The former Physicians Health Plan, which once covered about 16% of Lansing area residents, is no longer financially viable and will cease operations next year, as announced by officials. U-M Health Plan, which underwent a name change after the acquisition of Sparrow Health System by the University of Michigan Health, currently serves around 64,000 members. U-M Health has decided to end this plan in December 2025, leaving many relying on it in a state of uncertainty.

Union President's Concerns

Jeff Breslin, the president of the union representing approximately 2,000 nurses and healthcare professionals at U-M Health Sparrow, has raised serious questions. He expressed doubt about the absence of a "clear replacement plan" for the caregivers who depend on this insurance plan for their own healthcare needs. Additionally, he questioned the timing of the announcement, as U-M Health Sparrow workers are in the midst of contract negotiations where the cost and coverage of health insurance have already been key sticking points.

Breslin stated in a statement from the Michigan Nurses Association, "Many of U of M Health Sparrow's thousands of employees rely on the health insurance plan, which we were told was one of Sparrow's assets that attracted U of M Health to buy Sparrow. Did U of M Health buy the plan just to shut it down? It's impossible to believe that no higher-ups knew about the plan's financial troubles before U of M Health bought Sparrow. At the least, they should have known. And to drop this bomb on healthcare workers during negotiations – to take away coverage of the very care we provide without a solid option – is just unacceptable."

U-M Health-Sparrow union members have been engaged in contract negotiations since August, and their previous contract expired on October 30.

Reasons for Plan Closure

Mary Masson, the senior director of public relations for U-M Health, emphasized that the decision to stop offering the plan was not taken lightly. It was based on the plan's financial viability.

After a comprehensive business and financial assessment, U-M Health has made the difficult decision to discontinue the U-M Health Plan. This announcement follows a thorough evaluation of the plan's financial sustainability, market trends, and the evolving needs of our members, Masson said in a statement. She also pointed to changes in the health insurance landscape as factors contributing to the healthcare organization's decision to stop the plan. "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," she added.

Masson further stated that current president Dennis Reese recently resigned, and a new president, Sharon Williams, will lead U-M Health Plan through this transition. U-M Health acquired 90% of the health plan when it acquired Sparrow Health last year, as reported by Crain's Grand Rapids Business, with Covenant Health in Saginaw holding a 10% stake.

Impact on Staffing Crisis

Breslin highlighted that the closure of the health insurance plan complicates U-M Health-Sparrow's efforts to address its staffing crisis. The hospital is struggling to offer competitive wages to attract enough nurses and healthcare professionals to staff its planned $97 million psychiatric hospital in Lansing and $32 million health center near Grand Ledge.

"The closure of the health insurance plan only adds to the distrust at the negotiating table and reinforces our decision to hold a strike authorization vote to show the employer we're serious about getting what caregivers need as we try to ensure we can take care of our families while we take care of our community," Breslin said. The union is scheduled to hold a strike authorization vote starting December 4, with results tallied on December 11. If enough members support the authorization, it would give elected members of the union the power to call a strike.

Crain's Grand Rapids Business reported that Blue Cross Blue Shield of Michigan dominated the healthcare insurance market in Michigan in 2023, with a 67% market share across all types of health plans, followed by Priority Health's 12%, according to the American Medical Association report. In the Lansing area, Blue Cross Blue Shield had a 75% market share compared to the former Physicians Health Plan's 16% market share, as reported by Crain's.