached at abudhram@umich.edu and sarpal@umich.edu.
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