BCBS Individual Market Reform- HBs: 5282-5283 (6-27-08)

Fulton Sheen

In 1938 the Blues made a deal in the state of Michigan to be the "insurer of last resort," in exchange for tax exempt status and the ability to deal exclusively (meaning that if BCBS is the provider a company cannot have any other insurance provider but them).  Thanks to this arrangement, in 68 years BCBS has captured 70% of the Health Insurance Market.  No other Health Insurance Provider has this large of a percentage of market share in any other state in the nation - the closest non-profit Blues market share in another state is 38%.  No where in their original charter and mission was there any intention to allow the Blues to buy property and casualty companies or any other insurance companies.  Blue Cross has non-profit status, but can buy and sell like a for- profit company.  They are the Microsoft of the Healthcare industry in Michigan; however, unlike Microsoft they are not subject to any of the monopoly or anti-trust laws.

The Blues are so dominant in the large to medium markets that all the other commercial insurance companies combined control only 10%.  These bills will not help competition; they will hurt it.  They will drive up the cost of health insurance to the citizens of Michigan.  Five years ago, the Small Group Health Reform drove up the cost of group health insurance by adding new regulations and rate bands and now they want to do the same thing to the individual market. 
The blues also want to create and manage a high risk pool and force millions of Michigan citizens who don’t carry Blue Cross insurance to pay for their losses in the individual market.
The whole reason they were given tax exempt status and the ability to deal exclusively in the first place, was to avoid a high risk pool 

Having a risk pool will essentially drive up the cost of individual health care insurance. Commercial insurance companies and the people will have to bear the cost of this change, while Blue Cross reaps the benefits.  If Blue Cross wants to operate like a for profit company, then let’s make them one by removing their tax exempt status and their ability to deal exclusively.  California received 3 billion dollars for letting their Blues do what Michigan has allowed them to do for nothing.

The Senate substituted HBs 5282 & 5283 and sent them to the House for a concurrence vote.  These bills would not have created a risk pool; rate bands would have applied to BCBS, but not commercial insurers and HMOs. For the first time since 1938, BCBS would have to be audited and report to the Office of Insurance Regulation and the Legislature just as all the other insurance companies in the state.  Unfortunately, those bills were not adopted and instead were sent to conference, where BCBS will most likely get everything they want. 

The conference output will more than likely allow the Blues to sell rate banded products under the same regulatory structure as commercial insurers, in addition to being required to offer non health underwritten community rated products.  Consumers would be allowed to choose either a Blues community rated (non-health underwritten) or underwritten product.  A “community rated product/pool is a HIGH RISK POOL.  In every other state that has established a risk pool, where the Blues were the insurer of last resort, their Blues became for-profit. 

The Attorney General’s role will be diminished!  Blue Cross has inserted the word “trend” instead of “rate” so they can decide that amount.  If, for example, they say trend is 47%, neither the state nor the AG could challenge it.  I question whether or not the Blues “underwritten community rated product” is subject to file and use.  "Textured loss ratios" (no one knows what "textured losses" are except BCBS) with commercial carriers are set at 70% and BCBSM at 85% (a higher standard than commercials) of medical loss with a 5% percent commission allowance built in. Commissions above 5% would be allowable, but would have to be applied as an administrative cost.  All carriers will be subject to new data reporting requirements to OFIR to obtain the information relative to medical loss ratios. 

Again, we will become the only state in the union to consider agent commissions as a part of medical costs. It appears Senator George might be only one vote against a stacked deck in the conference committee, so it looks to be a meaningless effort in futility. 

The hospitals, doctors, nurses, insurance companies, the Attorney General, many of the unions, newspapers, NFIB, veterans groups, disability groups, consumer groups, the AARP, and other senior groups all opposed the House passed version of the Blues legislation.  However, it appears to me that the political contributions made to the Democratic and Republican caucus and individual members trumped good policy.  Bottom line BCBS won so far, and the job providers, consumers, and the state of Michigan have lost.