Few employer groups anywhere boast more members than the Employee Retirement System of Texas. When any insured group that large switches carriers, the move sends waves throughout the commercial market.
UnitedHealthcare of Texas shocked the state's commercial market last week by winning a new ERS point-of-service contract to cover 400,000-plus state and university employees and their dependents. Blue Cross and Blue Shield of Texas held the ERS HealthSelect for years; the loss represents a major blow. UnitedHealth's contract victory is a sign that Texas might see tougher fights for public-sector renewals.
UnitedHealth has been particularly aggressive in acquiring state business. Since 2009, UnitedHealth has won contracts for state employee plans in Missouri and Colorado, among others The ERS HealthSelect contract would be a market changer for any plan. For UnitedHealth, it places the insurer in more direct competition with the Texas Blue plan, which had more than 3.8 million members as of July 2011, according to HealthLeaders-InterStudy, compared to UnitedHealth's 2.3 million. The shift in members in September 2012 will place the two carriers on closer footing and could usher in a new level of competition for major accounts in Texas.
ERS is the second major public-sector contract recently lost by Blue Cross Blue Shield of Texas, which is owned by Health Care Service Corporation, the nation's fourth-largest carrier. In 2011 Cigna beat out the Texas Blue plan for the 66,000-member city of Houston contract. If national carriers are pricing public-sector business more aggressively, other contracts could change hands. The state's largest cities have contracted with a variety of carriers, and competitive pricing could lead to more shifts.
Blue Cross Blue Shield is still the biggest fish in the pond. The carrier has numerous large private-sector contracts (American Airlines, Brinker International, Dell, and Haliburton, among others), scores of small business clients, and the Texas Teachers Retirement System's ActiveCare plan, which covers more than 400,000 education employees. But if national carriers continue to beat the Blue plan on price, it could see its well-established pools of public business pumped away.