LANSING, Mich. (AP) — A spate of recent Blue Cross Blue Shield of Michigan TV and radio ads tell listeners that legislation pending in the state Legislature will keep health insurance affordable and available when they need it most.
The state's dominant health insurer is pushing for changes on how prices are set for people who have to buy their own insurance, called the individual market.
But critics of the Detroit-based company say the changes Blue Cross is pushing for are a power and money grab by a nonprofit organization that already gets major state tax breaks in exchange for helping make health care more affordable and accessible. Rival insurers say the legislation could raise their costs for doing business and drive away some Blue Cross competition, which could leave customers with higher insurance bills.
The state House in October passed the bills affecting how prices are set for individual health plans with relatively little discussion and with broad support. Now the fight has moved to the Senate, where opponents — including other insurance companies — are saying the bills favor Blue Cross over its competitors and would hurt customers by limiting their options. The Senate version of legislation likely will have differences with what passed the House.
Consumers are caught in the back-and-forth between Blue Cross and its for-profit rivals, with each side lobbying lawmakers to see things its way. The nonpartisan Michigan Campaign Finance Network estimates Blue Cross has spent roughly $1.5 million on its TV campaign alone.
Some Blue Cross customers already are unhappy with the price of their individual policies. Ron and Ghada Abraham of Livonia are challenging a Blue Cross plan to raise the cost of their individual market policy by 24 percent.
"If you push somebody, they are going to push you back," said Ron Abraham, a self-employed home improvement contractor. "They've got all this money to spend on advertising, but they're not taking care of the people who are paying for this increase. It isn't right."
Abraham's middle-of-the-road Blue Cross insurance, covering a family of three, was set to jump from $458.79 a month to $568.63 a month. An interim rate of $519.45 per month has been set while the rate challenge continues.
Blue Cross says its proposed rate increase is evidence that changes are needed in the rules guiding the individual market. The company says it lost $145 million in the segment last year, paying out $127 in individual policy claims for every $100 it took in through premiums.
"We see a problem on the horizon as this marketplace grows," said Mark Cook, the Blues vice president for government affairs. "As more and more people have to turn to the individual marketplace to get their insurance, there needs to be some security for them."
The individual market accounts for roughly 5 to 6 percent of Michigan's health insurance business, covering about 250,000 to 400,000 people. Some analysts suggest the individual market could grow to nearly 25 percent in less than a decade as more employers shed jobs and reduce workplace benefits and as more people retire early.
Blue Cross — which covers more than 60 percent of the state's overall health insurance market and has nearly 4.7 million customers — now has roughly a third to half of the individual market, depending on how it is defined. One of its rivals, Aetna Inc., says the House-passed bills would give Blue Cross unfair competitive advantages that could hurt consumers.
"These bills would make the Blues an unregulated monopoly in the state," said Mark Bertolini, president of Hartford, Conn-based Aetna. "These bills do not address the cost of health care and how to make premiums affordable."
Michigan's 2006-07 average annual premiums for the individual health care market — $1,878 for one person and $4,118 for a family — were among the lowest in the nation, according to a recent survey from America's Health Insurance Plans. Blue Cross says one reason is because it subsidizes losses on its share of the Michigan market.
By some estimates, one of every 10 Michigan residents doesn't have health insurance. Some aren't covered because they can't afford it. But a study from the Henry J. Kaiser Family Foundation suggests that sometimes even relatively high-income people choose to go without health insurance if they have to buy it themselves.
Most policymakers agree it would be good to entice more Michigan residents to buy health insurance. That could hold down overall rate increases because more people would be helping to pay for escalating health care costs.
Under the House-approved plan, Blue Cross would run a health insurance coverage pool for people who have been denied coverage. This pool would be a money-loser because its members likely would be in poor health or more likely to get sick.
Blue Cross would suffer most of the initial financial losses. But after two years, all insurers in the individual market would have to contribute to the pool and share the losses once they reached a certain level. Their liability would be based on their market share.
Supporters of the proposal say most other states have similar practices, making all companies in the marketplace cover costs in the money-losing high-risk pool. But Blues rivals call it an unfair tax.
Another point of contention is Blue Cross reserves, reported at about $2.8 billion last year. Critics, including the Abrahams, say that is excessive and could be used to hold down rate increases.
Blue Cross says its surpluses and other product lines do help hold down health insurance rate increases. Company officials point out their reserves wouldn't even cover two months' worth of claims from its millions of customers.
Providing coverage for individuals outside of the high-risk pool could be a profitable business opportunity, depending on how the state sets its rules.
Rates originally could be set based on health, age and geography. But insurance companies couldn't take health into consideration when an individual's policy is up for renewal, protecting consumers from being dropped or seeing large rate increases.
Maximum and minimum rates would be set for individual policies, giving prices some stability. The rates for all carriers would be subject to review after the fact by the state insurance commissioner and would have to stay within certain guidelines.
Blue Cross could raise rates without prior approval, just as for-profit companies already do. Attorney General Mike Cox and some consumers are upset their ability to challenge Blue Cross rate hikes before they kick in would be taken away through the legislation.
Other bills in the package would allow a Blue Cross for-profit subsidiary, The Accident Fund, to expand from its current worker's compensation insurance into other areas such as home and auto insurance, raising money the company says could help it hold down health insurance costs.
That provision has drawn fire from property casualty insurers, who say it would detract from Blue Cross's historical mission to make health care coverage accessible and affordable in the state.
Blue Cross and its critics also have squabbled over the size of its tax breaks and its level of spending on programs such as free health clinics, public health programs and hospital-related charity care.
Blue Cross officials say for-profit insurance companies are attacking them to try and take the focus off provisions that would help consumers but could make those companies less profitable.
"They are trying to make it about us," Cook said.
———
The health insurance bills are House Bills 5282-5285.
———
On the Net:
Michigan Legislature: http://www.legislature.mi.gov/
Blue Cross Blue Shield of Michigan: http://www.bcbsm.com/
Aetna: http://www.aetna.com
