Blues Bills Draw Fire From AG, Consumers, AARP
By PAUL
NATINSKY
In what shapes up to be an interesting battle of wills, politics and
health policy, Attorney General Mike Cox came out Dec. 3 strongly
opposing a package of bills advocated by Blue Cross and Blue Shield
of Michigan.
According to
the AG’s Web site: "Every change in this package of bills is aimed
at increasing profits for a benevolent charity that is already
making record profits now!" Cox said. "And the people, especially
the old, sick, and most vulnerable, will pay more or lose insurance
coverage. This is not about improving the quality of health care.
These changes promote profits over people. They should be stopped."
The bills, HBs
5282-5285, would, according to the AG’s analysis:
-
Eliminate
"community rating" and force seniors and sicker citizens to pay
more than current law;
-
Allow Blue
Cross to charge new customers with certain illnesses up to 80
percent more, without challenge;
-
Allow Blue
Cross to charge new customers with serious illnesses up to 250
percent more, without challenge;
-
Double the
time available to deny coverage for pre-existing illnesses, up
to 12 months from the current six months;
-
Triple the
margins Blue Cross can keep from every premium dollar (30
percent of every premium dollar);
-
Enable
Blue Cross to raise rates without consideration of their
surplus, for the first time ever;
-
Allow Blue
Cross to charge individuals more for health insurance based on
where they live, for the first time ever; and,
-
Eliminate
the role of the Attorney General to argue against rate hikes and
eliminate the ability of the Office of Financial and Insurance
Services (OFIS) to set rates.
The Blues receive $82 million a year in tax breaks, according to
published reports; have about $2.8 billion in reserve and have
purchased $366 million in new companies during the past few years.
BCBSM is treated differently under state law than standard indemnity
insurers. The Blues are considered a “Health Care Corporation” and
are held to cost, quality and access standards not applied to
traditional insurers. BCBSM is also, by statute, the “insurer of
last resort” for Michigan, meaning they cannot turn down anyone
seeking to buy health insurance. The Blues rates can also be
challenged, whereas traditional insurers essentially file rates with
the state without any real oversight.
In exchange for these benevolent missions, the BCBSM receives
favorable tax treatment, despite the fact that it owns several
for-profit entities and a well publicized $2.8 billion in reserve.
The Blues, of
course, see things differently. The company stated on its Web site
that, “The
legislation, which covers individuals who purchase insurance on
their own, would prevent for-profit insurance companies from jacking
up renewal rates for people who get sick. It would enable the State
of Michigan to order refunds if insurance rates were excessive. It
establishes rate bands with a minimum and maximum level of insurance
rates. Right now there are no limits on rates set by commercial
for-profit insurers in Michigan.
“Under the bills, Blue Cross would still be required to offer
coverage to everyone. This is unlike commercial for-profit insurers
who can – and do – reject people for medical conditions and other
factors that make them unprofitable to insure.”
The
Blues are pursuing a rate hike, with the highest increase expected
to be more than 40 percent for policies with the lowest
out-of-pocket costs for consumers and the average cost increase for
people who buy their own policies at 24 percent.
Blues spokeswoman Helen Stojic, explained to the Detroit Free Press
that, the insurer had no choice but to request rate hikes because it
is losing millions of dollars each year on policies, which pay out
more for medical bills than it gets in monthly premium charges.
“We
know it is very difficult for many people,” she told the Free Press.
“But right now, our rates are significantly below the cost of
medical care.”
The Blues
bills sped through the Democratically controlled Michigan House of
Representatives about a week after they were introduced, a fast
track by any measure. BCBSM is immensely powerful politically and
economically in Michigan and have long been reputed to be tied very
closely to powerful state Democrats.
That
conservative Republican Cox is leading the political charge against
the bills signals a partisan fight, particularly since state
Republicans have long been friendly with traditional insurers who
oppose the package.
But, partisan
impulses aside, some consumer groups have also come out against the
bills.
Bill Knox,
Associate State Director for Government Affairs for AARP, said: "The
bills would kill the community rating system and allow a wide range
of premiums based on health status, age, and geography. AARP favors
a 'pure' community rating system with a single premium for everybody
regardless of status. The bills would price older and sicker folks
out of the individual market."
Charles Bell,
Programs Director for Consumers Union, the nonprofit publisher of
Consumer Reports, said: "Consumers Union strongly opposes the Blue
Cross-sponsored legislation. These bills would drive up costs for
many consumers and restrict access to coverage. The proposed
legislation also contains many harsh anti-consumer provisions such
as longer waiting periods for consumers with pre-existing conditions
and elimination of both the policyholders' and Attorney General's
ability to seek rate hearings. Such measures would hurt consumers
across the board and have very negative impacts on vulnerable groups
such as early retirees and chronically ill and disabled consumers
who buy their own coverage. These bills are fatally flawed. They
should be squarely rejected by policymakers."
The AG claims
that the bills come at a time of unprecedented largess for the
Blues, and cites the following:
-
Blue
Cross' premium rates for Group Conversion increased 92 percent
from 2003 to 2007;
-
Blue
Cross' premium rates for individuals increased 79 percent from
2003 to 2007;
-
Over the
last five years, Blue Cross and its subsidiaries have made more
than $1 million in profits per day; and,
-
Since
2004, Blue Cross' top officers salary and benefits packages
increased by more than 42 percent, including Blue Cross
President and CEO Richard Whitmer's compensation of $4,253,558
in 2006.
"The Blues
want it both ways − they want to maintain their tax-exempt status,
which is worth at least $75 million each and every year but
eliminate state oversight; charge individuals based on where they
live, for the first time ever, and triple their ability to make
profits," said Cox.
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