Health Care Affordability: A Growing Threat to Michigan Employers

This article appeared in 2025 MMA Workforce Solutions Summit event program. Learn more about MMA events.

For more than a century, Michigan’s manufacturing sector has been a driving force behind our state’s economy. Today, rising health care costs are slowing the gears of profit and progress, and making it harder for manufacturers and other businesses to stay competitive. At Blue Cross Blue Shield of Michigan, we see this pressure building across the entire health care ecosystem.

We feel it, too. In 2024, our core health business lost more than $1 billion due to escalating claims costs and underwriting losses. This year, we had no choice but to adjust premiums, some by well over 10 percent, just to absorb the skyrocketing costs across the system. That puts added strain on businesses of all sizes, especially manufacturers working hard to provide quality benefits and retain skilled workers.

But before we can fix the problem, we need to discuss what’s driving it. That’s why we launched a new special section on our blog, MIBlueDaily.com/Affordability, to shed light on the forces driving health care costs and what we can do about it:

• Hospital costs are rising faster than inflation. From 2000 to 2024, medical prices grew 40 percent faster than everyday goods like gas and groceries. Hospital consolidation has also reduced choice. Studies indicate that consolidation is likely to drive costs higher.
• Prescription drug prices continue to spike. In 2023, the average launch price of a new drug increased 35 percent over the prior year. Blue Cross paid nearly $1 billion more for prescription and specialty medications, a dramatic increase that affects everyone in our system. In 2024, our pharmacy claims expense ballooned by 15 percent.
• Overall cost of care is growing. BCBSM paid $100 million a day for our members’ care and benefits in 2024. That’s $12 million more per day than in 2023. For every $1 in premiums we collected, we spent $1.04 for our members’ care. That’s not sustainable for any business in any industry.
• Increased use of an expensive system. Michiganians are using the health care system at a much greater rate than in the past, as chronic illnesses, cancers and other diseases continue to rise. This surge in utilization drives up costs for everyone — not only for insurers like Blue Cross Blue Shield of Michigan but also for self-funded employers who pay claims directly. These accelerating costs strain budgets and make it harder to sustain benefits that employees value.

We aren’t just watching these trends closely, we’re taking action. For our members, we’re investing in programs like Evio and Price Edge that provide more affordable drug options. Within our business, we’re targeting $600 million in administrative cost reductions over three years, through better use of technology and operational efficiencies.

But no one organization can fix this alone. Creating a more affordable, sustainable system will take partnership among insurers, hospitals, drug companies, employers, government agencies and our members, too.

We believe the health care system works best when we all work together.

You can help. I encourage you to visit MIBlueDaily.com/Affordability to learn more. Solving this will take teamwork, and that starts with a better understanding of the challenges we all face.

About the Author

Tricia A. Keith is President and CEO of Blue Cross Blue Shield of Michigan, a $40.6 billion diversified enterprise serving more than 4.7 million health insurance members across the country.

Blue Cross Blue Shield of Michigan is an MMA Premium Associate Member and has been an MMA member company since September 2009. Visit online: bcbsm.com.

Human Element was a sponsor of the 2024 MMA Workforce Solutions Summit. Learn more about MMA events.