Blue Cross Blue Shield to sell Advantasure subsidiary to California firm

Blue Cross Blue Shield of Michigan is quietly selling off its Advantasure subsidiary.

Last week, Aliso Viejo, Calif.-based health insurance administrator UST HealthProof announced it had entered into a definitive agreement to buy the Glen Allen, Va.-based Advantasure for an undisclosed sum.

UST made no mention of whom it entered into a contract with to take over Advantasure. But BCBSM formed Advantasure in 2016 to provide back office, compliance and call center services largely to Medicare Advantage plans.

In a statement to Crain’s, BCBSM acknowledged the deal. The Detroit insurer said its AF Group subsidiary, the former state-run Accident Fund, would continue to contract services from Advantasure under new owners.

“The combination of Advantasure and UST HealthProof strengthens capabilities and expertise across both organizations and extends their ability to deliver more services and solutions to meet the needs of clients on a broader scale,” BCBSM said in a statement. “As Blue Cross Blue Shield of Michigan’s relationship with Advantasure transitions from owner to customer, we look forward to having Advantasure and its employees continue to strengthen and support our growing Medicare Advantage business.”

Advantasure employs roughly 900 in Virginia and at an office in Southfield. UST plans to maintain both offices, the company said in a press release.

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It’s unclear why BCBSM is selling off Advantasure as Medicare Advantage plans continue to be one of the fastest-growing segments of private health insurance — a privatization of public health benefits that has been highly profitable for insurance companies. More than 40 percent of Medicare beneficiaries were enrolled in a private Medicare Advantage plan by the of 2020, according to research by the Kaiser Family Foundation. In 2019, about 38 percent of Medicare recipients in Michigan were enrolled in a Medicare Advantage plan.

More than half of all retirees in Michigan are on a Medicare Advantage plan and those plans are growing at upwards of 10 percent annually for BCBSM, Todd Van Tol, executive vice president of healthcare value, told Crain’s earlier this year.

Medicare Advantage is a federal program that allows private insurers to sell Medicare plans. Typically, Medicare Advantage plans include not just inpatient and outpatient coverage, like traditional Medicare, but also include prescription coverage and other wraparound benefits.

Medicare Advantage plans are growing in popularity because they are often a better deal for enrollees. Traditional Medicare recipients often have to acquire Medigap plans to cover associated healthcare costs that Medicare doesn’t cover, plus a prescription drug plan. Medicare Advantage plans often add those benefits, plus dental, vision and hearing coverage in many cases, at little to no extra cost.

BCBSM avoided a massive loss in 2021 thanks to its subsidiary portfolio that includes Advantasure, AF Group, life insurance company LifeSecure Insurance Co. and health management service organization Triarq Health. BCBSM acquired Royal Oak-based Triarq Health in April 2021 for an undisclosed sum.

The Blues reported a $374 million operating loss in 2021 thanks to $860 million in costs from COVID-19 treatments and testing.

However, it was able to record $360 million in income on its $32.5 billion revenue for the year after the health insurance losses were offset by the performances of its non-health insurance subsidiaries and investment portfolio, which generated $907 million in positive returns.

It’s unclear how much income each subsidiary generated or whether they were all profitable last year.

This story first appeared in our sister publication, Crain’s Detroit Business.

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